AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BERKSHIRE REALTY HOLDINGS, L.P.,
BRI ACQUISITION, LLC
AND
BERKSHIRE REALTY COMPANY, INC.
DATED AS OF APRIL 13, 1999
TABLE OF CONTENTS
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ARTICLE 1
THE MERGER.............................................................1
1.1 The Merger......................................................1
1.2 Closing.........................................................2
1.3 Effective Time..................................................3
1.4 Effect of Merger on Certificate of Incorporation and By-laws....3
1.5 Directors and Officers..........................................3
1.6 Effect on Shares................................................3
1.7 Merger Consideration............................................4
1.8 Transactions Relating to Seller Partnership.....................5
1.9 Exchange of Certificates; Pre-Closing Dividends: Fractional
Shares..........................................................5
1.10 Dissenting Shares...............................................7
1.11 Alternative Structure of Merger.................................7
1.12 Further Assurances..............................................8
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER...............................8
2.1 Organization, Standing and Power of Seller......................9
2.2 Seller Subsidiaries.............................................9
2.3 Capital Structure..............................................10
2.4 Other Interests................................................11
2.5 Authority; Noncontravention; Consents..........................12
2.6 SEC Documents; Financial Statements; Undisclosed Liabilities...13
2.7 Absence of Certain Changes or Events...........................14
2.8 Litigation.....................................................15
2.9 Properties.....................................................16
2.10 Environmental Matters..........................................18
2.11 Related Party Transactions.....................................20
2.12 Employee Benefits..............................................20
2.13 Employee Matters...............................................22
2.14 Taxes..........................................................23
2.15 No Payments to Employees, Officers or Directors................25
2.16 Brokers........................................................25
2.17 Compliance With Laws...........................................25
2.18 Contracts; Debt Instruments....................................26
2.19 Opinions of Financial Advisors.................................28
2.20 State Takeover Statutes........................................28
2.21 Proxy Statement and Consent Solicitation Statement.............29
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2.22 Investment Company Act of 1940.................................29
2.23 Definition of Knowledge of Seller..............................29
2.24 Insurance......................................................29
2.25 Board Recommendation...........................................30
2.26 Representations in Partnership Merger Agreement................30
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER....................30
3.1 Organization, Standing and Power of Parent and Buyer...........30
3.2 [Intentionally Omitted]........................................31
3.3 Ownership of Parent and Buyer..................................31
3.4 Authority; Noncontravention; Consents..........................31
3.5 Litigation.....................................................32
3.6 Undisclosed Liability..........................................33
3.7 Brokers........................................................33
3.8 Compliance With Laws...........................................33
3.9 Contracts; Debt Instruments....................................33
3.10 Solvency.......................................................33
3.11 [Intentionally Omitted]........................................34
3.12 Proxy Statement and Consent Solicitation Statement.............34
3.13 Investment Company Act of 1940.................................34
3.14 Parent and Buyer Not Interested Stockholders...................34
3.15 Definition of Knowledge........................................34
3.16 [Intentionally Omitted]........................................34
3.17 Sufficient Funds...............................................34
3.18 Pro Forma Capitalization Table.................................35
3.19 Representations in Partnership Merger Agreement................35
ARTICLE 4
COVENANTS.............................................................35
4.1 Acquisition Proposals..........................................35
4.2 Conduct of Seller's Business Pending Merger....................37
4.3 Conduct of Parent's and Buyer's Business Pending Merger........40
4.4 Other Actions..................................................42
4.5 Partnership Merger Agreement...................................42
4.6 Private Placement..............................................42
4.7 Irrevocable Letter of Credit...................................42
ARTICLE 5
ADDITIONAL COVENANTS..................................................43
5.1 Preparation of the Proxy Statement; Seller Stockholders
Meeting........................................................43
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5.2 Access to Information: Confidentiality........................45
5.3 Reasonable Best Efforts; Notification..........................46
5.4 Tax Treatment..................................................46
5.5 Public Announcements...........................................46
5.6 Transfer Taxes.................................................47
5.7 Benefit Plans..................................................47
5.8 Indemnification................................................47
5.9 Declaration of Dividends and Distributions.....................49
5.10 Resignations...................................................50
5.11 Outside Property Management Agreements.........................50
5.12 Stockholder Claims.............................................50
ARTICLE 6
CONDITIONS............................................................51
6.1 Conditions to Each Party's Obligation to Effect the Merger.....51
6.2 Conditions to Obligations of Parent and Buyer..................51
6.3 Conditions to Obligations of Seller............................53
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER.....................................55
7.1 Termination....................................................55
7.2 Certain Fees and Expenses......................................56
7.3 Effect of Termination..........................................59
7.4 Amendment......................................................59
7.5 Extension: Waiver..............................................59
ARTICLE 8
GENERAL PROVISIONS....................................................59
8.1 Nonsurvival of Representations and Warranties..................59
8.2 Notices........................................................59
8.3 Interpretation.................................................61
8.4 Counterparts...................................................61
8.5 Entire Agreement; No Third-Party Beneficiaries.................61
8.6 Governing Law..................................................62
8.7 Assignment.....................................................62
8.8 Enforcement....................................................62
8.9 Severability...................................................62
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EXHIBITS
Exhibit A Financing Commitments
Exhibit B Pro Forma Capitalization Table of Parent and its Subsidiaries
Exhibit C Form of Letter of Credit
Exhibit D Form of Tax Opinions
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INDEX OF DEFINED TERMS
DEFINED TERM SECTION
------------ -------
Accrued Dividends........................................................1.7(a)
Acquisition Proposal.....................................................4.1(a)
Additional Filings.......................................................5.1(a)
Affiliate..................................................................2.11
Agreement..............................................................Preamble
AICPA Statement..........................................................5.1(b)
Alternative Merger.........................................................1.11
Break-Up Expenses........................................................7.2(a)
Break-Up Fee.............................................................7.2(a)
Buyer..................................................................Preamble
Buyer Disclosure Letter...............................................Article 3
Buyer Material Adverse Effect............................................3.1(b)
Buyer Operating Partnership...........................................Recital E
Cash Collateral..........................................................4.7(a)
Certificates.............................................................1.9(c)
Certificate of Merger.......................................................1.3
Change of Control Preference.............................................1.7(a)
Claims...................................................................5.8(b)
Class A Preferred Units.....................................................1.8
Class B Units...............................................................1.8
Closing..................................................................1.2(a)
Closing Date.....................................................1.2(a), 1.2(b)
Code....................................................................2.12(a)
Commitment...............................................................4.2(r)
Common Merger Consideration..............................................1.7(a)
Consent Solicitation Statement...........................................5.1(a)
Controlled Group Member....................................................2.12
Development..............................................................2.9(g)
Development Agreements...................................................4.2(i)
DGCL........................................................................1.1
DLLCA.......................................................................1.1
Dissenting Shares..........................................................1.10
Effective Time......................................................1.2(b), 1.3
Election Notice............................................................1.11
Employee Plan..............................................................2.12
Encumbrances.............................................................2.9(a)
Environmental Law..........................................................2.10
Environmental Liabilities and Costs........................................2.10
Equity Commitments.........................................................3.17
ERISA......................................................................2.12
Escrow Agent.............................................................4.7(a)
Escrow Agreement.........................................................4.7(a)
Financing Commitment.......................................................3.17
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DEFINED TERM SECTION
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Fee Plan.................................................................1.7(c)
Flow-Through Entity.....................................................2.14(b)
GAAP........................................................................2.6
Governmental Entity......................................................2.5(b)
HSR Act..................................................................2.5(b)
Hazardous Materials.....................................................2.10(a)
Indebtedness............................................................2.18(b)
Indemnified Parties......................................................5.8(a)
Indemnifying Parties.....................................................5.8(b)
Injunction...............................................................7.1(d)
Knowledge of Buyer.........................................................3.15
Knowledge of Parent........................................................3.15
Knowledge of Seller........................................................2.23
Laws.....................................................................2.5(b)
Lazard.....................................................................2.16
Xxxxxx.....................................................................2.16
Letter of Credit.........................................................4.7(a)
Liens....................................................................2.2(b)
Liquidation Vote............................................................4.2
Material Contract.......................................................2.18(a)
Merger..........................................................Recital A, 1.11
Merger Consideration.....................................................1.7(a)
1940 Act...................................................................2.22
Option Consideration.....................................................1.7(b)
Ordinary Course Liabilities..............................................4.2(q)
Outside Property Management Agreements..................................2.18(e)
Parent.................................................................Preamble
Parent Material Adverse Effect...........................................3.1(a)
Parent's Closing Notice..................................................1.2(d)
Partial Period..............................................................5.9
Partial Period Dividend.....................................................5.9
Partnership Merger .........................................................1.8
Partnership Merger Agreement..........................................Recital E
Paying Agent.............................................................1.9(a)
Pension Plan...............................................................2.12
Person...................................................................2.2(a)
Preferred Merger Consideration...........................................1.7(a)
Property Restrictions....................................................2.9(a)
Proxy Statement..........................................................5.1(a)
Prudential.................................................................2.16
REIT....................................................................2.14(b)
SEC......................................................................2.5(b)
Securities Act..............................................................2.6
Seller.................................................................Preamble
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DEFINED TERM SECTION
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Seller Common Shares.....................................................2.3(a)
Seller Contribution Agreements..........................................2.18(a)
Seller Disclosure Letter..............................................Article 2
Seller Financial Statement Date.............................................2.7
Seller General Partner.....................................................2.25
Seller Material Adverse Change..............................................2.7
Seller Material Adverse Effect..............................................2.1
Seller OP Units.............................................................1.8
Seller Options...........................................................2.3(b)
Seller Partner Approval..................................................2.5(a)
Seller Partnership....................................................Recital E
Seller Partnership Agreement.............................................2.3(e)
Seller Permits.............................................................2.17
Seller Plan..............................................................2.3(a)
Seller Preferred Shares..................................................2.3(a)
Seller Properties..................................................2.9(a), 2.10
Seller SEC Documents........................................................2.6
Seller Shareholder Approval..............................................2.5(a)
Seller Shareholders Meeting..............................................5.1(c)
Seller Subsidiaries......................................................2.2(a)
Seller Unit Holder..........................................................1.8
Seller's Closing Notice..................................................1.2(c)
Seller's Environmental Reports.............................................2.10
Share Unit Account.......................................................1.7(c)
Share Units..............................................................1.7(c)
Subsidiary...............................................................2.2(a)
Superior Acquisition Proposal............................................4.1(d)
Surviving Company.....................................................1.1, 1.11
Surviving Operating Partnership.......................................Recital E
Takeover Statute...........................................................2.20
Tax(es).................................................................2.14(a)
Tax Authority...........................................................2.14(a)
Tax Return(s)...........................................................2.14(a)
Tax Protection Agreements...............................................2.18(i)
Third Party Provisions......................................................8.5
Transactions...............................................................2.25
Transfer Taxes..............................................................5.6
Welfare Plan...............................................................2.12
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of April
13, 1999, is by and among Berkshire Realty Holdings, L.P., a Delaware limited
partnership ("Parent"), BRI Acquisition, LLC, a Delaware limited liability
company and subsidiary of Parent ("Buyer"), and Berkshire Realty Company, Inc.,
a Delaware corporation ("Seller").
RECITALS:
A. The sole member of Buyer and the Board of Directors of Seller deem it
advisable and in the best interests of their respective members and
stockholders, subject to the conditions and other provisions contained herein,
that Buyer shall merge with and into Seller (the "Merger").
B. Seller has received fairness opinions relating to the transactions
contemplated hereby as more fully described herein.
C. Buyer and Seller desire to make certain representations, warranties
and agreements in connection with the transactions contemplated hereby.
D. Contemporaneously with the execution of this Agreement, BRI
Acquisition Sub, LP, a Delaware limited partnership ("Buyer Operating
Partnership"), and BRI OP Limited Partnership, a Delaware limited partnership
(the "Seller Partnership"), and Parent will enter into a Merger Agreement (the
"Partnership Merger Agreement") pursuant to which, immediately prior to the
Merger, Buyer Operating Partnership will be merged with and into Seller
Partnership with Seller Partnership as the surviving entity ("Surviving
Operating Partnership").
E. Immediately following the Merger, Parent may liquidate Seller and, as
a result of such liquidation, Parent would acquire all of the assets, and assume
all of the liabilities, of Seller.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the terms and conditions
of this Agreement (including, without limitation, Section 1.11), and in
accordance with Section 264 of the Delaware General Corporation Law ("DGCL") and
Section 18-209 of the Delaware Limited Liability Company Act ("DLLCA"), Buyer
shall be merged with and into Seller, with Seller as the surviving entity (the
entity surviving the Merger, the "Surviving Company").
1.2 Closing.
(a) Subject to Section 1.2(b), Seller's compliance with Section
1.2(c) and the satisfaction (or waiver by the parties entitled to the benefit
thereof) of the conditions set forth in Article 6, the closing of the Merger
(the "Closing") will take place at 10:00 a.m., local time in Boston,
Massachusetts on the date (the "Satisfaction Date") which is the first business
day to occur on or after the day which is the later of (i) the 10th calendar day
following satisfaction (or waiver by the parties entitled to the benefit
thereof) of the conditions set forth in Article 6 (other than Sections 6.2(d),
6.2(g), 6.2(i), 6.3(d) and 6.3(g)) and (ii) October 15, 1999, at the offices of
Xxxx and Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, unless another
date or place is agreed to in writing by the parties. The date on which the
Closing occurs shall be referred to herein as the "Closing Date."
(b) Notwithstanding the provisions of Section 1.2(a) and subject
to Parent's compliance with Section 4.7(b) hereof, Parent may elect to extend
the Closing Date to any business day on or prior to December 29, 1999 by
delivering written notice of such election to Seller as contemplated under
Section 1.2(d).
(c) On the first business day after the satisfaction (or waiver
by Parent and Buyer) of the conditions set forth in Sections 6.1 and 6.2 (other
than Sections 6.2(d), 6.2(g) and 6.2(i)), Seller shall deliver a written notice
("Seller's Closing Notice") to Parent and Buyer which (i) sets forth the date
that is the Satisfaction Date and (ii) certifies, as of the date of such notice,
the satisfaction (or waiver by Parent and Buyer) of the conditions set forth in
Sections 6.1 and 6.2 (other than Sections 6.2(d), 6.2(g) and 6.2(i)).
(d) At least three business days prior to the Satisfaction Date
(as indicated in Seller's Closing Notice), Parent shall deliver a written notice
to Seller ("Parent's Closing Notice") indicating one of the following: (i)
Parent's determination to exercise the election contemplated by Section 1.2(b)
and to extend the Closing Date to such business day on or prior to December 29,
1999 as is set forth in such notice, or (ii) Parent's determination not to
exercise the election contemplated by Section 1.2(b), in which case the Closing
Date shall be the Satisfaction Date.
(e) If the Closing Date is extended as contemplated by Section
1.2(b), then for purposes of the conditions set forth in Section 6.2 (other than
Sections 6.2(g) and 6.2(i)), all references in the lettered subsections thereof
to the terms "Closing Date" and "Effective Time" shall be deemed to mean the
Satisfaction Date, and the certificates and other documents to be delivered by
the parties pursuant to such Sections shall be delivered on and as of the
Satisfaction Date. The parties hereto agree that other than with respect to the
conditions set forth in Section 6.2(g) and 6.2(i) (which conditions shall be
satisfied or waived by the parties entitled to the
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benefit thereof as of the Closing Date), none of the conditions set forth in
Section 6.2 shall be required to be satisfied at any time after the Satisfaction
Date. Notwithstanding the foregoing, for purposes of determining whether Parent
or Buyer has the right to terminate this Agreement pursuant to Section 7.1(b),
the conditions set forth in Section 6.2(b) shall, in all circumstances, be
evaluated as of the Closing Date.
(f) If the conditions set forth in Sections 6.1 and 6.2 are not
satisfied (or waived by Parent and Buyer), or if the certificates and other
documents required to be delivered pursuant to Section 6.2 are not delivered, in
each case on and as of the Satisfaction Date (as indicated in Seller's Closing
Notice), then (i) the Satisfaction Date shall be deemed not to have occurred,
(ii) Seller's Closing Notice and Parent's Closing Notice shall be void and of no
further effect, (iii) the Closing shall remain subject to Seller's further
compliance with Section 1.2(c) hereof and the Closing shall occur as provided in
Section 1.2(a) and (iv) Parent shall have retained its right, subject to its
compliance with Section 1.2(b), to extend the Closing Date as contemplated
thereunder.
(g) If the Satisfaction Date occurs on or before October 29, 1999
and the Closing Date is extended as contemplated by Section 1.2(b) to a date
that is after October 29, 1999, then notwithstanding anything to the contrary
contained in the first paragraph of Section 5.9, Seller may declare a dividend
not to exceed $.25 per Seller Common Share for the dividend for the fourth
quarter of 1999 (i.e., with a record date of November 1, 1999).
1.3 Effective Time. On the Closing Date, the Surviving Company shall
execute and file a certificate of merger (the "Certificate of Merger"), executed
in accordance with Delaware law, and shall make all other filings and recordings
required under Delaware law. The Merger shall become effective at the time
("Effective Time") the Certificate of Merger is filed with the Secretary of
State of the State of Delaware, or at such time as Buyer and Seller shall agree
should be specified in the Certificate of Merger (not to exceed thirty (30) days
after the Certificate of Merger is filed with the Secretary of State of the
State of Delaware). Unless otherwise agreed, the parties shall cause the
Effective Time to occur on the Closing Date.
1.4 Effect of Merger on Certificate of Incorporation and By-laws.
Subject to Section 1.11, the Restated Certificate of Incorporation, as amended,
of Seller and the By-laws of Seller, as in effect immediately prior to the
Effective Time, shall constitute the Restated Certificate of Incorporation and
By-laws, respectively, of the Surviving Company, from and after the Effective
Time, until further amended in accordance with applicable Delaware law.
1.5 Directors and Officers. Subject to Section 1.11, the directors and
officers of the Surviving Company shall be the Persons who were the directors
and officers, respectively, of Seller immediately prior to the Effective Time.
Such
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directors and officers shall continue to serve for the balance of their
unexpired terms or their earlier death, resignation or removal.
1.6 Effect on Shares. The effect of the Merger on the shares of Seller
shall be as provided in this Article 1. Each membership interest of Buyer
outstanding immediately prior to the Merger shall be converted, without any
action on the part of the holder thereof, into one share of the common stock of
the Surviving Company.
1.7 Merger Consideration.
(a) Subject to Section 1.10 and Section 5.9 below, at the
Effective Time, by virtue of the Merger and without any action on the part of
Parent, Buyer, Seller or the holders of the following securities, each Seller
Common Share (as defined in Section 2.3(a)) issued and outstanding immediately
prior to the Effective Time (other than Seller Common Shares held by Parent,
Buyer, any wholly-owned subsidiary of Parent or Buyer, or in the treasury of
Seller, which shares, by virtue of the Merger and without any action on the part
of the holder thereof, shall be canceled and shall cease to exist with no
payment being made with respect thereto, and other than Dissenting Shares (as
defined in Section 1.10)) shall be converted into the right to receive $12.25 in
cash (the "Common Merger Consideration"), without interest thereon, upon
surrender of the certificate formerly representing such share. In addition, at
the Effective Time, by virtue of the Merger and without any action on the part
of Parent, Buyer, Seller or the holders of the following securities, each Seller
Preferred Share (as defined in Section 2.3(a)) issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares) shall be
converted into the right to receive the "Change of Control Preference" in the
amount of $28.75 per Seller Preferred Share together with 115% of any Accrued
Dividends per Seller Preferred Share ("Change of Control Preference" and
"Accrued Dividends" each being defined in the Certificate of Designation of the
Seller Preferred Shares) (the "Preferred Merger Consideration"), without
interest thereon, upon surrender of the certificate formerly representing such
share. The Surviving Company shall have the right to, and shall, take all steps
necessary to ensure compliance, and shall comply, with all withholding
obligations with respect to any foreign stockholders of Seller in connection
with the payment of the Merger Consideration. The Preferred Merger
Consideration, together with the Common Merger Consideration, is hereinafter
referred to as the "Merger Consideration".
(b) Each outstanding Seller Option (as defined in Section 2.3(b))
shall be subject to the terms of this Agreement. As of the Effective Time, each
outstanding Seller Option, whether or not then vested or exercisable, shall have
the expiration date thereof accelerated to the Closing Date and shall be
converted into the right to receive from the Surviving Company an amount of cash
equal to the product of (i) the number of Seller Common Shares subject to the
Seller Option and (ii) the excess, if any, of the Common Merger Consideration
over the exercise price per Seller Common Share of such option (the "Option
Consideration"). Prior to the Effective Time, Seller shall take all steps
necessary to give written notice to each
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holder of a Seller Option that all Seller Options shall expire effective as of
the Effective Time and be converted into the right to receive the Option
Consideration. The Surviving Company shall cause the Paying Agent (as defined in
Section 1.9(a)) to pay each holder of Seller Options, promptly following the
Effective Time, the Option Consideration for all Seller Options held by such
holder. The Board of Directors of Seller or any committee thereof responsible
for the administration of Seller's stock option plans shall take any and all
action necessary to effectuate the matters described in this Section 1.7(b) on
or before the Effective Time. Any amounts payable pursuant to this Section
1.7(b) shall be subject to any required withholding of taxes and shall be paid
without interest. Parent agrees to provide the Surviving Company with sufficient
funds to permit the Surviving Company to satisfy its obligations under this
Section 1.7(b).
(c) The Seller has adopted a Directors Retainer Fee Plan (the
"Fee Plan") pursuant to which eligible directors may elect to receive certain
fees in cash or in Seller Common Shares or to defer payment of such fees and
credit such fees to an account (the "Share Unit Account") consisting of units
that are equivalent in value to Seller Common Shares ("Share Units"). The Seller
shall take all actions necessary so that all Share Units outstanding immediately
prior to the Effective Time shall be canceled immediately prior to the Effective
Time in exchange for the right of each holder of Share Units to receive an
amount in cash equal to the product of (A) the number of Share Units in such
holder's Share Unit Account outstanding immediately prior to the Effective Time
and (B) the Common Merger Consideration to be delivered by the Surviving Company
immediately following the Effective Time. All applicable withholding taxes
attributable to the payments contemplated by this Section 1.7(c) shall be
deducted from the amounts payable under this Section 1.7(c) and any amounts
payable under this Section 1.7(c) shall be payable without interest. Except as
provided in this Section 1.7(c), the Fee Plan shall terminate at the Effective
Time.
1.8 Transactions Relating to Seller Partnership. Contemporaneously with
the execution of this Agreement, Parent and Buyer shall cause Buyer Operating
Partnership to enter into the Partnership Merger Agreement with Seller
Partnership pursuant to which, among other things, (i) Buyer Operating
Partnership will be merged with and into Seller Partnership (the "Partnership
Merger") with Seller Partnership surviving as the Surviving Operating
Partnership and (ii) each holder ("Seller Unit Holder") of units in the Seller
Partnership ("Seller OP Units") will be offered the option of receiving either
(A) an amount per Seller OP Unit equal to the Common Merger Consideration or (B)
one Class A Preferred Unit (as defined in the Partnership Merger Agreement) for
each Seller OP Unit held by such holder or (C) one Class B Unit (as defined in
the Partnership Merger Agreement) for each Seller OP Unit held by such holder.
Seller hereby consents to the cancellation of the Seller OP Units it owns
immediately prior to the effective time of the Partnership Merger in accordance
with the provisions of the Partnership Merger Agreement. Buyer hereby consents
to the cancellation of its general partnership interest in Buyer Operating
Partnership owned immediately prior to the effective time of the
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Partnership Merger in accordance with the provisions of the Partnership Merger
Agreement.
1.9 Exchange of Certificates; Pre-Closing Dividends: Fractional Shares.
(a) Prior to the Effective Time, Buyer shall appoint a paying
agent reasonably acceptable to Seller to act as agent (the "Paying Agent") for
the payment of the Merger Consideration upon surrender of certificates formerly
representing issued and outstanding Seller Common Shares or Seller Preferred
Shares, as applicable, and payment in respect of Seller Options and amounts
owing under the Fee Plan.
(b) Parent and Buyer shall provide to the Paying Agent on or
before the Effective Time, for the benefit of the holders of Seller Common
Shares, Seller Preferred Shares, Seller Options and Share Units, cash payable in
exchange for the issued and outstanding Seller Common Shares, cash payable in
exchange for the issued and outstanding Seller Preferred Shares, cash payable in
respect of Seller Options and cash payable in respect of Share Units.
(c) Promptly after the Effective Time, the Surviving Company
shall cause the Paying Agent to mail to each holder of record of a certificate
or certificates which immediately prior to the Effective Time represented
outstanding Seller Common Shares or Seller Preferred Shares (the "Certificates")
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Paying Agent and shall be in such form and
have such other provisions as Buyer may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancellation
to the Paying Agent, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor the applicable
Merger Consideration, and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Seller Common Shares or
Seller Preferred Shares which is not registered in the transfer records of
Seller, payment may be made to a Person (as defined in Section 2.2(a)) other
than the Person in whose name the Certificate so surrendered is registered if
such Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the Person requesting such payment either shall pay any transfer or
other Taxes (as defined in Section 2.14(a)) required by reason of such payment
being made to a Person other than the registered holder of such Certificate or
establish to the satisfaction of the Surviving Company that such Tax or Taxes
have been paid or are not applicable. Until surrendered as contemplated by this
Section 1.9, each Certificate (other than Certificates representing Dissenting
Shares) shall be deemed at any time after the Effective Time to represent only
the right to receive upon such surrender the Merger Consideration, without
interest. No interest will be paid or will accrue on the Merger Consideration
upon the surrender of any Certificate.
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(d) All Merger Consideration paid upon the surrender of
Certificates in accordance with the terms of this Section 1.9 shall be deemed to
have been paid in full satisfaction of all rights pertaining to the Seller
Common Shares or Seller Preferred Shares, as applicable, formerly represented by
such Certificates; provided, however, that Seller shall transfer to the Paying
Agent cash sufficient to pay any dividends or make any other distributions with
a record date on or prior to the Effective Time which may have been declared or
made by Seller on such Seller Common Shares, including without limitation any
dividends permitted by the second paragraph of Section 5.9 hereof, or Seller
Preferred Shares, as applicable, in accordance with the terms of this Agreement
or prior to the date of this Agreement and which remain unpaid at the Effective
Time and have not been paid prior to such surrender, and there shall be no
further registration of transfers on the stock transfer books of Seller of the
Seller Common Shares and Seller Preferred Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Company for any reason, they shall
be canceled and exchanged as provided in this Section 1.9.
(e) None of Parent, Seller, Buyer, the Surviving Company or the
Paying Agent shall be liable to any Person in respect of any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. Any portion of the Merger
Consideration delivered to the Paying Agent pursuant to this Agreement that
remains unclaimed for 12 months after the Effective Time shall be redelivered by
the Paying Agent to the Surviving Company, upon demand, and any holders of
Certificates who have not theretofore complied with Section 1.9(c) shall
thereafter look only to the Surviving Company for delivery of the Merger
Consideration and any unpaid dividends, subject to applicable escheat and other
similar Laws (as defined in Section 2.5(b)).
1.10 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, Seller Common Shares and Seller Preferred Shares outstanding
immediately prior to the Effective Time and held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has demanded
appraisal for such shares in accordance with Section 262 of the DGCL
("Dissenting Shares") shall not be converted into the right to receive the
Merger Consideration as provided in Section 1.7, unless and until such holder
fails to perfect or withdraws or otherwise loses his right to appraisal and
payment under the DGCL. If, after the Effective Time, any such holder fails to
perfect or withdraws or loses his right to appraisal, such Dissenting Shares
shall thereupon be treated as if they had been converted as of the Effective
Time into the right to receive the Merger Consideration, if any, to which such
holder is entitled, without interest thereon. Seller shall give Buyer prompt
notice of any demands received by Seller for appraisal of shares and, prior to
the Effective Time, Buyer shall have the right to participate in all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, Seller shall not, except with the prior written consent of
Buyer, make any payment with respect to, or settle or offer to settle, any such
demands.
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1.11 Alternative Structure of Merger. While it is currently contemplated
that the Merger shall be effected through the merger of Buyer with and into
Seller, Parent shall have the option, in its sole discretion and without
requiring the further consent of Seller or Seller's Board of Directors or
stockholders, to cause the Merger to be effected through an alternative
transaction structure of Seller merging into Parent, with Parent being the
Surviving Company (the "Alternative Merger"), in which case (i) each general
partnership interest and limited partnership interest of Parent issued and
outstanding immediately prior to the Effective Time shall be converted in the
Merger into a corresponding general partnership interest or limited partnership
interest, as the case may be, of the Surviving Company, (ii) the limited
partnership agreement of Parent shall be the limited partnership agreement of
the Surviving Company and (iii) the general partners and officers of Parent
shall be the general partners and officers of the Surviving Company. Parent
shall make such election by delivering to Seller a notice (the "Election
Notice") electing to effect the Alternative Merger. The Election Notice shall be
available for the inspection of any stockholder of Seller upon request during
normal business hours. Any such election may be made only after the respective
approvals of the Merger and the Partnership Merger by the stockholders of Seller
and Seller Unit Holders and after satisfaction (or waiver by the parties
entitled to the benefits thereof) of all other conditions to the consummation of
the Merger set forth in Article 6. For purposes of this Agreement, (i) all
references to the term "Merger" shall be deemed to include the Alternative
Merger, except for such references contained in the second sentence of Section
1.6 and in this Section 1.11, and (ii) all references to the term "Surviving
Company" shall be deemed to include Parent in its capacity as the surviving
entity in the Alternative Merger. As part of the Proxy Statement and the Consent
Solicitation Statement and in the manner required by applicable law, Seller
shall describe the provisions of this Section 1.11. In the event the Alternative
Merger is effectuated, the parties agree that for Federal income tax purposes,
the Merger shall be treated as an asset acquisition by Parent, followed by a
liquidation of Seller.
1.12 Further Assurances. If, at any time after the Effective Time, the
Surviving Company shall determine or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Company the right, title or interest in, to or under any of the rights,
properties or assets of Seller acquired or to be acquired by the Surviving
Company as a result of, or in connection with, the Merger or otherwise to carry
out this Agreement, the Surviving Company shall be authorized to execute and
deliver, in the name and on behalf of each of Parent, Buyer and Seller or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of each of Parent, Buyer and Seller or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Company or otherwise to carry
out this Agreement.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Parent and Buyer, except as set forth
in the letter of even date herewith signed by the President of Seller and
delivered to Buyer prior to the execution hereof (the "Seller Disclosure
Letter") (it being understood that the Seller Disclosure Letter shall be
arranged in sections corresponding to the sections contained in this Article 2,
and the disclosures in any section of the Seller Disclosure Letter shall qualify
all of the representations in the corresponding section of this Article 2 and,
in addition, other sections in this Article 2 to the extent it is clear from a
reading of the disclosure that such disclosure is applicable to such other
sections) as follows:
2.1 Organization, Standing and Power of Seller. Seller is a corporation
duly organized and validly existing under the Laws of Delaware. Seller has the
requisite corporate power and authority to carry on its business as now being
conducted. Seller is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed, individually or in the aggregate, would
not have a Seller Material Adverse Effect. Seller has delivered to Buyer
complete and correct copies of Seller's Certificate of Incorporation and
By-laws, in each case, as amended to the date of this Agreement. As used in this
Agreement, "Seller Material Adverse Effect" shall mean a material adverse effect
on the business, properties, assets, financial condition, or results of
operations of Seller and its Subsidiaries, taken as a whole, including the
prevention of the ability of Seller, the Seller General Partner (as defined
below) or the Seller Partnership to consummate any of the Transactions (as
defined below).
2.2 Seller Subsidiaries.
(a) Section 2.2 of the Seller Disclosure Letter sets forth (i)
each Subsidiary (as defined below) of Seller (the "Seller Subsidiaries"), (ii)
the ownership interest therein of Seller, (iii) if not wholly owned by Seller,
the identity and ownership interest of each of the other owners of such Seller
Subsidiary and (iv) each apartment community owned by such Subsidiary. As used
in this Agreement, "Subsidiary" of any Person (as defined below) means any
corporation, partnership, limited liability company, joint venture, trust or
other legal entity of which such Person (either directly or through or together
with another Subsidiary of such Person) owns 50% or more of the capital stock or
other equity interests of such corporation, partnership, limited liability
company, joint venture or other legal entity, including, without limitation, the
Seller Partnership, but does not include short-term money market investments and
other participation interests in short-term investments. As used herein,
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity.
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(b) (i) All the outstanding shares of capital stock owned by
Seller of each Seller Subsidiary that is a corporation have been validly issued
and are (A) fully paid, nonassessable and free of any preemptive rights, (B)
owned by Seller or by another Seller Subsidiary and (C) owned free and clear of
all pledges, claims, liens, charges, encumbrances and security interests of any
kind or nature whatsoever (collectively, "Liens") or any other limitation or
restriction (including any contractual restriction on the right to vote or sell
the same) other than restrictions under applicable securities laws; and (ii) all
equity interests in each Seller Subsidiary that is a partnership, joint venture,
limited liability company or trust which are owned by Seller, by another Seller
Subsidiary or by Seller and another Seller Subsidiary are owned free and clear
of all Liens or any other limitation or restriction (including any contractual
restriction on the right to vote or sell the same) other than restrictions under
applicable securities laws. Each Seller Subsidiary that is a corporation is duly
incorporated and validly existing under the Laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to carry on
its business as now being conducted, and each Seller Subsidiary that is a
partnership, limited liability company or trust is duly organized and validly
existing under the Laws of its jurisdiction of organization and has the
requisite power and authority to carry on its business as now being conducted.
Each Seller Subsidiary is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed, individually or in the aggregate, would not have a Seller Material
Adverse Effect. True and correct copies of the certificate of incorporation,
By-laws, organization documents and partnership, joint venture and operating
agreements of each Seller Subsidiary, and all amendments to the date of this
Agreement, have been made available or previously delivered to Buyer.
2.3 Capital Structure.
(a) The authorized shares of capital stock of Seller consist of
60,000,000 shares of preferred stock, $0.01 par value per share, of which
2,737,000 shares are issued and outstanding as of the date hereof and are
designated as Series 1997-A Convertible Preferred Shares (the "Seller Preferred
Shares"), and 140,000,000 shares of Common Stock, $0.01 par value per share (the
"Seller Common Shares"), of which 36,727,591 are issued and outstanding as of
the date hereof. As of the date hereof, (i) 3,300,000 Seller Common Shares have
been reserved for issuance under the Amended and Restated Stock Option Plan of
Seller (the "Seller Plan"), under which options in respect of 1,534,300 Seller
Common Shares have been granted and are outstanding as of the date hereof, (ii)
9,982,255 Seller Common Shares are reserved for issuance upon conversion of
Seller OP Units, (iii) 5,680,917 Seller Common Shares are reserved for issuance
upon conversion of the Seller Preferred Shares and (iv) no Seller Preferred
Shares or Seller Common Shares are held in the Seller's treasury.
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(b) Set forth in Section 2.3 of the Seller Disclosure Letter is a
true and complete list of the following: (i) each qualified or nonqualified
option to purchase Seller Common Shares granted under the Seller Plan or any
other formal or informal arrangement ("Seller Options"); (ii) each grant of
Seller Common Shares to employees which are subject to any risk of forfeiture;
and (iii) all other warrants or other rights to acquire stock, all limited stock
appreciation rights, phantom stock, dividend equivalents, performance units and
performance shares granted under the Seller Plan which are outstanding as of the
date hereof. On the date of this Agreement, except as set forth in this Section
2.3 or Section 2.3 of the Seller Disclosure Letter, no shares of capital stock
of Seller were outstanding or reserved for issuance.
(c) All outstanding shares of capital stock of Seller are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other indebtedness
of Seller having the right under applicable law or Seller's Certificate of
Incorporation or By-laws to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of
Seller may vote.
(d) There are no outstanding securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which Seller or any Seller Subsidiary is a party or by which any such entity
is bound, obligating Seller or any Seller Subsidiary to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock,
voting securities or other ownership interests of Seller or any Seller
Subsidiary or obligating Seller or any Seller Subsidiary to issue, grant, extend
or enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking (other than to Seller or a Seller
Subsidiary). There are no outstanding obligations of Seller or any Seller
Subsidiary to repurchase, redeem or otherwise acquire any shares of stock of
Seller or shares of stock or other ownership interests of any Seller Subsidiary.
(e) As of the date hereof, 46,376,824 Seller OP Units are validly
issued and outstanding, fully paid and nonassessable except to the extent
provided by applicable law, of which 36,414,986 are owned by Seller and 312,605
are owned by Berkshire Apartments, Inc. Section 2.3 of the Seller Disclosure
Letter sets forth the name of each Seller Unit Holder and the number of Seller
OP Units owned by each such Seller Unit Holder as of the date of this Agreement.
The Seller OP Units are subject to no restriction established by Seller or under
applicable law (other than restrictions on sale imposed by applicable securities
laws) except as set forth in the Amended and Restated Limited Partnership
Agreement of the Seller Partnership (the "Seller Partnership Agreement") and
Seller Contribution Agreements. Seller Partnership has not issued or granted and
is not a party to any outstanding commitments of any kind relating to, or any
presently effective agreements or understandings with respect to, issuing
interests in Seller Partnership or securities convertible into interests in
Seller Partnership.
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(f) All dividends on Seller Common Shares and distributions on
Seller OP Units which have been declared prior to the date of this Agreement
have been paid in full (except for the dividend on Seller Common Shares and
distributions on Seller OP Units payable on May 15, 1999).
2.4 Other Interests. Neither Seller nor any of its Subsidiaries owns
directly or indirectly any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust or entity (other
than investments in the Seller Subsidiaries and short-term investment
securities). Neither Seller nor any of the Seller Subsidiaries is in material
breach of any provision of any agreement, document or contract governing its
rights in or to any such interests owned or held by it. To the Knowledge of
Seller (as defined in Section 2.23), no other party to any such agreement,
document or contract is in material breach of any of its obligations under any
such agreement, document or contract, nor has Seller or any of Seller's
Subsidiaries received any notice of any such material breach.
2.5 Authority; Noncontravention; Consents.
(a) Seller has the requisite corporate power and authority to
enter into this Agreement and, subject to the adoption of this Agreement by
holders of (i) a majority of the outstanding Seller Preferred Shares and (ii) a
majority of the Seller Common Shares and Seller Preferred Shares (voting on an
as-converted basis), voting as a single class, representing a majority of the
issued and outstanding Seller Common Shares (after giving effect to a deemed
conversion of the Seller Preferred Shares) of the Seller (collectively, the
"Seller Shareholder Approval"), to consummate the transactions contemplated by
this Agreement to which Seller is a party. The execution and delivery of this
Agreement by Seller and the consummation by Seller of the transactions
contemplated by this Agreement to which Seller is a party have been duly
authorized by all necessary corporate action on the part of Seller, except for
and subject to the Seller Shareholder Approval and approval by the holders of a
majority of the limited partnership interest in the Seller Partnership (the
"Seller Partner Approval"). This Agreement has been duly executed and delivered
by Seller and constitutes a valid and binding obligation of Seller, enforceable
against Seller in accordance with and subject to its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar Laws relating to
creditors' rights and general principles of equity. The respective Boards of
Directors of Seller and the Seller General Partner have duly and validly
approved, and taken all corporate or partnership action required to be taken by
them for the consummation of the Transactions, including but not limited to all
actions required to render inapplicable to the Merger and this Agreement (and
the transactions provided for herein) the restrictions on "business
combinations" (as defined in Section 203(a)(1) of the DGCL) set forth in Section
203 of the DGCL.
(b) The execution and delivery of this Agreement by Seller do
not, and the consummation of the transactions contemplated by this Agreement to
which Seller is a party and compliance by Seller with the provisions of this
Agreement will not, require any consent, approval or notice under, or conflict
with, or result in any
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violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a benefit under, or result in the creation of any
Lien upon any of the properties or assets of Seller or any Seller Subsidiary
under, (i) the Certificate of Incorporation or the Amended and Restated By-laws
of Seller or the comparable certificate of incorporation or organizational
documents or partnership or similar agreement (as the case may be) of any Seller
Subsidiary, each as amended or supplemented to the date hereof, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, reciprocal easement
agreement, lease, joint venture agreement, development agreement, benefit plan
or other agreement, instrument, permit, concession, franchise or license
applicable to Seller or any Seller Subsidiary or their respective properties or
assets or (iii) subject to the governmental filings and other matters referred
to in the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation (collectively, "Laws") applicable to Seller or any
Seller Subsidiary, or their respective properties or assets, other than, in the
case of clause (ii) (other than such items relating to the incurrence of
indebtedness) or (iii), any such conflicts, violations, defaults, rights, loss
or Liens that individually or in the aggregate would not reasonably be expected
to (x) have a Seller Material Adverse Effect or (y) prevent or delay beyond
December 31, 1999 the consummation of the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or registration,
declaration or filing with, any federal, state or local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity"), is required
by or with respect to Seller or any Seller Subsidiary in connection with the
execution and delivery of this Agreement by Seller or the consummation by Seller
of the transactions contemplated by this Agreement, except for (i) the filing
with the Securities and Exchange Commission (the "SEC") and the New York Stock
Exchange of the Proxy Statement (as defined in Section 5.1(a)) and any filings
required by the Exchange Act (including Schedule 13E-3), (ii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware,
(iii) the filing of a certificate of merger with the Secretary of State of the
State of Delaware with respect to the Partnership Merger, (iv) any filings
required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (v) the filing of a Form D with the SEC with respect to
the transaction contemplated by the Partnership Merger Agreement and (vi) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings (A) as are set forth in Section 2.5 of the Seller Disclosure Letter,
(B) as may be required under (y) federal, state or local environmental Laws or
(z) the "blue sky" laws of various states, to the extent applicable or (C)
which, if not obtained or made, would not prevent or delay beyond December 31,
1999 the consummation of any of the transactions contemplated by this Agreement
or otherwise prevent or delay beyond December 31, 1999 Seller from performing
its obligations under this Agreement in any material respect or have,
individually or in the aggregate, a Seller Material Adverse Effect.
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2.6 SEC Documents; Financial Statements; Undisclosed Liabilities.
(a) Seller has filed all Seller SEC Documents (as defined below)
on a timely basis. Section 2.6 of the Seller Disclosure Letter contains a
complete list of all Seller SEC Documents filed by Seller or Seller Partnership
with the SEC since January 1, 1999 and on or prior to the date of this
Agreement. All of the Seller SEC Documents (other than preliminary material), as
of their respective filing dates, complied in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in each case, the rules and regulations promulgated
thereunder applicable to such Seller SEC Documents. None of the Seller SEC
Documents at the time of filing contained, or will contain at the time of filing
if not yet filed, any untrue statement of a material fact or omitted, or will
omit at the time of filing if not yet filed, to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except to
the extent such statements have been modified or superseded by later Seller SEC
Documents filed and publicly available. The consolidated financial statements of
Seller included in the Seller SEC Documents complied (or, with respect to the
Seller SEC Documents that have not been filed on or before the date hereof, will
comply) as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared (or will be prepared) in accordance with generally
accepted accounting principles ("GAAP") (except, in the case of unaudited
statements, as permitted by the applicable rules and regulations of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented (or will fairly present) in
all material respects, in accordance with the applicable requirements of GAAP
and the applicable rules and regulations of the SEC, the consolidated financial
position of Seller and its Subsidiaries, as of the dates thereof and the
consolidated results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Seller has no Subsidiaries which are not consolidated for
accounting purposes.
(b) Except (i) for liabilities or obligations incurred in the
ordinary course of business, (ii) for liabilities or obligations incurred in
connection with the transactions contemplated by this Agreement, or (iii) as
disclosed in the Seller SEC Documents filed after December 31, 1998 or in the
Seller Disclosure Letter, Seller and its Subsidiaries have no material
liabilities or obligations (whether absolute, accrued, contingent or otherwise).
As used herein, "Seller SEC Documents" shall mean all reports, schedules, forms,
statements and other documents required to be filed by the Seller with the SEC
since January 1, 1996; provided that with respect to all representations and
warranties of Seller contained in this Article 2 (except those contained in
Section 2.6(a)), references to Seller SEC Documents shall refer only to those
filings made prior to the date hereof.
2.7 Absence of Certain Changes or Events. Except as disclosed in the
Seller SEC Documents, since the date of the most recent audited financial
statements
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included in the Seller SEC Documents (the "Seller Financial Statement Date"),
Seller and its Subsidiaries have conducted their business only in the ordinary
course (taking into account prior practices, including the acquisition of
properties and issuance of securities) and, except as disclosed in the Seller
SEC Documents or the Seller Disclosure Letter, there has not been (a) any Seller
Material Adverse Change (as defined below), (b) except for regular quarterly
distributions not in excess of $.25 per Seller Common Share or Seller OP Unit
and dividends on the Seller Preferred Shares in accordance with the terms of
Seller's Certificate of Incorporation, respectively (or as necessary to maintain
REIT status), in each case subject to rounding adjustments as necessary and with
customary record and payment dates, and except as permitted by Section 5.9 of
this Agreement, any authorization, declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to the Seller Common Shares, the Seller OP Units or the Seller Preferred Shares,
(c) any split, combination or reclassification of the Seller Common Shares, the
Seller OP Units or the Seller Preferred 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 stock of Seller or partnership interests in Seller partnerships or any
issuance of an ownership interest in, any Seller Subsidiary, (d) any damage,
destruction or loss, whether or not covered by insurance, that has or would
reasonably be likely to have a Seller Material Adverse Effect, (e) any change in
financial or tax accounting methods, principles or practices by Seller or any
Seller Subsidiary materially affecting its assets, liabilities or business,
except insofar as may have been required by a change in GAAP, (f) (x) any
granting by Seller or any of its Subsidiaries to any officer or other key
employee of Seller or any of its Subsidiaries of any increase in compensation,
except for normal increases in the ordinary course of business consistent with
past practice or as required under employment agreements in effect as of
December 31, 1998, (y) any granting by Seller or any of its Subsidiaries to any
such officer or key employee of any increase in severance or termination pay,
except as was required under any employment, severance or termination agreements
in effect as of December 31, 1998 or (z) any entry by Seller or any of its
Subsidiaries into any employment, severance or termination agreement with any
such officer or key employee except in the ordinary course of business
consistent with past practice, (g) any acquisition or disposition of any real
property, or any commitment to do so, made by Seller or any of its Subsidiaries
or (h) any making or revocation of any material tax election. As used in this
Agreement, "Seller Material Adverse Change" shall mean (i) any material adverse
change in the business, properties, assets, financial condition or results of
operations of Seller and its Subsidiaries, taken as a whole, or (ii) any other
change that would prevent or delay beyond December 31, 1999 the ability of
Seller, the Seller General Partner or the Seller Partnership from consummating
any of the Transactions.
2.8 Litigation. Except as disclosed in the Seller SEC Documents, and
other than personal injury and other routine tort litigation arising from the
ordinary course of operations of Seller and its Subsidiaries (a) which are
covered by adequate insurance or (b) for which all material costs and
liabilities arising therefrom are reimbursable pursuant to common area
maintenance or similar agreements, as of the
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date hereof, there are no suits, actions or proceedings pending (in which
service of process has been received by an employee of Seller or an Seller
Subsidiary) or, to the Knowledge of Seller, threatened in writing against or
affecting Seller or any Seller Subsidiary that, individually or in the
aggregate, would reasonably be expected to (i) have a Seller Material Adverse
Effect or (ii) prevent or delay beyond December 31, 1999 the consummation of any
of the material transactions contemplated by this Agreement, nor are there any
judgments, decrees, injunctions, rules or orders of any court or arbitrator or
suits, actions or proceedings pending or threatened in writing by any
Governmental Entity outstanding against Seller or any of its Subsidiaries with
respect to any of the Transactions. Notwithstanding the foregoing, (y) Section
2.8 of the Seller Disclosure Letter sets forth, as of the date hereof, each and
every (i) uninsured claim with respect to which if determined adversely would
reasonably be expected to result in a dollar cost to Seller or its Subsidiaries
in excess of $100,000, (ii) equal employment opportunity claim against Seller or
a Seller Subsidiary with respect to which if determined adversely would
reasonably be expected to result in a cost in excess of $100,000 and (iii) claim
against Seller or a Seller Subsidiary relating to sexual harassment and/or
discrimination pending or, to the Knowledge of Seller, threatened as of the date
hereof with respect to which if determined adversely would reasonably be
expected to result in a cost in excess of $100,000, in each case with a brief
summary of such claim or threatened claim and (z) no claim is pending or has
been made within the five-year period ending on the date of this Agreement under
any director's or officer's liability insurance policy maintained at any time by
Seller or by any of its Subsidiaries.
2.9 Properties.
(a) Seller or a Seller Subsidiary set forth in Section 2.2 of the
Seller Disclosure Letter owns good and marketable fee simple title to each of
the real properties identified in Section 2.2 of the Seller Disclosure Letter
(collectively, the "Seller Properties" and each, a "Seller Property"), which are
all of the real properties owned by them as of the date hereof. Except as set
forth in the existing title reports identified in clause (iii) below and except
for any easements granted in the ordinary course of business since the date of
such title reports which do not have a material adverse effect on the operation
of any of the Seller Properties, no other Person has any real property ownership
interest in any of the Seller Properties. The Seller Properties are not subject
to any rights of way, written agreements, Laws, ordinances and regulations
affecting building use or occupancy, or reservations of an interest in title
(collectively, "Property Restrictions") or Liens (including Liens for Taxes),
mortgages or deeds of trust, claims against title, charges which are Liens,
security interests or other encumbrances on title (the "Encumbrances"), except
for (i) Property Restrictions and Encumbrances set forth in Section 2.9(a)(i) of
the Seller Disclosure Letter, (ii) Property Restrictions imposed or promulgated
by law or any governmental body or authority with respect to real property,
including zoning regulations, which, individually or in the aggregate, would not
have a Seller Material Adverse Effect, (iii) Property Restrictions and
Encumbrances disclosed on existing title reports or existing surveys (in either
case copies of which title reports and
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surveys have been delivered to Xxxxxxxx & Xxxxxxxx or made available to Buyer's
representatives at the offices of Xxxx and Xxxx LLP on or prior to February 18,
1999); provided that such Encumbrances secure either indebtedness which is
described in the Seller Disclosure Letter or indebtedness which has been
discharged in full, and (iv) mechanics', carriers', workmen's, repairmen's Liens
and other Encumbrances and Property Restrictions, if any, which, individually or
in the aggregate, would not have a Seller Material Adverse Effect. Section 2.9
of the Seller Disclosure Letter lists each of the Seller Properties which is
under development as of the date of this Agreement and describes the status of
such development as of the date hereof.
(b) Valid policies of title insurance have been issued insuring
Seller or the applicable Seller Subsidiary's fee simple title to each of the
Seller Properties owned by it in amounts at least equal to the purchase price
thereof paid by Seller or its Subsidiary subject only to the matters disclosed
above and in Section 2.9(b) of the Seller Disclosure Letter. Such policies are,
at the date hereof, in full force and effect. No claim has been made against any
such policy.
(c) Seller has not failed to obtain and maintain in full force
and effect a certificate, permit or license from any governmental authority
having jurisdiction over any of the Seller Properties which failure,
individually or in the aggregate, would have a Seller Material Adverse Effect.
There is no pending threat of modification or cancellation of any of same which,
individually or in the aggregate, would have a Seller Material Adverse Effect.
There is no notice of any violation of any federal, state or municipal law,
ordinance, order, regulation or requirement issued by any governmental authority
which, individually or in the aggregate, would have a Seller Material Adverse
Effect. There has been no physical damage to any Seller Properties which,
individually or in the aggregate, would have a Seller Material Adverse Effect
for which there is no insurance in effect covering the cost of the restoration.
(d) Neither Seller nor any of the Seller Subsidiaries has
received any notice with respect to any Seller Property to the effect that any
condemnation or rezoning proceedings are pending or threatened which,
individually or in the aggregate, would have a Seller Material Adverse Effect.
All work to be performed, payments to be made and actions to be taken by Seller
or the Seller Subsidiaries prior to the date hereof pursuant to any agreement
entered into with a governmental body or authority in connection with a site
approval, zoning reclassification or other similar action (e.g., Local
Improvement District, Road Improvement District, Environmental Mitigation)
material to Seller and the Seller Subsidiaries taken as a whole have been
performed, paid or taken, as the case may be, and Seller has no Knowledge of any
planned or proposed work, payments or actions that may be required after the
date hereof pursuant to such agreements that are material to Seller and the
Seller Subsidiaries taken as a whole.
(e) Except as set forth in Section 2.9(e) of the Seller
Disclosure Letter, all of the Seller's Properties are self-managed.
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(f) The rent roll for the Seller's Properties as of February 1,
1999 has been previously delivered to Buyer and was complete and correct in all
material respects as of the date thereof.
(g) Except as set forth in Section 2.9(g) of the Seller
Disclosure Letter, no Seller Property is currently under development or subject
to any agreement with respect to development, and neither Seller nor any Seller
Subsidiary shall enter into any such agreements between the date hereof and the
Effective Time without the prior written approval of Buyer; provided, however,
that "development" shall not include capital improvements made in the ordinary
course of business to existing Seller Properties and repairs made to existing
Seller Properties.
(h) No Governmental Entity having jurisdiction over any Seller
Property under development has denied or rejected any applications by Seller for
a certificate, permit or license with respect to such Seller Property, which
denial or rejection, individually or in the aggregate, would have a Seller
Material Adverse Effect.
(i) For purposes of this Section 2.9, all individual items that
are qualified by Seller Material Adverse Effect and do not cause a
representation set forth in this Section 2.9 to be untrue because such items
individually do not have a Seller Material Adverse Effect shall be aggregated
and the representations set forth in this Section 2.9 shall be deemed to be
untrue if the aggregate of all of such individual matters has a Seller Material
Adverse Effect.
(j) All buildings, structures and other improvements in, on or
within the Seller Properties are in good operating condition and repair, subject
to continued repair and replacement in accordance with past practice except for
any failures to be in such condition and repair that would not, individually or
in the aggregate, have a Seller Material Adverse Effect.
2.10 Environmental Matters.
(a) Except as disclosed in the Seller SEC Documents and Seller's
Environmental Reports (as defined below) previously made available to Buyer, to
Seller's knowledge, none of Seller, any of the Seller Subsidiaries or any other
Person has caused or permitted (i) the presence of any hazardous substances,
hazardous materials, toxic substances or waste materials, pollutants,
contaminants, and materials regulated or defined or designated as hazardous,
extremely or imminently hazardous, dangerous, or toxic pursuant to any local,
county, state, territorial or federal governmental authority or with respect to
which such a governmental authority otherwise requires environmental
investigation, monitoring, reporting or remediation (collectively, "Hazardous
Materials") on any of the Seller Properties that is not in compliance with, or
that would result in any liability under, any Environmental Law or (ii) any
spills, releases, discharges or disposal of Hazardous Materials to have occurred
or be presently occurring on or from the Seller Properties as a result of any
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construction on or operation and use of the Seller Properties, which presence or
occurrence would, individually or in the aggregate, have a Seller Material
Adverse Effect; and in connection with the construction on or operation and use
of the Seller Properties, Seller and the Seller Subsidiaries have complied with
all applicable local, state and federal Environmental Laws, including all
regulations, ordinances and administrative and judicial orders relating to the
generation, recycling, reuse, sale, storage, handling, transport and disposal of
any Hazardous Materials, except to the extent such failure to comply,
individually or in the aggregate, would not have a Seller Material Adverse
Effect. With respect to each Seller Property, since the date of the most recent
Seller's Environmental Report relating to such Seller Property, except where the
failure of any of the following to be true individually or in the aggregate
would not have a Seller Material Adverse Effect, (i) the assets, properties,
businesses and operations of Seller and its Subsidiaries are and have been in
compliance with applicable Environmental Laws, (ii) Seller and its Subsidiaries
have obtained, currently maintain and, as currently operating, are in compliance
with all Seller Permits necessary under any Environmental Law for the conduct of
the business and operations of Seller and its Subsidiaries in the manner now
conducted, and there are no actions or proceedings pending or threatened to
revoke or materially modify such Seller Permits, (iii) no Hazardous Materials
have been used, stored, manufactured, treated, processed or transported to or
from any such Seller Property except as necessary to the customary conduct of
business and in compliance with law and in a manner that does not result in
liability under Environmental Laws; (iv) there have been no spills, releases,
discharges or disposals of Hazardous Materials on or from such Seller Property;
and (v) Seller and Seller Subsidiaries have not received any notice of potential
responsibility, letter of inquiry or notice of alleged liability from any Person
regarding such Seller Property or the business conducted thereon. For the
purposes of this Paragraph 2.10 only, "Seller Properties" shall be deemed to
include all property formerly owned, operated or leased by Seller or Seller
Subsidiaries; solely, however, as to the period of time when such property was
so owned, operated or leased by Seller or the Seller Subsidiaries. Seller has
previously delivered or made available to Buyer complete copies of all final
versions of environmental investigations and testing or analysis (other than
those which have been superseded by more recent investigations, testing or
analyses) that are in the possession, custody or control of any of Seller or any
of the Seller Subsidiaries with respect to the environmental condition of the
Seller Properties, all of which are listed in Section 2.10 of the Seller
Disclosure Letter ("Seller's Environmental Reports").
(b) Except as set forth in Seller's Environmental Reports, (i)
there are no asbestos-containing materials, lead-based paints, or radon at, in
or part of any facility owned, operated or leased by Seller or any of its
Subsidiaries, the presence of which, individually or in the aggregate, would
reasonably be expected to result in Seller incurring Environmental Liabilities
and Costs aggregating $30 million or more and (ii) there are no underground
storage tanks owned, operated or controlled by Seller or its Subsidiaries on any
real property owned, operated or leased by Seller, the presence of which,
individually or in the aggregate, would be reasonably expected to result in
Seller incurring Environmental Liabilities and Costs aggregating $30 million or
more.
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(c) For purposes of this Agreement, the terms below shall have
the following meanings:
"Environmental Law" means any law (including, without limitation,
common law), regulation, ordinance, guideline, code, decree, judgment, order,
permit or authorization or other legally enforceable requirement of any
Governmental Entity relating to or imposing liability with respect to worker or
public safety or the indoor or outdoor environment or natural resources,
including, without limitation, pollution, contamination, Hazardous Materials,
cleanup, regulation and protection of the air, natural resources, water or soils
in the indoor or outdoor environment; and
"Environmental Liabilities and Costs" means all losses,
liabilities, damages, fines, penalties, obligations, costs or expenses
(including, without limitation, fees, disbursements, expenses of legal counsel,
experts and engineers and the costs of investigation and cleanup studies and to
remove, treat or clean up Hazardous Materials) incurred, assessed or levied
pursuant to any Environmental Law.
2.11 Related Party Transactions. Set forth in Section 2.11 of the Seller
Disclosure Letter is a list of all arrangements, agreements and contracts
entered into by Seller or any of the Seller Subsidiaries with any Person who is
an officer, director or Affiliate (as defined below) of Seller, or any entity of
which any of the foregoing is an Affiliate, except those of a type available to
Seller employees generally. Such documents, copies of all of which have
previously been delivered or made available to Buyer, are listed in Section 2.11
of the Seller Disclosure Letter. As used in this Agreement, the term "Affiliate"
shall have the same meaning as such term is defined in Rule 405 promulgated
under the Securities Act.
2.12 Employee Benefits. As used herein, the term "Employee Plan"
includes any pension, retirement, savings, disability, medical, dental, health,
life, death benefit, group insurance, profit sharing, deferred compensation,
stock option, bonus, incentive, vacation pay, tuition reimbursement, severance
pay, or other material employee benefit plan, trust, employment agreement,
contract, agreement, policy or commitment (including, without limitation, any
pension plan, as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended and the rules and regulations promulgated
thereunder ("ERISA") ("Pension Plan"), and any welfare plan as defined in
Section 3(1) of ERISA ("Welfare Plan")), whether any of the foregoing is funded,
insured or self-funded, written or oral, (i) sponsored or maintained by Seller
or its Subsidiaries (each a "Controlled Group Member") and covering any
Controlled Group Member's active or former employees (or their beneficiaries),
(ii) to which any Controlled Group Member is a party or by which any Controlled
Group Member (or any of the rights, properties or assets thereof) is bound or
(iii) with respect to which any current Controlled Group Member may otherwise
have any material liability (whether or not such Controlled Group Member still
maintains such Employee Plan). Each Employee Plan is listed in Section 2.12 of
the Seller Disclosure Letter. With respect to the Employee Plans:
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(a) Except as disclosed in Section 2.12 of the Seller Disclosure
Letter, no Controlled Group Member has any continuing liability under any
Welfare Plan which provides for continuing benefits or coverage for any
participant or any beneficiary of a participant after such participant's
termination of employment, except as may be required by Section 4980B of the
Internal Revenue Code of 1986, as amended (the "Code"), or Section 601 (et seq.)
of ERISA, or under any applicable state law, and at the expense of the
participant or the beneficiary of the participant.
(b) Each Employee Plan complies in all material respects with the
applicable requirements of ERISA and any other applicable law governing such
Employee Plan, and each Employee Plan has at all times been properly
administered in all material respects in accordance with all such requirements
of law, and in accordance with its terms and the terms of any applicable
collective bargaining agreement to the extent consistent with all such
requirements of law. Each Pension Plan which is intended to be qualified is
qualified under Section 401(a) of the Code, has received a favorable
determination letter from the IRS stating that such Plan meets the requirements
of Section 401(a) of the Code and that the trust associated with such Plan is
tax exempt under Section 501(a) of the Code and to the Knowledge of Seller no
event has occurred which would jeopardize the qualified status of any such plan
or the tax exempt status of any such trust under Sections 401(a) and Section
501(a) of the Code, respectively, except in circumstances in which, individually
or in the aggregate, the failure to so qualify or be tax exempt would not have a
Seller Material Adverse Effect. No lawsuits, claims (other than routine claims
for benefits) or complaints to, or by, any Person or Governmental Entity have
been filed or are pending which, individually or in the aggregate, would have a
Seller Material Adverse Effect and, to the Knowledge of Seller, there is no fact
or contemplated event which would be expected to give rise to any such lawsuit,
claim (other than routine claims for benefits) or complaint with respect to any
Employee Plan that would have a Seller Material Adverse Effect. Without limiting
the foregoing, except in the case of the following clauses (i) through (vi) as
would not individually or in the aggregate have a Seller Material Adverse
Effect, the following are true with respect to each Employee Plan:
(i) all Controlled Group Members have filed or caused to
be filed every material return, report statement, notice,
declaration and other document required by any law or
governmental agency, federal, state and local (including, without
limitation, the Internal Revenue Service and the Department of
Labor) with respect to each such Employee Plan, each of such
filings has been complete and accurate in all material respects
and no Controlled Group Member has incurred any material
liability in connection with such filings;
(ii) all Controlled Group Members have delivered or caused
to be delivered to every participant, beneficiary and other party
entitled to such material, all material plan descriptions,
returns, reports, schedules, notices, statements and similar
materials, including, without
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limitation, summary plan descriptions and summary annual reports,
as are required under Title I of ERISA, the Code, or both, and no
Controlled Group Member has incurred any material liability in
connection with such deliveries;
(iii) all contributions and payments with respect to
Employee Plans that are required to be made by a Controlled Group
Member with respect to periods ending on or before the Closing
Date (including periods from the first day of the current plan or
policy year to the Closing Date) have been, or will be, made or
accrued before the Closing Date in accordance with the
appropriate plan document, actuarial report, collective
bargaining agreements or insurance contracts or arrangements or
as otherwise required by ERISA or the Code;
(iv) with respect to each such Employee Plan, to the
extent applicable, Seller has delivered to or has made available
to Buyer true and complete copies of (A) plan documents, or any
and all other documents that establish the existence of the plan,
trust, arrangement, contract, policy or commitment and all
amendments thereto, (B) the most recent determination letter, if
any, received from the Internal Revenue Service, (C) the three
most recent Form 5500 Annual Reports (and all schedules and
reports relating thereto) and actuarial reports and (D) all
related trust agreements, insurance contract or other funding
agreements that implement each such Employee Plan;
(v) no payment made or to be made to an officer, director
or employee pursuant to an Employee Plan either before, on, or
after consummation of the transactions contemplated by this
Agreement shall constitute an "excess parachute payment" within
the meaning of Section 280G of the Code; and
(vi) consummation of the transactions contemplated by this
Agreement shall not (A) give rise to a severance pay obligation
with respect to those employees who continue employment with the
Surviving Corporation or (B) enhance or trigger (including
acceleration of vesting, payment or funding) any benefits under
any Employee Plan.
(c) With respect to each Employee Plan, there has not occurred,
and no Person or entity is contractually bound to enter into, any "prohibited
transaction" within the meaning of Section 4975(c) of the Code of Section 406 of
ERISA, which transaction is not exempt under Section 4975(d) of the Code or
Section 408 of ERISA which, individually or in the aggregate, would have a
Seller Material Adverse Effect.
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(d) No Controlled Group Member has maintained or been obligated
to contribute to any Employee Plan subject to Code Section 412 or Title IV of
ERISA.
2.13 Employee Matters. Neither Seller nor any of the Seller Subsidiaries
is a party to, or bound by, any collective bargaining agreement, contract or
other agreement or understanding with a labor union or other labor organization,
nor has Seller or any of the Seller Subsidiaries agreed that any unit of its
employees is appropriate for collective bargaining. No union or other labor
organization has been certified as bargaining representative for any of Seller's
employees. To the Knowledge of Seller, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being made or
threatened involving employees of Seller or any of the Seller Subsidiaries.
2.14 Taxes.
(a) Each of Seller and the Seller Subsidiaries and any
consolidated, combined, unitary or aggregate group for tax purposes of which
Seller or any Seller Subsidiary is or has been a member has timely filed all Tax
Returns (as defined below) required to be filed by it (after giving effect to
any timely filed extension properly granted by a Tax Authority (as defined
below) having authority to do so) and has timely paid (or Seller has timely paid
on its behalf) all Taxes (as defined below) shown on such Tax Returns as
required to be paid by it except (i) as set forth in Section 2.14 of the Seller
Disclosure Letter, (ii) Taxes that are being contested in good faith by
appropriate proceedings and for which Seller or the applicable Seller Subsidiary
shall have set aside on its books adequate reserves or (iii) where the failure
to file such Tax Returns or pay such Taxes would not have a Seller Material
Adverse Effect. Each such Tax Return is complete and accurate except where any
failure to be complete and accurate would not have a Seller Material Adverse
Effect. The most recent audited financial statements contained in the Seller SEC
Documents reflect an adequate reserve for all Taxes payable by Seller and the
Seller Subsidiaries for all taxable periods and portions thereof through the
date of such financial statements except where any failure would not have a
Seller Material Adverse Effect. Since the Seller Financial Statement Date,
Seller has incurred no liability for Taxes under Sections 857(b), 857(f), 860(c)
or 4981 of the Code, including without limitation any Tax arising from a
prohibited transaction described in Sec tion 857(b)(6) of the Code, and neither
Seller nor any Seller Subsidiary has incurred any material liability for Taxes
other than in the ordinary course of business. No event has occurred, and no
condition or circumstance exists, which presents a risk that any Tax described
in the preceding sentence will be imposed upon Seller or any Seller Subsidiary
except where any failure would not have a Seller Material Adverse Effect. No
material deficiencies for any Taxes have been proposed, asserted or assessed
against Seller or any Seller Subsidiary, and no requests for waivers of the time
to assess any such Taxes are pending and no extensions of time to assess any
such Taxes are in effect. All Taxes required to be withheld, collected and paid
over to any Tax Authority by the Seller and any Seller Subsidiary have been
timely withheld, collected and paid over to the proper Tax Authority except
where failure to
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do so would not have a Seller Material Adverse Effect. Except as set forth in
Section 2.14 of the Seller Disclosure Letter, there are no material pending
actions or proceedings by any Taxing Authority for assessment or collection of
any Tax. Complete copies of all federal, state and local income or franchise Tax
Returns that have been filed by Seller and each Seller Subsidiary for all
taxable years beginning on or after January 1, 1996, all extensions filed with
any Tax Authority that are currently in effect and all written communications
with a Taxing Authority relating thereto, have been or will hereafter promptly
be delivered to the Buyer and the representatives of the Buyer. No claim has
been made by a Taxing Authority in a jurisdiction where Seller or any Seller
Subsidiary does not file Tax Returns that it is or may be subject to taxation by
the jurisdiction except where the failure to file such Tax Return would not have
a Seller Material Adverse Effect. Neither the Seller nor any Seller Subsidiary
holds any material asset (A) the disposition of which would be subject to rules
similar to Section 1374 of the Code as a result of an election under Internal
Revenue Service Notice 88-19, or (B) that is subject to a consent filed pursuant
to Section 341(f) of the Code and the regulations thereunder. Except as set
forth in Section 2.14 of the Seller Disclosure Letter, neither the Seller, nor
any Seller Subsidiary is obligated to make after the Closing any payment that
would not be deductible pursuant to Section 162(m) of the Code except where the
lack of such deduction would not have a Seller Material Adverse Effect. Except
as set forth in Section 2.14 of the Seller Disclosure Letter, neither Seller nor
any Seller Subsidiary is party to, nor has any liability under (including
liability with respect to any predecessor entity), any indemnification,
allocation or sharing agreement with respect to Taxes. As used in this
Agreement, "Tax" or "Taxes" shall include all federal, state, local and foreign
income, property, sales, use, occupancy, transfer, recording, withholding,
franchise, employment, excise and other taxes, tariffs or governmental charges
of any nature whatsoever, together with penalties, interest or additions to tax
with respect thereto. As used in this Agreement, "Tax Return" or "Tax Returns"
shall include all original and amended returns and reports (including elections,
claims, declarations, disclosures, schedules, estimates, computations and
information returns) required to be supplied to a Tax Authority in any
jurisdiction. As used in this Agreement, "Tax Authority" shall mean the Internal
Revenue Service and any other domestic or foreign bureau, department, entity,
agency or other Governmental Entity responsible for the administration of any
Tax.
(b) Seller (i) for all taxable years commencing with its initial
taxable year through December 31, 1998 has been properly subject to taxation as
a real estate investment trust (a "REIT") within the meaning of Section 856 of
the Code and has qualified as a REIT for such years, (ii) has operated since
December 31, 1998, and will continue to operate to the Closing, in such a manner
as to qualify as a REIT for the taxable year beginning January 1, 1999
determined as if the taxable year of the REIT ended as of the Closing and (iii)
has not taken or omitted to take any action which would reasonably be expected
to result in a challenge to its status as a REIT, and no such challenge is
pending or to Seller's Knowledge threatened. Each Seller Subsidiary which 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 as a separate
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entity, as the case may be, and has not been treated for federal income tax
purposes as a corporation or an association taxable as a corporation and (ii)
has not since the later of its formation or the acquisition by Seller of a
direct or indirect interest therein owned any assets (including, without
limitation, securities) that would cause Seller to violate Section 856(c)(4) of
the Code. The nature of the assets of the Seller and the Seller Subsidiaries is
such that the sale of all of the assets owned by them would not cause the Seller
to be disqualified as a REIT under Code Section 856(c)(2) or 856(c)(3) or
otherwise. The Seller has not elected and will not elect to pay Tax on any
capital gain recognized on or after January 1, 1999. Each Seller Subsidiary
which is a corporation has been since its formation a qualified REIT subsidiary
under Section 856(i) of the Code. Seller Partnership is not a publicly traded
partnership within the meaning of Section 7704 of the Code, and the interests in
the Seller Partnership are not considered to be (i) traded on an established
securities market or (ii) readily tradable on a secondary market or the
substantial equivalent thereof under either Internal Revenue Service Notice
88-75 or Treasury Regulations Section 1.7704-1. In the case of a partner of
Seller Partnership that is a Flow-Through Entity (as defined below), no Person
owning an interest in such Flow-Through Entity (directly or through another
Flow-Through Entity) is treated as a partner of the Seller Partnership under
either Internal Revenue Service Notice 88-75 or Treasury Regulation Section
1.7704-1(h)(3). For purposes of this Section 2.14(b), "Flow-Through Entity"
means an entity classified as a partnership, a grantor trust or an S corporation
for federal income tax purposes.
(c) For purposes of this Section 2.14, all individual items that
are qualified by Seller Material Adverse Effect and do not cause a
representation set forth in this Section 2.14 to be untrue because such items
individually do not have a Seller Material Adverse Effect shall be aggregated
and the representations set forth in this Section 2.14 shall be deemed to be
untrue if the aggregate of all of such individual matters has a Seller Material
Adverse Effect.
2.15 No Payments to Employees, Officers or Directors. Section 2.15 of
the Seller Disclosure Letter contains a true and complete list of all cash and
non-cash payments, rights to property or other contract rights which will become
payable, accelerated or vested to or in each employee, officer or director of
Seller or any Seller Subsidiary as a result of the Merger. There is no
employment or severance contract, or other agreement requiring payments or an
increase in existing payments, cancellation of indebtedness or other obligation
to be made on a change of control or otherwise as a result of the consummation
of any of the transactions contemplated by this Agreement, with respect to any
employee, officer or director of Seller or any Seller Subsidiary.
2.16 Brokers. No broker, investment banker, financial advisor or other
Person, other than Lazard Freres & Co. LLC ("Lazard"), Xxxxxx Brothers Inc.
("Xxxxxx") and Prudential Securities Incorporated ("Prudential"), the fees and
expenses of which are as described in the engagement letters dated May 22, 1998,
as amended on July 27, 1998, May 26, 1998, and December 17, 1998, respectively,
and, in the case of Prudential, as further amended on April 13, 1999, true and
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correct copies of which have previously been given to Buyer, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of Seller or any Seller Subsidiary.
2.17 Compliance With Laws. Except as set forth on Section 2.17 of the
Seller Disclosure Letter, (i) neither Seller nor any of the Seller Subsidiaries
has violated or failed to comply with any statute, law, ordinance, regulation,
rule, judgment, decree or order of any Governmental Entity applicable to its
business, properties or operations, except to the extent that such violation or
failure has not had or would not reasonably be expected to have a Seller
Material Adverse Effect; (ii) Seller and its Subsidiaries have, and are in
compliance with, all permits, licenses, certificates, franchises, registrations,
variances, exemptions, orders and approvals of all Governmental Entities which
are material to the operation of their businesses, taken as a whole ("Seller
Permits"), except where the failure to comply has not had or would not
reasonably be expected to have a Seller Material Adverse Effect; and (iii) no
investigation by any Governmental Entity with respect to the Seller or the
Seller Subsidiaries is pending or, to the knowledge of the Seller, threatened,
other than investigations which, individually or in the aggregate, would not
reasonably be expected to have a Seller Material Adverse Effect.
2.18 Contracts; Debt Instruments.
(a) Except as disclosed in the Seller SEC Documents, there is no
contract or agreement that purports to limit in any material respect the
geographic location in which Seller or any Seller Subsidiary may conduct its
business. Neither Seller nor any Seller Subsidiary (i) is in violation of or in
default under any material loan or credit agreement, note, bond, mortgage,
indenture, lease, permit, concession, franchise, license or any other material
contract, agreement, arrangement or understanding, to which it is a party or by
which it or any of its properties or assets is bound (each, a "Material
Contract"), nor (ii) to the Knowledge of Seller does such a violation or default
exist, except to the extent that such violation or default referred to in
clauses (i) or (ii), individually or in the aggregate, would not have a Seller
Material Adverse Effect. Each Material Contract which has not been filed as an
Exhibit to any of the Seller SEC Documents has been previously delivered to
Xxxxxxxx & Xxxxxxxx or made available to Buyer's representatives at the offices
of Xxxx and Xxxx LLP on or prior to February 18, 1999, and a list of all
Material Contracts that have not been so filed is set forth in Section 2.18(a)
of the Seller Disclosure Letter. Seller has previously delivered to Xxxxxxxx &
Xxxxxxxx or made available to Buyer's representatives at the offices of Xxxx and
Xxxx LLP on or prior to February 18, 1999, all contracts and other agreements
relating to the contribution of assets to Seller Partnership in exchange for
Seller OP Units (the "Seller Contribution Agreements"). Except as set forth in
Section 2.18(a) of the Seller Disclosure Letter, neither Seller nor any of its
Subsidiaries is in default in any respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
Material Contract to which it is a party where such
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default, individually or in the aggregate, would reasonably be expected to have
a Seller Material Adverse Effect.
(b) Section 2.18(b) of the Seller Disclosure Letter sets forth a
list as of the date hereof of each loan or credit agreement, note, bond,
mortgage, indenture and any other agreement and instrument pursuant to which any
Indebtedness (as defined below) of Seller or any of Seller Subsidiaries, other
than Indebtedness payable to Seller or a Seller Subsidiary, is outstanding or
may be incurred in an amount in excess of $50,000, together with the amount
outstanding thereunder as of the date hereof. For purposes of this Section 2.18,
"Indebtedness" shall mean (i) indebtedness for borrowed money, whether secured
or unsecured, (ii) obligations under conditional sale or other title retention
agreements relating to property purchased by such Person, (iii) capitalized
lease obligations, (iv) obligations under interest rate cap, swap, collar or
similar transaction or currency hedging transactions (valued at the termination
value thereof) and (v) guarantees of any such indebtedness of any other Person.
(c) To the extent not set forth in response to the requirements
of Section 2.18(b), Section 2.18 of the Seller Disclosure Letter sets forth as
of the date hereof each interest rate cap, interest rate collar, interest rate
swap, currency hedging transaction, and any other agreement relating to a
similar transaction, in each case involving $50,000 or more, to which Seller or
any Seller Subsidiary is a party or an obligor with respect thereto.
(d) Neither Seller nor any of the Seller Subsidiaries is a party
to any agreement relating to the management of any of the Seller Properties by
any Person other than Seller Partnership.
(e) Neither Seller nor any of the Seller Subsidiaries is a party
to any agreement pursuant to which Seller or any Seller Subsidiary manages any
real properties other than Seller Properties, except for the agreements
described in Section 2.18 of the Seller Disclosure Letter (the "Outside Property
Management Agreements"). The Outside Property Management Agreements constitute
legal, valid, binding and enforceable obligations of Seller and, to Seller's
Knowledge, of each other party thereto, and there exists no default of Seller
or, to Seller's Knowledge, any other party thereto, except for any defaults that
would not reasonably be expected to have a Seller Material Adverse Effect.
(f) Section 2.18 of the Seller Disclosure Letter lists all
agreements entered into by Seller or any of the Seller Subsidiaries relating to
the development or construction of, or additions or expansions to, any Seller
Properties which are currently in effect and under which Seller or any of the
Seller Subsidiaries currently has, or expects to incur, any obligation in excess
of $1,000,000 per Seller Property or $10,000,000 in the aggregate. True and
correct copies of such agreements have previously been delivered or made
available to Buyer.
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(g) Section 2.18(g) of the Seller Disclosure Letter lists all
agreements entered into by Seller or any of the Seller Subsidiaries providing
for the sale or exchange of, or option to sell or exchange, any Seller
Properties or the purchase of or exchange, or option to purchase or exchange,
any real estate which are currently in effect.
(h) Neither Seller nor any Seller Subsidiary has any continuing
contractual liability (i) for indemnification or otherwise under any agreement
relating to the sale of real estate previously owned, whether directly or
indirectly, by Seller or any Seller Subsidiary,(ii) to pay any additional
purchase price for any of the Seller Properties, or (iii) to make any
reprorations or adjustments to prorations involving an amount in excess of
$100,000 that may previously have been made with respect to any property
currently or formerly owned by Seller.
(i) Neither Seller nor any Seller Subsidiary has entered into or
is subject, directly or indirectly, to any "Tax Protection Agreements." As used
herein, a Tax Protection Agreement is an agreement, oral or written, (A) that
has as one of its purposes to permit a Person to take the position that such
Person could defer federal taxable income that otherwise might have been
recognized upon a transfer of property to Seller Partnership or any other Seller
Subsidiary that is treated as a partnership for federal income tax purposes, and
(B) that (i) prohibits or restricts in any manner the disposition of any assets
of Seller or any Seller Subsidiary, (ii) requires that Seller or any Seller
Subsidiary maintain, or put in place, or replace, indebtedness, secured by one
or more of the Seller Properties, or (iii) requires that Seller or any Seller
Subsidiary offer to any Person at any time the opportunity to guarantee or
otherwise assume, directly or indirectly, the risk of loss for federal income
tax purposes for indebtedness or other liabilities of Seller or any Seller
Subsidiary.
(j) Except as set forth in Section 2.18(j) of Seller Disclosure
Letter and except for obligations to provide funds to the Seller Partnership or
to Seller Subsidiaries owned entirely by Seller and/or Seller Partnership, there
are no material outstanding contractual obligations of Seller or its
Subsidiaries to provide any funds to, or make investments in, any other Person.
(k) Except as set forth in Section 2.18(k) of the Seller
Disclosure Letter and Section 2.18(i), neither Seller nor any of the Seller
Subsidiaries is party to any agreement which would restrict any of them from
prepaying any of their Indebtedness without penalty or premium at any time or
which requires any of them to maintain any amount of Indebtedness with respect
to any of the Seller Properties.
2.19 Opinions of Financial Advisors. Seller has received the opinions of
Lazard, Xxxxxx and Prudential, each dated April 13, 1999, a signed copy of each
of which is being provided to Buyer concurrently with the execution and delivery
of this Agreement, with respect to the fairness of the cash consideration to be
received by the holders (other than Parent and its Subsidiaries) of Seller
Common Shares and Seller OP Units in connection with the Merger and the
Partnership Merger.
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2.20 State Takeover Statutes. Seller has taken all action necessary to
exempt the transactions contemplated by this Agreement, including without
limitation the Merger and the Alternative Merger, among Parent, Buyer and Seller
and their respective Affiliates from the operation of any "fair price,"
"moratorium," "control share acquisition" or any other anti-takeover statute or
similar statute other than Section 203 of the DGCL enacted under the state or
federal Laws of the United States or similar statute or regulation (a "Takeover
Statute"). Assuming the accuracy of the representation and warranty of Parent
and Buyer set forth in Section 3.14, the action of the Board of Directors of the
Seller in approving the Merger and this Agreement (and the transactions provided
for herein) is sufficient to render inapplicable to the Merger and this
Agreement (and the transactions provided for herein, including without
limitation the Alternative Merger) the restrictions on "business combinations"
(as defined in Section 203 of the DGCL) set forth in Section 203 of the DGCL.
2.21 Proxy Statement and Consent Solicitation Statement. The information
relating to Seller and the Seller Subsidiaries included in the Proxy Statement
(as defined in Section 5.1(a)) and the Consent Solicitation Statement (as
defined in Section 5.1(a)) will not, as of the date of mailing of the Proxy
Statement and the Consent Solicitation Statement, respectively, contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.22 Investment Company Act of 1940. Neither Seller nor any of Seller
Subsidiaries is, or at the Effective Time will be, required to be registered
under the Investment Company Act of 1940, as amended (the "1940 Act").
2.23 Definition of Knowledge of Seller. As used in this Agreement, the
phrase "Knowledge of Seller" (or words of similar import) means the knowledge of
those individuals identified in Section 2.23 of the Seller Disclosure Letter.
2.24 Insurance. Seller and Seller Subsidiaries maintain insurance
coverage for Seller and Seller Subsidiaries and their respective properties and
assets of a type and in amounts typical of similar companies engaged in the
respective businesses in which Seller and Seller Subsidiaries are engaged. All
such insurance policies (a) are in full force and effect, and with respect to
all policies neither of Seller nor any Seller Subsidiary is delinquent in the
payment of any premiums thereon, and no notice of cancellation or termination
has been received with respect to any such policy, and (b) are sufficient for
compliance with all requirements of law and of all agreements to which Seller or
the Seller Subsidiaries are a party or otherwise bound and are valid,
outstanding, collectible, and enforceable policies, subject to any exception in
the case of either clause (a) or (b), as would not, alone or in the aggregate,
be reasonably expected to have a Seller Material Adverse Effect or prevent or
materially delay the ability of Seller to consummate the transactions
contemplated by this Agreement. Neither Seller nor any Seller Subsidiary has
received written notice within the last 12 months from any insurance company or
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board of fire underwriters of any defects or inadequacies that would materially
adversely affect the insurability of, or cause any material increase in the
premiums for, insurance covering either Seller or any Seller Subsidiary or any
of their respective properties or assets that have not been cured or repaired to
the satisfaction of the party issuing the notice, except as would not have a
Seller Material Adverse Effect.
2.25 Board Recommendation. The Board of Directors of Seller, at a
meeting duly called and held on April 13, 1999, based upon the recommendations
of a special committee of the Board of Directors of the Seller consisting of
four directors unaffiliated with Parent or Buyer, unanimously adopted
resolutions adopting this Agreement and approving the transactions contemplated
hereby, including the Merger and the Alternative Merger. The Board of Directors
of the general partner of the Seller Partnership (the "Seller General Partner"),
at a meeting duly called and held on April 13, 1999, unanimously adopted
resolutions adopting the Partnership Merger Agreement and approving the
transactions contemplated thereby, including, without limitation, the
Partnership Merger (such transactions, together with the transactions
contemplated by this Agreement, including, without limitation, the Merger and
the Alternative Merger, are hereinafter collectively referred to as the
"Transactions"). The Board of Directors of the Seller recommended that Seller's
stockholders adopt this Agreement and approve the Merger and the Alternative
Merger and the Board of Directors of the Seller General Partner recommended that
the Seller Unit Holders adopt the Partnership Merger Agreement and approve the
Partnership Merger. Such recommendations shall not be withdrawn, modified or
amended, other than as expressly permitted under Section 4.1.
2.26 Representations in Partnership Merger Agreement. The
representations and warranties of the Seller General Partner and the Seller
Partnership set forth in the Partnership Merger Agreement are true and correct.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Parent and Buyer, jointly and severally, represent and warrant to
Seller, except as set forth in the letter of even date herewith signed by a
general partner of Parent and the sole member of Buyer and delivered to Seller
prior to the execution hereof (the "Buyer Disclosure Letter") (it being
understood that the Buyer Disclosure Letter shall be arranged in sections
corresponding to the sections contained in this Article 3, and the disclosures
in any section of the Buyer Disclosure Letter shall qualify all of the
representations in the corresponding section of this Article 3 and, in addition,
other sections in this Article 3 to the extent it is clear from a reading of the
disclosure that such disclosure is applicable to such other sections) as
follows:
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3.1 Organization, Standing and Power of Parent and Buyer.
(a) Parent is a limited partnership duly organized and validly
existing under the Laws of Delaware and has the requisite power and authority to
carry on its business as now being conducted. Parent is duly qualified or
licensed to do business as a foreign limited partnership and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a material adverse effect on
the ability of Parent and Buyer to consummate the transactions contemplated by
this Agreement or the Partnership Merger Agreement ("Parent Material Adverse
Effect"). Parent has delivered to Seller complete and correct copies of its
organizational documents (including the partnership agreement of Parent) as
amended or supplemented to the date of this Agreement.
(b) Buyer is a limited liability company duly organized and
validly existing under the Laws of Delaware and has the requisite power and
authority to carry on its business as now being conducted. Buyer is duly
qualified or licensed to do business as a foreign limited liability company and
is in good standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualifications or
licensing necessary, other than in such jurisdictions where the failure to be so
qualified or licensed, individually or in the aggregate, would not have a
material adverse effect on the ability of Buyer to consummate the transactions
contemplated by this Agreement or the Partnership Merger Agreement (a "Buyer
Material Adverse Effect"). Buyer has delivered to Seller complete and correct
copies of its organizational documents as amended or supplemented to the date of
this Agreement.
(c) Parent and Buyer are newly formed and, except for activities
incident to the acquisition of Seller, neither Parent nor Buyer has (i) engaged
in any business activities of any type or kind whatsoever or (ii) acquired any
property of any type or kind whatsoever.
3.2 [Intentionally Omitted].
3.3 Ownership of Parent and Buyer. All of Parent's partnership interests
are owned by affiliates of The Berkshire Companies Limited Partnership,
Whitehall Street Real Estate Limited Partnership XI and Blackstone Real Estate
Acquisitions III L.L.C. Buyer is a wholly owned Subsidiary of Parent.
3.4 Authority; Noncontravention; Consents.
(a) Each of Parent and Buyer has the requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement to which it is a party. The execution and
delivery of this Agreement by Parent and Buyer and the consummation by Parent
and Buyer of the transactions
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contemplated by this Agreement to which Parent and/or Buyer is a party have been
duly authorized by all necessary partnership or limited liability company action
on the part of Parent and Buyer. This Agreement has been duly executed and
delivered by Parent and Buyer and constitutes a valid and binding obligation of
each of Parent and Buyer, enforceable against each of Parent and Buyer in
accordance with and subject to its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar Laws relating to creditors' rights and
general principles of equity.
(b) The execution and delivery of this Agreement by each of
Parent and Buyer does not, and the consummation of the transactions contemplated
by this Agreement to which Parent and/or Buyer is a party and compliance by each
of Parent and Buyer with the provisions of this Agreement will not, conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any material obligation or to loss of a material benefit under,
or result in the creation of any Lien upon any of the properties or assets of
Parent or any of its Subsidiaries under, (i) the organizational documents of
Parent or Buyer or the comparable certificate of incorporation or organizational
documents or partnership or similar agreement (as the case may be) of any other
Subsidiary of the Parent, each as amended or supplemented to the date of this
Agreement, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
reciprocal easement agreement, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent or any of its Subsidiaries
or their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any Laws
applicable to Parent or any of its Subsidiaries or their respective properties
or assets, other than, in the case of clause (ii) or (iii), any such conflicts,
violations, defaults, rights, loss or Liens that individually or in the
aggregate would not reasonably be expected to (x) have a Parent Material Adverse
Effect or a Buyer Material Adverse Effect or (y) prevent the consummation of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Parent or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by Parent or Buyer
or the consummation by Parent or Buyer of any of the transactions contemplated
by this Agreement, except for (i) any filings required under the Exchange Act
(including Schedule 13E-3), (ii) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware, (iii) the filing of a
certificate of merger with the Secretary of State of the State of Delaware with
respect to the Partnership Merger, (iv) such filings as may be required in
connection with the payment of any Transfer Taxes (as defined in Section 5.6),
(v) any filings required under the HSR Act, (vi) the filing of a Form D with the
SEC with respect to the transaction contemplated by the Partnership Merger
Agreement and (vii) such other consents, approvals, orders, authorizations,
registrations, declarations and filings (A) as may be required under federal,
state or local environmental Laws, (B) as may be required under the "blue sky"
laws of various states, to the extent applicable, or (C) which, if not obtained
or made, would not prevent or delay beyond December 31, 1999 the consummation of
any of the transactions contemplated by this Agreement or otherwise prevent
Parent or Buyer
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from performing its obligations under this Agreement in any material respect or
have, individually or in the aggregate, a Parent Material Adverse Effect.
3.5 Litigation. As of the date of this Agreement, there is no suit,
action or proceeding pending (in which service of process has been received by
an employee of Parent or any of its Subsidiaries) or, to the Knowledge of Parent
(as defined in Section 3.15), threatened in writing against or affecting Parent
or any of its Subsidiaries that, individually or in the aggregate, would
reasonably be expected to prevent or delay beyond December 31, 1999 the
consummation of any of the material transactions contemplated by this Agreement,
nor, as of the date of this Agreement, is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Parent or any of its Subsidiaries having, or which, insofar as
reasonably can be foreseen, in the future would have, any such effect.
3.6 Undisclosed Liability. Neither Parent nor Buyer has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) required by GAAP to be set forth on a consolidated balance sheet of
Parent or Buyer or in the notes thereto and which, individually or in the
aggregate, would have a Parent Material Adverse Effect or Buyer Material Adverse
Effect.
3.7 Brokers. No broker, investment banker, financial advisor or other
Person, other than Xxxxxxxxx & Co., LLC, the fees and expenses of which will be
paid by Parent, is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the Merger based upon
arrangements made by or on behalf of Parent or any of its Subsidiaries.
3.8 Compliance With Laws. Neither Parent nor any of its Subsidiaries has
violated or failed to comply with any statute, law, ordinance, regulation, rule,
judgment, decree or order of any Governmental Entity applicable to its business,
properties or operations, except to the extent that such violation or failure
would not reasonably be expected to have a Parent Material Adverse Effect or
Buyer Material Adverse Effect.
3.9 Contracts; Debt Instruments. Neither Parent nor any of its
Subsidiaries (i) has received a written notice that Parent or any of its
Subsidiaries is in violation of or in default under any material loan or credit
agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or any other material contract, agreement, arrangement or
understanding, to which it is a party or by which it or any of its properties or
assets is bound, nor (ii) to the Knowledge of Buyer (as defined in Section 3.15)
does such a violation or default exist, except to the extent such violation or
default referred to in clauses (i) or (ii), individually or in the aggregate,
would not have a Parent Material Adverse Effect or a Buyer Material Adverse
Effect.
3.10 Solvency. Immediately after giving effect to the transactions
contemplated by this Agreement, the Partnership Merger Agreement and the Equity
Commitments and the closing of any financing to be obtained by the Parent, Buyer
or
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Buyer Operating Partnership in order to effect the transactions contemplated by
this Agreement, the Surviving Company and the Surviving Operating Partnership
shall be able to pay their respective debts as they become due and shall each
own property having a fair saleable value greater than the amounts required to
pay its debts (including a reasonable estimate of the amount of all contingent
liabilities). Immediately after giving effect to the transactions contemplated
by this Agreement, the Partnership Merger Agreement and the Equity Commitments
and the closing of any financing to be obtained by Parent, Buyer or Buyer
Operating Partnership in order to effect the transactions contemplated by this
Agreement and the Partnership Merger Agreement, the Surviving Company and the
Surviving Operating Partnership shall have adequate capital to carry on their
respective businesses. No transfer of property is being made and no obligation
is being incurred in connection with the transactions contemplated by this
Agreement and the Partnership Merger Agreement and the closing of any financing
to be obtained by Parent, Buyer or Buyer Operating Partnership in order to
effect the transactions contemplated by this Agreement and the Partnership
Merger Agreement with the intent to hinder, delay or defraud either present or
future creditors of Parent, Buyer, Buyer Operating Partnership, the Surviving
Company or the Surviving Operating Partnership.
3.11 [Intentionally Omitted].
3.12 Proxy Statement and Consent Solicitation Statement. The information
provided by Parent or Buyer with respect to Parent and its Subsidiaries for
inclusion in the Proxy Statement and the Consent Solicitation Statement will
not, as of the date of mailing of the Proxy Statement and the Consent
Solicitation Statement, respectively, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.13 Investment Company Act of 1940. Neither Parent nor any of its
Subsidiaries is, or at the Effective Time will be, required to be registered
under the 1940 Act.
3.14 Parent and Buyer Not Interested Stockholders. Neither Parent nor
Buyer is an "interested stockholder" of Seller within the meaning of Section 203
of the DGCL.
3.15 Definition of Knowledge. As used in this Agreement, the phrase
"Knowledge of Parent" or "Knowledge of Buyer" (or words of similar import) means
the knowledge of those individuals identified in Section 3.15 of the Buyer
Disclosure Letter.
3.16 [Intentionally Omitted].
3.17 Sufficient Funds. After giving effect to Parent's equity
commitments provided in the partnership agreement of Parent (the "Equity
Commitments"), and to borrowings under Parent's financing commitments attached
as Exhibit A (the
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"Financing Commitments"), the Surviving Company and the Surviving Operating
Partnership will have sufficient funds available to:
(a) refinance or repay in cash all indebtedness for borrowed
money of Seller or any Seller Subsidiary that will become due as a result of the
transactions contemplated by this Agreement or the Partnership Merger Agreement,
plus unpaid interest accrued thereon, and any prepayment, breakage or other
costs associated with the repayment or refinancing, as the case may be;
(b) pay all amounts required to be paid pursuant to this
Agreement and the Partnership Merger Agreement;
(c) pay all fees, costs and expenses incurred by Seller and the
Seller Partnership in connection with this Agreement, the Partnership Merger
Agreement and the transactions contemplated herein and therein assuming such
fees, costs and expenses (other than severance costs) are not in excess of $11
million; and
(d) pay all fees, costs and expenses incurred by Parent, Buyer
and Buyer Operating Partnership in connection with this Agreement, the
Partnership Merger Agreement and the other transactions contemplated herein and
therein.
3.18 Pro Forma Capitalization Table. Attached hereto as Exhibit B is a
true and correct pro forma capitalization table of Parent and its Subsidiaries,
giving effect to the Equity Commitments, the Financing Commitments and
consummation of the transactions contemplated by this Agreement and the
Partnership Merger Agreement.
3.19 Representations in Partnership Merger Agreement. The
representations and warranties of Parent and the Buyer Operating Partnership set
forth in the Partnership Merger Agreement are true and correct.
ARTICLE 4
COVENANTS
4.1 Acquisition Proposals. During the period from the date hereof and
continuing through the Effective Time or the earlier termination of this
Agreement in accordance with its terms, Seller agrees that:
(a) neither it nor any of the Seller Subsidiaries shall initiate,
solicit or knowingly encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect to a merger,
acquisition, tender offer, exchange offer, consolidation, sale of assets or
similar transaction involving all or any significant portion of the assets or
any equity securities of, Seller or any of its Subsidiaries, other than the
transactions contemplated by this Agreement (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations concerning or provide any confidential information or data
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to, or have any discussions with, any Person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal;
(b) it shall direct and use its best efforts to cause its
officers, directors, employees, agents or financial advisors not to engage in
any of the activities described in Section 4.1(a);
(c) it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing and will take the necessary
steps to inform the individuals or entities referred to in Section 4.1(b) of the
obligations undertaken in this Section 4.1; and
(d) it will notify Buyer promptly if Seller receives any such
inquiries or proposals, or any requests for such information, or if any such
negotiations or discussions are sought to be initiated or continued with it;
provided, however, that nothing contained in this Agreement shall prohibit the
Board of Directors of Seller (and the officers, directors, employees, agents and
financial advisors of Seller acting at the direction of the Board of Directors)
from prior to the Seller Shareholders Meeting (as defined below) furnishing
information to or entering into discussions or negotiations with, any Person
that makes an unsolicited Acquisition Proposal, if, and only to the extent that
(A) the Board of Directors of Seller determines in good faith that such action
is required for the Board of Directors to comply with its duties to stockholders
imposed by law and such proposal is a Superior Acquisition Proposal (as defined
below), (B) prior to furnishing such information to, or entering into
discussions or negotiations with, such Person, Seller provides written notice to
Buyer to the effect that it is furnishing information to, or entering into
discussions with, such Person and (C) subject to any confidentiality agreement
with such Person, Seller keeps Buyer informed of the status (not the terms) of
any such discussions or negotiations (Seller agreeing that it will not enter
into any confidentiality agreement with any Person subsequent to the date hereof
which prohibits Seller from providing such information to Buyer); and (ii) to
the extent applicable, taking and disclosing to the Seller stockholders a
position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal; provided, however, that the Board of
Directors of Seller may not approve or recommend an Acquisition Proposal, or
withdraw or modify its approval or recommendation of this Agreement and the
Merger, unless such Acquisition Proposal is a Superior Acquisition Proposal.
Nothing in this Section 4.1 shall (x) permit Seller to terminate this Agreement
(except as specifically provided in Article 7 hereof), (y) permit Seller to
enter into an agreement with respect to an Acquisition Proposal during the term
of this Agreement (other than a confidentiality agreement in customary form
executed as provided above) or (z) affect any other obligation of Seller under
this Agreement; provided, however, that the Board of Directors of Seller may
approve and recommend a Superior Acquisition Proposal and, in connection
therewith, withdraw or modify its approval or
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recommendation of this Agreement and the Merger. As used herein, "Superior
Acquisition Proposal" means a bona fide Acquisition Proposal made by a third
party which the Board of Directors of Seller (or a duly constituted committee
thereof charged with considering Acquisition Proposals) determines in good faith
(after consultation with its financial advisor) to be more favorable to Seller's
stockholders than the Merger and which the Board of Directors of Seller (or any
such committee) determines is reasonably capable of being consummated.
4.2 Conduct of Seller's Business Pending Merger. During the period from
the date hereof and continuing through the Effective Time, except as consented
to in writing by Buyer or as contemplated by this Agreement, specifically
including Section 1.7(b), and except as set forth on Section 4.2 of the Seller
Disclosure Letter, Seller shall, and shall cause each of the Seller Subsidiaries
to:
(a) conduct its business only in the usual, regular and ordinary
course and in substantially the same manner as heretofore conducted and take all
action necessary to continue to qualify as a REIT;
(b) use its reasonable efforts to (i) preserve intact its
business (corporate or otherwise) organizations and goodwill; provided that
Seller may cause Seller General Partner to be converted into a Delaware limited
liability company on or prior to the Closing Date and take such actions to cause
the conversions and liquidations contemplated by Section 6.2(g) to occur, (ii)
keep available the services of its officers and key employees and (iii) keep
intact the relationship with its customers, tenants, suppliers and others having
business dealings with Seller and Seller's Subsidiaries;
(c) confer on a regular basis with one or more representatives of
Buyer to report operational matters of materiality and, subject to Section 4.1,
any proposals to engage in material transactions;
(d) promptly notify Buyer of any material emergency or other
material adverse change in the condition (financial or otherwise), business,
properties, assets, liabilities or the normal course of its businesses or in the
operation of its properties, or of any material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated);
(e) promptly deliver to Buyer true and correct copies of any
report, statement or schedule to be filed with the SEC subsequent to the date of
this Agreement and prior to the Closing Date;
(f) maintain its books and records in accordance with GAAP
consistently applied and not change in any material manner any of its methods,
principles or practices of accounting in effect at the Seller Financial
Statement Date, except as may be required by the SEC, applicable law or GAAP;
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(g) duly and timely file all material Tax Returns and other
documents required to be filed with federal, state, local and other Tax
Authorities, subject to timely extensions permitted by law, provided Seller
notifies Buyer that it is availing itself of such extensions and provided such
extensions do not adversely affect Seller's status as a qualified REIT under the
Code;
(h) not make or rescind any material express or deemed election
relative to Taxes (unless required by law or necessary to preserve Seller's
status as a REIT or the status of any Seller Subsidiary as a partnership for
federal income tax purposes or as a qualified REIT subsidiary under Section
856(i) of the Code, as the case may be);
(i) not acquire, enter into any option to acquire, or exercise an
option or contract to acquire, additional real property, incur additional
indebtedness except for working capital under its revolving lines of credit,
encumber assets or commence construction of, or enter into any agreement or
commitment to develop or construct, other real estate projects, except with
respect to the construction of the multi-family residential projects described
in the Seller SEC Documents or the Seller Disclosure Letter as being under
development in accordance with the agreements in existence on the date of this
Agreement and previously furnished to Buyer (the "Development Agreements");
(j) not (except as contemplated by this Agreement) amend its
certificate of incorporation or By-laws, or the articles or certificate of
incorporation, bylaws, code of regulations, partnership agreement, operating
agreement or joint venture agreement or comparable charter or organization
document of any Seller Subsidiary;
(k) make no change in the number of its shares of capital stock,
membership interests or units of limited partnership interest (as the case may
be) issued and outstanding or reserved for issuance, other than pursuant to (i)
the exercise of options or other rights disclosed in Section 2.3 of the Seller
Disclosure Letter, (ii) the conversion of Seller Preferred Shares, or (iii) the
conversion or redemption of Seller OP Units pursuant to the Seller Partnership
Agreement for Seller Common Shares or cash, at Seller's option;
(l) except as set forth in Section 4.2(l) of the Seller
Disclosure Letter, grant no options or other rights or commitments relating to
its shares of capital stock, membership interests or units of limited
partnership interest or any security convertible into its shares of capital
stock, membership interests or units of limited partnership interest, or any
security the value of which is measured by shares of capital stock, or any
security subordinated to the claim of its general creditors and, except as
contemplated by this Agreement, not amend or waive any rights under any of the
Seller Options;
(m) except as provided in Section 5.9 and in connection with the
use of Seller Common Shares to pay the exercise price or tax withholding in
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connection with equity-based employee benefit plans by the participants therein,
not (i) authorize, declare, set aside or pay any dividend or make any other
distribution or payment with respect to any Seller Common Shares, Seller
Preferred Shares or Seller OP Units or (ii) directly or indirectly redeem,
purchase or otherwise acquire any shares of capital stock, membership interests
or units of partnership interest or any option, warrant or right to acquire, or
security convertible into, shares of capital stock, membership interests, or
units of partnership interest, except for (a) redemptions of Seller Common
Shares required under Article V of the Restated Certificate of Incorporation of
Seller in order to preserve the status of Seller as a REIT under the Code or (b)
conversions or redemptions of Seller OP Units, whether or not outstanding on the
date of this Agreement, for cash or Seller Common Shares in accordance with the
terms of the Seller Partnership Agreement;
(n) not sell, lease, mortgage, subject to any material Lien or
otherwise dispose of any of the Seller Properties;
(o) not sell, lease, mortgage, subject to any material Lien or
otherwise dispose of any of its personal property or intangible property, except
sales of equipment which are not material to Seller and its Subsidiaries taken
as a whole which are made in the ordinary course of business;
(p) not make any loans, advances or capital contributions to, or
investments in, any other Person, other than loans, advances and capital
contributions to Seller Subsidiaries in existence on the date hereof;
(q) not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or otherwise)
which are material to Seller and its Subsidiaries taken as a whole, other than
the payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) furnished to Buyer or
incurred in the ordinary course of business consistent with past practice
(collectively, "Ordinary Course Liabilities"), nor fail to pay Ordinary Course
Liabilities as they come due consistent with past practice;
(r) except as provided in Section 4.2(i) above, not enter into
any commitment, contractual obligation or transaction (each, a "Commitment") for
the purchase of any real estate; provided that expansion or improvements made in
the ordinary course of business to existing real property shall not be
considered a purchase of real property;
(s) not guarantee the indebtedness of another Person, enter into
any "keep well" or other agreement to maintain any financial statement condition
of another Person or enter into any arrangement having the economic effect of
any of the foregoing;
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(t) not enter into any contractual obligation with any officer,
director or Affiliate of Seller;
(u) not increase any compensation or enter into or amend any
employment, severance or other agreement with any of its officers, directors or
employees earning a base salary of more than $100,000 per annum, other than as
required by any contract or Employee Plan or pursuant to waivers by employees of
benefits under such agreements;
(v) not adopt any new employee benefit plan or amend, terminate
or increase any existing plans or rights, not grant any additional options,
warrants, rights to acquire stock, stock appreciation rights, phantom stock,
dividend equivalents, performance units or performance stock to any officer,
employee or director, or accelerate vesting with respect to any grant of Seller
Common Shares to employees which are subject to any risk of forfeiture, except
for changes which are required by law and changes which are not more favorable
to participants than provisions presently in effect;
(w) not change the ownership of any of its Subsidiaries, except
changes which arise as a result of the conversion of Seller OP Units into Seller
Common Shares or cash;
(x) not accept a promissory note in payment of the exercise price
payable under any option to purchase Seller Common Shares;
(y) not enter into or amend or otherwise modify or waive any
material rights under any agreement or arrangement for the Persons that are
executive officers or directors of Seller or any Seller Subsidiary;
(z) not directly or indirectly or through a subsidiary, merge or
consolidate with, acquire all or substantially all of the assets of, or acquire
the beneficial ownership of a majority of the outstanding capital stock or a
majority of any other equity interest in, any Person;
(aa) perform all agreements required to be performed by the
Seller and its Subsidiaries (including the Seller General Partner and the Seller
Partnership) under the Partnership Merger Agreement;
(bb) not make or revoke any material tax election or settle or
compromise any material tax liability; and
(cc) not agree, commit or arrange to take any action prohibited
under this Section.
Notwithstanding anything in this Agreement to the contrary, Seller shall
have the right, in accordance (except with respect to timing) with the
applicable provisions of its Restated Certificate of Incorporation, as amended,
to submit to its stockholders
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a proposal to liquidate the Seller (the "Liquidation Vote") and to make all
required filings with the SEC and take all such other necessary or appropriate
actions in connection therewith.
4.3 Conduct of Parent's and Buyer's Business Pending Merger. Prior to
the Effective Time, except as (i) contemplated by this Agreement, or (ii)
consented to in writing by Seller, Parent shall, and shall cause Buyer to:
(a) use its reasonable efforts to preserve intact its business
organizations and goodwill and keep available the services of its officers and
employees;
(b) promptly notify Seller of any material emergency or other
material change in the condition (financial or otherwise), business, properties,
assets, liabilities, prospects or the normal course of its businesses or in the
operation of its properties, or of any material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated);
(c) not amend its certificate of limited partnership or limited
partnership agreement, or the articles or certificate of incorporation, bylaws,
code of regulations, partnership agreement, operating agreement or joint venture
agreement or comparable charter or organization document of any Subsidiary of
the Parent; provided, however, that any such amendment may be made (1) in
connection with the financing of Parent, Buyer and Buyer Operating Partnership
in accordance with the terms of the Equity Commitments and the Financing
Commitments, so long as any such amendment would not reasonably be expected to
materially adversely affect Seller's stockholders, the Seller Unit Holders, the
Merger or the transactions contemplated by the Partnership Merger Agreement or
(2) so long as such amendment would not, under Sections 3.7 or 11.1 of the
limited partnership agreement of Parent, require the consent of any holder of
Class A Preferred Units or Class B Units if such securities were issued and
outstanding at the time of such amendment and the holders of such securities
were then limited partners of the Partnership;
(d) not enter into any Commitment for the acquisition of any
interest in real property if the amount of such Commitment would cause the
aggregate amount of all such Commitments subsequent to the date hereof to exceed
$1,000,000 unless such Commitment has been approved by Seller;
(e) not directly or indirectly, through a subsidiary or
otherwise, merge or consolidate with, or acquire all or substantially all of the
assets of, or the beneficial ownership of a majority of the outstanding capital
stock or other equity interests in any Person whose securities are registered
under the Exchange Act unless such transaction has been approved by Seller;
(f) except as contemplated by this Agreement, not issue any Buyer
or Buyer Operating Partnership securities pursuant to a Registration Statement
filed
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with the SEC relating to the public offering of any Buyer or Buyer Operating
Partnership securities from the date hereof until the date of the Proxy
Statement (as defined in Section 5.1(a)) unless such issuance has been approved
by Seller;
(g) use reasonable best efforts to do all necessary things
required to close the equity funding contemplated by the Equity Commitments and
the borrowings contemplated by the Financing Commitments and to cause such
equity funding and such borrowings to be made available to Parent, Buyer and
Buyer Operating Partnership as provided therein; and
(h) not agree, commit or arrange to take any action prohibited
under this Section.
4.4 Other Actions. Each of Seller on the one hand and Parent and Buyer
on the other hand shall not knowingly take, and shall use commercially
reasonable efforts to cause their Subsidiaries not to take, any action that
would result in (i) any of the representations and warranties of such party
(without giving effect to any "knowledge" qualification) set forth in this
Agreement that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties (without giving effect to any "knowledge"
qualification) that are not so qualified becoming untrue in any material respect
or (iii) except as contemplated by Section 4.1, any of the conditions to the
Merger set forth in Article 6 not being satisfied.
4.5 Partnership Merger Agreement. Parent shall, and shall cause its
Subsidiaries to, perform all agreements required to be performed by the Parent
and its Subsidiaries (including the Buyer Operating Partnership) under the
Partnership Merger Agreement.
4.6 Private Placement. Parent shall take all actions necessary for
Parent to offer and sell interests in Parent to holders of Seller OP Units in
the manner contemplated by the Partnership Merger Agreement and Section 5.1
hereof and as shall be required for the offering and sale of such units of
limited partnership interest to be exempt from the registration requirements of
the Securities Act pursuant to Rule 506 of Regulation D.
4.7 Irrevocable Letter of Credit.
(a) Parent has delivered to American Stock Transfer and Trust
Company (the "Escrow Agent") $29,500,000 (the "Cash Collateral") in cash to
secure the obligation of Parent and Buyer to pay certain fees and expenses
pursuant to Section 7.2 and to be held in accordance with the terms of an Escrow
Agreement dated as of date hereof among the Escrow Agent, Seller, Seller
Partnership and Parent (the "Escrow Agreement"). At the election of Parent and
if Seller has not given a notice to the Escrow Agent directing the Escrow Agent
to terminate Parent's right to receive any part of the Cash Collateral, Parent
may deliver to the Escrow Agent an irrevocable letter of credit in the amount of
the Cash Collateral, substantially in the form attached hereto as Exhibit C,
with such changes as shall be
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reasonably satisfactory to Seller and from a bank reasonably satisfactory to
Seller (the "Letter of Credit"). Upon delivery of such Letter of Credit and if
Seller has not given a notice to the Escrow Agent directing the Escrow Agent to
terminate Parent's right to receive any part of the Cash Collateral, the full
amount of the Cash Collateral then held by the Escrow Agent shall be immediately
returned to Buyer. Seller shall, simultaneously with delivering any direction to
the Escrow Agent to terminate Parent's right to receive any part of the Cash
Collateral as provided in the Escrow Agreement or to make a draw under the
Letter of Credit, deliver to Parent and Buyer a certificate confirming that
Seller is entitled to make such direction pursuant to Section 7.2 and, if such
certification is false or Seller is not otherwise entitled to make such
direction pursuant to Section 7.2, Parent and Buyer shall be entitled to all
remedies available at law or in equity (including recovery of any amounts
improperly withdrawn or drawn); provided, however, that Parent and Buyer shall
notify the Seller within 30 days after receiving such certificate if they wish
to assert that Seller is not entitled to so direct the Escrow Agent and any
failure to provide such notice within such 30 day period shall irrevocably
prohibit Parent and Buyer from maintaining that Seller was not so entitled.
(b) If Parent elects to extend the Closing Date as contemplated
under Section 1.2(b), then on or prior to the Additional Collateral Date (as
defined below), Parent shall increase the Cash Collateral by either delivering
an additional $25,000,000 to the Escrow Agent in cash to be held in accordance
with the terms of the Escrow Agreement or, if Parent has previously delivered a
Letter of Credit to the Escrow Agent as contemplated under Section 4.7(a), by
amending such Letter of Credit to increase the amount available thereunder by an
additional $25,000,000. As used herein, the term "Additional Collateral Date"
shall mean the first business day following the Satisfaction Date; provided,
however, that if the conditions set forth in Sections 6.1 and 6.2 (other than
Sections 6.2(g) and 6.2(i)) are satisfied (or waived by Parent and Buyer), and
if the certificates and other documents required to be delivered pursuant to
Section 6.2 are delivered, in each case as of the Satisfaction Date and at or
prior to 9:30 a.m. on such date, then the term "Additional Collateral Date"
shall mean the Satisfaction Date.
ARTICLE 5
ADDITIONAL COVENANTS
5.1 Preparation of the Proxy Statement; Seller Stockholders Meeting.
(a) The parties shall cooperate and promptly prepare and Seller
shall file with the SEC as soon as practicable a proxy statement with respect to
the meeting of the stockholders of Seller in connection with the Merger (the
"Proxy Statement"). The parties shall cooperate and promptly prepare and the
appropriate party shall file with the SEC as soon as practicable any other
filings required under the Exchange Act ("Additional Filings"), including
without limitation, a Rule 13e-3 Transaction Statement on Schedule 13E-3 with
respect to the Merger to be filed jointly by Seller, Parent and Buyer, together
with any required amendments thereto.
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The parties shall cooperate and promptly prepare a Consent
Solicitation/Information Statement of Seller Partnership and Parent for use in
connection with the solicitation of consents to the matters described in the
definition of Seller Partner Approval and the offering of units of limited
partnership interest in Parent (the "Consent Solicitation Statement"). Each of
Seller, Seller Partnership, Parent, Buyer and Buyer Operating Partnership agrees
that the information provided by it for inclusion in the Proxy Statement, the
Additional Filings, the Consent Solicitation Statement and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the
meeting of stockholders of Seller and at the time of the taking of consent in
respect of the Seller Partner Approval, will not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Parent, Buyer and Buyer Operating
Partnership shall, with respect to the Seller Partner Approval and the offering
of units of limited partnership interest in Parent to holders of Seller OP
Units, comply with Regulation D of the Securities Act, as applicable. Seller
will use its reasonable best efforts, and Parent, Buyer and Buyer Operating
Partnership will cooperate with Seller to (i) file a preliminary Proxy Statement
with the SEC and (ii) cause the Proxy Statement to be mailed to Seller's
stockholders, in each case, as promptly as practicable (including clearing the
Proxy Statement with the SEC). Seller will use its reasonable best efforts, and
Parent, Buyer and Buyer Operating Partnership will cooperate with Seller, to
cause the Consent Solicitation Statement to be mailed to the Seller Unit Holders
as promptly as practicable after the SEC has cleared the Proxy Statement. Seller
will notify Buyer promptly of the receipt of any comments from the SEC and of
any request by the SEC for amendments or supplements to the Proxy Statement or
the Additional Filings or for additional information and will supply Buyer with
copies of all correspondence between such party or any of its representatives
and the SEC, with respect to the Proxy Statement or the Additional Filings. The
parties shall cooperate to cause the Proxy Statement, the Consent Solicitation
Statement and any Additional Filings to comply in all material respects with all
applicable requirements of law. Whenever any event occurs which is required to
be set forth in an amendment or supplement to the Proxy Statement, the
Additional Filings or the Consent Solicitation Statement, Seller on the one
hand, and Parent and Buyer on the other hand, shall promptly inform the other of
such occurrence and cooperate in filing with the SEC and/or mailing to the
stockholders of Seller or holders of Seller OP Units, as applicable, such
amendment or supplement to the Proxy Statement or the Consent Solicitation
Statement.
(b) It shall be a condition to the mailing of the Proxy Statement
and the Consent Solicitation Statement that if they so request, Buyer and Buyer
Operating Partnership shall have received a "comfort" letter or an "agreed upon
procedures" letter from PricewaterhouseCoopers LLP, independent public
accountants for Seller and Seller Partnership, of the kind contemplated by the
Statement of Auditing Standards with respect to Letters to Underwriters
promulgated by the American Institute of Certified Public Accountants (the
"AICPA Statement"), dated as of the date on which the Proxy Statement is to be
mailed to the stockholders of Seller, addressed to Parent, Buyer and Buyer
Operating Partnership, in form and substance
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reasonably satisfactory to Buyer and Buyer Operating Partnership, concerning the
procedures undertaken by PricewaterhouseCoopers LLP with respect to the
financial statements and information of Seller, Seller Partnership and their
Subsidiaries contained in the Proxy Statement and the other matters contemplated
by the AICPA Statement and otherwise customary in scope and substance for
letters delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
(c) Seller will, as soon as practicable following the date of
this Agreement duly call, give notice of, convene and hold a meeting of its
stockholders, such meeting to be held no sooner than 20 business days nor later
than 45 days following the date the Proxy Statement is mailed to the
stockholders of Seller (the "Seller Shareholders Meeting") for the purpose of
obtaining the Seller Shareholder Approval. Seller shall be required to hold the
Seller Shareholders Meeting, regardless of whether the Board of Directors of
Seller has withdrawn, amended or modified its recommendation that its
stockholders adopt this Agreement and approve the Merger, unless this Agreement
has been terminated pursuant to the provisions of Section 7.1. Seller will,
through its Board of Directors, recommend that its stockholders adopt this
Agreement and approve the transactions contemplated hereby, including the Merger
and the Alternative Merger; provided, that prior to the Seller Shareholders
Meeting, such recommendation may be withdrawn, modified or amended if Seller
shall have received a Superior Acquisition Proposal, but only to the extent
expressly permitted under Section 4.1.
(d) If on the date for the Seller Shareholders Meeting
established pursuant to Section 5.1(c) of this Agreement, Seller has not
received duly executed proxies which, when added to the number of votes
represented in person at the meeting by Persons who intend to vote to adopt this
Agreement, will constitute a sufficient number of votes to adopt this Agreement
(but less than a majority of the outstanding Seller Common Shares (including the
Seller Preferred Shares voting with the Seller Common Shares on an as-converted
basis) have indicated their intention to vote against, or have submitted duly
executed proxies voting against, the adoption of this Agreement), then Seller
shall recommend the adjournment of its stockholders meeting until the date ten
(10) days after the originally scheduled date of the stockholders meeting.
5.2 Access to Information: Confidentiality. Subject to the requirements
of confidentiality agreements with third parties, each of Seller, Parent and
Buyer shall, and shall cause each of its Subsidiaries to, afford to the other
party and to the officers, employees, accountants, counsel, financial advisors
and other representatives of such other party, reasonable access during normal
business hours prior to the Effective Time to all their respective properties,
books, contracts, commitments, personnel and records and, during such period,
each of Seller, Parent and Buyer shall, and shall cause each of its Subsidiaries
to, furnish promptly to the other party all other information concerning its
business, properties and personnel as such other party may reasonably request.
Parent and Buyer shall have the right to conduct non- intrusive environmental
and engineering inspections at the Seller Properties; provided
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that in no event shall Parent or Buyer have the right to conduct so-called
"Phase II" environmental tests. Notwithstanding anything in this Section 5.2 to
the contrary, all of Parent's and Buyer's activities pursuant to this Section
5.2 must be conducted in a manner that does not unreasonably interfere with the
ongoing operations of Seller and Seller Subsidiaries.
5.3 Reasonable Best Efforts; Notification.
(a) Subject to the terms and conditions herein provided, Seller,
Parent and Buyer shall: (i) use all reasonable best efforts to cooperate with
one another in (A) determining which filings are required to be made prior to
the Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
governmental or regulatory authorities of the United States, the several states
and foreign jurisdictions and any third parties in connection with the execution
and delivery of this Agreement, and the consummation of the transactions
contemplated hereby, including without limitation any required filings and
consents under the HSR Act, and (B) timely making all such filings and timely
seeking all such consents, approvals, permits and authorizations; (ii) use all
reasonable best efforts (other than the payment of money) to obtain in writing
any consents required from third parties to effectuate the Merger and avoid
defaults or acceleration of the rights of third parties under contracts with
Seller or Seller Subsidiaries as a result of the consummation of the Merger,
such consents to be in form reasonably satisfactory to Seller and Buyer; and
(iii) use all reasonable best efforts to take, or cause to be taken, all other
action and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement. In furtherance thereof, Seller agrees to vote in favor of the
transactions contemplated by the Partnership Merger Agreement in its capacity as
a limited partner of the Seller Partnership, and to cause the Seller General
Partner to so vote in its capacity as a general partner of the Seller
Partnership. If at any time after the Effective Time any further action is
necessary or desirable to carry out the purpose of this Agreement, Parent and
the Surviving Company shall take all such necessary action.
(b) Seller shall give prompt notice to Parent and Buyer, and
Parent and Buyer shall give prompt notice to Seller, (i) if any representation
or warranty made by it or them contained in this Agreement that is qualified as
to materiality becomes untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becomes untrue or inaccurate
in any material respect or (ii) of the failure by it or them to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
5.4 Tax Treatment. The Surviving Operating Partnership will use the
"traditional method" under Treasury Regulations Section 1.704-3(b) for purposes
of making allocations under Section 704(c) of the Code with respect to the
properties of
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or interests in the Seller Partnership as of the Effective Time. The Surviving
Company shall prepare and file all Tax Returns of Seller and Seller Subsidiaries
due after the Effective Time.
5.5 Public Announcements. Parent, Buyer and Seller will consult with
each other before issuing, and provide each other the opportunity to review and
comment upon, any press release or other written public statements with respect
to the transactions contemplated by this Agreement, and shall not issue any such
press release or make any such written public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement will be in the form
agreed to by the parties hereto prior to the execution of this Agreement.
5.6 Transfer Taxes. Buyer and Seller shall cooperate in the preparation,
execution and filing of all returns, questionnaires, applications or other
documents regarding any real property transfer, sales, use, transfer, value
added, stock transfer and stamp taxes, any transfer, recording, registration and
other fees and any similar taxes which become payable in connection with the
transactions contemplated by this Agreement (together with any related
interests, penalties or additions to tax, "Transfer Taxes"). From and after the
Effective Time, the Surviving Company shall, or shall cause the Surviving
Operating Partnership, as appropriate, to pay or cause to be paid, without
deduction or withholding from any amounts payable to the holders of Seller
Common Shares or Seller OP Units, all Transfer Taxes.
5.7 Benefit Plans. After the Effective Time, all employees of Seller who
are employed by the Surviving Company shall, at the option of the Surviving
Company, either continue to be eligible to participate in an "employee benefit
plan," as defined in Section 3(3) of ERISA, of Seller which is, at the option of
the Surviving Company, continued by the Surviving Company, or alternatively
shall be eligible to participate in any "employee benefit plan," as defined in
Section 3(3) of ERISA, established, sponsored or maintained by the Surviving
Company after the Effective Time. With respect to each such employee benefit
plan not formerly maintained by Seller, service with Seller or any Seller
Subsidiary (as applicable) shall be included for purposes of determining
eligibility to participate, vesting (if applicable) and entitlement to benefits
and all pre-existing condition exclusions shall be waived and expenses incurred
by any employee for deductibles and copayments in the portion of the year prior
to the date employee first becomes a participant in such employee benefit plan
shall be credited to the benefit of such employee under such employee benefit
plan for the year in which the employee's participation commences.
5.8 Indemnification.
(a) From and after the Effective Time, the Surviving Company
shall provide exculpation and indemnification for each Person who is now or has
been at any time prior to the date hereof or who becomes prior to the Effective
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Time, an officer, employee or director of Seller or any Seller Subsidiary (the
"Indemnified Parties") which is the same as the exculpation and indemnification
provided to the Indemnified Parties by Seller and the Seller Subsidiaries
immediately prior to the Effective Time in their respective certificate of
incorporation and Bylaws or other organizational documents, as in effect on the
date hereof; provided, that such exculpation and indemnification covers actions
on or prior to the Effective Time, including, without limitation, all
transactions contemplated by this Agreement.
(b) In addition to the rights provided in Section 5.8(a) above,
in the event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including without
limitation, any action by or on behalf of any or all security holders of Seller,
Parent or Buyer, or any Subsidiary of the Seller or Parent, or by or in the
right of Seller, Parent or Buyer, or any Subsidiary of the Seller or Parent, or
any claim, action, suit, proceeding or investigation (collectively, "Claims") in
which any Indemnified Party is, or is threatened to be, made a party based in
whole or in part on, or arising in whole or in part out of, or pertaining to (i)
the fact that he is or was an officer, employee or director of Seller or any of
the Seller Subsidiaries or any action or omission or alleged action or omission
by such Person in his capacity as an officer, employee or director, or (ii) this
Agreement or the Partnership Merger Agreement or the transactions contemplated
by this Agreement or the Partnership Merger Agreement, whether in any case
asserted or arising before or after the Effective Time, Parent and the Surviving
Company (the "Indemnifying Parties") shall from and after the Effective Time
jointly and severally indemnify and hold harmless the Indemnified Parties from
and against any losses, claims, liabilities, expenses (including reasonable
attorneys' fees and expenses), judgments, fines or amounts paid in settlement
arising out of or relating to any such Claims. Parent, the Surviving Company and
the Indemnified Parties hereby agree to use their reasonable best efforts to
cooperate in the defense of such Claims. In connection with any such Claim, the
Indemnified Parties shall have the right to select and retain one counsel, at
the cost of the Indemnifying Parties, subject to the consent of the Indemnifying
Parties (which consent shall not be unreasonably withheld or delayed). In
addition, after the Effective Time, in the event of any such threatened or
actual Claim, the Indemnifying Parties shall promptly pay and advance reasonable
expenses and costs incurred by each Indemnified Person as they become due and
payable in advance of the final disposition of the Claim to the fullest extent
and in the manner permitted by law. Notwithstanding the foregoing, the
Indemnifying Parties shall not be obligated to advance any expenses or costs
prior to receipt of an undertaking by or on behalf of the Indemnified Party,
such undertaking to be accepted without regard to the creditworthiness of the
Indemnified Party, to repay any expenses advanced if it shall ultimately be
determined that the Indemnified Party is not entitled to be indemnified against
such expense. Notwithstanding anything to the contrary set forth in this
Agreement, the Indemnifying Parties (i) shall not be liable for any settlement
effected without their prior written consent (which consent shall not be
unreasonably withheld or delayed), and (ii) shall not have any obligation
hereunder to any Indemnified Party to the extent that a court of competent
jurisdiction shall determine in a final and non-appealable order that such
indemnification is prohibited by applicable law. In
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the event of a final and non-appealable determination by a court that any
payment of expenses is prohibited by applicable law, the Indemnified Party shall
promptly refund to the Indemnifying Parties the amount of all such expenses
theretofore advanced pursuant hereto. Any Indemnified Party wishing to claim
indemnification under this Section 5.8, upon learning of any such Claim, shall
promptly notify the Indemnifying Parties of such Claim and the relevant facts
and circumstances with respect thereto; provided however, that the failure to
provide such notice shall not affect the obligations of the Indemnifying Parties
except to the extent such failure to notify materially prejudices the
Indemnifying Parties' ability to defend such Claim; and provided, further,
however, that no Indemnified Party shall be obligated to provide any
notification pursuant to this Section 5.8(b) prior to the Effective Time.
(c) At or prior to the Effective Time, Buyer shall purchase
directors' and officers' liability insurance policy coverage for Seller's and
each Seller Subsidiaries' directors and officers for a period of six years which
will provide the directors and officers with coverage on substantially similar
terms as currently provided by Seller and the Seller Subsidiaries to such
directors and officers. At or prior to the Effective Time, Seller shall have the
right to reasonably review and approve any such policy, which approval shall not
be unreasonably withheld.
(d) This Section 5.8 is intended for the irrevocable benefit of,
and to grant third party rights to, the Indemnified Parties and their
successors, assigns and heirs and shall be binding on all successors and assigns
of Parent and Buyer, including without limitation the Surviving Company. Each of
the Indemnified Parties shall be entitled to enforce the covenants contained in
this Section 5.8 and Parent and Buyer acknowledge and agree that each
Indemnified Party would suffer irreparable harm and that no adequate remedy at
law exists for a breach of such covenants and such Indemnified Party shall be
entitled to injunctive relief and specific performance in the event of any
breach of any provision in this Section 5.8.
(e) In the event that the Surviving Company or any of its
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case, the successors
and assigns of such entity shall assume the obligations set forth in this
Section 5.8, which obligations are expressly intended to be for the irrevocable
benefit of, and shall be enforceable by, each director and officer covered
hereby.
Parent guarantees, unconditionally and absolutely, the performance of
Surviving Company's and Buyer's obligations under this Section 5.8.
5.9 Declaration of Dividends and Distributions. From and after the date
of this Agreement, Seller shall not make any dividend or distribution to its
stockholders without the prior written consent of Buyer; provided, however, the
written consent of Buyer shall not be required for the authorization and payment
of quarterly distributions (i) with respect to the Seller Common Shares, (a) for
the dividend for
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the second and third quarters of 1999 (i.e., $.25 per share with a record date
of May 1, 1999 and August 1, 1999) and (b) as permitted under Section 1.2(g),
and (ii) with respect to the Seller Preferred Shares for the dividend for the
second quarter of 1999 and for each quarterly dividend thereafter in the amounts
provided for in the Certificate of Designation in respect of the Seller
Preferred Shares. From and after the date of this Agreement, Seller Partnership
shall not make any distribution to the holders of Seller OP Units except a
distribution per Seller OP Unit in the same amount as a dividend per Seller
Common Share permitted pursuant to this Section 5.9 (including without
limitation pursuant to the following paragraph), with the same record and
payment dates as such dividend on the Seller Common Shares. The foregoing
restrictions shall not apply, however, to the extent a distribution by Seller is
necessary for Seller to maintain REIT status or to prevent Seller from having to
pay federal income tax; provided that in the event of such a distribution, the
aggregate cash consideration payable to holders of Seller Common Shares in the
Merger shall be reduced by the aggregate amount of such distribution, and the
Common Merger Consideration per share shall be reduced accordingly.
Notwithstanding the foregoing, if the Effective Time occurs on a date after
November 1, 1999, the Seller may declare or establish a record date and set
aside funds for payment of a dividend for the period commencing November 1, 1999
and ending on the date on which the Effective Time occurs (the "Partial
Period"). The amount of the dividend per Seller Common Share for such Partial
Period shall equal a fraction, (I) the numerator of which equals (a) $.25, times
(b) the number of days comprising such Partial Period, and (II) the denominator
of which is 90.
5.10 Resignations. On the Closing Date, Seller shall use its best
efforts to cause the directors and officers of Seller or any of the Seller
Subsidiaries to submit their resignations from such positions as may be
requested by Buyer, effective immediately after the Effective Time; provided,
however, that by resigning, such officers and directors will not lose the
benefit of any "change of control" provisions of any employment agreement or
other instruments to which they would otherwise be entitled.
5.11 Outside Property Management Agreements. Seller will not, and will
not permit any of its Subsidiaries to, amend the Outside Property Management
Agreements. Seller will not, and will not permit any of its Subsidiaries to,
renew any Outside Property Management Agreement except as approved by Buyer,
which approval shall not be unreasonably withheld or delayed.
5.12 Stockholder Claims. Seller shall not settle or compromise for an
amount in excess of $10,000,000 any claim relating to the Transactions brought
by any current, former or purported holder of any securities of Seller or the
Seller Partnership without the prior written consent of Buyer, which consent
will not be unreasonably withheld.
5.13 Cooperation with Proposed Financings and Asset Sales. At the
request of the Buyer, the Seller will, at the Buyer's expense, reasonably
cooperate with the
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Buyer in connection with the proposed financing of the Transactions by the
Parent and its Subsidiaries or proposed post-closing sales of the Seller
Properties, provided that such requested actions do not unreasonably interfere
with the ongoing operations of Seller and Seller Subsidiaries.
ARTICLE 6
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
obligations of each party to effect the Merger and to consummate the other
transactions contemplated by this Agreement to occur on the Closing Date shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) Stockholder Approvals. This Agreement shall have been adopted
by the Seller Shareholder Approval.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger, the Partnership Merger or any of the other
transactions contemplated hereby shall be in effect.
(c) HSR. All applicable waiting periods (and any extensions
thereof) under the HSR Act shall have expired or otherwise been terminated.
6.2 Conditions to Obligations of Parent and Buyer. The obligations of
Parent and Buyer to effect the Merger and to consummate the other transactions
contemplated to occur on the Closing Date are further subject to the following
conditions, any one or more of which may be waived by Buyer:
(a) Representations and Warranties. The representations and
warranties of Seller set forth in this Agreement shall be true and correct in
all material respects (except for the representations set forth in Section 2.3
or representations having a materiality or Seller Material Adverse Effect
qualification, which shall be correct in all respects) as of the date of this
Agreement and as of the Closing Date, as though made on and as of the Closing
Date, except to the extent the representation or warranty is expressly limited
by its terms to another date, in which case such representation or warranty
shall be true and correct in all material respects (except for representations
having a materiality or Seller Material Adverse Effect qualification, which
shall be correct in all respects) only as of such specific date, and Parent and
Buyer shall have received a certificate (which certificate may be qualified by
Knowledge to the same extent as the representations and warranties of Seller
contained herein are so qualified) signed on behalf of Seller by the chief
executive officer or the chief financial officer of Seller, in such capacity, to
such effect.
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(b) Performance of Obligations of Seller. Seller shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and Parent and Buyer
shall have received a certificate signed on behalf of Seller by the chief
executive officer or the chief operating officer of Seller, in such capacity, to
such effect.
(c) Material Adverse Change. Since the date of this Agreement
through and including the Satisfaction Date, (i) there shall have been no Seller
Material Adverse Change and (ii) Parent and Buyer shall have received a
certificate of the chief executive officer or chief financial officer of Seller,
in such capacity, certifying to such effect. For purposes of this Section
6.2(c), it is understood and agreed that a Seller Material Adverse Change shall
be deemed to have occurred, without regard to any certificate provided pursuant
to clause (ii) of the first sentence of this Section 6.2(c), if as a result of a
"change of law" after the date hereof there shall exist at the Effective Time a
material increase in the risk that the Seller would not qualify (at or prior to
the Effective Time) as a REIT. For this purpose, the term "change in law" shall
mean any amendment to or change (including any announced prospective change
having a proposed effective date at or prior to the Effective Time) in the
federal tax laws of the United States, including any statute, regulation or
proposed regulation or any official administrative pronouncement (consisting of
the issuance or revocation of any revenue ruling, revenue procedure, notice,
private letter ruling or technical advice memorandum) or any judicial decision
interpreting such federal tax laws (whether or not such pronouncement or
decision is issued to, or in connection with, a proceeding involving the Seller
or a Seller Subsidiary or is subject to review or appeal).
(d) Tax Opinions Relating to REIT Status of Seller And
Partnership Status of Seller Partnership. Parent and Buyer shall have received
an opinion of Xxxx and Xxxx LLP, or other counsel to Seller reasonably
acceptable to Parent and Buyer, and of Xxxxx & Xxxxxxxxx LLP, each dated as of
the Effective Time, in the form attached hereto as Exhibit D. Each of such
opinions may be based on certificates in the form of Section 6.2(d) of the
Seller Disclosure Letter.
(e) Consents. All consents and waivers (including, without
limitation, waivers of rights of first refusal) from third parties necessary in
connection with the consummation of the transactions contemplated by this
Agreement (including the Merger) shall have been obtained and not subsequently
been revoked, as of the Satisfaction Date other than such consents and waivers
from third parties, which, if not obtained, would not result, individually or in
the aggregate, in a Buyer Material Adverse Effect or a Seller Material Adverse
Effect; provided, however, that the failure to obtain any consent or waiver in
connection with any instrument, obligation or matter set forth in the Seller
Disclosure Letter shall not constitute a failure of the condition set forth in
this Section 6.2(e).
(f) [Intentionally omitted].
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(g) Conversion of Corporate Subsidiaries. Seller shall have, at
or prior to the Effective Time, either converted each of its direct or indirect
corporate Subsidiaries into Delaware limited liability companies or liquidated
such subsidiaries into Seller; provided that this condition shall not apply to
corporations that are Subsidiaries of Seller and that serve as general partners
of limited partnerships if the organizational documents of such corporations or
limited partnerships would, as of the date hereof, prevent such conversions or
liquidations; provided that no consequence of Seller's performance of this
condition will be taken into account in determining the satisfaction of any
other conditions to Parent's and Buyer's obligations to effect the Merger.
(h) Partnership Merger Conditions. All conditions set forth in
Sections 5.1(c), 5.1(d) and 5.3 of the Partnership Merger Agreement shall have
been waived or satisfied as of the Satisfaction Date in accordance with the
terms of the Partnership Merger Agreement.
(i) Partnership Merger. The Partnership Merger shall have been
consummated.
Notwithstanding anything to the contrary in this Agreement, none of the
initiation, threat or existence of any legal action of any kind with respect to
this Agreement or the Partnership Merger Agreement or any transaction
contemplated hereby or thereby, including without limitation any action
initiated, threatened or maintained by any stockholder of Seller or any partner
in the Seller Partnership, whether alleging rights with respect to Dissenting
Shares, claims under any Federal or state securities law, contract or tort
claims, claims for breach of fiduciary duty or otherwise, will constitute a
failure of the conditions set forth in Section 6.2(a), 6.2(b), 6.2(c), 6.2(e),
6.2(h), 6.3(a), 6.3(b), 6.3(c), 6.3(e) or 6.3(f) (and no such action shall cause
the chief executive officer or chief financial officer of Seller or of Parent or
Buyer to be unable to deliver a certificate attesting to compliance with such
conditions) unless that action has resulted in the granting of injunctive relief
that prevents the consummation of the Merger and the other transactions
contemplated hereby or thereby, and such injunctive relief has not been
dissolved or vacated.
6.3 Conditions to Obligations of Seller. The obligation of Seller to
effect the Merger and to consummate the other transactions contemplated to occur
on the Closing Date is further subject to the following conditions, any one or
more of which may be waived by Seller:
(a) Representations and Warranties. The representations and
warranties of Parent and Buyer set forth in this Agreement shall be true and
correct in all material respects (except for representations having a
materiality or Parent Material Adverse Effect or Buyer Material Adverse Effect
qualification, which shall be correct in all respects) as of the date of this
Agreement and as of the Closing Date, as though made on and as of the Closing
Date, except to the extent the representation or warranty is expressly limited
by its terms to another date, in which case such representation or warranty
shall be true and correct in all material respects
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(except for representations having a materiality or Parent Material Adverse
Effect or Buyer Material Adverse Effect qualification, which shall be correct in
all respects) only as of such specific date, and Seller shall have received a
certificate (which certificate may be qualified by Knowledge to the same extent
as the representations and warranties of Parent and Buyer contained herein are
so qualified) signed on behalf of Parent and Buyer by the chief executive
officer or the chief financial officer of such party, in such capacity, to such
effect.
(b) Performance of Obligations of Buyer. Each of Parent and Buyer
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time, and
Seller shall have received a certificate of Parent and Buyer signed on behalf of
Buyer by the chief executive officer or the chief financial officer of Parent
and Buyer, in such capacity, to such effect.
(c) Material Adverse Change. Since the date of this Agreement,
there shall have been no change in the business, financial condition or results
of operations of Parent and its Subsidiaries, taken as a whole, or of Buyer and
the Buyer Subsidiaries, taken as a whole, that has had or would reasonably be
expected to have a material adverse effect on the ability of Parent, Buyer or
Buyer Operating Partnership to consummate the transactions contemplated by this
Agreement and the Partnership Merger Agreement, and Seller shall have received a
certificate of the chief executive officer or chief financial officer of Parent
and Buyer, in such capacity, certifying to such effect.
(d) Tax Opinion Relating to the Partnership Merger. Seller shall
have received an opinion dated the Closing Date from Xxxx, Weiss, Rifkind,
Xxxxxxx & Xxxxxxxx, special counsel to the Buyer, based upon such certificates
and letters dated the Closing Date as are acceptable to such special counsel, to
the effect that, for federal income tax purposes, Seller Unit Holders (other
than persons that are not United States persons within the meaning of Section
7701(a)(30) of the Code) who elect to exchange all Seller OP Units held by them
for Class A Preferred Units or Class B Units in Parent pursuant to the
Partnership Merger shall recognize no income, gain or loss upon the exchange.
For purposes of such opinion, counsel may assume that each Seller Unit Holder
shall enter into a guarantee of indebtedness of Parent in accordance with
Section 4.8 of the partnership agreement of Parent in an amount equal to such
Seller Unit Holder's negative tax capital account and that such guarantee shall
be effective to cause the Seller Unit Holder to bear the "economic risk of loss"
(within the meaning of Treasury Regulation Section 1.752-2) associated with the
portion of the indebtedness so guaranteed.
(e) Consents. All consents and waivers (including, without
limitation, waivers of rights of first refusal) from third parties necessary in
connection with the consummation of the transactions contemplated hereby
(including the Merger) shall have been obtained, other than such consents and
waivers from third parties, which, if not obtained, would not result,
individually or in the aggregate, in a Parent Material Adverse Effect, a Buyer
Material Adverse Effect or a
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Seller Material Adverse Effect; provided, however, that the failure to obtain
any consent or waiver in connection with any instrument, obligation or matter
set forth in the Seller Disclosure Letter shall not constitute a failure of the
condition set forth in this Section 6.3(e).
(f) Partnership Merger. All conditions set forth in Sections
5.1(c), 5.1(d) and 5.2 of the Partnership Merger Agreement shall have been
waived or satisfied in accordance with the terms of the Partnership Merger
Agreement.
(g) Solvency Opinion. Seller and the Seller Partnership shall
have received an opinion, by a reputable expert firm selected by Parent and
reasonably acceptable to the Seller, in a customary form for transactions of
this type as to the solvency and adequate capitalization of the Seller and the
Seller Partnership immediately before and of the Surviving Company and the
Surviving Operating Partnership immediately after giving effect to the
Transactions, which opinion shall be reasonably satisfactory to the Seller.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the Seller Shareholder Approvals are
obtained:
(a) by mutual written consent duly authorized by Parent and the
Board of Directors of Seller;
(b) by Parent or Buyer, upon a breach of any representation,
warranty, covenant, obligation or agreement on the part of Seller set forth in
this Agreement, in any case such that the conditions set forth in Section 6.2(a)
or Section 6.2(b), as the case may be, are not satisfied or would be incapable
of being satisfied within 30 days after the giving of written notice to Seller;
(c) by Seller, upon a breach of any representation, warranty,
covenant obligation or agreement on the part of Parent or Buyer set forth in
this Agreement, in either case such that the conditions set forth in Section
6.3(a) or Section 6.3(b), as the case may be, are not satisfied or would be
incapable of being satisfied within 30 days after the giving of written notice
to Parent or Buyer;
(d) by Parent, Buyer or Seller, if any judgment, injunction,
order, decree or action by any Governmental Entity of competent authority
preventing the consummation of the Merger shall have become final and
nonappealable (an "Injunction");
(e) by Parent, Buyer or Seller, if the Merger shall not have been
consummated on or before December 31, 1999; provided, however, that a party may
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not terminate pursuant to this clause (e) if the terminating party shall have
breached in any material respect its representations or warranties or its
obligations under this Agreement in any manner that shall have proximately
contributed to the occurrence of the failure referred to in this clause;
(f) by either Seller (unless Seller is in breach of its
obligations under Section 5.1) or Parent or Buyer if, upon a vote at a duly held
Seller Shareholders Meeting or any adjournment thereof, Seller Shareholder
Approvals shall not have been obtained as contemplated by Section 5.1;
(g) by Seller, prior to the Seller Shareholders Meeting, if the
Board of Directors of Seller shall have withdrawn or modified its approval or
recommendation of the Merger or this Agreement in connection with, or approved
or recommended, a Superior Acquisition Proposal; provided, however, that no
termination shall be effective pursuant to this Section 7.1(g) under
circumstances in which a Break-Up Fee (as defined in Section 7.2(a)) is payable
pursuant to Section 7.2(a)(vi), unless within 15 days after such termination,
such Break-Up Fee is paid in full by the Seller and Seller Partnership in
accordance with Section 7.2(a)(vi);
(h) by Parent or Buyer if (i) prior to the Seller Shareholders
Meeting, the Board of Directors of Seller shall have withdrawn or modified in
any manner adverse to Buyer its approval or recommendation of the Merger or this
Agreement, or approved or recommended any Acquisition Proposal; or (ii) Seller
shall have entered into a definitive agreement with respect to any Acquisition
Proposal;
(i) by Seller, if Buyer has not closed the equity funding
contemplated by the Equity Commitments and the borrowings contemplated by the
Financing Commitments (x) on or prior to the Satisfaction Date or (y) on or
prior to December 29, 1999, if (1) Parent elects to extend the Closing Date as
contemplated by Section 1.2(b), (2) the conditions set forth in Section 6.1(b)
shall have been satisfied and (3) Seller shall have delivered a written notice
to Parent and Buyer certifying its ability to satisfy the conditions set forth
in Section 6.2(g);
(j) by either Seller or Parent or Buyer, if the stockholders of
Seller adopt the Liquidation Vote; or
(k) by Parent or Buyer, if an Acquisition Proposal that is
publicly announced shall have been commenced or communicated in writing to
Seller and contains a proposal as to price and (i) Seller shall not have
rejected such proposal within ten business days after the date of the receipt
thereof by Seller or after the date of its existence first becomes publicly
announced, if sooner, or (ii) Seller shall have failed to confirm its
recommendation described in Section 2.25 within ten business days after being
requested by Buyer to do so.
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7.2 Certain Fees and Expenses.
(a) If this Agreement shall be terminated:
(i) pursuant to Section 7.1(b), and the breach by Seller
was willful, then Seller and Seller Partnership will pay Parent an aggregate
amount equal to the Break-Up Fee (defined below) plus the lesser of $10,500,000
and the BreakUp Expenses (defined below),
(ii) pursuant to Section 7.1(b), and the breach by Seller
was not willful, then Seller and Seller Partnership will pay Parent an aggregate
amount equal to the lesser of $15,000,000 and the Break-Up Expenses (provided
that, in the case of a termination by Buyer pursuant to Section 7.1(b) on the
basis of a breach of the representation in Section 2.10(b), Buyer shall not be
entitled to such amount),
(iii) pursuant to Section 7.1(c), and the breach by Parent
or Buyer was willful, then Parent and Buyer will pay Seller an aggregate amount
equal to the Break-Up Fee plus the lesser of $4,500,000 and the Break-Up
Expenses,
(iv) pursuant to Section 7.1(c), and the breach by Parent
or Buyer was not willful, then Parent and Buyer will pay Seller an aggregate
amount equal to the lesser of $4,500,000 and the Break-Up Expenses,
(v) pursuant to Section 7.1(f), then Seller and Seller
Partnership will pay Parent an aggregate amount equal to the lesser of
$15,000,000 and the Break-Up Expenses,
(vi) pursuant to Section 7.1(g), 7.1(h) or 7.1(k), then
Seller and Seller Partnership will pay Parent an aggregate amount equal to the
Break-Up Fee plus the lesser of $10,500,000 and the Break-Up Expenses,
(vii) pursuant to Section 7.1(i), then Parent and Buyer
will pay Seller an aggregate amount equal to the Break-Up Fee plus the lesser of
$4,500,000 and the Break-Up Expenses,
(viii) pursuant to Section 7.1(j), then Seller and Seller
Partnership will pay Parent an aggregate amount equal to the lesser of
$10,500,000 and the Break-Up Expenses; and
(ix) pursuant to Section 7.1(d), and the subject of the
Injunction (as defined in Section 7.1(d)) is a stockholder claim that was the
subject of a bona fide settlement proposal with respect to which Buyer withheld
its consent after Seller's request for same pursuant to Section 5.12, then
Parent and Buyer will pay
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Seller an aggregate amount equal to the lesser of $4,500,000 and the Break-Up
Expenses.
Notwithstanding anything in this Agreement to the contrary, the right of
a party to receive payment of the Break-Up Fee, Break-Up Expenses or other
amounts in accordance with this Section 7.2(a) shall be the exclusive remedy of
such party for the loss suffered by such party as a result of the failure of the
Merger and the Partnership Merger to be consummated, and no party shall have any
other liability to any other party after the payment of the Break-Up Fee,
Break-Up Expenses or other amounts (as applicable). The Break-Up Fee, Break-Up
Expenses or other amounts payable by Seller and Seller Partnership in accordance
with this Section 7.2(a) shall be paid by Seller and Seller Partnership to
Buyer, in immediately available funds within fifteen (15) days after the date
the event giving rise to the obligation to make such payment occurred. Except as
provided in Section 7.2(b), the Break-Up Fee, the Break-Up Expenses or other
amounts payable by Parent and Buyer to Seller in accordance with this Section
7.2(a) shall be paid by Parent or Buyer to Seller, in immediately available
funds within fifteen (15) days after the day the event giving rise to the
obligation to make such payment occurred. As used in this Agreement, "Break Up
Fee" shall be an amount equal to $25,000,000; provided that if the Cash
Collateral has been increased by $25,000,000, or the Letter of Credit has been
amended to increase the amount available thereunder by $25,000,000, each as
provided in Section 4.7(b), the Break-Up Fee payable to Seller shall be an
amount equal to $50,000,000. The "Break-Up Expenses" payable to Parent or
Seller, as the case may be, shall be an amount equal to the out-of-pocket
expenses of such party (and, in the case of Parent, including Buyer and Parent's
general partners and limited partners) incurred in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, all fees and expenses payable to financing sources or hedging
counterparties, attorneys', accountants' and investment bankers' fees and
expenses). Such Break-Up Expenses shall be reflected on invoices or other means
verifying the incurrence of such Break-Up Expenses.
(b) If this Agreement shall be terminated by Seller and, as
provided in Section 7.2(a), Parent and Buyer are required to pay to Seller a
Break-Up Fee or Break-Up Expenses, then Seller shall be entitled to direct the
Escrow Agent (i) to terminate Parent's rights to receive any part of the Cash
Collateral or (ii) if the Letter of Credit has been delivered to the Escrow
Agent in substitution for the Cash Collateral, to draw on the Letter of Credit
in accordance with the terms thereof. Except as described in the preceding
sentence, in no other circumstances shall Seller have any right to receive any
part of the Cash Collateral or to draw on the Letter of Credit. If this
Agreement is terminated in any circumstance other than as described in the first
sentence of this Section 7.2(b), Seller shall direct the Escrow Agent to return
the Cash Collateral or Letter of Credit, as applicable, to Parent within one
business day of any such termination. Notwithstanding anything in this Agreement
to the contrary, the right of Seller to receive amounts with respect to which
Parent's
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rights to receive any part of the Cash Collateral is terminated or which are
drawn on the Letter of Credit in accordance with this Section 7.2(b) shall be
the exclusive remedy of Seller, and its stockholders, the Seller Partnership and
the OP Unitholders for any and all losses suffered as a result of the failure of
the Merger and the Partnership Merger to be consummated and upon payment of such
amounts neither Parent nor Buyer shall have any other liability to Seller
hereunder (including under Section 7.2(a)). Any amounts which Seller has the
right to receive pursuant to this Section 7.2(b) shall be applied as set forth
in the Escrow Agreement.
(c) Except as specifically provided in this Section 7.2, each
party shall bear its own expenses in connection with this Agreement and the
Transactions.
7.3 Effect of Termination. In the event of termination of this Agreement
by Seller, Buyer or Parent as provided in Section 7.1, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of Parent, Buyer, or Seller, other than in accordance with Section 7.2,
this Section 7.3 and Article 8.
7.4 Amendment. This Agreement may be amended by Parent, Buyer and Seller
in writing by action of their respective Boards of Directors at any time before
or after any Seller Shareholder Approvals are obtained and prior to the
Effective Time; provided, however, that, after the Seller Shareholder Approvals
are obtained, no such amendment, modification or supplement shall be made which
by law requires the further approval of stockholders without obtaining such
further approval. The parties agree to amend this Agreement in the manner
provided in the immediately preceding sentence to the extent required to
continue the status of Seller as a REIT.
7.5 Extension: Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of any other party, (b) waive any inaccuracies in the representations
and warranties of any other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
7.4, waive compliance with any of the agreements or conditions of any other
party contained in this Agreement. Any agreement on the part of a party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
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ARTICLE 8
GENERAL PROVISIONS
8.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement confirming the representations and warranties in this
Agreement shall survive the Effective Time. This Section 8.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time.
8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally, sent by overnight courier (providing proof of delivery) to the
parties or sent by telecopy (providing confirmation of transmission) at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a party as shall be specified by like notice):
(a) if to Parent or Buyer, to:
Berkshire Realty Holdings, L.P.
Xxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Fax: (000) 000-0000
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
Xxxxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
and
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
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and
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Xxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
(b) if to Seller, to:
Berkshire Realty Company, Inc.
Xxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: President
Fax: (000) 000-0000
with a copy to:
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
and Xxxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
and
Xxxxx & Xxxxxxxxx LLP
0000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
All notices shall be deemed given only when actually received.
8.3 Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
Interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
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8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement, the
Seller Disclosure Letter, the Buyer Disclosure Letter, the Confidentiality
Agreement dated September 16, 1998 between Xxxxxxxxx & Co., LLC and Lazard on
behalf of Seller, the Partnership Merger Agreement and the other agreements
entered into in connection with the Merger (a) constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this Agreement and (b)
except as provided in Section 5.8 (the "Third Party Provision") are not intended
to confer upon any Person other than the parties hereto any rights or remedies.
The Third Party Provision may be enforced by the beneficiaries thereof or on
behalf of the beneficiaries thereof by the directors of Seller who had been
members of the Board of Directors of Seller prior to the Effective Time.
8.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
8.7 Assignment. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned or delegated, in whole or
in part, by operation of law or otherwise by any of the parties without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
8.8 Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed by
Seller in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that Parent and Buyer shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement by Seller and to enforce
specifically the terms and provisions of this Agreement in any federal court
located in Delaware or in Chancery Court in Delaware, this being in addition to
any other remedy to which they are entitled at law or in equity. The parties
acknowledge that Seller shall not be entitled to an injunction or injunctions to
prevent breaches of this Agreement by Parent or Buyer or to enforce specifically
the terms and provisions of this Agreement and that Seller's sole and exclusive
remedy with respect to any such breach shall be the remedy set forth in Section
7.2. In addition, each of the parties
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hereto (a) consents to submit itself (without making such submission exclusive)
to the personal jurisdiction of any federal court located in Delaware or
Chancery Court located in Delaware in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement and (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court.
8.9 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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IN WITNESS WHEREOF, Parent, Buyer and Seller have caused this Agreement
to be signed by their respective officers thereunto duly authorized all as of
the date first written above.
BERKSHIRE REALTY HOLDINGS, L.P.,
a Delaware limited partnership
By: /s/ Xxxxxxx X. Xxxxx
--------------------
Xxxxxxx X. Xxxxx
Authorized Signatory
BRI ACQUISITION, LLC,
a Delaware limited liability company
By: /s/ Xxxxxxx X. Xxxxx
--------------------
Xxxxxxx X. Xxxxx
Authorized Signatory
BERKSHIRE REALTY COMPANY, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Executive
Officer
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BRI OP LIMITED PARTNERSHIP, a Delaware limited partnership joins in this
Agreement solely with respect to Section 7.2
By: Berkshire Apartments, Inc.
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Name: Xxxxx X. Xxxxxxxx
Title: President and Chief Executive
Officer
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