PRIVILEGED AND CONFIDENTIAL
AGREEMENT AND PLAN OF MERGER
BY AND AMONG UNION PROPERTY INVESTORS, INC.
KRANZCO REALTY TRUST AND KRT UNION CORP.
Dated November 12, 1996
TABLE OF CONTENTS
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ARTICLE I THE MERGER...................................................................................1
SECTION 1.01 The Merger. ..........................................................................1
SECTION 1.02 Effects of the Merger. ..............................................................2
SECTION 1.03 Merger Consideration. ...............................................................3
SECTION 1.04 Adjustment of Target Common Stock Consideration. .....................................5
SECTION 1.05 Certificate of Incorporation; Bylaws; Directors; Officers. ..........................6
ARTICLE II EXCHANGE OF SHARES...........................................................................6
SECTION 2.01 Surrender of Target Certificates......................................................6
SECTION 2.02 No Fractional Shares for Acquiror Series B Preferred Shares;
Cash Payments.........................................................................7
SECTION 2.03 No Dividends..........................................................................7
SECTION 2.04 Return to Acquiror....................................................................8
SECTION 2.05 No Further Transfer...................................................................8
SECTION 2.06 Withholding Rights....................................................................9
SECTION 2.07 Lost, Stolen or Destroyed Certificates................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF TARGET.....................................................9
SECTION 3.01 Organization and Good Standing........................................................9
SECTION 3.02 Capitalization of Target.............................................................10
SECTION 3.03 Authority of Target..................................................................11
SECTION 3.04 Consents and Approvals; No Violations................................................11
SECTION 3.05 Public Reports.......................................................................12
SECTION 3.06 Real Property; Contracts and Leases Relating to Real Property........................12
SECTION 3.07 Leases. ............................................................................15
SECTION 3.08 Tenant Improvements..................................................................16
SECTION 3.09 Environmental Matters................................................................17
SECTION 3.10 Insurance............................................................................18
SECTION 3.11 Absence of Certain Changes...........................................................18
SECTION 3.12 No Undisclosed Liabilities...........................................................18
SECTION 3.13 Litigation...........................................................................18
SECTION 3.14 Compliance with Applicable Law.......................................................19
SECTION 3.15 Taxes................................................................................19
SECTION 3.16 Financial Statements and Condition...................................................21
SECTION 3.17 Brokers or Finders...................................................................21
SECTION 3.18 Other Interests......................................................................21
SECTION 3.19 Disclosure...........................................................................21
SECTION 3.20 Vote Required........................................................................21
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Table of Contents
(Continued)
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SECTION 3.21 Parent Shares........................................................................21
SECTION 3.22 Target Preferred Stock...............................................................22
SECTION 3.23 Employee Benefit Plans...............................................................22
SECTION 3.24 Labor Matters........................................................................22
SECTION 3.25 Related Party Transactions...........................................................23
SECTION 3.26 Actions of Holders of Target Common Stock............................................23
SECTION 3.27 Books and Records....................................................................23
SECTION 3.28 Fairness Opinion.....................................................................23
SECTION 3.29 No Representation or Warranty........................................................24
SECTION 3.30 Obligations of Milestone.............................................................24
SECTION 3.31 Target Directors' and Officers' Liability Insurance Policy...........................24
SECTION 3.32 South Carolina Outparcel Agreement...................................................24
SECTION 3.33 Pending Milestone Action.............................................................24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND
NEWCO.......................................................................................25
SECTION 4.01 Organization and Good Standing.......................................................25
SECTION 4.02 Capitalization of Acquiror and Newco.................................................26
SECTION 4.03 Authority of Acquiror and Newco......................................................27
SECTION 4.04 Consents and Approvals; No Violations................................................27
SECTION 4.05 Public Reports.......................................................................28
SECTION 4.06 Real Property; Contracts and Leases Relating to Real Property........................28
SECTION 4.07 Leases. ............................................................................31
SECTION 4.08 Environmental Matters................................................................31
SECTION 4.09 Insurance............................................................................32
SECTION 4.10 Absence of Certain Changes...........................................................32
SECTION 4.11 No Undisclosed Liabilities...........................................................32
SECTION 4.12 Litigation...........................................................................33
SECTION 4.13 Compliance with Applicable Law.......................................................33
SECTION 4.14 Taxes................................................................................34
SECTION 4.15 Financial Statements and Condition...................................................34
SECTION 4.16 Newco................................................................................35
SECTION 4.17 Brokers or Finders...................................................................35
SECTION 4.18 Other Interests......................................................................35
SECTION 4.19 Disclosure...........................................................................35
SECTION 4.20 Employee Benefit Plans...............................................................35
SECTION 4.21 Labor Matters........................................................................36
SECTION 4.22 Related Party Transactions...........................................................36
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Table of Contents
(Continued)
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SECTION 4.23 Books and Records....................................................................37
SECTION 4.24 No Representation or Warranty........................................................37
ARTICLE V COVENANTS...................................................................................37
SECTION 5.01 Target PreClosing Obligations........................................................37
SECTION 5.02 Acquiror Pre-Closing Obligations.....................................................41
SECTION 5.03 HartScottRodino and Other Filings....................................................43
SECTION 5.04 Title Insurance......................................................................43
SECTION 5.05 No Solicitations.....................................................................43
SECTION 5.06 Access to Information................................................................44
SECTION 5.07 Target Stockholder Meeting...........................................................45
SECTION 5.08 Target Proxy Statement...............................................................45
SECTION 5.09 Registration Statement...............................................................46
SECTION 5.10 Efforts to Consummate................................................................48
SECTION 5.11 Letters of Accountants...............................................................48
SECTION 5.12 Indemnification of Managers..........................................................49
SECTION 5.13 No Breach of Representations and Warranties..........................................49
SECTION 5.14 Consents; Notices....................................................................50
SECTION 5.15 Public Announcements.................................................................50
SECTION 5.16 Exchange Listing.....................................................................51
SECTION 5.17 Filing of Articles Supplementary.....................................................51
SECTION 5.18 Closing Certificates.................................................................51
SECTION 5.19 Reorganization.......................................................................51
SECTION 5.20 No Improvements; Damage or Destruction; Condemnation;
Environmental........................................................................52
SECTION 5.21 Affiliates of Target.................................................................52
SECTION 5.22 Estoppel Certificates................................................................53
SECTION 5.23 Indemnification Obligations..........................................................53
SECTION 5.24 First Union Line of Credit...........................................................53
SECTION 5.25 Sale of South Carolina Outparcel.....................................................54
SECTION 5.26 Termination of Management Agreements.................................................54
ARTICLE VI CONDITIONS TO ACQUIROR'S AND NEWCO'S OBLIGATIONS............................................55
SECTION 6.01 Representations and Warranties.......................................................55
SECTION 6.02 Covenants............................................................................55
SECTION 6.03 Officer's Certificate................................................................55
SECTION 6.04 Opinion of Counsel...................................................................55
SECTION 6.05 Absence of Changes...................................................................55
SECTION 6.06 Number of Dissenting Shares..........................................................56
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Table of Contents
(Continued)
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SECTION 6.07 Approvals and Consents...............................................................56
SECTION 6.08 Injunctions..........................................................................56
SECTION 6.09 HSR Act..............................................................................56
SECTION 6.10 Effectiveness of Registration Statement..............................................56
SECTION 6.11 Stockholder Approval.................................................................56
SECTION 6.12 Accountants' Letters.................................................................57
SECTION 6.13 Shareholders and Voting Trust Agreement..............................................57
SECTION 6.14 Guaranty Agreement...................................................................57
SECTION 6.15 Registration Rights Agreement........................................................57
SECTION 6.16 Termination of Target Affiliate Contracts............................................58
SECTION 6.17 Redemption of Target Preferred Stock.................................................58
SECTION 6.18 Estoppel Certificates................................................................58
SECTION 6.19 Statement of Accounts Receivable.....................................................58
SECTION 6.20 Title Insurance Policies.............................................................59
ARTICLE VII CONDITIONS TO TARGET'S OBLIGATIONS..........................................................59
SECTION 7.01 Representations and Warranties.......................................................59
SECTION 7.02 Covenants............................................................................59
SECTION 7.03 Officer's Certificate................................................................59
SECTION 7.04 Opinion of Counsel...................................................................59
SECTION 7.05 Absence of Changes...................................................................60
SECTION 7.06 Approvals and Consents...............................................................60
SECTION 7.07 Injunctions..........................................................................60
SECTION 7.08 HSR Act..............................................................................60
SECTION 7.09 Effectiveness of Registration Statement..............................................60
SECTION 7.10 Stockholder Approval.................................................................60
SECTION 7.11 Merger...............................................................................60
SECTION 7.12 Accountants' Letters.................................................................60
SECTION 7.13 Financial Statements.................................................................61
SECTION 7.14 Registration Rights Agreement........................................................61
SECTION 7.15 Shareholders Agreement...............................................................61
SECTION 7.16 Fairness as to Target Preferred Stock................................................61
ARTICLE VIII TERMINATION AND AMENDMENT...................................................................62
SECTION 8.01 Termination..........................................................................62
SECTION 8.02 Effect of Termination. ...................................................63
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Table of Contents
(Continued)
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ARTICLE IX MISCELLANEOUS...............................................................................66
SECTION 9.01 Survival of Agreements and Representations and Warranties............................66
SECTION 9.02 Incorporation of Exhibits............................................................66
SECTION 9.03 Notices..............................................................................66
SECTION 9.04 Descriptive Headings.................................................................67
SECTION 9.05 Assignment; Binding Effect; Benefit..................................................67
SECTION 9.06 Counterparts.........................................................................68
SECTION 9.07 Entire Agreement.....................................................................68
SECTION 9.08 Governing Law and Consent to Jurisdiction............................................68
SECTION 9.09 Fees and Expenses....................................................................68
SECTION 9.10 Non-Recourse.........................................................................68
SECTION 9.11 Enforcement..........................................................................69
SECTION 9.12 Severability.........................................................................69
SECTION 9.13 Amendment............................................................................69
SECTION 9.14 Extension; Waiver....................................................................70
SECTION 9.15 Knowledge............................................................................70
SECTION 9.16 Interpretation.......................................................................70
SCHEDULES AND EXHIBITS
Schedule 1.04(a) Definitions of Total Current Assets and Total Current Liabilities
Schedule 6.18 Tenants Required to Furnish Estoppel Certificates
Exhibit A Form of Articles Supplementary for Acquiror's 9.75% Series B
Cumulative Convertible Preferred Stock
Exhibit B Form of Articles Supplementary for Acquiror's Series C Cumulative
Redeemable Preferred Shares
Exhibit C Form of Affiliate Letter
Exhibit D Form of Estoppel Certificate
Exhibit E Form of Shareholder and Voting Trust Agreement
Exhibit F Form of Guaranty Agreement
Exhibit G Form of Registration Rights Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated November 12, 1996, by and among
Union Property Investors, Inc., a Delaware corporation ("Target"), Kranzco
Realty Trust, a Maryland real estate investment trust ("Acquiror;" Acquiror and
its directly or indirectly majority-owned subsidiary corporations and
partnerships, taken together on a consolidated basis, are collectively referred
to herein as the "Company;" and such subsidiary corporations and partnerships
are individually referred to herein as "Acquiror Subsidiaries"), and KRT Union
Corp. ("Newco"), a Delaware wholly-owned subsidiary of Acquiror organized solely
for the purpose of consummating the merger and the other transactions hereby
contemplated.
WHEREAS, the Board of Directors of each of Target and Acquiror have
determined that it is in the best interests of their respective entities and
stockholders to consummate the business combination transaction provided for
herein, pursuant to which Target will, on the terms and subject to the
conditions set forth herein, merge with and into Newco so that Newco will be the
surviving entity and a qualified real estate investment trust ("REIT")
subsidiary within the meaning of Section 856(i)(2) of the Internal Revenue Code
of 1986, as amended (the "Code");
WHEREAS, for federal income tax purposes, the merger is intended to be
treated as a reorganization pursuant to the provisions of Section 368(a)(1)(A)
of the Code, and for accounting purposes shall be accounted for as a "purchase";
and
WHEREAS, the parties hereto desire to make certain covenants,
representations, warranties and agreements in connection with the merger and
also to prescribe certain conditions to the merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger.
(a) Upon the terms and subject to the conditions hereof and in
accordance with Section 251 of the Delaware General Corporation Law (the
"DGCL"), on the first business day following the satisfaction or waiver of the
conditions set forth in Article VI and Article VII, unless the parties shall
otherwise agree, a closing (the "Closing") of the merger of Target
with and into Newco in accordance with this Agreement with the separate
corporate existence of Target thereupon ceasing (the "Merger") shall take place
at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 9:00 a.m. (local time) or such
other place or time as the parties shall agree in writing. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date".
(b) Concurrently with the Closing, a certificate of merger (the
"Delaware Merger Certificate"), in form and substance reasonably satisfactory to
Acquiror and Target, providing for the merger of Target with and into Newco
shall be duly prepared, executed and filed by Newco, as the surviving
corporation (the "Surviving Corporation"), with the Delaware Secretary of State
in accordance with the relevant provisions of the DGCL and the Merger shall
become effective upon the effective date of the filing of the Delaware Merger
Certificate, or at such later time as the parties shall have agreed upon and
designated in the Delaware Merger Certificate in accordance with the DGCL. The
date and time the Merger becomes effective is referred to herein as the
"Effective Time".
SECTION 1.02 Effects of the Merger.
(a) The Merger shall have the effects set forth in the DGCL and as
hereinafter set forth. Immediately following the Merger, the Surviving
Corporation shall (i) continue its corporate existence under the laws of the
State of Delaware, (ii) be a wholly-owned, qualified REIT subsidiary of
Acquiror, and (iii) succeed to all rights, assets, liabilities and obligations
of Target and Newco in accordance with the DGCL. At the Effective Time, in
accordance with the relevant provision of the DGCL, the separate existence of
Target shall cease and the Surviving Corporation shall succeed, without other
transfer, to all the rights and property of each of Newco and Target and shall
be subject to all the debts and liabilities of each in the manner provided by
the DGCL.
(b) At the Effective Time each share of common stock, par value $.01
per share, of Newco issued and outstanding immediately prior to the Effective
Time shall remain outstanding and by reason of the Merger and without any action
by the holder thereof represent one validly issued, fully paid and
non-assessable share of common stock, par value $.01 per share, of the Surviving
Corporation. As a result of the Merger and without any action by the holder
thereof, (i) all shares of Target's common stock, par value $.01 per share (the
"Target Common Stock"), shall cease to be outstanding and shall be cancelled and
retired and shall cease to exist, and, except as provided in Section 1.03(d),
each holder of a Target Certificate (as defined in Section 2.01) representing
any shares of Target Common Stock (a "Target Common Stockholder") shall
thereafter cease to have any rights with respect to such shares of Target Common
Stock, except the right to receive, without interest, the Target Common Stock
Consideration (as defined in Section 1.03 below) and cash in lieu of fractional
share interests upon the surrender of such Target Certificate in accordance with
this Agreement and (ii) all shares of Target's preferred stock, par value $.01
per share (the "Target Preferred Stock"), shall cease to be outstanding and
shall be cancelled and retired and
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shall cease to exist, and each holder of a Target Certificate (as defined in
Section 2.01) representing any shares of Target Preferred Stock shall thereafter
cease to have any rights with respect to such shares of Target Preferred Stock
except the right to receive Acquiror Series C Preferred Shares in accordance
with Section 1.03.
(c) Each share of Target Common Stock issued and held in Target's
treasury at the Effective Time, if any, shall, by virtue of the Merger, cease to
be outstanding and shall be cancelled and retired and shall cease to exist
without payment of any consideration therefor.
SECTION 1.03 Merger Consideration.
(a) At the Effective Time, each share of Target Common Stock issued and
outstanding immediately prior to the Effective Time shall, by reason of the
Merger and without any action by the holder thereof, be converted into the right
to receive, subject to adjustment pursuant to Section 1.04 and in addition to
the cash to be received, if any, in lieu of the issuance of fractional shares of
Acquiror Series B Preferred Shares pursuant to Section 2.02), (i) 0.2980 shares
of Acquiror's 9.75% Series B Cumulative Convertible Preferred Shares, par value
$.01 per share each with a $25.00 per share liquidation preference (the
"Acquiror Series B Preferred Shares"), the form of Articles Supplementary for
which is attached as Exhibit A hereto, plus (ii) the number of shares of
Acquiror Series B Preferred Shares equal to (A) an amount equal to the result of
dividing the sum of (1) the aggregate of the payments made by Target for the
reduction of the principal amount of the Underlying Debt (as hereafter defined
and listed in the Disclosure Letter delivered by Target to Acquiror
simultaneously with the execution and delivery of this Agreement (the "Target
Disclosure Letter")), and (2) the amount paid for the redemption of the Target
Preferred Stock, in each case from September 30, 1996 through the date one day
prior to the Closing Date (the aggregate of such payments is referred to
hereinafter as "Closing Adjustment Payments"), by $25, divided by (B) 3,789,171,
plus (iii) if the unpaid Merger Expenses (as defined below) are equal to or less
than $2,000,000, the number of shares of Acquiror Series B Preferred Shares
equal to (A) an amount equal to the result of dividing the excess of $2,000,000
over the aggregate of all unpaid Merger Expenses substantiated to Acquiror's
reasonable satisfaction, by $25, divided by (B) 3,789,171 minus (iv) if the
unpaid Merger Expenses are greater than $2,000,000, the number of shares of
Acquiror Series B Preferred Shares equal to (A) an amount equal to the result of
dividing the excess of the unpaid Merger Expenses over $2,000,000 by $25,
divided by (B) 3,789,171. The right to receive Acquiror Series B Preferred
Shares pursuant to this Section 1.03(a) (as adjusted pursuant to Section 1.04),
and the cash to be received, if any, in lieu of the issuance of fractional
shares of Acquiror Series B Preferred Shares pursuant to Section 2.02, is
hereinafter referred to as the "Target Common Stock Consideration". "Merger
Expenses" shall mean (i) all investment banking fees and disbursements
(including, without limitation, finders fees), legal fees and disbursements, and
accounting fees and disbursements, in each case incurred by Target in connection
with the negotiation, execution and delivery of this Agreement and the
consummation of the Merger and other transactions contemplated by this Agreement
and the Ancillary Documents (as defined below), plus (ii) the lesser of (A)
$200,000 and (B) one-half of the following: all debt
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assumption and prepayment fees, printing expenses, filing fees, property and
other taxes payable in jurisdictions in which Target is, or is required to be,
qualified to do business, property transfer taxes, any other fees and expenses
paid to obtain any required consents and approvals, and any fees and expenses
required to obtain the Target D & O Liability Insurance Tail (as defined below),
in each case incurred in connection with the negotiation, execution and delivery
of this Agreement and the consummation of the Merger and other transactions
contemplated by this Agreement and the Ancillary Documents.
(b) At the Effective Time, each share of the Target Preferred Stock
(together with the Target Common Stock, the "Target Stock"), issued and
outstanding immediately prior to the Effective Time shall, by reason of the
Merger and without any action by the holder thereof, be converted into the right
to receive one share of Acquiror Series C Cumulative Redeemable Preferred
Shares, par value $.01 per share each with a $10.00 per share redemption value
and liquidation preference (the "Acquiror Series C Preferred Shares"), the form
of Articles Supplementary for which is attached as Exhibit B hereto.
(c) Notwithstanding Subsection 1.03(a), shares of Target Common Stock
issued and outstanding immediately prior to the Effective Time and held by a
holder of Target Common Stock ("Dissenting Shares") who has not voted in favor
of the Merger or consented thereto in writing and who has demanded appraisal for
such stock in accordance with the DGCL and is entitled thereto, shall not be
converted into the right to receive shares of Acquiror Series B Preferred Shares
unless such holder fails to perfect or withdraws or loses his right to
appraisal. If, after the Effective Time, such holder fails to perfect or
withdraws or loses the right to appraisal to which he is entitled, such shares
of Target Common Stock shall thereupon be deemed to have been converted into and
to represent the right to receive, at the Effective Time, the shares of Acquiror
Series B Preferred Shares pursuant to the terms of this Section 1.03, without
any interest thereon or addition thereto. Target shall give Acquiror prompt
notice of any written demands for appraisal or withdrawals of demands for
appraisal received by Target and, except with the prior written consent of
Acquiror, shall not make any payment with respect to, or settle or offer to
settle any such demands, and, prior to the Effective Time, Acquiror shall have
the right to participate in all negotiations and proceedings with respect to
such demands.
(d) Except as provided in this Section 1.03, (i) holders of Target
Common Stock shall, at and after the Effective Time, by reason of the Merger and
without any action by the holder thereof, cease to have any rights with respect
to such Target Common Stock, except the right to receive the Target Common Stock
Consideration, and (ii) holders of Target Preferred Stock shall, at and after
the Effective Time, by reason of the Merger and without any action by the holder
thereof, cease to have any rights with respect to such Target Preferred Stock,
except the right to receive Acquiror Series C Preferred Shares, in each case in
accordance with this Section 1.03.
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SECTION 1.04 Adjustment of Target Common Stock Consideration.
(a) The parties agree that the number of shares of Acquiror Series B
Preferred Shares to be exchanged for each share of Target Common Stock (i) shall
be increased, as set forth in Section 1.04(b), to the extent that the amount
(the "Adjustment Increase Amount") by which the Total Current Assets (as defined
on Schedule 1.04(a) attached hereto) as of the close of business on the day
immediately preceding the Closing Date (the "Adjustment Time") exceeds the Total
Current Liabilities (as defined on Schedule 1.04(a) attached hereto) as of the
Adjustment Time or (ii) shall be reduced, as set forth in Section 1.04(b), by an
amount (the "Adjustment Decrease Amount") equal to the amount by which the Total
Current Liabilities (excluding unpaid Merger Expenses) as of the Adjustment Time
exceed Total Current Assets as of the Adjustment Time. For purposes of this
Section 1.04, (i) Total Current Assets shall not include the South Carolina
Outparcel Proceeds (as defined in Section 5.25) and (ii) Total Current
Liabilities shall not include (A) any unpaid Merger Expenses, (B) any unpaid
costs and expenses provided for in clauses (2) and (3) of Section 5.25 relating
to the South Carolina Outparcel Transfer or (C) up to $19,000 for income taxes
accrued by Target in accordance with GAAP but not paid on the Closing Date
arising from the South Carolina Outparcel Transfer. Except as otherwise provided
in this Agreement, Target shall not take any action after the date hereof, and
has not taken any action, that could reasonably be expected to change the Total
Current Assets or the Total Current Liabilities during the period from the
Adjustment Time to the Effective Time.
(b) The number of shares of Acquiror Series B Preferred Shares to be
exchanged for each share of Target Common Stock shall be increased by the number
of shares of Acquiror Series B Preferred Shares equal to (A) an amount equal to
the result of dividing the Adjustment Increase Amount, by $25, divided by (B)
3,789,171. The number of shares of Acquiror Series B Preferred Shares to be
exchanged for each share of Target Common Stock shall be decreased by the number
of shares of Acquiror Series B Preferred Shares equal to (A) an amount equal to
the result of dividing the Adjustment Decrease Amount, by $25, divided by (B)
3,789,171.
(c) In order to determine whether any adjustments are required pursuant
to this Section 1.04, the parties agree that Target will (i) calculate the
Adjustment Increase Amount or Adjustment Decrease Amount, as the case may be,
and (ii) deliver to Acquiror on or before the Closing Date an unaudited
financial statement (the "Closing Adjustment Statement") and supporting and
other substantiating documentation, setting forth in reasonable detail the Total
Current Assets and Total Current Liabilities of Target as of the Adjustment
Time, together with a letter from Deloitte & Touche, Target's independent public
accountants, describing the procedures performed by them concerning the accuracy
of the amounts and calculations set forth in, and otherwise containing such
statements and information with respect to the Closing Adjustment Statement, in
form and substance reasonably satisfactory to Acquiror. In making its
calculations, Target shall apply the same accounting methods used by Target in
the preparation of Target's unaudited balance sheet as at September 30, 1996.
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SECTION 1.05 Certificate of Incorporation; By-laws; Directors;
Officers.
(a) The Certificate of Incorporation and By-laws of Newco in effect on
the date hereof shall be the Certificate of Incorporation and By-laws of the
Surviving Corporation at the Effective Time, and thereafter may be amended in
accordance with their respective terms and applicable law.
(b) The directors of Newco immediately prior to the Effective Time
shall be the directors of the Surviving Corporation as of and following the
Effective Time.
(c) The officers of Newco immediately prior to the Effective Time shall
be the officers of the Surviving Corporation as of and following the Effective
Time.
ARTICLE II
EXCHANGE OF SHARES
SECTION 2.01 Surrender of Target Certificates. Prior to the Effective
Time, Acquiror shall make available to an exchange agent selected by Acquiror,
which shall be Acquiror's transfer agent, or such other party reasonably
acceptable to Target (the "Exchange Agent"), in trust for the benefit of the
holders of Target Common Stock and Target Preferred Stock, for exchange in
accordance with this Article II, the amount of cash payable in lieu of
fractional shares pursuant to Section 2.02 and the certificates representing the
aggregate number of shares of Acquiror Series B Preferred Shares and Acquiror
Series C Preferred Shares, respectively, to be issued pursuant to Section 1.03.
Promptly after the Effective Time, the Exchange Agent shall mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time represented shares of Target Common Stock or Target Preferred
Stock (collectively, the "Target Certificates" and individually, a "Target
Certificate") a letter of transmittal and instructions for use in effecting the
surrender of Target Certificates in exchange for cash in lieu of fractional
shares, after giving effect to any required withholding tax, and certificates
representing shares of Acquiror Series B Preferred Shares or Acquiror Series C
Preferred Shares, respectively, and cash in lieu of fractional shares, if
applicable, after giving effect to any required withholding tax. The letter of
transmittal shall specify that delivery shall be effected, and risk of loss and
title to Target Certificates shall pass, only upon delivery of the Target
Certificates to the Exchange Agent, and shall be in such form and have such
other provisions as Acquiror shall reasonably specify. Upon surrender of a
Target Certificate representing shares of Target Common Stock to the Exchange
Agent, together with such letter of transmittal, duly executed, the holder of
such
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Target Certificate shall be entitled to receive in exchange therefor shares of
Acquiror Series B Preferred Shares and cash in lieu of fractional shares,
pursuant to Section 1.03 and subject to Section 2.06, for each share of Target
Common Stock formerly represented by such Target Certificate, and the Target
Certificate so surrendered shall forthwith be canceled. Upon surrender of a
Target Certificate representing shares of Target Preferred Stock to the Exchange
Agent, together with such letter of transmittal, duly executed, the holder of
such Target Certificate shall be entitled to receive in exchange therefor shares
of Acquiror Series C Preferred Shares pursuant to the terms of Section 1.03 and
the Target Certificate so surrendered shall be cancelled. Until surrendered as
contemplated by this Article II, from and after the Effective Time, each Target
Certificate shall be deemed to represent only the right to receive the above
described consideration for each share of Target Common Stock or Target
Preferred Stock formerly represented by such Target Certificate, and shall not
evidence any interest in Acquiror or Newco. If a certificate representing shares
of Acquiror Series B Preferred Shares or Acquiror Series C Preferred Shares is
to be issued to and cash is to be paid in lieu of fractional shares to a person
other than the one in whose name the Target Certificate surrendered in exchange
therefor is registered, it shall be a condition to such issuance or payment that
such Target Certificate be properly endorsed (or accompanied by an appropriate
instrument of transfer), with signatures guaranteed, if requested, and
accompanied by evidence that any applicable stock transfer taxes have been paid
or provided for.
SECTION 2.02 No Fractional Shares for Acquiror Series B Preferred
Shares; Cash Payments.
(a) No certificate or scrip representing fractional shares of Acquiror
Series B Preferred Shares shall be issued upon the surrender for exchange of
Target Certificates representing shares of Target Common Stock, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of Acquiror. The fractional shares of Acquiror Series B
Preferred Shares to be received by each Target Common Stockholder will be
aggregated so that no Target Common Stockholder will receive cash in an amount
equal to or greater than the value of one full share of Acquiror Series B
Preferred Shares. In lieu of any such fractional share, the Exchange Agent shall
pay, subject to Section 2.06, to each Target Common Stockholder who otherwise
would be entitled to receive a fractional share of Acquiror Series B Preferred
Shares an amount of cash determined by multiplying $25 by the fraction of a
share of Acquiror Series B Preferred Shares to which such holder would otherwise
be entitled. The transfer of cash to Target Common Stockholders in lieu of
fractional shares of Acquiror Series B Preferred Shares, if any, is solely for
the purpose of avoiding the expense and inconvenience to Acquiror of accounting
for fractional shares and does not represent separately bargained-for
consideration.
(b) Acquiror shall make available to the Exchange Agent sufficient
funds as and when necessary to enable the Exchange Agent to make the cash
payments to be made in lieu of the issuance of fractional shares under Section
2.02. In no event shall interest be paid or accrued on any such cash payments.
The cash amount to be paid to the holders of Target Common Stock pursuant to
Section 2.02 shall be rounded up to the nearest cent.
SECTION 2.03 No Dividends. No dividends or other distributions declared
or made after the Effective Time with respect to Acquiror Series B Preferred
Shares or Acquiror Series C Preferred Shares with a record date after the
Effective Time shall be paid to the holder of any Target Certificate with
respect to the Acquiror Series B Preferred Shares or the Acquiror Series C
Preferred Shares represented thereby until the holder of record of such Target
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Certificate shall surrender such Target Certificate for exchange as provided
herein. Dividends or other distributions with a record date after the Effective
Time payable in respect of Acquiror Series B Preferred Shares or Acquiror Series
C Preferred Shares held by the Exchange Agent shall be paid to the Exchange
Agent and held in trust for the benefit of such holders of Target Certificates.
Following surrender of any previously unsurrendered Target Certificate
surrendered for exchange as provided herein, there shall be paid to the record
holder of the certificates representing shares of Acquiror Series B Preferred
Shares or Acquiror Series C Preferred Shares issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any dividends
or other distributions with a record date after the Effective Time theretofore
paid with respect to such shares of Acquiror Series B Preferred Shares or
Acquiror Series C Preferred Shares, respectively, and (ii) at the date of
payment of any dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender, the amount of such dividends or other distributions payable with
respect to such shares of Acquiror Series B Preferred Shares or Acquiror Series
C Preferred Shares, respectively.
SECTION 2.04 Return to Acquiror. Any shares of Acquiror Series B
Preferred Shares or Series C Preferred Shares and any cash in lieu of fractional
share interests made available to the Exchange Agent and not exchanged for
Target Certificates within 12 months after the Effective Time and any dividends
and distributions held by the Exchange Agent for payment or delivery to the
holders of unsurrendered Target Certificates representing Target Common Stock or
Target Preferred Stock and unclaimed at the end of such 12 month period shall be
redelivered or repaid by the Exchange Agent to Acquiror, after which time any
holder of Target Certificates who has not theretofore delivered or surrendered
such Target Certificates to the Exchange Agent, subject to applicable law, shall
look only to Acquiror for the consideration to be paid pursuant to the terms of
Section 1.03 and, if applicable, the dividends or distributions to be paid
pursuant to Section 2.03. Notwithstanding the foregoing, none of the Exchange
Agent, the Surviving Corporation or any other party hereto shall be liable to a
holder of Target Common Stock or Target Preferred Stock for any shares of
Acquiror Series B Preferred Shares or Acquiror Series C Preferred Shares,
respectively, cash in lieu of fractional share interests, if applicable, or
dividends or distributions delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
SECTION 2.05 No Further Transfer. Following the Effective Time, there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Target Common Stock or Target Preferred
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Target Certificates issued prior to the Effective Time are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged for shares of Acquiror Series B Preferred Shares or Acquiror
Series C Preferred Shares as provided in this Article II. Target Certificates
surrendered for exchange by any person (an "Affiliate") constituting an
"affiliate" of Target for purposes of Rule 145(c) under the Securities Act of
1933, as amended (the "1933 Act"), shall not be exchanged until Acquiror has
received a written agreement from such person as provided in Section 5.21.
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SECTION 2.06 Withholding Rights. The Exchange Agent and the Surviving
Corporation shall be entitled to deduct and withhold from the payment of any
Target Common Stock Consideration, cash in lieu of fractional share interests,
and any other consideration payable to any holder of the Target Stock (a "Target
Stockholder") pursuant to this Agreement, such amounts as the Exchange Agent or
the Surviving Corporation may be required to deduct and withhold under the Code,
or any provision of any state, local or foreign law. To the extent that any
amounts are so withheld, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to such Target Stockholder.
SECTION 2.07 Lost, Stolen or Destroyed Certificates. In the event that
any Target Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Target
Certificate to be lost, stolen or destroyed and, if required by the Surviving
Corporation in its sole discretion, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Target Certificate,
the Exchange Agent or the Surviving Corporation shall exchange for such lost,
stolen or destroyed Target Certificate such Acquiror Series B Preferred Shares,
Acquiror Series C Preferred Shares, cash, dividends and distributions to which
such person would otherwise have been entitled had such Target Certificate been
surrendered in accordance with Section 2.01.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
Target represents and warrants to Acquiror and Newco as follows:
SECTION 3.01 Organization and Good Standing. Target is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
operate, lease and Encumber its properties and assets and to carry on its
business as it is now being conducted. Target is duly qualified or licensed to
do business as a foreign corporation, and is in good standing, under the laws of
(a) each jurisdiction listed in the Target Disclosure Letter and (b) each other
jurisdiction in which the character of the properties owned, operated, leased or
Encumbered by Target therein or in which the carrying on of its business makes
such qualification or licensing necessary, except where the failure to be so
qualified, licensed or in good standing could not reasonably be expected to have
a Target Material Adverse Effect. "Target Material Adverse Effect" means, with
respect to Target, any event or events that could, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
business, assets, results of operations or financial condition of Target or the
Target Properties (as defined in Section 3.06), taken as a whole. For the
purposes of this Agreement, a Target Material Adverse Effect shall be deemed to
have occurred to the extent that any one or more events, individually or in the
aggregate, could reasonably be expected to (i) adversely affect Target's gross
revenues by $500,000 or more during any 12-month period, or (ii) have a cost to
remedy, or result in an expense or liability to Target, the Company or Newco, or
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acceleration of the payment of any obligation of Target (collectively, a "Target
Remediation Cost"), of $500,000 or more, or (iii) adversely affect the value of
the Target Properties by $2,500,000 or more. The amounts (i) of any effect on
Target's gross revenues and (ii) any Target Remediation Costs in case of each of
clauses (i), (ii) and (iii) that could reasonably be expected to result from
such one or more events, are hereinafter referred to as the "Target Costs."
Notwithstanding the foregoing, a Target Material Adverse Effect shall not be
deemed to have occurred if (A) any one or more of the events giving rise to a
Target Cost or loss of value is covered by insurance and Target has a right to
receive payments pursuant to such insurance policy as a result of such event or
events, (B) the aggregate amount of Target Costs and/or loss of value does not
exceed $2,500,000 or $5,000,000, respectively, and (C) after giving effect to
the application of such insurance proceeds, the aggregate amount of Target Costs
and/or the loss of value is less than $500,000 or $2,500,000, respectively.
Target has delivered to Acquiror true, correct and complete copies of its
Certificate of Incorporation and By-laws, each as amended to date. Any effects
on Target's gross revenues or the value of the Target Properties that is
attributable to any default, diminution of rent or rejection under any Target
Lease by any tenant that is the subject of any bankruptcy proceedings on the
date hereof shall not be included in any determination of whether a Target
Material Adverse Effect has occurred or in any calculation of Target Costs.
SECTION 3.02 Capitalization of Target. The authorized capital stock of
Target consists of (i) 20,000,000 shares of Target Common Stock, of which
3,789,171 shares are issued and outstanding as of the date hereof, and (ii)
650,000 shares of Target Preferred Stock, of which 395,834 shares are issued and
outstanding as of the date hereof. All of the issued and outstanding shares of
Target Common Stock and Target Preferred Stock have been duly authorized and are
validly issued, fully paid and nonassessable and are free of preemptive rights
with no personal liability attaching to the ownership thereof. Target has no
outstanding bonds, debentures, notes, or other obligations the holders of which
have the right to vote (or are convertible into or exercisable for securities
having the right to vote) with the holders of Target Common Stock on any matter.
Except as set forth in the Target Disclosure Letter, Target does not have and is
not bound by, and at the Effective Time, will not have or be bound by, any
outstanding subscriptions, options, warrants, calls, convertible securities,
rights, or other contracts, commitments, agreements, arrangements or
understandings (collectively, "Contracts") of any character, to or by which
Target is a party or is bound, which, directly or indirectly, obligate Target to
issue, deliver, transfer or sell any shares of Target Common Stock or Target
Preferred Stock or any other equity or debt security of Target or any securities
representing the right to purchase or otherwise receive any shares of Target
Common Stock or Target Preferred Stock or any other equity or debt security of
Target. After the Effective Time, the Surviving Corporation will have no
obligation to issue, deliver, transfer or sell any shares of capital stock or
other equity interest of Target or the Surviving Corporation pursuant to any
employee benefit plan of Target.
SECTION 3.03 Authority of Target. Target has all requisite corporate
power and authority to execute and deliver this Agreement and the documents (the
"Ancillary Documents") needed to consummate the Merger and the other
transactions contemplated by
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this Agreement to which Target is a party, and, subject to approval by the
Target Stockholders in accordance with the DGCL, to consummate the Merger and
the other transactions contemplated by this Agreement and the Ancillary
Documents, and to take all other actions required to be taken by it pursuant to
the provisions hereof and the Ancillary Documents. The execution, delivery and
performance by Target of this Agreement and the Ancillary Documents to which
Target is a party, the consummation by Target of the Merger and the other
transactions contemplated by this Agreement and the Ancillary Documents, have
been duly and validly authorized and approved by all requisite corporate action
of Target and no other corporate proceedings on the part of Target are necessary
to authorize the execution, delivery and performance of this Agreement or any of
the Ancillary Documents, to consummate the Merger and the other transactions
contemplated by this Agreement and the Ancillary Documents, other than the
approval of the Merger and adoption of this Agreement and the Ancillary
Documents by the Target Stockholders in accordance with the DGCL. This Agreement
and each of the Ancillary Documents to which Target is a party have been duly
and validly executed and delivered by Target and constitute valid and binding
agreements of Target, enforceable against Target in accordance with their
respective terms, except as may be limited by bankruptcy and other laws
affecting the enforceability of creditors' rights generally or laws governing
the availability of specific performance or other equitable remedies, or
restrictions of the enforcement of securities indemnification and contribution
provisions imposed by public policy.
SECTION 3.04 Consents and Approvals; No Violations. Except as set forth
in the Target Disclosure Letter and for applicable requirements of the 1933 Act,
Securities Exchange Act of 1934, as amended (the "1934 Act"), state Blue Sky
laws, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), if any, the filing and recordation of the Delaware Merger
Certificate, as required by the DGCL, and such filings, authorizations, orders
and approvals as may be required under State "control share acquisition",
"antitrust" or other similar statutes or regulations, or such filings,
authorizations, orders and approvals as may be required under the By-laws of the
National Association of Securities Dealers, Inc. ("NASD") (collectively, the
"Target Required Filings"), no filing or registration with, and no consent,
authorization, declaration or approval of, any governmental body, court,
arbitration board, tribunal or authority ("Governmental Entity"), or any third
party, is necessary for the execution, delivery and performance by Target of
this Agreement or any of the Ancillary Documents or the consummation of the
Merger and the other transactions contemplated by this Agreement and the
Ancillary Documents. The Target Disclosure Letter sets forth a true, correct and
complete list of all filings, registrations, consents, authorizations,
declarations or approvals necessary to consummate the Merger and the other
transactions contemplated by this Agreement and the Ancillary Documents (the
"Target Consents"). Except as set forth in the Target Disclosure Letter, subject
to approval by the Target Stockholders in accordance with the DGCL, neither the
execution, delivery and performance by Target of this Agreement or any of the
Ancillary Documents nor the consummation by Target of the Merger and the other
transactions contemplated by this Agreement and the Ancillary Documents will (i)
constitute any violation or breach of any provision of the Certificate of
Incorporation or By-laws of Target, or (ii) constitute any
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violation or breach of any provision of, or constitute a default (or an event
which, with the giving of notice or the passage of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, pledges, mortgages, deeds of trust, security
interests, claims against title, charges, options or other encumbrances
("Encumbrances") upon any of the properties of Target under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any Target Contract (as defined below), or any
franchise, permit, concession, Contract, or other instrument, or other
obligation to which Target is a party, or by which Target or any of its
properties is bound or affected except, with respect to this clause (ii), for
those which could not have a Target Material Adverse Effect.
SECTION 3.05 Public Reports. Target has delivered to Acquiror true,
correct and complete copies of (i) its Annual Report on Form 10-KSB for the year
ended December 31, 1995, (ii) its Quarterly Report on Form 10-QSB for the three
months ended ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) its Quarterly Report on Form 10-QSB for the
six months ended June 30, 1996, and (iv) all other registration statements,
reports, proxy statements, information statements and other documents filed by
Target with the Securities and Exchange Commission since December 31, 1995 (the
"SEC"); in each case including all exhibits, amendments and supplements thereto
and each of such documents is in the form (including exhibits, amendments and
supplements thereto) filed with the SEC (collectively, the "Target SEC
Reports"). Each of the Target SEC Reports was filed with the SEC in a timely
manner. The Target SEC Reports constitute all registration statements, reports,
proxy statements, information statements and other documents required to be
filed by Target since December 31, 1995 under the 1933 Act, the 1934 Act and the
rules and regulations promulgated thereunder (the "Securities Laws"). As of
their respective dates, the Target SEC Reports (i) complied in all material
respects with the applicable requirements of the Securities Laws and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading.
Since December 31, 1995, Target has not received from the SEC any comments, or
requests for additional information, with respect to any Target SEC Report.
SECTION 3.06 Real Property; Contracts and Leases Relating to Real
Property.
(a) The Target Disclosure Letter contains a true, correct and complete
list by street address of all of the real estate properties owned by Target. The
Target Disclosure Letter or the title reports and surveys with respect to the
real estate properties owned by Target listed in the Target Disclosure Letter
(collectively, the "Existing Target Title Documents") (in each case true,
correct and complete copies of which Existing Target Title Documents have been
delivered to Acquiror) set forth all improvements thereon (including, without
limitation, (i) the buildings and other structures and parking areas located
thereon and (ii) any easements, rights of way, privileges and appurtenances
thereto relating to such real estate properties). The real estate properties
owned by Target and improvements thereon (including, without limitation, (i) the
buildings and other structures and parking areas located thereon and (ii) any
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easements, rights of way, privileges and appurtenances thereto relating to such
real estate properties) are hereinafter referred to as the "Target Properties."
Except as set forth in the Target Disclosure Letter or in the Existing Target
Title Documents, Target owns fee simple title to each of the Target Properties,
free and clear of Encumbrances, and the Target Properties are not subject to any
rights of way, written agreements, or Property Laws (as defined below) affecting
building use or occupancy, or reservations of an interest in title
(collectively, "Property Restrictions") except for (i) Property Restrictions
imposed or promulgated by law or any Governmental Entity with respect to real
property, including, without limitation, zoning regulations, that, individually
or in the aggregate, do not materially and adversely affect the current use of
the property or materially detract from the value of the property and (ii)
Property Restrictions disclosed on the Existing Target Title Documents.
(b) To Target's knowledge, except as set forth in the Target Disclosure
Letter or in the Existing Target Title Documents, Target has (i) all
certificates, permits and licenses from all Governmental Entities having
jurisdiction over any of the Target Properties and (ii) all agreements,
easements and other rights, that are necessary to permit the lawful use and
operation of the buildings and improvements on any and all of the Target
Properties or are necessary to permit the lawful use and operation of all
driveways, roads and other means of egress and ingress to and from any and all
of the Target Properties (any such agreement, easement or other right referred
to in this clause (ii) shall hereafter be referred to as a "Target REA
Agreement") except, in the case of clauses (i) and (ii) of this paragraph, those
the failure to obtain of which could not reasonably be expected to have a Target
Material Adverse Effect. Each Target REA Agreement is in full force and effect,
and there is no pending threat of modification or cancellation of any of same.
Target is not, and to Target's knowledge no person has asserted, or is
threatening to assert, that Target is, in default under any Target REA Agreement
except for those which could not have a Target Material Adverse Effect.
(c) Except as set forth in the Target Disclosure Letter or in the
Existing Target Title Documents, to Target's knowledge, (i) the Target
Properties, and the size of, use of, occupancy of, improvements on, construction
on, and access to, the Target Properties (the "Target Property Uses"), are in
compliance in all material respects with all federal, state and municipal laws,
ordinances, orders, regulations, codes, zoning regulations, certificates,
permits, licenses and requirements, including, without limitation, those
relating to subdivision, building, safety, fire, health, and sewage connection,
treatment and disposal ("Property Laws"), affecting all or any portion of all or
any of the Target Properties; (ii) the Target Properties, and the Target
Property Uses, are not, and no person or Governmental Entity has asserted, or is
threatening to assert, that the Target Properties, or the Target Property Uses,
are, in violation of any Property Laws; (iii) there are no pending or threatened
proceedings or actions that could reasonably be expected to in any manner
materially and adversely affect the Target Property Uses; and (iv) to Target's
knowledge, no betterment assessments have been levied against, and no
condemnation or rezoning proceedings, or proceedings requiring any public
installations or improvements, are pending or threatened with respect to, any of
the Target Properties.
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(d) Except as set forth in the Target Disclosure Letter or in the
engineering reports, true, correct and complete copies of which Acquiror has
obtained prior to the date hereof, to Target's knowledge, (i) there is no Target
Property with building systems not in working order; (ii) there is no physical
damage to any Target Property in excess of $10,000 for which there is no
insurance in effect covering the full cost of the restoration, ordinary wear and
tear excepted; (iii) there are no structural defects relating to any of the
Target Properties; and (iv) there is no current renovation or restoration or
tenant improvements to any Target Property the cost of which exceeds $10,000.
(e) Target has delivered to Acquiror true, correct and complete copies
of (i) all of the following Contracts to which Target is a party relating to
real property owned or leased by Target: (A) all documents evidencing any
indebtedness secured by the Target Properties (the "Target Underlying Debt"),
(B) the Target Leases (as defined in Section 3.07), (C) all other service,
equipment, supply, maintenance, management and other Contracts providing for
payments in excess of $10,000 annually unless the same are terminable by Target
by notice of not more than 90 days for a cost of less than $10,000, (D)
outstanding Contracts relating to the development or construction of any Target
Properties, (E) all leases pursuant to which Target, as lessee, leases personal
property providing for payments in excess of $10,000 annually or leases real
property, (F) all outstanding options pursuant to which Target has granted, or
been granted, an option to purchase real property, and (G) any and all
amendments and supplements to all of the foregoing (collectively, as amended or
supplemented, the "Target Property Contracts"); (ii) all loan or credit
agreements, notes, debentures, bonds, mortgages, indentures, deeds of trust, or
Contracts, instruments or other obligations for borrowed money to which Target
is a party, and all amendments and supplements to all of the foregoing, (X)
pursuant to which any indebtedness of Target in excess of $10,000 is outstanding
or may be incurred or is evidenced or (Y) which may result in or evidences total
payments or liabilities to Target in excess of $10,000 (as amended or
supplemented, the "Target Loan Contracts"); and (iii) all joint venture,
shareholder agreements, operating agreements, partnership agreements or similar
Contracts to which Target is a party (together with the Target Property
Contracts and the Target Loan Contracts, as amended or supplemented, the "Target
Contracts"). For purposes of this Section 3.06, "indebtedness" shall mean, with
respect to any person, without duplication, (i) all indebtedness of such person
for borrowed money, whether secured or unsecured, (ii) all obligations of such
person under conditional sale or title retention agreements relating to property
purchased by such person, (iii) all capitalized lease obligations of such
person, (iv) all obligations of such person under interest rate or currency
hedging transactions (valued at the termination value thereof) and (v) all
guarantees of such person of any indebtedness of any other person. The Target
Disclosure Letter contains a true, correct and complete list of the Target
Contracts. The Target Contracts are valid, subsisting and in full force and
effect with respect to Target, and, to Target's knowledge, with respect to the
other parties to the Target Contracts. Target is not, and to Target's knowledge
no person has asserted, or is threatening to assert, that Target is, in material
default under any Target Contract providing for payments in excess of $10,000
annually. No existing use of any of the Target Properties constitutes, and to
Target's knowledge no person has asserted, or is threatening to assert, that
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any existing use of any of the Target Properties constitutes, a conflict with
any exclusive rights granted to any person under any of the Target Contracts
providing for payments in excess of $10,000 annually. To Target's knowledge, no
party to any Target Contract providing for payments in excess of $10,000
annually is in default under such Target Contract. To Target's knowledge, there
does not exist any condition which, with the giving of notice or the passage of
time or both, would cause such a violation or default under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, or result in the creation of any Encumbrances upon any
of the Target Properties under, or result in being declared void, voidable or
without further binding effect, any of the terms, conditions or provisions of
any Target Contract providing for payments in excess of $10,000 annually, or any
license, franchise, permit or concession or other instrument, or other
obligation to which Target is a party, or by which Target or any of the Target
Properties is bound or affected. None of the Target Contracts (other than the
Target Leases) contain any provision which would prevent the Acquiror or the
Surviving Corporation from occupying and using all or any portion of the Target
Properties, or any property or assets leased by Target, in the same manner and
on the same terms and conditions as Target is so occupying or using it.
(f) Target has delivered to Acquiror true, correct and complete copies
of (i) each permanent or temporary Certificate of Occupancy with respect to any
of the Target Properties which Target has in its possession and (ii) all
manufacturers' and contractors' warranties and guarantees currently in effect
with respect to the Target Properties which Target has in its possession.
(g) Each of the Target Properties is separately assessed for tax
purposes. Target has delivered to Acquiror true, correct and complete copies of
the most recent real estate tax bills for each of the Target Properties.
SECTION 3.07 Leases.
(a) The Target Disclosure Letter contains a true, correct and complete
rent roll for all leases, licenses and tenancies, each as amended and
supplemented ("Target Leases") covering all or each portion of the Target
Properties (the "Target Rent Roll"). The Target Rent Roll includes or describes
for each Target Lease, the name and address of the tenant, the space leased, the
current balances of security and other deposits, the current base rent the
tenant is obligated to pay thereunder, and the amount of percentage rent most
recently paid. Target has delivered to Acquiror a true, correct and complete
statement evidencing common area maintenance ▇▇▇▇▇▇▇▇ and real estate tax
escalations under each Target Lease.
(b) Except as set forth in the Target Disclosure Letter, (i) to
Target's knowledge, each of the Target Leases is valid and subsisting and in
full force and effect; (ii) no Tenant is controlled by, under common control
with or controls Target; (iii) the tenant under each of the Target Leases is in
actual possession of the leased premises; (iv) no tenant under any Target Lease
is in arrears for the payment of rent for any month preceding the month of the
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date of this Agreement or to Target's knowledge otherwise in default of such
tenant's lease obligations; (v) to Target's knowledge, no tenant under any
Target Lease intends to vacate prior to the termination of its lease; (vi) there
are no pending summary proceedings or other legal actions by Target for eviction
under any Target Lease; (vii) all decorating, repairs, alterations, or other
work required to be performed by Target under the Target Leases, or the costs to
be reimbursed to any tenant under any Target Lease, has been performed or, if
required, reimbursed; (viii) no space subject to any Target Lease is occupied
rent free or at a rental rate reduced from the rates stated in the Target Rent
Roll; and (ix) none of the Target Leases and none of the rents or other amounts
payable thereunder have been assigned, pledged or encumbered, other than to
lenders, except as described in the Target Disclosure Letter. Target has not
collected payment of rent (other than security deposits) accruing for a period
which is more than one month beyond the date of collection. All brokerage or
leasing commissions payable by the landlord with respect to Target Leases have
been paid in full and there are no commissions payable with respect to renewals
or extensions of any Target Lease. There are no material unsatisfied obligations
wherein rent and/or other obligations of the tenant in other buildings or
improvements have been assumed by Target.
(c) Except as shown in the Target Disclosure Letter, to Target's
knowledge, no tenant, licensee or occupant under any of the Target Leases has
notified Target in writing of any claim, offset or defense which would
materially affect the collection of rent from such tenant.
(d) The Target Disclosure Letter sets forth a true, correct and
complete list of all written or oral legally enforceable commitments made by
Target to lease any of the Target Properties or any portion thereof which has
not yet been reduced to a written lease. To Target's knowledge, no person has
asserted, or is threatening to assert, that any of such written or oral
commitments is not legally enforceable. Target has delivered to Acquiror true,
correct and complete copies of all such written commitments and the Target
Disclosure Letter provides with respect to each such oral commitment the
principal terms of such commitment, including, if applicable, those items set
forth in Section 3.07(a).
SECTION 3.08 Tenant Improvements. The Target Disclosure Letter contains
(i) a true, correct and complete list of all unpaid tenant improvements being
conducted by Target and (ii) to Target's knowledge, the aggregate amount of all
unpaid tenant improvements for all Target Properties do not exceed $25,000.
Target has delivered to Acquiror true, correct and complete copies of any and
all Contracts, plans, specifications and agreements in connection with all
uncompleted tenant improvements and all completed tenant improvements which have
not been fully paid for or with respect to which there exists a dispute between
Target, the tenant and/or any contractor or subcontractor with respect to such
improvements.
SECTION 3.09 Environmental Matters. Except as set forth in any of the
environmental assessments or other environmental reports (i) identified in the
Target Disclosure Letter and in the possession of Target with respect to the
Target Properties (the
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"Target Environmental Reports"), true, correct and complete copies of which have
been delivered to Acquiror or (ii) prepared for Acquiror with respect to the
Target Properties:
(a) the activities, operations and business carried out by Target at or
on the Target Properties are in compliance, in all material respects, with all
applicable federal, state or local environmental laws, ordinances, rules and
regulations including, without limitation, the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and Recovery
Act, as amended, and the rules and regulations adopted and promulgated pursuant
to each of the foregoing ("Environmental Laws");
(b) no lien has been imposed on the Target Properties by any federal,
state or local Governmental Entity in connection with a violation of any
Environmental Laws at or on the Target Properties;
(c) Target has no knowledge (i) of any pending or threatened litigation
or proceedings before any Governmental Entity in which any person or entity
alleges Target's violation or threatened violation of any Environmental Laws or
(ii) that any Governmental Entity has determined that Target is in violation of
any Environmental Laws in connection with the Target Properties; and
(d) to Target's knowledge, no hazardous substances ("Hazardous
Materials"), including, without limitation, any flammables, explosives,
radioactive materials, hazardous wastes, hazardous and toxic substances or
related materials, asbestos or any material containing asbestos (including,
without limitation, vinyl asbestos tile), or any other substance or material as
defined by any Environmental Laws as hazardous have been treated, stored or
disposed of, or otherwise deposited in or on the Target Properties, including,
without limitation, the surface waters and subsurface waters of the Target
Properties; no spills, releases, discharges, or disposals of Hazardous Materials
have occurred or are presently occurring on or from any of the Target
Properties, in violation of any Environmental Law; there are no substances or
conditions in or on the Target Properties or any other parcels of land which may
affect the Target Properties or the use thereof or which may support a claim or
cause of action under any Environmental Law. To Target's knowledge, there are no
underground tanks at the Target Properties and no part of the Target Properties
lies in a flood plain or constitutes "wetlands." Target is not aware of any
inaccuracies in the Target Environmental Reports. For purposes of this Section,
Hazardous Materials shall not include substances sold or used by tenants under
the Target Leases provided such use or sale is in the ordinary course of such
tenant's business and is in compliance with all applicable laws, rules or
regulations.
SECTION 3.10 Insurance. True and complete copies of all insurance
policies carried by Target or pursuant to which the Target Properties are
insured have been provided to Acquiror, all of such policies are in full force
and effect as of the date hereof, all premiums due and payable in respect of
such policies have been paid, and, except as set forth
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in the Target Disclosure Letter, no claims have been made against any such
policies as of the date hereof. Target has not received any written notice from
any insurance company which has issued a policy with respect to the Target
Properties or from any board of fire underwriters (or other body exercising
similar functions) (i) claiming any defects or deficiencies which have not been
cured or corrected, (ii) requesting the performance of any repairs, alterations
or other work which have not been performed, or (iii) stating, in effect, that
any of such policies will not be renewed or will be renewed at a higher premium
than is presently payable therefor.
SECTION 3.11 Absence of Certain Changes. Except as contemplated herein
or set forth in the Target Disclosure Letter, since September 30, 1996, (i)
Target has not suffered a Target Material Adverse Effect, or entered into any
transaction or conducted its business or operations other than in the ordinary
course of operating the Target Properties and other than in connection with
Target's exploration of alternatives leading to the execution of this Agreement,
(ii) Target has not entered into or made any Contract, borrowing, capital
expenditure or transaction (each, a "Commitment"), other than Commitments of not
more than $10,000 annually made in the ordinary course of operating the Target
Properties and (iii) Target has made no change in its accounting principles,
practices or methods.
SECTION 3.12 No Undisclosed Liabilities. Except as and to the extent
set forth or disclosed in the Target Disclosure Letter, the Target SEC Reports
or in this Agreement, (i) at September 30, 1996, Target did not have any
liabilities (whether absolute, accrued, asserted or unasserted, contingent or
otherwise), required by GAAP, consistently applied, to be reflected on a balance
sheet of Target, in excess of $10,000 in the aggregate, that were not reflected
on Target's September 30, 1996 balance sheet and (ii) since September 30, 1996,
Target has not incurred any liabilities (whether absolute, accrued, asserted or
unasserted, contingent or otherwise) which are required by GAAP, consistently
applied, to be reflected on a balance sheet of Target, except liabilities
incurred in the ordinary course of operating the Target Properties.
SECTION 3.13 Litigation. Except as set forth in the Target Disclosure
Letter, there are (i) no continuing orders, injunctions, judgements or decrees
of any court, arbitrator or other Governmental Entity, to which Target is a
party or by which any of the Target Properties are bound or, to Target's
knowledge, to which any of Target's directors, officers, employees or agents (in
each case, in his capacity as such) is a party or by which any of Target's
properties or assets are bound, that could reasonably be expected to have a
Target Material Adverse Effect or prevent or delay the consummation of Merger
and the other transactions contemplated by this Agreement and the Ancillary
Documents and (ii) there are no actions, suits or proceedings pending (or to
Target's knowledge, threatened), at law or in equity, against Target or, to
Target's knowledge, against any of Target's directors, officers, employees or
agents in their capacities as such, that seek equitable relief or claim damages
in excess of $10,000, or that could reasonably be expected to have a Target
Material Adverse Effect or prevent or delay the consummation of the Merger and
the other transactions
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contemplated by this Agreement and the Ancillary Documents, or result in the
rescission of the issuance of any Target Common Stock.
SECTION 3.14 Compliance with Applicable Law. To Target's knowledge,
Target is not in violation of any order of any Governmental Entity, or any law,
ordinance, governmental rule or regulation to which Target or any of the Target
Properties is subject, where such violation or violations could reasonably be
expected to have a Target Material Adverse Effect. Target has obtained all
licenses, permits and other authorizations and has taken all actions required by
applicable law or governmental regulations in connection with its business as
now conducted, where the failure to obtain any such item or items or to take any
such action could reasonably be expected to have a Target Material Adverse
Effect. Without limiting the generality of the foregoing, to Target's knowledge
neither Target nor (i) any consultant or employee or (ii) any person who is or
was an officer, director or affiliate of Target, has, directly or indirectly,
made, promised to make, or authorized the making of, an offer, payment or gift
of money or anything of value to any government official, political party or
employee, agent or fiduciary of a customer, to obtain a Contract for or to
influence a decision in favor of Target where such offer, payment or gift was or
would be, if made, in violation of any applicable law, ordinance, governmental
rule or regulation, nor have any of them maintained for this purpose cash or
anything of value, in an account or otherwise, not properly and accurately
accounted for on the books and records of Target.
SECTION 3.15 Taxes. (a) Except as set forth in the Target Disclosure
Letter, Target has timely filed all federal, state, local and foreign tax
returns required to be filed by it through the date hereof and such returns are
complete, accurate and comply with all applicable law in all material respects.
True, correct and complete copies of all federal, state, local and foreign tax
returns filed by Target and all communications relating thereto have been
delivered to Acquiror. Target has not executed or filed with any tax authority
any Contract now in effect extending the period for assessment or collection of
any income or other Taxes (as defined below), and no extension of time with
respect to any date on which a tax return was or is to be filed by Target is in
force. Except as set forth in the Target Disclosure Letter, Target is not a
party to any action or proceeding for assessment or collection of Taxes, and no
claim for assessment or collection of Taxes has been asserted or threatened
against it. There is no dispute or claim concerning any tax liability of Target
claimed by any tax authority. To Target's knowledge, no claim has ever been made
by a tax authority in a jurisdiction where Target does not file tax returns that
Target is or may be subject to taxation in such jurisdiction. There are no
security interests on any of the Target Properties that arose in connection with
any failure (or alleged failure) of Target to pay Taxes. Target has never
entered into a closing agreement pursuant to Section 7121 of the Code.
(b) Target has timely paid or caused to be paid all Taxes (as defined
below), including, without limitation, all transfer Taxes, if any, (i) shown as
due on its returns, (ii) which have become due and payable pursuant to any
assessment, deficiency notice, 30-day letter or other notice received by Target,
(iii) which became due and payable as a result of the
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transfer by Milestone Properties, Inc. ("Milestone") to Target of any assets or
properties, or the distribution by Milestone of Target Common Stock to the
stockholders of Milestone or (iv) are otherwise due and payable. Target has
properly accrued all Taxes for all periods subsequent to the periods covered by
such returns. Except as set forth in the Target Disclosure Letter, Target has
withheld from employees and paid over to the appropriate taxing authority all
income, social security, and other payroll Taxes required to be withheld and
paid over. For purposes of this Agreement, "Taxes" shall mean any and all taxes
(including, without limitation, transfer taxes), levies, duties or other
assessments in the nature of taxes imposed by any federal, state, local or
foreign taxing authority.
(c) Target is not a "foreign person" within the meaning of Section
1445(b)(2) of the Code and Target will furnish Acquiror at Closing with an
affidavit to that effect.
(d) Target has not (i) filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by Target or (ii) been a party to a tax sharing
agreement or similar arrangement.
(e) Target is not required and has not agreed to make any adjustments
pursuant to Section 481(a) of the Code or any similar provision of foreign,
state or local law by reason of a change in accounting method initiated by it or
any other relevant party, nor has any knowledge that the IRS or any taxing
authority has proposed any such adjustment or change in accounting method, nor
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that related to the business or assets of
Target.
(f) Target is not a party to any contract, agreement, plan or
arrangement covering any person that, individually or collectively, could give
rise to the payment of any amount that would not be deductible by reason of
Section 280G of the Code in connection with the Merger.
(g) Target has not been party to an election under Section 338 of the
Code and Target has no liability for the taxes of any person (other than Target)
under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or otherwise.
SECTION 3.16 Financial Statements and Condition. Except as set forth in
the Target Disclosure Letter, Target's (i) audited balance sheets and related
statements of revenues, cash flow and stockholders' equity, including the notes
thereto, at and for the year ended December 31, 1995 (the "Target Financial
Statements") and (ii) unaudited balance sheet and related statements of income
and cash flows at and for the nine month period ended September 30, 1996 (the
"Target Interim Financial Statements") are attached to the Target Disclosure
Letter or attached to the Target SEC Reports. The Target Financial Statements
and the Target Interim Financial Statements present fairly, in all material
respects, Target's
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financial position and results of operations at the dates and for the periods
reflected therein, all in conformity with GAAP applied on a consistent basis,
except as otherwise noted therein or, in the case of the Target Interim
Financial Statements, for normal audit and accrual adjustments.
SECTION 3.17 Brokers or Finders. Except as set forth in the Target
Disclosure Letter, Target has not entered into any Contract with any agent,
broker, investment banker, financial advisor or other firm or person which may
result in the obligation of Target, Acquiror or Newco to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the Merger and the
other transactions contemplated by this Agreement and the Ancillary Documents.
Except as set forth in the Target Disclosure Letter, to Target's knowledge, no
claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments has been asserted in connection with the negotiations
leading to this Agreement or the consummation of the Merger and the other
transactions contemplated by this Agreement and the Ancillary Documents.
SECTION 3.18 Other Interests. Target does not own, directly or
indirectly, any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, business, trust, or other person.
SECTION 3.19 Disclosure. The representations and warranties of Target
in this Agreement do not contain any untrue statement of a material fact.
SECTION 3.20 Vote Required. The affirmative vote of a majority of the
outstanding shares of Target Common Stock is the only vote of the holders of any
class or series of Target's capital stock necessary under applicable law to
permit the execution, delivery and performance by Target of this Agreement and
the Ancillary Documents to which Target is a party, and the consummation by
Target of the Merger and the other transactions contemplated by this Agreement
and the Ancillary Documents.
SECTION 3.21 Parent Shares. Except as set forth in this Agreement:
(a) Except as set forth in the Target Disclosure Letter, Target does
not, nor do any of its affiliates or associates, beneficially own any voting
shares of Acquiror, directly or indirectly.
(b) Target does not, nor do any of its affiliates or associates, (i)
have the right to acquire voting shares of Acquiror (whether such right is
exercisable immediately or only after the passage of time), pursuant to any
agreement, arrangement, or understanding (other than this Agreement) or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise; or (ii) have the right to vote voting shares of Acquiror pursuant to
any agreement, arrangement or understanding.
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(c) Target does not, nor do any of its affiliates or associates, have
any agreement, arrangement, or understanding for the purpose of acquiring,
holding, voting, or disposing of voting shares of Acquiror with any other person
or entity that beneficially owns, or whose affiliates or associates beneficially
own, directly or indirectly, such voting shares of Acquiror.
For purposes of this Section 3.21 only, (i) "affiliate" shall mean a
person or entity that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
a specified person or entity and (ii) "associate," when used to indicate a
relationship with any person or entity shall mean (A) any person or entity of
which such person or entity is an officer, director, or partner or is, directly
or indirectly, the beneficial owner of 10 percent or more of any class of equity
securities; or (B) any trust or other estate in which such person or entity has
a substantial beneficial interest or as to which such person or entity serves as
trustee or in a similar fiduciary capacity; or (C) any relative or spouse of
such person, or any relative of such spouse, who has the same home as such
person or who is a director or officer of the person or entity or any of its
affiliates.
SECTION 3.22 Target Preferred Stock. Target has paid all accrued and
payable dividends on the Target Preferred Stock pursuant to the terms of the
Target Preferred Stock through the date hereof.
SECTION 3.23 Employee Benefit Plans. Target has no employees. Target
has no employee benefits plans (within the meaning of Section 3(3) of ERISA) and
no other benefit arrangements covering employees of Target. Neither Target nor
any entity under common control with Target within the meaning of ERISA Section
4001 has contributed to, or been required to contribute to, any multiemployer
plan (as defined in Sections 3(37) and 4001(a)(3) of ERISA). Except as otherwise
required by Sections 601 through 608 of ERISA, Section 4980B of the Code and
applicable state laws, Target does not maintain or contribute to any plan or
arrangement which provides or has any liability to provide life insurance,
medical or other employee welfare benefits to any employee or former employee
upon his retirement or termination of employment and Target has never
represented, promised or contracted (whether in oral or written form) to any
employee or former employee that such benefits would be provided.
SECTION 3.24 Labor Matters. Target is not a party to, or bound by, any
collective bargaining agreement or other Contract with a labor union or labor
union organization. There is no unfair labor practice or labor arbitration
proceeding pending or, to Target's knowledge, threatened, against Target
relating to its business. To Target's knowledge, there are no organizational
efforts with respect to the formation of a collective bargaining unit presently
being made or threatened involving employees of Target.
SECTION 3.25 Related Party Transactions. Except as set forth in the
Target Disclosure Letter, Target has no arrangements, agreements or Contracts
with (i) any consultant or employee, (ii) any person who is an officer, director
or Affiliate of Target, any relative of any of the foregoing or any entity of
which any of the foregoing is an Affiliate,
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including, without limitation, those persons and entities listed as Affiliates
in the Target Disclosure Letter, or (iii) to Target's knowledge, any person who
owns more than 5% of the outstanding Target Common Stock (collectively, "Target
Affiliate Contracts"). Target has delivered to Acquiror true, correct and
complete copies of all Target Affiliate Contracts. Except as set forth in the
Target Disclosure Letter, Target has paid in full or otherwise satisfied and
discharged all obligations under the Target Affiliate Contracts that are due.
SECTION 3.26 Actions of Holders of Target Common Stock. The Target
Disclosure Letter sets forth a true, correct and complete list of the number of
shares of Target Common Stock held by each Affiliate of Target. From the date
hereof until the Effective Time, none of such Affiliates shall sell, transfer or
otherwise Encumber his shares of Target Common Stock. Notwithstanding the
foregoing, any Affiliate of Target may sell or transfer his shares of Target
Common Stock to another Affiliate of Target, provided that (i) the selling or
transferring Affiliate shall, within one business day after the date of such
sale or transfer, deliver to the Company written notice thereof and (ii) such
sale or transfer occurs at least two business days prior to the Closing Date.
Each of such persons shall, on or prior to the date hereof, have executed and
delivered a letter to Acquiror pursuant to which he shall agree to approve this
Agreement, the Merger and the transactions contemplated by this Agreement and
the Ancillary Documents at the Target Stockholders Meeting.
SECTION 3.27 Books and Records.
(a) The books of account and other financial records of Target (i)
accurately reflect in all material respects the financial transactions and
business of Target in accordance with GAAP, and (ii) are consistent in all
material respects with the financial statements included in the Target SEC
Reports.
(b) The minute books and other records of Target have been made
available to Acquiror, contain in all material respects accurate records of all
meetings and accurately reflect in all material respects all other corporate
action taken at such meeting or by unanimous consent of the stockholders and
directors of Target. There are no committees of the Board of Directors of
Target.
SECTION 3.28 Fairness Opinion. Target has received the opinion of
Societe Generale to the effect that the Merger and the other transactions
contemplated by this Agreement and the Ancillary Documents, and the
consideration to be paid by Acquiror to the holders of Target Common Stock
pursuant to the Merger and such other transactions, are fair to the holders of
Target Common Stock from a financial point of view.
SECTION 3.29 No Representation or Warranty. Except as set forth in this
Agreement, Target makes no representation or warranty as to the present or
former condition or uses of the Target Properties. Acquiror expressly waives any
claim whatsoever, except for breach of representation or warranty contained
herein, relating to or arising from the physical condition of the Target
Properties, including, without limitation, claims arising from the
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presence of any Hazardous Materials on, at or beneath the Target Properties or
otherwise arising under any Environmental Law, whether now or hereinafter in
force. Target is not liable or bound in any manner by expressed or implied
warranties, guaranties or representations pertaining to the Target Properties or
the Target Leases made or furnished by any real estate broker, investment
banker, agent, attorney, employee, servant or other person representing or
purporting to represent Target, unless the same are specifically set forth
herein.
SECTION 3.30 Obligations of Milestone. The Target Disclosure Letter
sets forth a true, correct and complete list of all guarantees and liabilities
of Milestone of any indebtedness or other obligations of Target in effect on the
date hereof (the "Milestone Obligations"). Target has delivered to Acquiror
true, correct and complete copies of all Milestone Obligations.
SECTION 3.31 Target Directors' and Officers' Liability Insurance
Policy. Target has delivered to Acquiror a true, correct and complete copy of
Target's directors' and officers' liability insurance policy, as currently in
effect (the "Existing Target D & O Liability Insurance Policy").
SECTION 3.32 South Carolina Outparcel Agreement. Target has delivered
to Acquiror a true, correct and complete copy of the Agreement to Sell and
Purchase Real Estate, dated December 1995, between Target and CPC-1, a South
Carolina limited liability company (the "South Carolina Outparcel Purchaser"),
and all amendments thereto (as amended, the "South Carolina Outparcel
Agreement"), concerning the sale by Target to the South Carolina Outparcel
Purchaser of the outparcel (the "South Carolina Outparcel") described in the
South Carolina Outparcel Agreement. Target has delivered to Acquiror true,
correct and complete copies of all documents filed with any court or served on
or by Target, or, to Target's knowledge, by any other person, in connection with
the action commenced by South Carolina Outparcel Purchaser relating to the South
Carolina Outparcel.
SECTION 3.33 Pending Milestone Action. Target has delivered to Acquiror
true, correct and complete copies of all documents filed with any court or
served on or by Target, or, to Target's knowledge, by any other person, in
connection with the Pending Milestone Action (as defined below) or any other
action or proceeding with respect to, or arising out of, the facts, events and
circumstances giving rise to the Pending Milestone Action.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND NEWCO
Acquiror and Newco, jointly and severally, represent and warrant to
Target as follows:
SECTION 4.01 Organization and Good Standing. (i) Acquiror is a real
estate investment trust duly formed and existing by virtue of the laws of the
State of Maryland and
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is in good standing with the State Department of Assessments and Taxation of
Maryland, (ii) Newco is a corporation duly incorporated, duly organized, validly
existing and in good standing under the laws of the State of Delaware, (iii)
each Acquiror Subsidiary is duly incorporated or formed, as the case may be,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and (iv) each of Acquiror, Newco and each
Acquiror Subsidiary, has all requisite trust or corporate or partnership power,
as the case may be, to own, operate, lease and Encumber its properties and
assets and to carry on its business as it is now being conducted. Each of
Acquiror, Newco and each Acquiror Subsidiary, is duly qualified or licensed to
do business as a foreign corporation or partnership, and is in good standing,
under the laws of each jurisdiction in which the character of the properties
owned, operated, leased or Encumbered by it therein or in which the carrying on
of its business makes such qualification or licensing necessary, except where
the failure to be so qualified, licensed or in good standing could not
reasonably be expected to have a Acquiror Material Adverse Effect. "Acquiror
Material Adverse Effect" means, with respect to the Company, any event or events
that could, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the business, assets, results of operations or
financial condition of the Company or the Acquiror Properties (as defined in
Section 4.06), taken as a whole. For the purposes of this Agreement, an Acquiror
Material Adverse Effect shall be deemed to have occurred to the extent that any
one or more events, individually or in the aggregate, could reasonably be
expected to (i) adversely affect Acquiror's gross revenues by $1,000,000 or more
during any 12-month period, or (ii) have a cost to remedy, or result in an
expense or liability to the Company, or acceleration of the payment of any
obligation of the Company (collectively, a "Company Remediation Cost"), of
$1,000,000 or more, or (iii) adversely affect the value of the Acquiror
Properties by $5,000,000 or more. The amounts (i) of any effect on Acquiror's
gross revenues, (ii) any Company Remediation Costs and (iii) any expenses or
liabilities to Target, the Company and Newco, in the case of each of clauses
(i), (ii) and (iii) that could reasonably be expected to result from such one or
more events, are hereinafter referred to as the "Acquiror Costs."
Notwithstanding the foregoing, an Acquiror Material Adverse Effect shall not be
deemed to have occurred if (A) any one or more of the events giving rise to a
Acquiror Cost or loss of value is covered by insurance and Acquiror has a right
to receive payments pursuant to such insurance policy as a result of such event
or events, (B) the aggregate amount of Acquiror Costs and/or loss of value does
not exceed $5,000,000 or $10,000,000, respectively, and (C) after giving effect
to the application of such insurance proceeds the aggregate amount of Acquiror
Costs and/or the loss of value, is less than $1,000,000 or $5,000,000,
respectively. Acquiror has delivered or made available to Target true, correct
and complete copies of its Declaration of Trust and Bylaws, and Newco's
Certificate of Incorporation and By-laws, each as amended to date. Any effects
on Acquiror's gross revenues or the value of the Acquiror Properties that is
attributable to any default, diminution of rent or rejection under any Acquiror
Lease by any tenant that is the subject of any bankruptcy proceedings on the
date hereof shall not be included in any determination of whether an Acquiror
Material Adverse Effect has occurred or in any calculation of Acquiror Costs.
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SECTION 4.02 Capitalization of Acquiror and Newco. The authorized
shares of beneficial interest of Acquiror consist of 100,000,000 shares of
beneficial interest. As of the date hereof, there were 10,332,784 issued and
outstanding shares of common stock, par value $.01 per share, of Acquiror (the
"Acquiror Common Shares") and (ii) (x) 11,155 issued and outstanding shares of
Series A Increasing Rate Cumulative Convertible Preferred Shares of Acquiror
(the "Acquiror Series A Preferred Shares") or (y) 11,155 issued and outstanding
shares of Series A-1 Increasing Rate Cumulative Convertible Preferred Shares of
Acquiror (the "Acquiror Series A-1 Preferred Shares"). The Acquiror Disclosure
Letter (as defined below) sets forth a true, correct and complete list of all
Acquiror Subsidiaries and the direct or indirect ownership interest of Acquiror
in each of such Acquiror Subsidiaries. The shares or interests of each Acquiror
Subsidiary owned by Acquiror are free and clear of Encumbrances and Acquiror has
good title to such shares or interests. All of the issued and outstanding shares
of beneficial interest of Acquiror have been duly authorized and are validly
issued, fully paid and nonassessable and are free of preemptive rights, except
that shareholders may be subject to further assessment with respect to claims
for tort, contract, taxes, statutory liability and otherwise in some
jurisdictions to the extent such claims are not satisfied by Acquiror. Acquiror
has no outstanding bonds, debentures, notes, or other obligations the holders of
which have the right to vote (or are convertible into or exercisable for
securities having the right to vote) with the holders of Acquiror Common Shares
on any matter. Except as set forth in the Disclosure Letter delivered by
Acquiror to Target simultaneously with the execution and delivery of this
Agreement (the "Acquiror Disclosure Letter"; together with the Target Disclosure
Letter, the "Disclosure Letters"), Acquiror does not have and is not bound by,
and at the Effective Time, will not have or be bound by, any outstanding
subscriptions, options, warrants, calls, convertible securities, rights, or
other Contracts of any character, to or by which Acquiror or Newco is a party or
is bound, which, directly or indirectly, obligate Acquiror or Newco to issue,
deliver, transfer or sell any shares of beneficial interest of Acquiror or any
other equity or debt security of Acquiror except (i) Acquiror Common Shares
issuable upon the conversion of the Acquiror Series A Preferred Shares or
Acquiror Series A-1 Preferred Shares and (ii) Acquiror Common Shares issuable
upon the exercise of stock options issued to employees and trustees pursuant to
Acquiror's 1992 Employee Share Option Plan, 1992 Trustee Share Option Plan and
the 1995 Management Incentive Plan or issued to Acquiror's trustees in lieu of
payment of trustee fees. At the date hereof and on the Closing Date, all of the
issued and outstanding shares of common stock of Newco are and will be owned by
Acquiror.
SECTION 4.03 Authority of Acquiror and Newco. Each of Acquiror and
Newco has all requisite trust or corporate power and authority, as the case may
be, to execute and deliver this Agreement and the Ancillary Documents to which
it is a party, and needed to consummate the Merger and the other transactions
contemplated by this Agreement and the Ancillary Documents, and to take all
other actions required to be taken by it pursuant to the provisions hereof and
the Ancillary Documents. The execution, delivery and performance by each of
Acquiror and Newco of this Agreement and the Ancillary Documents to which it is
a party, the consummation by each of Acquiror and Newco of the Merger and the
other transactions contemplated by this Agreement and the Ancillary Documents,
have been duly
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and validly authorized and approved by all requisite corporate action of
Acquiror and Newco and no other corporate proceedings on the part of Acquiror or
Newco are necessary to authorize the execution, delivery and performance of this
Agreement or any of the Ancillary Documents, to consummate the Merger and the
other transactions contemplated by this Agreement and the Ancillary Documents.
This Agreement and each of the Ancillary Documents to which Acquiror or Newco is
a party have been duly and validly executed and delivered by Acquiror or Newco,
as the case may be, and constitute valid and binding agreements of Acquiror or
Newco, as the case may be, enforceable against Acquiror or Newco, as the case
may be, in accordance with their respective terms, except as may be limited by
bankruptcy and other laws affecting the enforceability of creditors' rights
generally or laws governing the availability of specific performance or other
equitable remedies, or restrictions of the enforcement of securities
indemnification and contribution provisions imposed by public policy.
The issuance by Acquiror of shares of Acquiror Series B
Preferred Shares and Acquiror Series C Preferred Shares in connection with the
Merger (i) will not be subject to preemptive rights or other preferential rights
of any present or future stockholders of Acquiror, and (ii) will not result in a
change in conversion rights in any of Acquiror's options, warrants or other
securities.
SECTION 4.04 Consents and Approvals; No Violations. Except as set forth
in the Acquiror Disclosure Letter and for applicable requirements of the 1933
Act, the 1934 Act, state Blue Sky laws, the HSR Act, if any, the filing and
recordation of the Delaware Merger Certificate and the Target Required Filings,
no filing or registration with, and no consent, authorization, declaration or
approval of, any Governmental Entity, or any third party, is necessary for the
execution, delivery and performance by Acquiror or Newco of this Agreement or
any of the Ancillary Documents or the consummation of the Merger and the other
transactions contemplated by this Agreement and the Ancillary Documents. Except
as set forth in the Acquiror Disclosure Letter, neither the execution, delivery
and performance by Acquiror or Newco of this Agreement or any of the Ancillary
Documents nor the consummation by Acquiror or Newco of the Merger and the other
transactions contemplated by this Agreement and the Ancillary Documents will (i)
constitute any violation or breach of any provision of the charter documents of
Acquiror or Newco, or (ii) constitute any violation or breach of any provision
of, or constitute a default (or an event which, with the giving of notice or the
passage of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, or result in the creation of any Encumbrances upon any
of the properties of the Company under, or result in being declared void,
voidable or without further binding effect, any of the terms, conditions or
provisions of any Acquiror Contract (as defined below), or any license,
franchise, permit, concession, lease, Contract, or other instrument, or other
obligation to which the Company is a party, or by which the Company or any of
its properties is bound or affected, except with respect to clause (ii), for
those which could not have an Acquiror Material Adverse Effect.
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SECTION 4.05 Public Reports. Acquiror has delivered or made available
to Target true, correct and complete copies of (i) its Annual Report on Form
10-K for the year ended December 31, 1995, (ii) its Quarterly Report on Form
10-Q for the three months ended ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) its Quarterly Report on
Form 10-Q for the six months ended June 30, 1996, (iv) its Quarterly Report on
Form 10-Q for the nine months ended September 30, 1996 and (v) those other
registration statements, reports, proxy statements, information statements and
other documents filed by Acquiror with the SEC that are listed in the Acquiror
Disclosure Letter; in each case including all exhibits, amendments and
supplements thereto and each of such documents is in the form (including
exhibits, amendments and supplements thereto) filed with the SEC (collectively,
the "Acquiror SEC Reports"). Each of the Acquiror SEC Reports was filed with the
SEC in a timely manner. The Acquiror SEC Reports constitute all registration
statements, reports, proxy statements, information statements and other
documents required to be filed by Acquiror since December 31, 1995 under the
Securities Laws. As of their respective dates, the Acquiror SEC Reports (i)
complied in all material respects with the applicable requirements of the
Securities Laws and (ii) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading. Since December 31, 1995, Acquiror has not received
from the SEC any comments, or requests for additional information, with respect
to any Acquiror SEC Report.
SECTION 4.06 Real Property; Contracts and Leases Relating to Real
Property.
(a) The Acquiror Disclosure Letter contains a true, correct and
complete list by street address of all of the real estate properties owned by
the Company. The Acquiror Disclosure Letter or the existing title reports and
surveys with respect to the real estate properties owned by Acquiror listed in
the Acquiror Disclosure Letter (the "Existing Acquiror Title Documents") (in
each case true, correct and complete copies of which Existing Acquiror Title
Documents have been made available to Target) set forth any improvements thereon
(including, without limitation, (i) the buildings and other structures and
parking areas located thereon and (ii) any easements, rights of way, privileges
and appurtenances thereto relating to such real estate properties). The real
estate properties owned by the Company and improvements thereon (including,
without limitation, (i) the buildings and other structures and parking areas
located thereon and (ii) any easements, rights of way, privileges and
appurtenances thereto relating to such real estate properties) are hereinafter
referred to as the "Acquiror Properties". Except as set forth in the Acquiror
Disclosure Letter or the Existing Acquiror Title Documents, the Company owns fee
simple title to each of the Acquiror Properties, free and clear of Encumbrances,
and the Acquiror Properties are not subject to any Property Restrictions except
for (i) Property Restrictions imposed or promulgated by law or any Governmental
Entity with respect to real property, including, without limitation, zoning
regulations, that, individually or in the aggregate, do not materially and
adversely affect the current use of the property or materially detract from the
value of the property and (ii) Property Restrictions contained in leases to
tenants at Acquiror Properties.
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(b) To Acquiror's knowledge, except as set forth in the Acquiror
Disclosure Letter or in the Existing Acquiror Title Documents, the Company has
(i) all certificates, permits or licenses from all Governmental Entities having
jurisdiction over any or all of the Acquiror Properties and (ii) all agreements,
easements and other rights, that are necessary to permit the lawful use and
operation of the buildings and improvements on any and all of the Acquiror
Properties or are necessary to permit the lawful use and operation of all
driveways, roads and other means of egress and ingress to and from any and all
of the Acquiror Properties (any such agreement, easement or other right referred
to in this clause (ii) shall hereafter be referred to as an "Acquiror REA
Agreement") except, in the case of clauses (i) and (ii) of this paragraph, those
the failure to obtain of which could not reasonably be expected to have an
Acquiror Material Adverse Effect. Each Acquiror REA Agreement is in full force
and effect, and there is no pending threat of modification or cancellation of
any of same. The Company is not, and to Acquiror's knowledge no person has
asserted, or is threatening to assert, that the Company is, in default under any
Acquiror REA Agreement except for those which could not reasonably be expected
to have an Acquiror Material Adverse Effect.
(c) Except as set forth in the Acquiror Disclosure Letter or in the
Existing Acquiror Title Documents, to Acquiror's knowledge, (i) the Acquiror
Properties, and the size of, use of, occupancy of, improvements on, construction
on, and access to, the Acquiror Properties (the "Acquiror Property Uses"), are
in compliance in all material respects with all Property Laws affecting all or
any portion of all or any of the Acquiror Properties; (ii) the Acquiror
Properties, and the Acquiror Property Uses, are not, and no person or
Governmental Entity has asserted, or is threatening to assert, that the Acquiror
Properties, or the Acquiror Property Uses, are, in violation of any Property
Laws; (iii) there are no pending or threatened proceedings or actions that could
reasonably be expected to in any manner materially and adversely affect the
Acquiror Property Uses; (iv) no betterment assessments have been levied against,
and no condemnation or rezoning proceedings, or proceedings requiring any public
installations or improvements, are pending or threatened with respect to, any of
the Acquiror Properties; and (v) all charges and fees for all certificates,
permits, licenses and approvals referred to in this paragraph have been paid.
(d) Except as set forth in the Acquiror Disclosure Letter, to
Acquiror's knowledge, (i) there is no Acquiror Property with building systems
not in working order; (ii) there is no physical damage to any Acquiror Property
in excess of $10,000 for which there is no insurance in effect covering the full
cost of the restoration, ordinary wear and tear excepted; (iii) there are no
structural defects relating to any of the Acquiror Properties; and (iv) there is
no current renovation or restoration or tenant improvements to any Acquiror
Property the cost of which exceeds $10,000.
(e) Acquiror has made available to Target true, correct and complete
copies of (i) all loan or credit agreements, notes, debentures, bonds,
mortgages, indentures and deeds of trust, and all amendments and supplements to
all of the foregoing, (X) pursuant to which any indebtedness of the Company in
excess of $100,000 is outstanding or may be incurred or is evidenced or (Y)
which may result in or evidences total payments or liabilities to the
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Company in excess of $100,000 and (ii) all joint venture, shareholder
agreements, operating agreements, partnership agreements or similar Contracts to
which the Company is a party (together with the Contracts referred to in clause
(i) of this Section 4.06(e), as amended or supplemented, the "Acquiror
Contracts"). For purposes of this Section 4.06, "indebtedness" shall mean, with
respect to any person, without duplication, (i) all indebtedness of such person
for borrowed money, whether secured or unsecured, (ii) all obligations of such
person under conditional sale or title retention agreements relating to property
purchased by such person, (iii) all capitalized lease obligations of such
person, (iv) all obligations of such person under interest rate or currency
hedging transactions (valued at the termination value thereof) and (v) all
guarantees of such person of any indebtedness of any other person. The Acquiror
Disclosure Letter contains a true, correct and complete list of the Acquiror
Contracts. The Acquiror Contracts are valid, subsisting and in full force and
effect with respect to the Company, and, to the Company's knowledge, with
respect to the other parties to the Acquiror Contracts. The Company is not, and
to Acquiror's knowledge no person has asserted, or is threatening to assert,
that the Company is, in material default under any Acquiror Contract providing
for payments in excess of $10,000 annually. No existing use of any of the
Acquiror Properties constitutes, and to Acquiror's knowledge no person has
asserted, or is threatening to assert, that any existing use of any of the
Acquiror Properties constitutes, a conflict with any exclusive rights granted to
any person under any of the Acquiror Contracts providing for payments in excess
of $10,000 annually. To Acquiror's knowledge, no party to any of the Acquiror
Contracts providing for payments in excess of $10,000 annually is in default
under such Acquiror Contract. To Acquiror's knowledge, there does not exist any
condition which, with the giving of notice or the passage of time or both, would
cause such a violation or default under, or result in the termination or in a
right of termination or cancellation of, or accelerate the performance required
by, or result in the creation of any Encumbrances upon any of the Acquiror
Properties under, or result in being declared void, voidable or without further
binding effect, any of the terms, conditions or provisions of any Acquiror
Contract providing for payments in excess of $10,000 annually, or any material
license, franchise, permit or concession or other instrument, or other
obligation to which the Company is a party, or by which the Company or any of
the Acquiror Properties is bound or affected.
SECTION 4.07 Leases.
(a) The Acquiror Disclosure Letter contains a true, correct and
complete rent roll for all leases, licenses and tenancies, each as amended and
supplemented ("Acquiror Leases") covering all or each portion of the Acquiror
Properties (the "Acquiror Rent Roll"). The Acquiror Rent Roll includes or
describes for each Acquiror Lease, the name of the tenant, the space leased the
current balances of security and other deposits, the current base rent the
tenant is obligated to pay thereunder, and the amount of percentage rent most
recently paid.
(b) Except as set forth in the Acquiror Disclosure Letter, (i) to
Acquiror's knowledge, each of the Acquiror Leases is valid and subsisting and in
full force and effect; (ii) no tenant is controlled by, under common control
with or controls the Company; (iii) the
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tenant under each of the Acquiror Leases is in actual possession of the leased
premises; (iv) no tenant under any Acquiror Lease is in arrears for the payment
of rent for any month preceding the month of the date of this Agreement or, to
Acquiror's knowledge, otherwise in default of such tenant's lease obligations;
(v) to Acquiror's knowledge, no tenant under any Acquiror Lease intends to
vacate prior to the termination of its lease; (vi) there are no pending summary
proceedings or other legal actions by Acquiror for eviction under any Acquiror
Lease; (vii) all decorating, repairs, alterations, or other work required to be
performed by the Company under the Acquiror Leases, or the costs to be
reimbursed to any tenant under any Acquiror Lease, has been performed or, if
required, reimbursed; (viii) no space subject to any Acquiror Lease is occupied
rent free or at a rental rate reduced from the rates stated in the Acquiror Rent
Roll; and (ix) none of the Acquiror Leases and none of the rents or other
amounts payable thereunder have been assigned, pledged or encumbered, other than
to lenders, as described in the Acquiror Disclosure Letter. Except as set forth
in the Acquiror Disclosure Letter, the Company has not collected payment of rent
(other than security deposits) accruing for a period which is more than one
month beyond the date of collection. There are no material unsatisfied
obligations wherein rent and/or other obligations of the tenant in other
buildings or improvements have been assumed by the Company.
SECTION 4.08 Environmental Matters. Except as set forth in any of the
environmental assessments or other environmental reports identified in the
Acquiror Disclosure Letter and in the possession of the Company with respect to
the Acquiror Properties (the "Acquiror Environmental Reports"), true, correct
and complete copies of which have been made available to Target:
(a) the activities, operations and business carried out by the Company
at or on the Acquiror Properties are and have been in compliance, in all
material respects, with all applicable Environmental Laws;
(b) no lien has been imposed on the Acquiror Properties by any federal,
state or local Governmental Entity in connection with a violation of any
Environmental Laws at or on the Acquiror Properties;
(c) Acquiror has no knowledge (i) of any pending or threatened
litigation or proceedings before any Governmental Entity in which any person or
entity alleges the Company's violation or threatened violation of any
Environmental Laws or (ii) that any Governmental Entity has determined that the
Company is in violation of any Environmental Laws in connection with the
Acquiror Properties; and
(d) to Acquiror's knowledge, no Hazardous Materials have been treated,
stored or disposed of, or otherwise deposited in or on the Acquiror Properties,
including, without limitation, the surface waters and subsurface waters of the
Acquiror Properties; no spills, releases, discharges, or disposals of Hazardous
Materials have occurred or are presently occurring on or from any of the
Acquiror Properties, in violation of any Environmental Law; there are no
substances or conditions in or on the Acquiror Properties or any other parcels
of
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land which may affect the Acquiror Properties or the use thereof or which may
support a claim or cause of action under any Environmental Law. To Acquiror's
knowledge, except as set forth in the Acquiror Disclosure Letter, there are no
underground tanks at the Acquiror Properties and no part of the Acquiror
Properties lies in a flood plain or constitutes "wetlands." Acquiror is not
aware of any inaccuracies in the Acquiror Environmental Reports. For purposes of
this Section, Hazardous Materials shall not include substances sold or used by
tenants under the Acquiror Leases provided such use or sale is in the ordinary
course of such tenant's business and is in compliance with all applicable laws,
rules or regulations.
SECTION 4.09 Insurance. True and complete copies of insurance policies
carried by the Company or pursuant to which the Acquiror Properties are insured
have been made available to Target, all of such policies are in full force and
effect as of the date hereof, all premiums due and payable in respect of such
policies have been paid, and, except as set forth in the Acquiror Disclosure
Letter, no claims have been made against any such policies as of the date
hereof. The Company has not received any written notice from any insurance
company which has issued a policy with respect to the Acquiror Properties or
from any board of fire underwriters (or other body exercising similar functions)
(i) claiming any defects or deficiencies which have not been cured or corrected,
(ii) requesting the performance of any repairs, alterations or other work which
have not been performed, or (iii) stating, in effect, that any of such policies
will not be renewed or will be renewed at a higher premium than is presently
payable therefor.
SECTION 4.10 Absence of Certain Changes. Except as disclosed in the
Acquiror SEC Reports, since September 30, 1996, (i) the Company has not suffered
a Acquiror Material Adverse Effect, or entered into any transaction or conducted
its business or operations other than in the ordinary course of the Company's
business and other than in connection with Acquiror's exploration of
alternatives leading to the execution of this Agreement and (ii) Acquiror has
made no change in its accounting principles, practices or methods.
SECTION 4.11 No Undisclosed Liabilities. Except as and to the extent
set forth or disclosed in the Acquiror Disclosure Letter, the Acquiror SEC
Reports or in this Agreement, (i) at September 30, 1996, the Company did not
have any liabilities (whether absolute, accrued, asserted or unasserted,
contingent or otherwise), required by GAAP, consistently applied, to be
reflected on a balance sheet of Acquiror, in excess of $50,000 in the aggregate,
that were not reflected on Acquiror's September 30, 1996 balance sheet and (ii)
since September 30, 1996, the Company has not incurred any liabilities (whether
absolute, accrued, asserted or unasserted, contingent or otherwise) which are
required by GAAP, consistently applied, to be reflected on a balance sheet of
Acquiror, except liabilities incurred in the ordinary course of the Company's
business.
SECTION 4.12 Litigation. There are (i) no continuing orders,
injunctions, judgements or decrees of any court, arbitrator or other
Governmental Entity, to which the Company is a party or by which any of the
Acquiror Properties are bound or, to Acquiror's
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knowledge, to which any of Acquiror's directors, officers, employees or agents
(in each case, in his capacity as such) is a party or by which any of the
Company's properties or assets are bound, that could reasonably be expected to
have a Acquiror Material Adverse Effect or prevent or delay the consummation of
Merger and the other transactions contemplated by this Agreement and the
Ancillary Documents and (ii) there are no actions, suits or proceedings pending
(or to Acquiror's knowledge, threatened), at law or in equity, against the
Company or, to Acquiror's knowledge, against any of Acquiror's or any Acquiror
Subsidiary's directors, officers, employees or agents in their capacities as
such, that seek equitable relief or claim damages in excess of $10,000, or that
could reasonably be expected to have a Acquiror Material Adverse Effect or
prevent or delay the consummation of the Merger and the other transactions
contemplated by this Agreement and the Ancillary Documents.
SECTION 4.13 Compliance with Applicable Law. To Acquiror's knowledge,
the Company is not in violation of any order of any Governmental Entity, or any
law, ordinance, governmental rule or regulation to which the Company or any of
the Acquiror Properties is subject, where such violation or violations could
reasonably be expected to have a Acquiror Material Adverse Effect. The Company
has obtained all licenses, permits and other authorizations and has taken all
actions required by applicable law or governmental regulations in connection
with its business as now conducted, where the failure to obtain any such item or
items or to take any such action could reasonably be expected to have a Acquiror
Material Adverse Effect. Without limiting the generality of the foregoing, to
Acquiror's knowledge neither the Company nor (i) any consultant or employee or
(ii) any person who is or was an officer, director or Affiliate of the Company,
has, directly or indirectly, made, promised to make, or authorized the making
of, an offer, payment or gift of money or anything of value to any government
official, political party or employee, agent or fiduciary of a customer, to
obtain a Contract for or to influence a decision in favor of the Company where
such offer, payment or gift was or would be, if made, in violation of any
applicable law, ordinance, governmental rule or regulation, nor have any of them
maintained for this purpose cash or anything of value, in an account or
otherwise, not properly and accurately accounted for on the books and records of
Acquiror.
SECTION 4.14 Taxes. Acquiror and each Acquiror Subsidiary has timely
filed all federal, state, local and foreign tax returns required to be filed by
it through the date hereof and such returns are complete, accurate and comply
with all applicable law in all material respects. True, correct and complete
copies of all federal, state, local and foreign tax returns filed by Acquiror
and each Acquiror Subsidiary and all communications relating thereto have been
delivered or made available to Target. Neither Acquiror nor any Acquiror
Subsidiary has executed or filed with any tax authority any Contract now in
effect extending the period for assessment or collection of any income or other
Taxes, and no extension of time with respect to any date on which a tax return
was or is to be filed by Acquiror or any Acquiror Subsidiary is in force. Except
as set forth in the Acquiror Disclosure Letter, neither Acquiror nor any
Acquiror Subsidiary is a party to any action or proceeding for assessment or
collection of Taxes, and no claim for assessment or collection of Taxes has been
asserted or threatened against Acquiror or any Acquiror Subsidiary. There is no
dispute or claim
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concerning any tax liability of Acquiror or any Acquiror Subsidiary claimed by
any tax authority. To the Company's knowledge, no claim has ever been made by a
tax authority in a jurisdiction where Acquiror or any Acquiror Subsidiary does
not file tax returns that Acquiror or any Acquiror Subsidiary is or may be
subject to taxation in such jurisdiction. There are no security interests on any
of the Acquiror Properties that arose in connection with any failure (or alleged
failure) of Acquiror or any Acquiror Subsidiary to pay Taxes. Acquiror and each
Acquiror Subsidiary has never entered into a closing agreement pursuant to
Section 7121 of the Code.
Acquiror and each Acquiror Subsidiary has timely paid or
caused to be paid all Taxes (i) shown as due on its returns, (ii) which have
become due and payable pursuant to any assessment, deficiency notice, 30-day
letter or other notice received by Acquiror or such Acquiror Subsidiary, or
(iii) are otherwise due and payable. Acquiror and each Acquiror Subsidiary has
properly accrued all Taxes for all periods subsequent to the periods covered by
such returns. Except as set forth in the Acquiror Disclosure Letter, Acquiror
and each Acquiror Subsidiary has withheld from employees and paid over to the
appropriate taxing authority all income, social security, and other payroll
Taxes required to be withheld and paid over.
Acquiror has (i) elected to be taxed as a REIT within the
meaning of the Code and has qualified as a REIT for 1995, and has complied with
all applicable laws, rules and regulations, including, without limitation, the
Code, relating to, its REIT status in 1995, (ii) has operated and intends to
continue to operate, in such a manner as to qualify as a REIT for 1996, and
(iii) has not taken or omitted to take any action which could result in, and the
executive officers of Acquiror have not received written notice of and have no
actual knowledge of, a challenge to its status as a REIT. Acquiror represents
that Newco and each of the other Acquiror Subsidiaries are qualified REIT
subsidiaries as defined in Section 856(i)(2) of the Code.
SECTION 4.15 Financial Statements and Condition. The financial
statements included in the Acquiror SEC Reports (the "Acquiror Financial
Statements") present fairly, in all material respects, the Company's financial
position and results of operations at the dates and for the periods reflected
therein, all in conformity with GAAP applied on a consistent basis, except as
otherwise noted therein and for normal audit and accrual adjustments.
SECTION 4.16 Newco. Newco was formed solely for the purpose of engaging
in the transactions hereby contemplated, 100% of Newco's outstanding stock is,
has been and will be owned by Acquiror at all times during the period of Newco's
existence, and Newco has engaged in no other business activities and has
conducted its operations only as hereby contemplated.
SECTION 4.17 Brokers or Finders. Except as set forth in the Acquiror
Disclosure Letter, Acquiror has not entered into any Contract with any agent,
broker, investment banker, financial advisor or other firm or person which may
result in the obligation of Target,
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Acquiror or Newco to pay any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the Merger and the other transactions
contemplated by this Agreement and the Ancillary Documents. Except as set forth
in the Acquiror Disclosure Letter, to Acquiror's knowledge, no claim for payment
of any finder's fees, brokerage or agent's commissions or other like payments
has been asserted in connection with the negotiations leading to this Agreement
or the consummation of the Merger and the other transactions contemplated by
this Agreement and the Ancillary Documents.
SECTION 4.18 Other Interests. Except as set forth in the Acquiror
Disclosure Letter, neither the Acquiror nor any Acquiror Subsidiary owns,
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust, or entity. With
respect to such interests, the Acquiror or Acquiror Subsidiary is a partner or
shareholder in good standing, owns such interests free and clear of all
Encumbrances, is not in breach of any provision of any Contract governing the
Acquiror's or Acquiror Subsidiary's rights, as the case may be, in or to the
interests owned or held, all of which Contracts are set forth in the Acquiror
Disclosure Letter, are unmodified as described thereon, and are in full force
and effect and, to Acquiror's knowledge, the other parties to such Contracts are
not in breach of any of their respective obligations under such Contracts.
SECTION 4.19 Disclosure. The representations and warranties of Acquiror
and Newco in this Agreement do not contain any untrue statement of a material
fact.
SECTION 4.20 Employee Benefit Plans. All employee benefits plans
(within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) and other benefit arrangements covering
employees of the Company (the "Company Benefit Plans") are listed in the
Acquiror Disclosure Letter. Acquiror has delivered or made available to Target
true, correct and complete copies of the Company Benefit Plans. To the extend
applicable, the Company Benefit Plans have been administered in all material
respects in accordance with their terms and comply, in all material respects,
with the applicable requirements of ERISA and the Code. Any Company Benefit plan
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service (the "IRS") or
a determination letter request has been filed with the IRS with respect to any
such plan and is still pending. No Company Benefit Plan is covered by Title IV
of ERISA or Section 412 of the Code. Neither any Company Benefit Plan nor the
Company has incurred any liability or penalty under Section 4975 of the Code or
Section 502(i) of ERISA. There are no pending or anticipated claims against or
otherwise involving any of the Company Benefit Plans and no suit, action or
other litigation (excluding claims for benefits incurred in the ordinary course
of Company Benefit Plan activities) has been brought against or with respect to
any such Company Benefit Plan. All material contributions required to be made as
of the date hereof to the Company Benefit Plans have been made or provided for.
The Company has no unfunded liabilities under any Company Benefit Plan, except
as set forth in the Acquiror Disclosure Letter. Neither the Company nor any
entity under common control with the Company within the
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meaning of ERISA Section 4001 has contributed to, or been required to contribute
to, any multiemployer plan (as defined in Sections 3(37) and 4001(a)(3) of
ERISA). Except as otherwise required by Sections 601 through 608 of ERISA,
Section 4980B of the Code and applicable state laws, the Company does not
maintain or contribute to any plan or arrangement which provides or has any
liability to provide life insurance, medical or other employee welfare benefits
to any employee or former employee upon his retirement or termination of
employment and the Company has never represented, promised or contracted
(whether in oral or written form) to any employee or former employee that such
benefits would be provided. Except as disclosed in the Acquiror Disclosure
Letter, the execution and delivery of this Agreement, and the consummation of
the transactions contemplated by this Agreement and the Ancillary Documents,
will not constitute an event under any Company Benefit Plan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligations to fund benefits with respect to any employee, director or
consultant of the Company.
SECTION 4.21 Labor Matters. The Company is not a party to, or bound by,
any collective bargaining agreement or other Contract with a labor union or
labor union organization. There is no unfair labor practice or labor arbitration
proceeding pending or, to Acquiror's knowledge, threatened, against the Company
relating to its business. To Acquiror's knowledge, there are no organizational
efforts with respect to the formation of a collective bargaining unit presently
being made or threatened involving employees of the Company.
SECTION 4.22 Related Party Transactions. Except as set forth in the
Acquiror Disclosure Letter, the Company has no arrangements, agreements or
Contracts with (i) any consultant or employee, (ii) any person who is an
officer, director or affiliate of Acquiror or any Acquiror Subsidiary, any
relative of any of the foregoing or any entity of which any of the foregoing is
an affiliate or (iii) to Acquiror's knowledge, any person who owns more than 5%
of the outstanding Acquiror Common Shares (collectively, "Acquiror Affiliate
Contracts"). Acquiror has delivered or made available to Target true, correct
and complete copies of all Acquiror Affiliate Contracts.
SECTION 4.23 Books and Records.
(a) The books of account and other financial records of Acquiror (i)
accurately reflect in all material respects the financial transactions and
business of the Company in accordance with GAAP, and (ii) are consistent in all
material respects with the financial statements included in the Acquiror SEC
Reports.
(b) The minute books and other records of Acquiror have been made
available to Target, contain in all material respects accurate records of all
meetings and accurately reflect in all material respects all other corporate
action taken at such meeting or by unanimous
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consent of the shareholders and trustees and all committees of the Board of
Trustees of Acquiror.
SECTION 4.24 No Representation or Warranty. Except as set forth in this
Agreement, Acquiror makes no representation or warranty as to the present or
former condition or uses of the Acquiror Properties. Target expressly waives any
claim whatsoever, except for breach of representation or warranty contained
herein, relating to or arising from the physical condition of the Acquiror
Properties, including, without limitation, claims arising from the presence of
any Hazardous Materials on, at or beneath the Acquiror Properties or otherwise
arising under any Environmental Law, whether now or hereinafter in force.
Acquiror is not liable or bound in any manner by expressed or implied
warranties, guaranties or representations pertaining to the Acquiror Properties
or the Acquiror Leases made or furnished by any real estate broker, investment
banker, agent, attorney, employee, servant or other person representing or
purporting to represent Acquiror, unless the same are specifically set forth
herein.
ARTICLE V
COVENANTS
SECTION 5.01 Target Pre-Closing Obligations.
(a) Except as expressly contemplated by this Agreement or as set forth
in the Target Disclosure Letter, during the period from the date of this
Agreement and continuing until the earlier of the Effective Time or the
termination of this Agreement in accordance with its terms, Target will carry on
its business in its usual, regular and ordinary course, in substantially the
same manner as heretofore conducted, and use its reasonable efforts to preserve
intact its present business organizations and good will and keep available the
services of its present officers and employees.
(b) Except as expressly contemplated by this Agreement or as set forth
in the Target Disclosure Letter, during the period from the date of this
Agreement and continuing until the earlier of the Effective Time or the
termination of this Agreement in accordance with its terms, Target shall not,
unless Acquiror otherwise has consented in writing:
(i) (A) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of any Target Common Stock or Target Preferred
Stock, except that Target shall be allowed to make dividend payments on
the Target Preferred Stock as are required pursuant to the terms of
Target's Certificate of Incorporation, as amended, (B) split, reverse
share split, stock dividend, combine or reclassify any of its capital
stock or Issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock, (C) redeem, purchase or otherwise acquire any of its
capital stock (except, with respect to the Target Preferred Stock, as
expressly required by the terms of the Target Preferred Stock plus up
to an aggregate of $270,000 of
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optional redemptions of the Target Preferred Stock) by or (D) amend the
terms of any of its securities, or propose to do any of the foregoing
except as expressly permitted hereby;
(ii) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any stock of any class or any other securities
(including, without limitation, indebtedness having the right to vote)
or equity equivalents (including, without limitation, stock
appreciation rights) or amend in any material respect any of the terms
of any such securities or Contracts outstanding on the date hereof
except as expressly permitted hereby;
(iii) amend or propose to amend its Certificate of
Incorporation or By-laws;
(iv) incur any, indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or warrants,
options or rights to acquire any debt securities of Target or guarantee
(or become liable for) any debt of others or make any loans, advances
or capital contributions to, or any investments in, any other person,
or make, create or grant any mortgage, pledge or otherwise Encumber any
assets or suffer any material Encumbrance thereupon, except for the
refinancing of indebtedness for borrowed money which becomes due and
payable between the date hereof through the Closing Date which shall be
in all respects reasonably acceptable to Acquiror;
(v) (A) prepay any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) or
(B) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise)
other than the payment, discharge or satisfaction, in the ordinary
course of operating the Target Properties in substantially the same
manner as heretofore conducted, or in accordance with their terms, of
claims, liabilities or obligations reflected or reserved against in, or
contemplated by, the Target Financial Statements;
(vi) change any of the accounting principles or practices used
by it in the preparation of any of Target's financial statements or
make any tax elections;
(vii) (A) increase any compensation or enter into or amend any
employment Contract with any of its present or future officers or
directors, or (B) adopt any new employee benefit plan (including,
without limitation, any stock option, stock benefit or stock purchase
plan) or amend any existing employee benefit plan in any material
respect;
(viii) acquire, enter into an option to acquire or exercise an
option or Contract to acquire additional real property, incur
additional indebtedness, encumber assets or
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commence construction of, or enter into any Contract to develop or
construct, or other real estate projects.
(ix) sell, lease in its entirety or otherwise dispose of (A)
any Target Properties or (B) except in the ordinary course of operating
the Target Properties, any of its other assets;
(x) enter into any Contract, borrowing, capital expenditure or
transaction which may result in total payments or liability by or to it
in excess of $10,000;
(xi) enter into any Affiliate Contract or any other Contract,
borrowing, capital expenditure or transaction with (i) any consultant
or employee, (ii) any person who is an officer, director or affiliate
of Target, any relative of any of the foregoing or any entity of which
any of the foregoing is an affiliate or (iii) to Target's knowledge,
any person who owns 5% or more of the outstanding Target Common Stock;
(xii) enter into any additional, or renew (except as may be
required pursuant to the terms of an existing Target Lease or other
agreement listed in the Target Disclosure Letter), amend or otherwise
modify any existing, Target Leases, except with Acquiror's prior
written consent which shall not be unreasonably withheld or delayed;
provided, that Acquiror shall be deemed to have granted such consent if
it fails to notify Target of its grant or withholding of such consent
within five business days after its receipt of a written request
therefor; or
(xiii) (A) agree to take any of the foregoing actions or (B)
take or agree to take any action that is reasonably likely to result in
any of Target's representations or warranties contained in this
Agreement, the Ancillary Documents, or in the certificates and other
documents delivered pursuant hereto or thereto being untrue, or result
in any of the conditions to the Merger set forth in Article VI not
being satisfied in any material respect.
(c) During the period from the date of this Agreement and continuing
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Target shall:
(i) confer on a regular basis with one or more representatives
of Acquiror to report on material operational matters and any proposals
to engage in material transactions;
(ii) promptly notify Acquiror of any material change in the
Target Properties, or in Target's condition (financial or otherwise),
business, properties, assets, liabilities or the normal course of
Target's business or in the operation of its properties, any material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the material breach
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of any of Target's representations or warranties contained in this
Agreement, the Ancillary Documents, or in the certificates and other
documents delivered pursuant hereto or thereto (other than a
representation or warranty qualified by reference to materiality or a
Target Material Adverse Effect), or the breach of any of Target's
representations or warranties contained in this Agreement, the
Ancillary Documents, or in the certificates and other documents
delivered pursuant hereto or thereto qualified by reference to
materiality or a Target Material Adverse Effect;
(iii) deliver to Acquiror draft copies in substantially final
form of any report, statement or schedule to be filed with the SEC
subsequent to the date of this Agreement at least two business days
prior to the filing thereof;
(iv) (A) make dividend payments on the Target Preferred Stock
required to be made pursuant to the terms of Target's Certificate of
Incorporation, as amended, (B) pay all accrued and unpaid dividends on
the Target Preferred Stock pursuant to the terms of the Target
Preferred Stock and (C) redeem such amount of Target Preferred Stock so
that the applicable rate of interest used to determine dividends
payable pursuant to the terms of the Target Preferred Stock shall be 8%
from the date hereof through and including the Closing Date;
(v) deliver to Acquiror within ten days after the end of each
month current Target Rent Rolls, together with a detailed aging report
of all receivables;
(vi) use reasonable efforts to obtain the Target Directors'
and Officers' Liability Insurance Policy; and
(vii) pay in full or otherwise satisfy and discharge all
obligations under the Target Affiliate Contracts that are due.
SECTION 5.02 Acquiror Pre-Closing Obligations.
(a) Except as expressly contemplated by this Agreement or as set forth
in the Acquiror Disclosure Letter, during the period from the date of this
Agreement and continuing until the earlier of the Effective Time or the
termination of this Agreement in accordance with its terms, Acquiror and the
Acquiror subsidiaries will each carry on their respective businesses (which
includes the acquisition and disposition of assets and properties) in its usual,
regular and ordinary course, in substantially the same manner as heretofore
conducted, and use their reasonable efforts to preserve intact their present
business organizations and goodwill and keep available the services of their
present officers and employees.
(b) Except as expressly contemplated by this Agreement or as set forth
in the Acquiror Disclosure Letter, during the period from the date of this
Agreement and continuing until the earlier of the Effective Time or the
termination of this Agreement in accordance with its terms, Acquiror shall not,
unless Target otherwise has consented in writing:
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(i) except pursuant to the exercise of options, warrants,
conversion rights and other contractual rights existing on the date
hereof and disclosed pursuant to this Agreement, effect any share
split, reverse share split, share dividend, recapitalization or other
similar transaction;
(ii) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of beneficial
interest, except for a dividend not to exceed $0.50 per share of
Acquiror Common Shares for each calendar quarter ending during the
period from the date hereof through the Closing Date, and dividends on
Acquiror Series A Preferred Shares or Acquiror Series A-1 Preferred
Shares in accordance with their terms;
(iii) issue any Acquiror Common Shares or Acquiror Common
Share Equivalents except: (A) such Acquiror Common Shares as are issued
upon conversion of any shares of beneficial interest that by their
terms are convertible into Acquiror Common Shares, and that (1) are
outstanding on the date hereof or (2) have been issued after the date
hereof and prior to the Closing Date to the extent not prohibited by
the terms of this Section 5.02(b)(iii); (B) such Acquiror Common Shares
as are issued pursuant to any dividend reinvestment plan or stock
purchase plan available to all holders of Acquiror Common Shares; (C)
such Acquiror Common Shares or Acquiror Common Share Equivalents as are
issued in any public offering for an amount per Acquiror Common Share
or Acquiror Common Share Equivalent (including any amount payable on
exercise of a Acquiror Common Share Equivalent) equal to at least 92%
or more of the closing price per share on the New York Stock Exchange,
Inc. ("NYSE") of the Acquiror Common Shares on the last trading day
immediately preceding the issue date, less any underwriting discounts
and commissions; (D) the issuance of preferred shares or any other
equity security of Acquiror (other than Acquiror Common Shares or
Acquiror Common Share Equivalents) in any public offering for fair
value; (E) such Acquiror Common Shares or Acquiror Common Share
Equivalents as are issued for fair market value in connection with the
acquisition of assets or properties from any person or entity that is
not affiliated with Acquiror prior to such acquisition; (F) Acquiror
Series A-1 Preferred Shares in connection with Acquiror's exchange of
issued and outstanding Acquiror Series A Preferred Shares for Acquiror
Series A-1 Preferred Shares; and (F) additional Acquiror Common Shares,
and additional Acquiror Common Share Equivalents, issued to Affiliates
of Acquiror provided that such additional Acquiror Common Shares and
the Acquiror Common Shares into which such Acquiror Common Share
Equivalents may be exercised or converted do not exceed, in the
aggregate, 250,000 Acquiror Common Shares, including, without
limitation, (1) Acquiror Common Shares issued to directors, officers,
employees, or trustees of Acquiror or any Acquiror Subsidiary and (2)
Acquiror Common Shares or Acquiror Common Share Equivalents issued
pursuant to stock option, stock purchase, performance or other
remuneration plans adopted by the Board of Trustees of Acquiror from
time to time (including, without limitation, Acquiror's 1992 Employee
Share Option Plan, 1992
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Trustee Share Option Plan and 1995 Management Incentive Plan, and any
Acquiror Common Shares issued to employees of Acquiror in lieu of
bonuses or to trustees of Acquiror in lieu of trustee's fees).
"Acquiror Common Share Equivalent" shall mean any evidence of
indebtedness, shares of beneficial interest or other securities which
are or may be convertible into or exchangeable for Acquiror Common
Shares ("Acquiror Convertible Securities"), or any warrant, option or
other right to subscribe for any Acquiror Convertible Securities or for
any Acquiror Common Shares; or
(iv) agree to take any of the foregoing actions or take or
agree to take any action that is reasonably likely to result in any of
Acquiror's representations or warranties contained in this Agreement,
the Ancillary Documents, or in the certificates and other documents
delivered pursuant hereto or thereto being untrue or result in any of
the conditions to the Merger set forth in Article VII not being
satisfied in any material respect.
(c) During the period from the date of this Agreement and continuing
until the earlier of the Effective Time or the termination of this Agreement in
accordance with its terms, Acquiror shall:
(i) confer on a regular basis with one or more representatives
of Target to report on material transactions;
(ii) promptly notify Target of any material change in the
condition (financial or otherwise), business, properties, assets,
liabilities, prospects or the normal course of the Company's business
or in the operation of its properties, any material governmental
complaints, investigations or hearings (or communications indicating
that the same may be contemplated), or the material breach of any
representation or warranty (other than a representation or warranty
qualified by reference to materiality or an Acquiror Material Adverse
Effect), or the breach of any of Acquiror's or Newco's representations
or warranties contained in this Agreement, the Ancillary Documents, or
in the certificates and other documents delivered pursuant hereto or
thereto qualified by reference to materiality or an Acquiror Material
Adverse Effect; and
(iii) deliver to Target true and correct copies of any report,
statement or schedule filed with the SEC subsequent to the date of this
Agreement promptly after the filing thereof.
SECTION 5.03 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ and Other Filings. Subject to the terms
and conditions herein provided, Target and Acquiror shall: (i) to the extent
required, promptly make their respective filings and thereafter make any other
required submissions under the HSR Act with respect to the Merger; (ii) use all
reasonable efforts to cooperate with one another in (x) 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
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prior to the Effective Time from, governmental or regulatory authorities of the
United States, the several states and local and foreign jurisdictions in
connection with the execution, delivery and performance of this Agreement and
the consummation of the Merger and the other transactions contemplated hereby
and thereby and (y) timely making all such filings and timely seeking all such
consents, approvals, permits or authorizations; (iii) use all reasonable efforts
to obtain in writing any consents required from third parties in form and
substance reasonably satisfactory to Target and Acquiror necessary to consummate
the Merger and the other transactions contemplated hereby and thereby; and (iv)
use all reasonable efforts to take, or cause to be taken, all other action and
do, or cause to be done, all other things necessary, proper or appropriate to
consummate the Merger and the other transactions contemplated by this Agreement
and the Ancillary Documents. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purpose of this
Agreement, the proper officers and directors of Target and Acquiror shall take
all such necessary action.
SECTION 5.04 Title Insurance. Target shall cause a person or entity
acceptable to the Title Company (as defined below) that shall own of record upon
consummation of the Merger Acquiror Series B Preferred Shares having a
liquidation preference of at least $1,000,000, to deliver such affidavits,
indemnities and/or financial statements as shall have been agreed upon between
Target and the title company or companies chosen by Acquiror (collectively, the
"Title Company") prior to the date hereof so as to enable the Title Company to
issue the title insurance policies required by Section 6.20.
SECTION 5.05 No Solicitations. Target will immediately cease any
existing discussions or negotiations with any third parties conducted prior to
the date hereof with respect to any merger, business combination, sale of any
Target Properties, or, except as permitted by Section 5.01(b)(ix), sale of any
other assets of Target, sale of shares of capital stock by Target or similar
transaction involving such party or any of its subsidiaries or divisions (a
"Target Acquisition Transaction"). Neither Target, nor its directors, officers,
partners, employees, bankers, attorneys or other advisors or representatives
shall, directly or indirectly, solicit, initiate or encourage any person or
entity concerning any Target Acquisition Transaction (other than the
transactions contemplated by this Agreement and the Ancillary Agreements);
provided, however, that (i) nothing in this Agreement shall preclude Target's
Board of Directors, pursuant to its fiduciary duties as determined by Target's
Board of Directors after consultation with Rosenman & Colin LLP or another
nationally-recognized law firm, from entering into, or causing Target's
officers, representatives, agents or affiliates from entering into, negotiations
with or furnishing information to a third party which has initiated contact with
Target without any solicitation, initiation or encouragement in violation of
this Section, from passing on to Target Stockholders information regarding any
such third party proposal or inquiry consistent with such fiduciary duties, or
otherwise fulfilling such fiduciary duties, and (ii) Target may participate in
negotiations with or furnish information to a third party which (without any
solicitation, initiation or encouragement from Target) has initiated contact
with Target with respect to a Target Acquisition Transaction consistent with the
fiduciary obligations of its Board of Directors. Target shall promptly advise
Acquiror of the receipt of any written offer for an Target Acquisition
Transaction, including, without
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limitation, the terms thereof, and, in the event Target receives such a written
offer, nothing contained in this Agreement shall prevent Target's Board of
Directors from approving such proposal or recommending such Target Acquisition
Transaction to Target's Stockholders if Target's Board of Directors determines
in good faith that failure to take such action would not be consistent with, or
would result in a breach of, its fiduciary duties as determined by Target's
Board of Directors after consultation with Rosenman & Colin LLP or another
nationally-recognized law firm, and in such case the Board of Directors of
Target may amend, withhold or withdraw its recommendation regarding the Merger.
In the event that Target is prepared to accept another proposal for a Target
Acquisition Transaction, Target shall notify Acquiror at least 48 hours prior to
terminating this Agreement and entering into a definitive agreement with respect
to such other proposal, unless Target receives an opinion of counsel that
compliance with its obligation to give 48 hours' notice as required pursuant to
this Agreement would not be consistent with, or would constitute a breach of,
the fiduciary duties of Target's Board of Directors. Nothing in this Agreement
shall prevent Target or its Board of Directors from complying with the
provisions of the 1934 Act and the rules and regulations thereunder.
SECTION 5.06 Access to Information.
(a) Upon reasonable notice and subject to restrictions contained in
confidentiality Contracts listed in the Target Disclosure Letter to which it is
subject (from which it shall use reasonable efforts to be released), Target
shall afford to the officers, employees, accountants, counsel and other
representatives of Acquiror ("Acquiror Representatives"), reasonable access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, Contracts and records and, during such period, Target
shall furnish promptly to Acquiror all information concerning Target, its
business, properties and personnel as Acquiror may reasonably request. Acquiror
Representatives shall be permitted to make copies of and extracts from, the
accounts, minute books, other records, books of account, other books, deeds,
leases, title documents, insurance policies, Contracts, tax returns, records and
files of Target, and such other information relating to Target, and its
business, properties and personnel as Acquiror shall reasonably request.
(b) Upon reasonable notice and subject to restrictions contained in
confidentiality Contracts to which it is subject (from which it shall use
reasonable efforts to be released), Acquiror shall (and shall cause each of the
Acquiror Subsidiaries to) afford to the officers, employees, accountants,
counsel and other representatives of Target ("Target Representatives"),
reasonable access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, Contracts, and records and, during
such period, Acquiror shall (and shall cause each of the Acquiror Subsidiaries
to) furnish promptly to Target all information concerning its business,
properties and personnel as Target may reasonably request. Target
Representatives shall be permitted to make copies of and extracts from, the
accounts, minute books, other records, books of account, other books, deeds,
leases, title documents, insurance policies, Contracts, tax returns, records and
files of Acquiror, and
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such other information relating to Acquiror, and its business, properties and
personnel as Target shall reasonably request.
SECTION 5.07 Target Stockholder Meeting. Target will take all action
necessary in accordance with Delaware law, Target's Certificate of
Incorporation, as amended, and its By-laws, to convene a special meeting of the
Target Stockholders (the "Target Stockholders Meeting") as promptly as
practicable following effectiveness of the registration statement on Form S-4
(the "S-4"), or other appropriate registration statement, of Acquiror and the
clearance by the SEC of the proxy statement (which will be included in the S-4
or other registration statement) relating to the Target Stockholders Meeting
(the "Target Proxy Statement") to consider and vote upon the approval of this
Agreement, the Merger and the transactions contemplated by this Agreement and
the Ancillary Documents. Target's Board of Directors shall, subject to its good
faith judgment as to its fiduciary obligations to Target's stockholders imposed
by law, recommend that the Target Stockholders vote in favor of this Agreement,
the Merger and the transactions hereby contemplated and cause Target to take all
lawful actions to solicit from the Target Stockholders proxies in favor of such
approval.
SECTION 5.08 Target Proxy Statement.
(a) Target shall prepare (and Acquiror shall assist where reasonable
and appropriate), as promptly as practicable upon execution of this Agreement,
the Target Proxy Statement and a form of proxy for use at the Target
Stockholders Meeting relating to the vote of the Target Stockholders with
respect to this Agreement, the Merger and the transactions hereby contemplated
(together with any amendments or supplements thereto, in each case in the form
or forms mailed to the Target Stockholders). Target shall cause the Target Proxy
Statement to be mailed to Target Stockholders at the earliest possible date.
Acquiror and Newco shall promptly furnish to Target such information regarding
each of Acquiror and Newco and their respective officers and directors as may be
reasonably requested by Target for inclusion in the Target Proxy Statement as
required by any law or by the SEC.
(b) Target covenants that none of the information concerning Target or
any of its affiliates, directors, officers, employees, agents or representatives
in the Target Proxy Statement (including, without limitation, such information
contained in the Target Proxy Statement as is based on Target's representations
and warranties herein) will, at the time the Registration Statement or any
amendment or supplement thereto is filed with the SEC or becomes effective and
at the time of mailing of the Target Proxy Statement or any amendment or
supplement thereto to the Target Stockholders, not contain any untrue statement
of any material fact, or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Target covenants that the Target Proxy Statement shall
comply in all material respects with the applicable provisions of the 1934 Act
and the rules and regulations thereunder, except that no covenant is made by
Target with respect to statements made therein based on information supplied by
Acquiror or Newco or any of their affiliates, directors, officers, employees,
agents or representatives in writing for inclusion or
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incorporation by reference therein or based upon Acquiror's or Newco's
representations or warranties made herein or in any Ancillary Documents or with
respect to omitted information regarding Acquiror or Newco so required to be
included in the Target Proxy Statement.
(c) Acquiror covenants that none of the information supplied or to be
supplied in writing by Acquiror or Newco or any of its affiliates, directors,
officers, employees, agents or representatives for inclusion or incorporation by
reference in the Target Proxy Statement (including, without limitation, such
information contained in the Target Proxy Statement as is based on Acquiror's
and Newco's representations and warranties herein) will, at the time the
Registration Statement or any amendment or supplement thereto is filed with the
SEC or becomes effective and at the time of mailing of the Target Proxy
Statement or any amendment or supplement thereto to the Target Stockholders, not
contain any untrue statement of any material fact, or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 5.09 Registration Statement.
(a) Acquiror shall register under the 1933 Act the Acquiror Series B
Preferred Shares to be issued in the Merger and the Acquiror Common Shares to be
issued upon the conversion of shares of Acquiror Series B Preferred Shares on a
registration statement on Form S-4 or another appropriate registration statement
(the "Acquiror Registration Statement") (which shall contain the Target Proxy
Statement) and shall keep such registration effective thereafter through the
third anniversary of the Closing Date. As promptly as practicable after the date
of this Agreement, Acquiror shall prepare, with the assistance of Target, as
appropriate, and file with the SEC the Acquiror Registration Statement together
with the prospectus to be included therein (the "Prospectus") and the Target
Proxy Statement included therein, and any other documents required by the 1933
Act or the 1934 Act in connection with the Merger. Each of Acquiror and Target
shall use reasonable efforts to respond promptly to any comments of the SEC and
to have the Acquiror Registration Statement declared effective under the 1933
Act as promptly as practicable after such filing. Acquiror shall use its
reasonable efforts to obtain, prior to the Effective Time, all necessary state
securities or "blue sky" permits or approvals required to consummate the Merger
and the other transactions contemplated by this Agreement and the Ancillary
Documents.
Target shall promptly furnish to Acquiror all information
concerning Target and the Target Stockholders as may be reasonably required in
connection with any action contemplated by this Section 5.09. Each of Acquiror
and Target will notify the other promptly of the receipt of any comments from
the SEC or its staff and of any request by the SEC or its staff for amendments
or supplements to the Acquiror Registration Statement or the Prospectus or for
additional information and will supply the other with copies of all
correspondence with the SEC or its staff with respect to the Acquiror
Registration Statement or the Prospectus. Whenever any event occurs which should
be set forth in an amendment or supplement to the Acquiror Registration
Statement or the Prospectus, Acquiror or Target, as the case may be,
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shall promptly inform the other of such occurrence and cooperate in filing with
the SEC or its staff, and/or mailing to stockholders of Target, such amendment
or supplement.
(b) Acquiror covenants that none of the information in the Acquiror
Registration Statement will, at the time the Acquiror Registration Statement is
filed with the SEC and at the time it becomes effective under the 1933 Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading, except
that no covenant is made by Acquiror with respect to statements made therein
based on information supplied in writing by Target for inclusion in the Acquiror
Registration Statement. Acquiror covenants that the Acquiror Registration
Statement and the Prospectus will comply in all material respects with the
provisions of the 1933 Act and the 1934 Act, as the case may be, and the rules
and regulations thereunder, except that no covenant is made by Acquiror with
respect to statements made therein based on information supplied by Target or
any of its affiliates, directors, officers, employees, agents or representatives
in writing for inclusion or incorporation by reference therein or based upon
Target's representations or warranties made herein or in any Ancillary Documents
or with respect to omitted information regarding Target so required to be
included in the Registration Statement.
(c) Target covenants that none of the information supplied in writing
by Target for inclusion or incorporation by reference in the Acquiror
Registration Statement or any amendments or supplements thereto to be filed with
the SEC in connection with the issuance of Acquiror Series B Preferred Shares
and, upon conversion, Acquiror Common Shares, pursuant to the transactions
hereby contemplated will, at the time the Acquiror Registration Statement or any
amendments or supplements thereto is filed with the SEC and at the time it
becomes effective under the 1933 Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstance under
which they were made, not misleading.
SECTION 5.10 Efforts to Consummate. Subject to the terms and conditions
of this Agreement, in addition to the matters otherwise specifically set forth
in this Article V, each of the parties hereto agrees to use reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
including, without limitation, (i) the preparation and filing of all other
forms, registrations and notices required to be filed to consummate the Merger
and the transactions hereby contemplated and the taking of such actions as are
necessary to obtain any requisite approvals, consents, orders, exemptions, or
waivers (including, without limitation, any Target Consents) by any public or
private third party, (ii) such actions as may be required to permit, on or prior
to the Effective Time, the Acquiror Series B Preferred Shares to be issued
pursuant to the terms and conditions hereof and the Acquiror Common Shares to be
issued upon conversion to be listed on the NYSE (subject to official notice of
issuance), and (iii) such actions as may be reasonable to cause, concurrently
with the Effective Time, the delisting of Target's securities from the OTC
Bulletin Board and the deregistration of Target's
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securities under the 1934 Act; provided, however, that in order to obtain any
consent, approval, waiver, license, permit, authorization, registration,
qualification or other permission or action referred to in clause (i) of this
sentence, no party shall be required to (A) pay any consideration, to divest
itself of any of, or otherwise rearrange the composition of, its assets or to
agree to any conditions or requirements which are materially adverse or
burdensome or (B) amend, or agree to amend, in any material respect any
Contract. Each party shall promptly consult with the other and provide any
necessary information with respect to, and provide the other (or its counsel)
with copies of, all filings made by such party with any Governmental Entity in
connection with this Agreement, the Merger and the transactions hereby
contemplated.
SECTION 5.11 Letters of Accountants. Each of Target and Acquiror shall
use reasonable efforts to cause to be delivered to the other, letters from their
respective independent public accountants to each such party, dated a date no
later than the date on which the Acquiror Registration Statement and any
supplements or post-effective amendments thereto shall become effective and
addressed to the other, in form and substance reasonably satisfactory to the
other and customary in scope and substance for "cold comfort" letters delivered
by independent public accountants in connection with registration statements
similar to the Acquiror Registration Statement.
SECTION 5.12 Indemnification of Managers.
(a) Acquiror and Newco each agree that all rights, if any, to
indemnification existing on the date hereof in favor of the present or former
officers and directors of Target (the "Managers"), with respect to actions taken
in their capacity as officers and/or directors prior to or at the Effective Time
as provided in Target's Certificate of Incorporation and By-laws (including,
without limitation, in connection with the Merger and the other transactions
contemplated by this Agreement and the Ancillary Documents), shall, subject to
Delaware law, survive the Merger for a period of seven years. The Surviving
Corporation and Acquiror shall assume, honor and be bound by the terms of such
Certificate of Incorporation and By-laws with respect to their actions and
omissions in such capacity taken prior to the Effective Time (including, without
limitation, in connection with the Merger and the other transactions
contemplated by this Agreement and the Ancillary Documents), whether or not such
persons continue in their positions with the Surviving Corporation following the
Effective Time, and shall continue in full force and effect following the
Effective Time for a period of seven years, and all such rights, if any, in the
Certificate of Incorporation and By-laws in effect as of the date hereof between
Target and any Manager shall survive the Merger and continue in full force and
effect in accordance with its terms as between such Managers and the Surviving
Corporation and Acquiror for a period of seven years.
(b) Target shall use reasonable efforts to obtain a tail covering the
period from the Closing Date through the first anniversary of the Closing Date
to, and having substantially the same coverage and deductibles as, the Existing
Target D & O Liability Insurance Policy (the "Target D & O Insurance Liability
Tail"). The premium for such Target D & O Liability
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Insurance Tail shall not exceed $75,000 and shall be a Merger Expense. In the
event that Target is unable to obtain the Target Directors' and Officers'
Liability Insurance Policy for such period, Acquiror agrees to indemnify, until
the first anniversary of the Closing Date, the directors and officers covered by
the Existing Target D & O Liability Insurance Policy on the same or similar
terms and conditions in effect under the Existing Target D & O Liability
Insurance Policy, and the same dollar limitations in effect under Acquiror's
directors' and officers' liability insurance policy, as currently in effect.
Acquiror has delivered or made available to Target a true, correct and complete
copy of Acquiror's directors' and officers' liability insurance policy, as
currently in effect.
(c) The provisions of this Section 5.12 shall survive the Effective
Time and are intended to be for the benefit of, and shall be enforceable by,
each officer and director of Target and his or her heirs and representatives.
SECTION 5.13 No Breach of Representations and Warranties. Each of
Target, Acquiror and Newco agree that it will not take any action that would
cause or constitute, or would, if it had been taken prior to the date hereof,
have caused or constituted, a material breach of any of its respective
representations or warranties (other than those representations or warranties
qualified by reference to materiality or an Acquiror Material Adverse Effect or
a Target Material Adverse Effect, as the case may be), or the breach of any of
its respective representations or warranties qualified by reference to
materiality or an Acquiror Material Adverse Effect or a Target Material Adverse
Effect, as the case may be, contained in this Agreement, the Ancillary
Documents, or in the certificates and other documents delivered pursuant hereto
or thereto. Each of the parties hereto shall, in the event of, or promptly after
the occurrence of, or promptly after obtaining knowledge of the occurrence of or
the impending or threatened occurrence of, any fact or event which would cause
or constitute a Target Material Adverse Effect, with respect to Target, or a
Acquiror Material Adverse Effect, with respect to Acquiror or Newco, or a
material breach of any of the representations or warranties (other than those
representations or warranties qualified by reference to materiality or an
Acquiror Material Adverse Effect or a Target Material Adverse Effect, as the
case may be), or the breach of any of the representations or warranties
qualified by reference to materiality or an Acquiror Material Adverse Effect or
a Target Material Adverse Effect, as the case may be, contained in this
Agreement, the Ancillary Documents, or in the certificates and other documents
delivered pursuant hereto or thereto, as of the Closing Date, give detailed
notice thereof to the other parties hereto; and such notifying party shall use
its or their reasonable efforts to prevent or promptly to remedy such breach.
The giving of notice pursuant to this Section 5.13 shall not act as a waiver of
any breach hereunder.
SECTION 5.14 Consents; Notices.
(a) Target shall use reasonable efforts to make, and Acquiror shall use
all reasonable efforts to cooperate with Target in Target's making, the filings
and registrations with, and obtain the consents, authorizations, declarations
and approvals of, the Governmental Entities and other third parties, necessary
for the execution, delivery and performance by
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Target of this Agreement or any of the Ancillary Documents or the consummation
of the Merger and the other transactions contemplated by this Agreement and the
Ancillary Documents. Target shall also deliver all notices to third parties
required to be delivered in connection with the execution of this Agreement and
the consummation of the Merger and the transactions hereby contemplated.
(b) Acquiror shall use reasonable efforts to obtain and deliver to
Target written consents identified in the Acquiror Disclosure Letter, in form
and substance reasonably satisfactory to Target required in connection with this
Agreement, the Merger or the transactions hereby contemplated. Target shall use
all reasonable efforts to cooperate with Acquiror in Acquiror's obtaining of
such consents. Acquiror shall also deliver all notices to third parties required
to be delivered in connection with the execution of this Agreement and the
consummation of the Merger and the transactions hereby contemplated.
SECTION 5.15 Public Announcements. Except as otherwise required by law
or the rules of the NASD or the NYSE, neither Target nor Acquiror shall, nor
shall Acquiror permit any of the Acquiror Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to
the Merger and the transactions contemplated by this Agreement and the Ancillary
Documents without prior written approval of the other party, which approval
shall not be unreasonably withheld.
SECTION 5.16 Exchange Listing. Acquiror shall promptly prepare and
submit to the NYSE a listing application covering the Acquiror Common Shares
issuable upon conversion of the Acquiror Series B Preferred Shares, and shall
use reasonable efforts to obtain, prior to the Effective Time, approval for the
listing of such Acquiror Common Shares, subject to official notice of issuance;
and Acquiror shall pay the listing fee in connection therewith. Prior to the
Effective Time, Acquiror shall, if and when notified in writing by Target, use
reasonable efforts to cause the Acquiror Series B Preferred Shares to be listed
on the NYSE and Target shall pay the listing fee in connection therewith. If
Target does not request listing of the Series B Preferred Shares as aforesaid
prior to the Effective Time, then after the Effective Time, Acquiror shall, if
and when notified in writing by holders of a majority of the Acquiror Series B
Preferred Shares, use reasonable efforts to cause the Acquiror Series B
Preferred Shares to be listed on the NYSE and holders of the Acquiror Series B
Preferred Shares shall pay the listing fee in connection therewith.
SECTION 5.17 Filing of Articles Supplementary.
(a) Acquiror shall, on or prior to the Closing Date, file with the
State Department of Assessments and Taxation of Maryland the Articles
Supplementary for the Acquiror Series B Preferred Shares (the "Acquiror Series B
Preferred Shares Articles Supplementary") and the Articles Supplementary for the
Acquiror Series C Preferred Shares and shall promptly deliver to Target evidence
of such filings.
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(b) When issued, the Acquiror Series B Preferred Shares, Acquiror
Series C Preferred Shares and the Acquiror Common Shares to be issued upon
conversion of the Acquiror Series B Preferred Shares shall be duly authorized,
validly issued, fully paid and nonassessable except that shareholders may be
subject to further assessment with respect to claims for tort, contract, taxes,
statutory liability and otherwise in some jurisdictions to the extent such
claims are not satisfied by Acquiror. The Acquiror Series B Preferred Shares and
the Acquiror Series C Preferred Shares shall be as set forth in the Articles
Supplementary attached as Exhibit A hereto and Exhibit B hereto, respectively,
with the completion of any blanks contained therein.
SECTION 5.18 Closing Certificates. Target shall prepare and deliver to
Acquiror at the Closing the Closing Adjustment Statement and a certificate
setting forth all of the Merger Expenses.
SECTION 5.19 Reorganization. The parties intend to adopt this Agreement
and the Merger as a plan of reorganization under Section 368(a)(1)(A) of the
Code. Each of Acquiror, Newco and Target agree to use reasonable efforts not to
(i) knowingly take or fail to take any actions that would jeopardize
qualification of the Merger as a reorganization pursuant to the provisions of
Section 368(a)(1)(A) of the Code, (ii) enter into any Contract with respect to
the foregoing, or (iii) take a position inconsistent with this Section on any
tax return or otherwise unless otherwise required by law.
SECTION 5.20 No Improvements; Damage or Destruction; Condemnation;
Environmental.
(a) Acquiror specifically agrees that Target shall not be obligated to
do any restoration, repairs or other work in connection with the Target
Properties, and that Target shall not be responsible for any work or
improvements, including, without limitation, any clean-up or other environmental
remedial or removal work, necessary to cause the Target Properties to meet
applicable Environmental Laws or other laws, ordinances, regulations, or be
suitable for any particular use.
(b) Notwithstanding anything else in this Agreement, in the event of
the destruction of or damage to any of the Target Properties by fire or other
casualty, or any taking thereof by condemnation or eminent domain, prior to the
Closing resulting in Target Costs (without giving effect to insurance proceeds)
in excess of $5,000,000, Acquiror shall have the right, in its sole discretion,
either to (i) terminate this Agreement or (ii) proceed to closing hereunder
without any abatement of the Merger consideration, it being agreed that
Acquiror's sole remedy would be to succeed to Target's claims, rights and
proceeds, whether from insurance or otherwise, by reason of the Merger.
SECTION 5.21 Affiliates of Target.
(a) At least 30 days prior to the Closing Date, Target shall deliver to
Acquiror a list of names and addresses of those persons who were, in Target's
reasonable judgment, on
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the record date for the Target Stockholders Meeting, Affiliates of Target.
Target shall provide Acquiror with such information and documents as Acquiror
shall reasonably request for purposes of reviewing such list. Target shall use
all reasonable efforts to deliver to Acquiror, prior to the Closing Date, from
each of the Affiliates identified in the foregoing list, an Affiliate Letter in
the form attached hereto as Exhibit C hereto (each, an "Affiliate Letter").
Acquiror shall be entitled to place legends as specified in such Affiliate
Letters on the certificates evidencing any Acquiror Common Shares, Acquiror
Series B Preferred Shares and Acquiror Series C Preferred Shares to be received
by such Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Acquiror
Common Shares, Acquiror Series B Preferred Shares and Acquiror Series C
Preferred Shares consistent with the terms of such Affiliate Letters.
(b) Acquiror shall file the reports required to be filed by it under
the 1934 Act and the rules and regulations promulgated thereunder, and it will
take such further action as any Affiliate may reasonably request, all to the
extent required from time to time to enable such Affiliate to sell Acquiror
Common Shares, Acquiror Series B Preferred Shares and Acquiror Series C
Preferred Shares received by such Affiliate in the Merger without registration
under the 1933 Act pursuant to (i) Rule 145, or (ii) any successor rule or
regulation hereafter adopted by the SEC.
SECTION 5.22 Estoppel Certificates. Target shall request an estoppel
certificate (an "Estoppel Certificate") from (i) each of the tenants of the
Target Properties in the form attached to or required by the applicable Target
Lease, or in the form commonly used by such tenant, or, if no form is attached
to or required by the applicable Target Lease, or commonly used by the
applicable tenant, then in the form of Exhibit D, (ii) each party to a Target
REA Agreement, in the form of Exhibit D and (iii) each mortgagee to each
mortgage encumbering any of the Target Properties, in the form of Exhibit D.
Target shall deliver to Acquiror true, correct and complete copies of all
Estoppel Certificates received by Target and shall notify Acquiror of any such
tenants, parties or mortgagees that refuse to deliver an Estoppel Certificate
and the reason for such refusal, if known.
SECTION 5.23 Indemnification Obligations.
(a) Target shall indemnify and hold harmless Acquiror and Newco, and
their affiliates, directors, trustees, shareholders, representatives, employees
and agents, from and against, and in respect of, any and all damages, claims,
losses, charges, actions, suits, proceedings, costs and expenses (including,
without limitation, attorneys' fees and expenses) up to an aggregate of $50,000
which are incurred or suffered by any or all of them by reason of, with respect
to, or arising from, the action entitled ▇▇▇▇ ▇▇▇▇▇▇▇ vs. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Milestone Properties, Inc. and Concord Assets Group, Inc. pending in
the Court of Chancery of the State of Delaware in and for New Castle County,
C.A. No. 14807 (the "Pending Milestone Action") or any other action or
proceeding with respect to, or arising out of, the facts, events and
circumstances giving rise to the Pending Milestone Action.
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(b) After the Effective Time and to the extent Acquiror assumes any
indebtedness or other obligations as to which Milestone is liable pursuant to
any Milestone Obligation, Acquiror shall indemnify and hold harmless Milestone,
and its affiliates, directors, shareholders, representatives, employees and
agents, from and against, and in respect of, any and all damages, claims,
losses, charges, actions, suits, proceedings, cost and expenses (including,
without limitation, attorneys' fees and expenses) which are incurred or suffered
by Milestone by reason of, with respect to, or arising from, the failure of
Acquiror to pay or perform any such indebtedness or other obligations in
accordance with their terms. The parties hereby agree that Milestone shall be a
third party beneficiary of this Section 5.23(b), and that this Section 5.23(c)
shall not be amended without the written agreement of Milestone.
SECTION 5.24 First Union Line of Credit. The aggregate amount of all
obligations of Target under the line of credit (the "First Union Line of
Credit") extended by First Union National Bank ("First Union") to Target
pursuant to the loan agreement dated April 24, 1995, between First Union and
Target (including, without limitation, obligations to pay the principal amount
of all loans made under the First Union Line of Credit and all interest thereon)
and the amount of all debt assumption, prepayment and other fees, shall not
exceed $2,000,000 at the Effective Time. At or prior to the Effective Time,
Acquiror shall transfer to another branch of First Union, pay or refinance, the
First Union Line of Credit, provided that the amount of all debt assumption,
prepayment and other fees do not exceed $2,000,000 at the Effective Time.
SECTION 5.25 Sale of South Carolina Outparcel. Notwithstanding anything
contained in this Agreement to the contrary, Target may transfer (the "South
Carolina Outparcel Transfer") to the South Carolina Outparcel Purchaser the
South Carolina Outparcel, in accordance with the terms of the South Carolina
Outparcel Agreement, in settlement of any dispute or litigation arising out of
or relating to the South Carolina Outparcel Agreement; provided, that (i) Target
obtains from the South Carolina Outparcel Purchaser a release, in form and
substance reasonably satisfactory to Acquiror, of all claims the South Carolina
Outparcel Purchaser may have arising out of or relating to the South Carolina
Outparcel Agreement, (ii) all of the South Carolina Outparcel Proceeds are cash
and (iii) Target deposits all of the South Carolina Outparcel Proceeds into a
segregated account. Target shall not expend, distribute, Encumber or commingle
the South Carolina Outparcel Proceeds with any other funds of Target or any
other person except payments pursuant to clauses (2) or (3) below. "South
Carolina Outparcel Proceeds" shall mean the gross proceeds of the transfer of
the South Carolina Outparcel, less (1) any out-of-pocket costs and expenses
(including reasonable attorneys' fees and customary and reasonable brokerage
commissions) incurred by Target to unrelated third parties in order to
consummate the transfer of the South Carolina Outparcel, (2) any costs required
pursuant to paragraphs 2 and 3 of that certain Lease Modification Agreement by
and between ▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc., as tenant, and Target, as landlord (a true,
correct and complete of which has been delivered to Acquiror) and (3) payment of
up to $19,000 of income tax to any federal, state or local taxing authority that
is attributable to
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gain recognized from the South Carolina Outparcel Transfer; provided, however,
the amounts paid by Target pursuant to clauses (1) and (2) of this Section 5.25
shall not exceed $60,000.
SECTION 5.26 Termination of Management Agreements. On or prior to the
Closing Date, Target shall terminate, without any cost, expense or liability to
Target, the Company or Newco, any and all management agreements relating to any
or all of the Target Properties, including, without limitation, those management
agreements listed in the Target Disclosure Letter.
ARTICLE VI
CONDITIONS TO ACQUIROR'S AND NEWCO'S OBLIGATIONS
All obligations of Acquiror and Newco under this Agreement are subject
to the fulfillment, at the Closing Date, of each of the following conditions,
any or all of which may be waived in whole or in part, at or prior to the
Closing Date, by Acquiror in its sole discretion:
SECTION 6.01 Representations and Warranties. (i) All representations
and warranties of Target contained in this Agreement, the Ancillary Documents,
or in the certificates and other documents delivered pursuant hereto or thereto
(other than representations or warranties qualified by reference to materiality
or a Target Material Adverse Effect), shall be true and correct in all material
respects, and (ii) all representations and warranties contained in this
Agreement, the Ancillary Documents, or in the certificates and other documents
delivered pursuant hereto or thereto qualified by reference to materiality or a
Target Material Adverse Effect shall be true and correct, in the case of each of
clause (i) and (ii), at and as of the Closing Date as though such
representations and warranties were made at and as of such time, except for
those representations and warranties that are expressly made as of a specified
earlier date. For the purposes of Section 6.01(i), the representations and
warranties of Target shall be deemed true and correct in all material respects
unless the breach of such representations and warranties, in the aggregate,
could reasonably be expected to have a Target Material Adverse Effect.
SECTION 6.02 Covenants. Target shall have performed and complied in all
material respects with all agreements and conditions on its part required by
this Agreement to be performed or complied with prior to or on the Closing Date.
SECTION 6.03 Officer's Certificate. Acquiror shall have received a
certificate of an executive officer of Target, dated the Closing Date,
certifying to the fulfillment of the conditions specified in Section 6.01 and
Section 6.02.
SECTION 6.04 Opinion of Counsel. Target shall have received an opinion
of counsel of Rosenman & Colin LLP, counsel for Target, dated the Closing Date,
in form and substance reasonably satisfactory to Acquiror, that, among other
things, shall be to the effect
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that the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code, and that
Target and Acquiror will each be a party to that reorganization within the
meaning of Section 368(b) of the Code.
SECTION 6.05 Absence of Changes. From the date of this Agreement
through the Effective Time, there shall not have occurred any change or changes
in the financial condition, business or operations of Target that could
reasonably be expected to have a Target Material Adverse Effect.
SECTION 6.06 Number of Dissenting Shares. If holders of shares of
Target Common Stock who did not vote in favor of this Agreement and the Merger
are entitled to demand appraisal rights in accordance with the DGCL, the number
of Dissenting Shares shall not at any time exceed 7.5% of the shares of Target
Common Stock outstanding at such time.
SECTION 6.07 Approvals and Consents. Acquiror shall have received (in
form and substance reasonably satisfactory to Acquiror) all filings,
registrations, consents, authorizations, declarations or approvals necessary to
consummate the Merger and the other transactions contemplated by this Agreement
and the Ancillary Documents, other than such filings, registrations, consents,
authorizations, declarations or approvals, the absence of which, individually or
in the aggregate, could not reasonably be expected to have an Acquiror Material
Adverse Effect if the transactions contemplated by this Agreement and the
Ancillary Documents were consummated without first obtaining such filings,
registrations, consents, authorizations, declarations or approvals. Acquiror
shall have obtained the approval for the listing of the Acquiror Common Shares
issuable in the Merger on the NYSE, subject to official notice of issuance.
SECTION 6.08 Injunctions. No court, agency or other authority shall
have issued any order, decree or judgment to set aside, restrain, enjoin or
prevent, and no statute, rule, regulation, executive order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any United States
court or Governmental Entity of competent jurisdiction which prohibits
restrains, enjoins, sets aside or prevents, the consummation of the Merger or
the transactions hereby contemplated.
SECTION 6.09 HSR Act. If applicable, Target shall have made all
pre-merger notification filings required to be made by it under the HSR Act, all
applicable waiting periods thereunder shall have expired or been terminated
without any request from any appropriate governmental agency for additional
information or, if additional information has been requested, all applicable
extended waiting periods shall have expired.
SECTION 6.10 Effectiveness of Registration Statement. The Acquiror
Registration Statement shall have been declared effective under the 1933 Act,
all necessary state securities or "blue sky" permits or approvals required to
consummate the Merger and the other transactions contemplated by this Agreement
and the Ancillary Documents shall have been
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obtained, and no stop order or proceedings seeking a stop order with respect to
any of the foregoing shall be in effect.
SECTION 6.11 Stockholder Approval. This Agreement and the Merger and
the other transactions contemplated by this Agreement and the Ancillary
Documents shall have been approved in the manner required by applicable law, and
by applicable regulations of any stock exchange or other regulatory body, by the
holders of the issued and outstanding shares of capital stock or beneficial
interest of Target entitled to vote thereon on or before March 31, 1997.
SECTION 6.12 Accountants' Letters. Acquiror shall have received "cold
comfort" letters from Deloitte & Touche LLP, Target's independent public
accountants, dated no later than the date of the effectiveness of the Acquiror
Registration Statement and any supplements and post-effective amendments
thereto, with respect to the operations of Target in the form and substance of
such letters delivered by independent public accountants in connection with the
Acquiror Registration Statement and reasonably satisfactory to Acquiror and its
counsel.
SECTION 6.13 Shareholders and Voting Trust Agreement. The Affiliates of
Target listed in the Target Disclosure Letter (other than ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇) shall have executed and delivered a shareholders and
voting trust agreement with Acquiror, dated as of the Closing Date,
substantially in the form attached as Exhibit E hereto (the "Shareholders
Agreement"), which shall set forth certain terms, conditions and limitations
with respect to the shares of Acquiror Series B Preferred Shares to be received
by said parties pursuant to the Merger. The Shareholders Agreement, when
executed, shall be the legal, valid and binding obligation of the signatories
thereto, shall be enforceable in accordance with its terms (except as may be
limited by bankruptcy and other laws affecting the enforceability of creditors'
rights generally or laws governing the availability of specific performance or
other equitable remedies, or restrictions of the enforcement of securities
indemnification and contribution provisions imposed by public policy) and shall
not conflict with any other agreement to which any of the signatories thereto is
a party.
SECTION 6.14 Guaranty Agreement. A person or entity designated by
Target that shall own of record upon consummation of the Merger Acquiror Series
B Preferred Shares having a liquidation preference of at least $1,000,000 (the
"Guarantor") shall have executed and delivered a guaranty agreement with
Acquiror, dated as of the Closing Date (the "Guaranty Agreement"), as set forth
as Exhibit F hereto with the completion of any blanks therein. The Guaranty
Agreement shall continue in full force and effect with respect to any claims
made prior to the date which is the earlier of (i) the date which is twenty (20)
days after the delivery to Acquiror by the Acquiror's independent public
accountant's of an audit opinion with respect to the Company's 1997 calendar
year financial statements and (ii) the date which is fifteen (15) months after
the Closing Date. The maximum obligation of the Guarantor under the Guaranty
Agreement shall be limited to an aggregate of $1,000,000 payable, at the
guarantor's option, by cash or by delivery of Acquiror Series B Preferred Shares
(based on a value of $25 per Acquiror Series B Preferred Share).
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SECTION 6.15 Registration Rights Agreement. The Affiliates of Target
listed in the Target Disclosure Letter shall have executed and delivered a
registration rights agreement with Acquiror, dated as of the Closing Date (the
"Registration Rights Agreement"), substantially in the form attached as Exhibit
G hereto, which shall set forth certain terms, conditions and limitations with
respect to the registration under the 1933 Act of the Acquiror Series B
Preferred Shares and the shares of the Acquiror Common Shares into which the
Acquiror Series B Preferred Shares are convertible. The Registration Rights
Agreement, when executed, shall be the legal, valid and binding obligation of
the signatories thereto, shall be enforceable in accordance with its terms
(except as may be limited by bankruptcy and other laws affecting the
enforceability of creditors' rights generally or laws governing the availability
of specific performance or other equitable remedies, or restrictions of the
enforcement of securities indemnification and contribution provisions imposed by
public policy), and shall not conflict with any other agreement to which any of
the signatories thereto is a party.
SECTION 6.16 Termination of Target Affiliate Contracts. All Target
Affiliate Contracts shall have been terminated and Target shall have paid in
full or otherwise satisfied and discharged all obligations under all Target
Affiliate Contracts.
SECTION 6.17 Redemption of Target Preferred Stock. Target shall have
redeemed such amount of Target Preferred Stock so that the applicable rate of
interest used to determine dividends payable pursuant to the terms of the Target
Preferred Stock shall be 8% from the date hereof through and including the
Closing Date.
SECTION 6.18 Estoppel Certificates. Target shall have furnished
Estoppel Certificates, substantially in the form required by Section 5.22, from
(a) each tenant listed on Schedule 6.18, (b) additional tenants under Target
Leases (the "Additional Tenants") leasing at least (75%) of the gross leasable
area of the Target Properties that is not leased by the tenants listed in
Schedule 6.18 (the "Non-Anchor GLA"), (c) each party to a Target REA Agreement,
provided that in the event Target is unable to obtain an Estoppel Certificate
from a party to a Target REA Agreement who is not required to provide same under
such agreement after exercising reasonable efforts to obtain same, the failure
to obtain such Estoppel Certificate shall not be a condition to Closing
hereunder and (d) each mortgagee with respect to each mortgage encumbering any
of the Target Properties. In the event that Additional Tenants leasing less than
75% of the Non-Anchor GLA shall have furnished Estoppel Certificates, provided
that Additional Tenants leasing at least 50% of the Non-Anchor GLA furnished
Estoppel Certificates, Concord Assets Group, Inc. and Castle Plaza, Inc. shall
have the right to satisfy the condition set forth in clause (b) above by
furnishing to Acquiror their own Estoppel Certificates with respect to a
sufficient number of Target Leases so that Estoppel Certificates covering at
least 75% of the Non-Anchor GLA shall have been furnished to Acquiror.
SECTION 6.19 Statement of Accounts Receivable. Target shall have
delivered to Acquiror (i) the Target Financial Statements and the Target Interim
Financial Statements, (ii)
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an unaudited balance sheet and related statements of revenues and cash flows at
and for the nine month period ended September 30, 1996, and, until the earlier
of the Effective Time or the termination of this Agreement, succeeding unaudited
quarterly and unaudited annual balance sheet and related statements of revenue
in the event the Closing shall occur on or after February 15, 1997 and (iii) a
statement of all accounts receivable as of the Effective Date, as determined in
accordance with GAAP applied on a consistent basis, and (iv) the Closing
Adjustment Statement.
SECTION 6.20 Title Insurance Policies. Acquiror shall have received
from the Title Company a title insurance policy for such of the Target
Properties as Acquiror may elect, dated the Effective Date, in the form
initialled by each of the parties hereto and without further exception or
qualification other than those which, individually or in the aggregate with all
other breaches of representations, warranties and covenants of Target, could not
reasonably be expected to have a Target Material Adverse Effect.
ARTICLE VII
CONDITIONS TO TARGET'S OBLIGATIONS
All obligations of Target under this Agreement are subject to the
fulfillment, at the Closing Date, of each of the following conditions, any or
all of which may be waived in whole or in part, at or prior to the Closing Date,
by Target in its sole discretion:
SECTION 7.01 Representations and Warranties. (i) All representations
and warranties of Acquiror and Newco contained in this Agreement, the Ancillary
Documents, or in the certificates and other documents delivered pursuant hereto
or thereto (other than representations or warranties qualified by reference to
materiality or an Acquiror Material Adverse Effect), shall be true and correct
in all material respects, and (ii) all representations and warranties of
Acquiror and Newco contained in this Agreement, the Ancillary Documents, or in
the certificates and other documents delivered pursuant hereto or thereto and
qualified by reference to materiality or an Acquiror Material Adverse Effect
shall be true and correct, in the case of each of clause (i) and (ii), at and as
of the Closing Date as though such representations and warranties were made at
and as of such time, except for those representations and warranties that are
expressly made as of a specified earlier date. For the purposes of Section
7.01(i), the representations and warranties of Acquiror and Newco shall be
deemed true and correct in all material respects unless the breach of such
representations or warranties could reasonably be expected to have an Acquiror
Material Adverse Effect.
SECTION 7.02 Covenants. Acquiror and Newco shall each have performed
and complied in all material respects with all agreements and conditions on
their respective parts required by this Agreement to be performed or complied
with prior to or on the Closing Date.
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SECTION 7.03 Officer's Certificate. Target shall have received a
certificate of an executive officer of each of Acquiror and Newco, dated the
Closing Date, certifying to the fulfillment of the conditions specified in
Section 7.01 and Section 7.02.
SECTION 7.04 Opinion of Counsel. Acquiror shall have received an
opinion of counsel of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel
for Acquiror, dated the Closing Date, in form and substance reasonably
satisfactory to Target, that, among other things, shall be to the effect that
the Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a)(1)(A) of the Code, and that Target and
Acquiror will each be a party to that reorganization within the meaning of
Section 368(b) of the Code.
SECTION 7.05 Absence of Changes. From the date of this Agreement
through the Effective Time, there shall not have occurred any change or changes
in the financial condition, business or operations of Acquiror that could
reasonably be expected to have a Acquiror Material Adverse Effect.
SECTION 7.06 Approvals and Consents. Target shall have received (in
form and substance reasonably satisfactory to Target) all Target Consents
designated as "required consents" in the Target Disclosure Letter.
SECTION 7.07 Injunctions. No court, agency or other authority shall
have issued any order, decree or judgment to set aside, restrain, enjoin or
prevent, and no statute, rule, regulation, executive order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any United States
court or Governmental Entity of competent jurisdiction which prohibits
restrains, enjoins, sets aside or prevents, the consummation of the Merger or
the transactions hereby contemplated.
SECTION 7.08 HSR Act. If applicable, Acquiror shall have made all
pre-merger notification filings required to be made by it under the HSR Act, all
applicable waiting periods thereunder shall have expired or been terminated
without any request from any appropriate governmental agency for additional
information or, if additional information has been requested, all applicable
extended waiting periods shall have expired.
SECTION 7.09 Effectiveness of Registration Statement. The Acquiror
Registration Statement shall have been declared effective under the 1933 Act,
all necessary state securities or "blue sky" permits or approvals required to
consummate the Merger and the other transactions contemplated by this Agreement
and the Ancillary Documents shall have been obtained, and no stop order or
proceedings seeking a stop order with respect to any of the foregoing shall be
in effect.
SECTION 7.10 Stockholder Approval. This Agreement and the Merger and
the other transactions contemplated by this Agreement and the Ancillary
Documents shall have been approved in the manner required by applicable law, and
by applicable regulations of any
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stock exchange or other regulatory body, by the holders of the issued and
outstanding shares of capital stock or beneficial interest of Target entitled to
vote thereon.
SECTION 7.11 Merger. The Delaware Merger Certificate shall have been
executed and delivered by Newco to Target.
SECTION 7.12 Accountants' Letters. Target shall have received "cold
comfort" letters from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇'▇ independent public
accountants, dated no later than the date of the effectiveness of the Acquiror
Registration Statement (and the Target Proxy Statement included therein) and any
supplements and post-effective amendments thereto, with respect to the
operations of Acquiror in the form and substance of such letters delivered by
independent public accountants in connection with the Acquiror Registration
Statement and reasonably satisfactory to Target and its counsel.
SECTION 7.13 Financial Statements. Acquiror shall have delivered to
Target an unaudited balance sheet and related statements of revenues and cash
flows at and for the nine month period ended September 30, 1996, and succeeding
unaudited quarterly and unaudited annual balance sheet and related statements of
revenue in the event the Closing shall occur on or after February 15, 1997 in
conformity with GAAP applied on a consistent basis, except as otherwise noted
therein and for normal audit and accrual adjustments.
SECTION 7.14 Registration Rights Agreement. The Acquiror shall have
executed and delivered the Registration Rights Agreement. The Registration
Rights Agreement, when executed, shall be the legal, valid and binding
obligation of the signatories thereto, shall be enforceable in accordance with
its terms (except as may be limited by bankruptcy and other laws affecting the
enforceability of creditors' rights generally or laws governing the availability
of specific performance or other equitable remedies, or restrictions of the
enforcement of securities indemnification and contribution provisions imposed by
public policy), and shall not conflict with any other agreement to which any of
the signatories thereto is a party.
SECTION 7.15 Shareholders Agreement. The Acquiror shall have executed
and delivered the Shareholders Agreement. The Shareholders Agreement, when
executed, shall be the legal, valid and binding obligation of the signatories
thereto, shall be enforceable in accordance with its terms (except as may be
limited by bankruptcy and other laws affecting the enforceability of creditors'
rights generally or laws governing the availability of specific performance or
other equitable remedies, or restrictions of the enforcement of securities
indemnification and contribution provisions imposed by public policy) and shall
not conflict with any other agreement to which any of the signatories thereto is
a party.
SECTION 7.16 Fairness as to Target Preferred Stock. On or prior to the
Closing Date either (i) Target shall have caused Milestone to execute and
deliver to Acquiror and Target a consent to the exchange of the Series C
Preferred Shares for the Target Preferred Stock in the Merger and a waiver of
any claims with respect to the fairness of such exchange
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or (ii) Target shall have received the opinion of Societe Generale or another
investment banking firm to the effect that the consideration to be paid to the
holders of the Target Preferred Stock pursuant to the Merger is fair to the
holders of Target Preferred Stock from a financial point of view.
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.01 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the Target Stockholders Meeting:
(a) by mutual consent of Target and Acquiror;
(b) by either Target or Acquiror, if the Merger shall not have been
consummated by March 31, 1997, unless the failure to consummate the Merger on or
before such date shall have proximately resulted from (i) a material breach or
material breaches by the terminating party of any of its representations or
warranties contained in this Agreement (other than a representation or warranty
qualified by reference to materiality or an Acquiror Material Adverse Effect or
a Target Material Adverse Effect, as the case may be), (ii) a breach or breaches
by the terminating party of any of its representations or warranties contained
in this Agreement qualified by reference to materiality or an Acquiror Material
Adverse Effect or a Target Material Adverse Effect, as the case may be or (iii)
a material breach or material breaches of any agreement or covenant by the
terminating party contained in this Agreement;
(c) by either Target or Acquiror, if any permanent injunction or other
order, decree or ruling of a court or other competent authority preventing the
consummation of the Merger shall have become final and nonappealable; provided,
that the party seeking to terminate this Agreement pursuant to this Section
8.01(c) shall have used all reasonable efforts to remove such permanent
injunction or other order, decree or ruling;
(d) by action of the Board of Directors of Target, if (i) in the
exercise of its good faith judgment as to its fiduciary duties to its
stockholders imposed by law, after consultation with Rosenman & Colin LLP or
another nationally recognized law firm, the Board of Directors of Target
determines that such termination is required by reason of a proposal relating to
a Target Acquisition Transaction being made, or (ii) there has been a breach or
breaches of a representation or warranty of Acquiror or Newco contained in this
Agreement and such breach or breaches could reasonably be expected to have an
Acquiror Material Adverse Effect or (iii) there has been a material breach or
material breaches by Acquiror of any of the covenants or agreements of Acquiror
or Newco set forth in this Agreement on the part of Acquiror or Newco, which
breach or breaches are not curable or, if curable, are not cured within 30 days
after written notice of such breach or breaches is given by Target to Acquiror;
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(e) by action of the Board of Trustees of Acquiror, if (i) (A) the
Board of Directors of Target fails to make, or withdraws, materially modifies or
changes in a manner adverse to Acquiror its recommendation to the Target
Stockholders of this Agreement or the Merger, or resolves to do any of the
foregoing (other than as a result of the occurrence of an event that, in the
good faith judgment of the Board of Directors of Target, has or could reasonably
be expected to have a Acquiror Material Adverse Effect) and the holders of a
majority of the Target Common Stock outstanding do not promptly thereafter
execute and deliver, or shall not have previously executed and delivered, an
agreement, in form and substance reasonably satisfactory to Acquiror, pursuant
to which such holders agree to vote to approve this Agreement and the Merger at
the Target Stockholders Meeting and any adjournment thereof (provided, however,
if the Target Stockholders Meeting is held prior to the termination of this
Agreement by the Acquiror and the holders of a majority of the Target Common
Stock outstanding vote to approve this Agreement and the Merger at such Target
Stockholders Meeting, then Acquiror shall no longer have the right to terminate
this Agreement pursuant to this clause (e)(i)(A)), or (B) the Board of Directors
of Target shall have recommended that the Target Stockholders accept or approve
a Target Acquisition with a person other than Acquiror, or resolves to do the
foregoing, or (ii) the Target Stockholders Meeting has been duly convened and
held and the approval of the Target Stockholders required by Section 6.11 shall
not have been obtained at such meeting or any adjournment thereof, (iii) there
has been a breach or breaches of a representation or warranty of Target
contained in this Agreement and such breach or breaches could reasonably be
expected to have a Target Material Adverse Effect, or (iv) there has been a
material breach or material breaches by Target of any of the covenants or
agreements of Target set forth in this Agreement, which breach or breaches are
not curable or, if curable, are not cured within 30 days after written notice of
such breach or breaches is given by Acquiror to Target;
(f) by Target, if (i) Acquiror amends, alters or repeals, whether by
merger, consolidation or otherwise, any of the provisions of its Declaration of
Trust so as to adversely affect, in the reasonable opinion of Target, the
preferences, right to convert, conversion price adjustments, notice rights,
special conversion rights, distribution and liquidation rights, preferences,
restrictions or limitations, redemption rights and privileges or voting powers
or rights of the Acquiror Series B Preferred Shares or (ii) if Acquiror reduces
the dividend on Acquiror Common Shares below $0.48 per share of Acquiror Common
Shares for any calendar quarter ending during the period from the date hereof
through the Closing Date.
SECTION 8.02 Effect of Termination.
(a) If (i) Acquiror elects to terminate this Agreement pursuant to
Section 8.01(e)(i), (iii), or (iv), provided in the case of Section 8.01(e)(iv)
that such breach or breaches of covenants either (A) are within the reasonable
control of Target or (B) could reasonably be expected to have a Target Material
Adverse Effect, (ii) Acquiror elects to terminate this Agreement pursuant to
Section 8.01(e)(ii), unless ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Concord
Milestone Partners, L.P., Concord Associates, Concord Income Realty VI, L.P.,
Castle Plaza, Inc., Mill Neck Associates, and Mountain View Mall, Inc. used
their best efforts
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to approve, and were enjoined from approving, this Agreement and the Merger and
the other transactions contemplated by this Agreement and the Ancillary
Documents, or (iii) Target elects to terminate this Agreement pursuant to
Section 8.01(d)(i), then Target (or the successor thereto) shall, as liquidated
damages and not as a penalty or forfeiture, pay to Acquiror, from the Acquiror
Liquidated Damage Amount (as defined below) deposited into escrow in accordance
with the next sentence, an amount equal to the lesser of (m) the Acquiror
Liquidated Damage Amount and (n) the sum of (1) the maximum amount that can be
paid to Acquiror without causing Acquiror to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code determined as if the payment of such
amount did not constitute income described in Sections 856(c)(2)(A)-(H) and
856(c)(3)(A)-(I) of the Code ("Qualifying Income"), as determined by Acquiror's
certified public accountants, and (2) in the event Acquiror receives a letter
from Acquiror's counsel indicating that Acquiror has received a ruling from the
IRS described in Section 8.02(b)(ii) or (iii) or in the event Acquiror receives
an opinion of counsel described in Section 8.02(b)(iv), an amount equal to the
Acquiror Liquidated Damage Amount less the amount payable under clause (1)
above. To secure Target's obligation to pay any amounts due and owing upon
termination of this Agreement pursuant to this Section 8.02(a), Target shall
deposit into escrow upon such termination an amount in cash equal to $930,000,
plus all documented out-of-pocket costs and expenses, up to a maximum of
$570,000, in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement incurred by Acquiror (collectively,
the "Acquiror Liquidated Damage Amount"), with an escrow agent selected by
Acquiror and on such terms (subject to Section 8.02(b)) as shall be agreed upon
by Acquiror and the escrow agent (as amended, supplemented or otherwise modified
from time to time, the "Escrow Agreement"). Notwithstanding anything contained
in this Agreement to the contrary, in the event of a dispute between Acquiror
and Target as to the payment by Target of the Acquiror Liquidated Damage Amount,
Acquiror shall not enjoin or seek to enjoin any merger, business combination,
sale of any Target Properties, sale of any other assets, sale of shares of
capital stock or similar transaction by Target, provided that Target has entered
into arrangements reasonably satisfactory to Acquiror to secure the payment of
the Acquiror Liquidated Damage Amount in the event such an amount is determined
to be due and owing. Except as otherwise provided in Section 8.01(d), the
payment or deposit into escrow of the Acquiror Liquidated Damage Amount pursuant
to this Section 8.02(a) shall be by wire transfer or bank check within three
days of the termination.
(b) The Escrow Agreement shall provide that the amount in escrow or any
portion thereof shall not be released to Acquiror unless the escrow agent
receives any one or combination of the following: (i) a letter from Acquiror's
certified public accountants indicating the maximum amount that can be paid by
the escrow agent to Acquiror without causing Acquiror to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code determined as if the
payment of such amount did not constitute Qualifying Income or a subsequent such
letter revising that amount, in which case the escrow agent shall release such
amount to Acquiror, or (ii) a letter from Acquiror's counsel indicating that
Acquiror received a ruling from the IRS holding that the receipt by Acquiror of
the Acquiror Liquidated Damage Amount would either constitute Qualifying Income
or would be excluded from gross income within the meaning of Sections 856(c)(2)
and (3) of the Code, in which case the escrow agent shall release the remainder
of the Acquiror Liquidated Damage Amount to Acquiror, or (iii) a letter from
Acquiror's counsel indicating that Acquiror received a ruling from the IRS
holding that the receipt by Acquiror of the remaining balance of the Acquiror
Liquidated Damage Amount following the receipt of and pursuant to such ruling
would not be deemed constructively received prior thereto, or (iv) an opinion of
Acquiror's counsel to the effect that the receipt by Acquiror of the Acquiror
Liquidated Damage Amount would either constitute Qualifying Income or would be
excluded from gross
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income within the meaning of Sections 856(c)(2) and 856(c)(3) of the Code, in
which case the escrow agent shall release the remainder of the Acquiror
Liquidated Damage Amount to Acquiror. Target agrees to amend this Section 8.02
at the request of Acquiror in order to (x) maximize the portion of the Acquiror
Liquidated Damage Amount that may be distributed to Acquiror hereunder without
causing Acquiror to fail to meet the requirements of Sections 856 (c)(2) and (3)
of the Code or (y) improve Acquiror's chances of securing a favorable ruling
described in this Section 8.02(b), provided that no such amendment may result in
any additional cost or expense to Target. The Escrow Agreement shall also
provide that any portion of the Acquiror Liquidated Damage Amount held in escrow
for five years shall be released by the escrow agent to Target. Target shall not
be a party to such Escrow Agreement and shall not bear any cost of or have
liability resulting from the Escrow Agreement.
(c) If (i) Target elects to terminate this Agreement pursuant to
Section 8.01(d)(ii) or (iii), provided in the case of Section 8.01(d)(iii) that
such breach or breaches of covenants either (A) are within the reasonable
control of Acquiror or (B) could reasonably be expected to have an Acquiror
Material Adverse Effect, Acquiror shall upon such termination, as liquidated
damages and not as a penalty or forfeiture, pay to Target an amount equal to
$930,000, plus all documented out-of-pocket costs and expenses, up to a maximum
of $570,000, in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement incurred by Acquiror (collectively,
the "Target Liquidated Damage Amount"). Except as otherwise provided in Section
8.01(d), the payment of the Target Liquidated Damage Amount pursuant to this
Section 8.02(c) shall be by wire transfer or bank check within three days of the
termination. Notwithstanding anything contained in this Agreement to the
contrary, in the event of a dispute between Acquiror and Target as to the
payment by Acquiror of the Target Liquidated Damage Amount, Target shall not
enjoin or seek to enjoin any merger, business combination, sale of any Acquiror
Properties, sale of any other assets, sale of shares of capital stock or similar
transaction by Acquiror, provided that Acquiror has entered into arrangements
reasonably satisfactory to Target to secure the payment of the Target Liquidated
Damage Amount in the event such an amount is determined to be due and owing.
(d) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to this Article VIII, all obligations of the parties
hereto shall terminate, except the obligations of the parties pursuant to this
Section 8.02, Section 9.08, Section 9.10 and the confidentiality agreements,
dated April 16, 1996 and August __, 1996 (together, the "Confidentiality
Agreements"), between Target and Acquiror. Notwithstanding the foregoing,
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in the event that either party is required to file suit to seek all or a portion
of any Acquiror Liquidated Damage Amount and it ultimately obtains a judgment in
its favor, it shall be entitled to all expenses, including, without limitation,
attorneys' fees and expenses, which it has incurred in enforcing its rights
hereunder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Survival of Agreements and Representations and Warranties.
None of the agreements, representations and warranties contained in this
Agreement shall survive the Closing; provided, however, that (i) the agreements
contained in Article II, Section 5.03, Section 5.12, 5.16, Section 5.19, Section
5.21, Section 5.23, Section 8.02, Section 9.08, Section 9.10 and the
Confidentiality Agreements shall survive the Closing, (ii) all of the
representations and warranties of Target contained in this Agreement shall be
deemed to survive the Closing only for the purposes, and during the term, of the
Guaranty Agreement and (iii) all of the representations and warranties of
Acquiror contained in this Agreement shall be deemed to survive the Closing
until the Guaranty Termination Date. This Agreement has been entered into after
full investigation and neither party has relied upon any statement or
representation not embodied in this Agreement or the Confidentiality Agreements,
made by or on behalf of the other. Each of the parties hereto acknowledges and
agrees that the maximum obligation of the Company for amounts incurred or
suffered by Target, or any of its affiliates, directors, officers, stockholders,
representatives, employees or agents, by reason of, with respect to, or arising
from, any breach or breaches of any of its representations or warranties
contained in this Agreement shall be limited to an aggregate of $1,000,000
payable, at Acquiror's option, by cash or by delivery of Acquiror Series B
Preferred Shares (based on a value of $25 per Acquiror Series B Preferred
Share).
SECTION 9.02 Incorporation of Exhibits. The Disclosure Letters and all
of the Exhibits attached hereto and referred to herein are hereby incorporated
herein and made a part hereof for all purposes as if fully set forth herein. Any
capitalized terms used in either Disclosure Letter or any Exhibit but not
otherwise defined therein shall have the meaning as defined in this Agreement.
When a reference is made in a Disclosure Letter or an Exhibit to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated.
All references to Sections and Subsections refer to Sections and Subsections of
this Agreement.
SECTION 9.03 Notices. All notices and other communications hereunder
shall be in writing (and shall be deemed given upon receipt) if delivered
personally, sent by facsimile transmission (receipt of which is confirmed) or by
registered or certified mail, return receipt requested, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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if to Target, to:
Union Property Investors, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Rosenman & Colin LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and
if to Acquiror or Newco, to:
Kranzco Realty Trust
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Aronsohn & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 9.04 Descriptive Headings. The descriptive headings herein are
inserted for convenience only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
SECTION 9.05 Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder or under any
of the Ancillary Documents shall be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other parties. Subject to the preceding sentence, this
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Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Article II and Section 5.12, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement or any
of the Ancillary Documents.
SECTION 9.06 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
SECTION 9.07 Entire Agreement. This Agreement, the Disclosure Letters
and each of the Exhibits hereto constitute the entire agreement and supersede
all prior contracts and understandings, both written and oral, among the parties
with respect to the subject matter hereof other than the Confidentiality
Agreements, any provisions of which are inconsistent with the transactions
contemplated by this Agreement being waived hereby but the provisions of which
that are not inconsistent shall survive.
SECTION 9.08 Governing Law and Consent to Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without regard to any applicable principles of conflicts of law. Each
of Target, Acquiror and Newco hereby consents to submit to the exclusive
jurisdiction of the courts of the state of New York and of the United States of
America located in the city and state of New York (the "New York Courts") for
any litigation arising out of or relating to this Agreement and the transactions
contemplated hereby and agrees not to commence any litigation relating thereto
except in such courts, waives any objection to the laying of venue of any such
litigation in the New York Courts and agrees not to plead or claim that such
litigation brought in any New York Court has been brought in an inconvenient
forum.
SECTION 9.09 Fees and Expenses. Except as otherwise set forth herein,
each of the parties hereto shall bear its own expenses associated with the
negotiation and execution of the Agreement and the consummation of the Merger
and the other transactions hereby by this Agreement and the Ancillary Documents
including, without limitation, investment banking, legal and accounting fees and
expenses.
SECTION 9.10 Non-Recourse.
(a) This Agreement and all documents, agreements, understandings and
arrangements relating hereto have been entered into or executed on behalf of
Acquiror by the undersigned in his capacity as a trustee or officer of Acquiror,
which has been formed as a Maryland real estate investment trust pursuant to an
Amended and Restated Declaration of Trust of
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Acquiror, as amended and restated, and not individually. Neither the trustees,
officers nor shareholders of Acquiror shall be personally bound or have any
personal liability hereunder. Target shall look solely to the assets of Acquiror
for satisfaction of any liability of Acquiror with respect to this Agreement and
the Ancillary Agreements to which it is a party. Target will not seek recourse
or commence any action against any of the trustees, officers or shareholders of
Acquiror or any of their personal assets for the performance or payment of any
obligation of Acquiror hereunder or thereunder.
(b) This Agreement, and all documents, agreements, understandings and
arrangements relating hereto, have been entered into or executed on behalf of
Target by the undersigned in his or her capacity as an officer of Target, a
Delaware corporation, and not individually. Neither the officers nor
stockholders of Target shall be personally bound or have any personal liability
hereunder. Acquiror shall look solely to the assets of Target for satisfaction
of any liability of Target with respect to this Agreement and the Ancillary
Documents to which it is a party. Acquiror will not seek recourse or commence
any action against any of the stockholders, directors or officers of Target or
any of their personal assets for the performance or payment of any obligation of
Target hereunder or thereunder. Nothing contained in this paragraph shall affect
the rights or obligations of any person or entity under the Stockholders
Agreement, the Guaranty Agreement, the Registration Rights Agreement or the
Affiliate Letters.
SECTION 9.11 Enforcement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any New York Court, this being
in addition to any other remedy to which they are entitled at law or in equity.
Except as otherwise set forth herein, the prevailing party in any proceeding
brought to enforce any provision of the Agreement shall be entitled to recover
the reasonable fees and costs of its counsel, plus all other costs of such
proceeding.
SECTION 9.12 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.
SECTION 9.13 Amendment. This Agreement may be amended by the parties
hereto at any time before or after approval by the Target Stockholders of the
matters presented in connection with the Merger, but, after any such stockholder
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further
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approval. This Agreement may not be amended except by a written instrument
signed on behalf of each of the parties hereto.
SECTION 9.14 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained in this Agreement, the Ancillary Documents, or in the certificates and
other documents delivered pursuant hereto or thereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
SECTION 9.15 Knowledge. With respect to "knowledge", as such term is
used in this Agreement, Acquiror or Newco will be deemed to have "knowledge" or
received notice of a particular fact or other matter if any individual who is
serving as an director or officer of Acquiror or Newco, respectively, is
actually aware of such fact or other matter. With respect to "knowledge", as
such term is used in this Agreement, Target will be deemed to have "knowledge"
or received notice of a particular fact or other matter if any individual who is
serving as an director or officer of Target, Milestone Property Management, Inc.
or Milestone Properties, Inc. is actually aware of such fact or other matter.
SECTION 9.16 Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
KRANZCO REALTY TRUST UNION PROPERTY INVESTORS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President Title: President
KRT UNION CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
Exhibit A
[Articles Supplementary for Acquiror's 9.75% Series B Cumulative
Convertible Preferred Stock]
KRANZCO REALTY TRUST
ARTICLES SUPPLEMENTARY CLASSIFYING
[_____] SHARES OF BENEFICIAL INTEREST
AS
9.75% SERIES B CUMULATIVE CONVERTIBLE PREFERRED SHARES
OF
BENEFICIAL INTEREST
(Pursuant to Section 8-203(b) of the
Corporations and Associations Article
of the Annotated Code of Maryland)
Kranzco Realty Trust, a real estate investment trust organized and existing
under the laws of the State of Maryland (the "Company"), and having its
executive office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to the authority granted to and vested in the Board of
Trustees of the Company (the "Board of Trustees") in accordance with the Amended
and Restated Declaration of Trust of the Company, dated November 4, 1992, as
amended (the "Declaration of Trust"), the Board of Trustees at a meeting duly
convened and held on [_____] adopted resolutions authorizing, creating and
classifying, out of the 100,000,000 authorized shares of beneficial interest of
the Company (the "Shares"), a separate class of preferred shares of beneficial
interest consisting of [_____] preferred shares of beneficial interest to be
known as the "Series B Cumulative Convertible Preferred Shares of Beneficial
Interest" (the "Series B Preferred Shares"). The Series B Preferred Shares shall
have a par value of $.01 per share. The designation, preferences, conversion and
other rights, voting powers, restrictions, or limitations as to dividends or
other distributions of the Series B Preferred Shares, which shall be deemed to
be part of Article VI of the Declaration of Trust, are as follows:
9.75% SERIES B CUMULATIVE CONVERTIBLE
PREFERRED SHARES OF BENEFICIAL INTEREST
A. Certain Definitions.
Unless the context otherwise requires, the terms defined in this Paragraph
(A) shall have, for all purposes of the provisions of the Declaration of Trust
in respect of the Series B Preferred Shares, the meanings herein specified (with
terms defined in the singular having comparable meanings when used in the
plural):
Additional Common Equity. The term "Additional Common Equity" shall have
the meaning set forth in Subparagraph (D)(6)(ii).
Adjustment Event. The term "Adjustment Event" shall mean any event
described in Subparagraph (D)(6).
Board of Trustees. The term "Board of Trustees" shall mean the Board of
Trustees of the Company.
Business Day. The term "Business Day" shall mean any day, other than a
Saturday or a Sunday, that is neither a legal holiday nor a day on which banking
institutions in New York City are authorized or required by law to close.
Call Price. The term "Call Price" shall have the meaning set forth in
Subparagraph (G)(1).
Capital Gains Amount. The term "Capital Gains Amount" shall have the
meaning set forth in Subparagraph (B)(7).
Capital Lease. The term "Capital Lease" shall mean any lease of property,
real or personal, the obligations of the lessee in respect of which are required
in accordance with generally accepted accounting principles to be capitalized on
the balance sheet of the lessee.
Code. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
Common Equity. The term "Common Equity" shall mean all shares now or
hereafter authorized of any class or series of common shares of beneficial
interest of the Company, including the Common Shares, and any other shares,
howsoever designated, which have the right (subject always to prior rights of
any class or series of preferred shares of beneficial interest) to participate
in the distribution of the assets and earnings of the Company without limit as
to per share amount.
Common Share Distribution. The term "Common Share Distribution" shall have
the meaning set forth in Subparagraph (D)(1).
Common Share Distribution Period. The term "Common Share Distribution
Period" shall have the meaning set forth in Subparagraph (D)(1).
Common Share Equivalent. The term "Common Share Equivalent" shall have the
meaning set forth in Subparagraph (D)(6)(ii).
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Common Shares. The term "Common Shares" shall mean the Common Shares of
Beneficial Interest, $.01 par value per share, of the Company.
Company Affiliate. The term "Company Affiliate" shall have the meaning set
forth in Subparagraph (D)(6)(ii).
Converted Series B Preferred Share Distribution. The term "Converted Series
B Preferred Share Distribution" shall have the meaning set forth in Subparagraph
(D)(1).
Convertible Securities. The term "Convertible Securities" shall have the
meaning set forth in Subparagraph (D)(6)(ii).
Current Market Price per Common Share. The term "Current Market Price per
Common Share" shall mean the average of the closing prices for a Common Share
for the thirty trading days preceding the tenth trading day prior to the
relevant date of determination. The closing price for such days shall be the
last reported sale price regular way or, in case no such reported sale takes
place on such date, the average of the reported closing bid and asked prices
regular way, in either case on the New York Stock Exchange, Inc., or if the
Common Shares are not listed or admitted to trading on the New York Stock
Exchange, Inc., on the principal national securities exchange on which the
Common Shares are listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, the closing sale price of the
Common Shares or in case no reported sale takes place, the average of the
closing bid and asked prices, on NASDAQ or any comparable system. If the Common
Shares are not quoted on NASDAQ or any comparable system, the Board of Trustees
shall in good faith determine the current market price on such basis as it
considers appropriate.
Distribution. The term "Distribution" or "Distributions" shall mean any
cash or other property paid or payable on or with respect to any share of
beneficial interest, common or preferred, including, without limitation, any
dividend or other distribution, whether in liquidation or otherwise.
Distribution Payment Date. The term "Distribution Payment Date" shall have
the meaning set forth in Subparagraph (B)(2).
Distribution Period. The term "Distribution Period" shall mean the period
from and including the Initial Issue Date to, but not including, the first
Distribution Payment Date and thereafter, each quarterly period from and
including any Distribution Payment Date to, but not including, the next
Distribution Payment Date.
Distributions Accrued and Accrued Distributions. The terms "Distributions
Accrued" and "Accrued Distributions" shall mean,
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with respect to any class or series of preferred shares of beneficial interest,
an amount which shall be equal to distributions thereon at the annual
distribution rates per share for the respective class or series thereof from the
date or dates on which such distributions commence to accrue to the end of the
then current distribution period for such preferred shares, less the amount of
all distributions paid, with respect to such preferred shares for such period
from the date such distributions commenced to accrue.
Excess Amount. The term "Excess Amount" shall have the meaning set forth in
Subparagraph (D)(1).
Excess Shares. The term "Excess Shares" shall have the meaning set forth in
Subparagraph (F)(4).
Four Quarter Preferential Distribution Non-Payment. The term "Four Quarter
Preferential Distribution Non-Payment" shall have the meaning set forth in
Subparagraph (E)(2)(ii).
Initial Issue Date. The term "Initial Issue Date" shall mean the date that
Series B Preferred Shares are first issued by the Company.
Junior Shares. The term "Junior Shares" shall mean, as the case may be, (i)
the Common Equity and any other class or series of Shares which is not entitled
to receive any distributions in any Distribution Period unless all distributions
required to have been paid or declared and set apart for payment on the Series B
Preferred Shares shall have been so paid or declared and set apart for payment
or (ii) the Common Equity and any other class or series of Shares which is not
entitled to receive any assets upon liquidation, dissolution or winding up of
the affairs of the Company until the Series B Preferred Shares shall have
received the entire amount to which such Class B Preferred Shares is entitled
upon such liquidation, dissolution or winding up.
Liquidation Preference. The term "Liquidation Preference" shall mean $25.00
per share.
Notice of Redemption. The term "Notice of Redemption" shall have the
meaning set forth in Subparagraph (G)(2).
Overlapping Period. The term "Overlapping Period" shall have the meaning
set forth in Subparagraph (D)(1).
Parity Shares. The term "Parity Shares" shall mean, as the case may be, (i)
any class or series of Shares which is entitled to receive payment of
distributions on a parity with the Series B Preferred Shares or (ii) any class
or series of Shares which is entitled to receive assets upon liquidation,
dissolution or
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winding up of the affairs of the Company on a parity with the Series B Preferred
Shares.
Person. The term "Person" shall mean an individual, corporation,
partnership, estate, trust (including a trust classified under Section 401(a) or
501(c)(17) of the Code), a portion of a trust permanently set aside for or to be
used exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company, limited liability company or other entity, and also
includes a group as that term is used for purposes of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended, but does not include an underwriter
which participates in a public offering of the Series B Preferred Shares;
provided, that such ownership by such underwriter would not result in the
Company being "closely held" within the meaning of Section 856(h) of the Code,
or otherwise result in the Company failing to qualify as a REIT.
Preferred Shares Trustee. The term "Preferred Shares Trustee" shall have
the meaning set forth in Subparagraph (E)(2)(ii).
Record Date. The term "Record Date" shall mean the date designated by the
Board of Trustees at the time a distribution is declared; provided, that such
Record Date shall be the first day of the calendar month in which the applicable
Distribution Payment Date falls or such other date designated by the Board of
Trustees for the payment of distributions that is not more than ninety (90) days
prior to such Distribution Payment Date.
Redemption Date. The term "Redemption Date" shall have the meaning set
forth in Subparagraph (G)(2).
Redemption Distributions. The term "Redemption Distributions" shall have
the meaning set forth in Subparagraph (G)(1).
REIT. The term "REIT" shall mean a real estate investment trust under
Section 856 of the Code.
Senior Shares. The term "Senior Shares" shall mean, as the case may be, (i)
any class or series of Shares ranking senior to the Series B Preferred Shares in
respect of the right to receive distributions or (ii) any class or series of
Shares ranking senior to the Series B Preferred Shares in respect of the right
to participate in any distribution upon liquidation, dissolution or winding up
of the affairs of the Company.
Series A Preferred Shares. The term "Series A Preferred Shares" shall mean
the Series A Increasing Rate Cumulative
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Convertible Preferred Shares of Beneficial Interest, $.01 par value per share,
of the Company.
Series A-1 Preferred Shares. The term "Series A-1 Preferred Shares" shall
mean the Series A-1 Increasing Rate Cumulative Convertible Preferred Shares of
Beneficial Interest, $.01 par value per share, of the Company.
Series A-1 Preferred Share Conversion Limit. The term "Series A-1 Preferred
Share Conversion Limit" shall have the meaning set forth in Subparagraph (D)(6).
Series B Conversion Price. The term "Series B Conversion Price" shall have
the meaning set forth in Subparagraph (D)(1).
Series B Excess Shares. The term "Series B Excess Shares" shall have the
meaning set forth in Subparagraph (F)(4).
Shares. The term "Shares" shall mean any transferable shares of beneficial
interest of the Company of any class or series.
Series B Excepted Person. The term "Series B Excepted Person" shall have
the meaning set forth in Subparagraph (F)(5).
Special Conversion Event. The term "Special Conversion Event" shall mean:
(i) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ceasing to be any of the following: (A) Chief
Executive Officer, (B) Chief Operating Officer or (C) any other senior
executive officer of the Company having an active role in such capacity in
the management of the business of the Company;
(ii) the merger or consolidation of the Company with or into any
Person, unless (A) immediately following such merger or consolidation, more
than 50% of the surviving company's issued and outstanding voting
securities are held by the holders of the Company's issued and outstanding
voting securities immediately prior to such merger or consolidation and (B)
effective provision is made in the charter documents of the surviving
Person or otherwise for the recognition, preservation and protection of the
preferences, conversion and other rights, voting powers, restrictions and
limitations as to dividends or other distributions of the Series B
Preferred Shares;
(iii) the sale, lease, transfer, spin-off, or other disposal or
distribution of all or substantially all of the assets of the Company;
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(iv) a tender offer or other similar offer for at least a majority of
the voting shares of beneficial interest of the Company by any Person or
group of related Persons for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended, is commenced and completed, and as a
result thereof such Person or related group of Persons owns or controls
more than a majority of the issued and outstanding voting securities of the
Company;
(v) with respect to any agreements for, or notes or other instruments
evidencing, borrowed money of the Company or any of the Subsidiaries for,
individually or in the aggregate, $10,000,000 or more (including as a
result of any cross-default provisions), if (A) the Company or any of the
Subsidiaries defaults in any payment of principal or interest, (B) a
non-monetary default by the Company or any of the Subsidiaries occurs which
is not contested by the Company or the applicable Subsidiary and is not
cured within any applicable grace period or waived or (C) a non-monetary
default by the Company or any of the Subsidiaries occurs which is contested
by the Company or the applicable Subsidiary and is not cured within 30 days
after it is determined by a court of competent jurisdiction that the
Company or the applicable Subsidiary has committed such default, and, in
any case, the holders (or trustees on behalf of such holders) of any
indebtedness for borrowed money of the Company or any of the Subsidiaries
for an aggregate amount of $10,000,000 or more, pursuant to such
agreements, notes or instruments, or any cross-default provisions contained
in any agreements, notes or instruments representing indebtedness for
borrowed money, elect to accelerate the stated maturity or payment dates of
such indebtedness;
(vi) with respect to any Capital Lease of the Company or any of the
Subsidiaries pursuant to which the Company or any of the Subsidiaries has
rental obligations in an aggregate amount of $25,000,000 or more over the
term of such Capital Lease (including as a result of any cross-default
provisions), if (A) a default by the Company or any of the Subsidiaries
occurs in any payment of any rental obligations, (B) a non-monetary default
by the Company or any of the Subsidiaries occurs which is not contested by
the Company or the applicable Subsidiary and is not cured within any
applicable grace period or waived or (C) a non-monetary default by the
Company or any of the Subsidiaries occurs which is contested by the Company
or the applicable Subsidiary and is not cured within 30 days after it is
determined by a court of competent jurisdiction that the Company or the
applicable Subsidiary has committed such default, and, in each case, if the
lessors of Capital Leases of the Company or any of the Subsidiaries
pursuant to which
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the Company or any of the Subsidiaries has rental obligations in an
aggregate amount of $25,000,000 or more over the term of such Capital
Leases, pursuant to such Capital Leases, or any cross-default provisions
contained in any Capital Leases, elect to accelerate all remaining rental
obligations under such Capital Leases to become due prior to the stated
payment dates thereof;
(vii) the commencement by or against the Company of any insolvency,
bankruptcy, dissolution, liquidation or receivership proceedings with
respect to the Company;
(viii) the loss of the Company's status as a REIT; or
(ix) if the Company shall have failed to pay a distribution on the
outstanding Series B Preferred Shares for any quarterly Distribution Period
within five days of the Distribution Payment Date therefor.
Subsidiaries. The term "Subsidiaries" shall mean all corporations,
partnerships or other business entities of which more than 50% of the total
voting securities or equity securities are owned or controlled by the Company.
Total Distributions. The term "Total Distributions" shall have the meaning
set forth in Subparagraph (B)(7).
B. Distributions.
1. The record holders of Series B Preferred Shares shall be entitled to
receive from the Initial Issue Date, when, as and if authorized by the Board of
Trustees, out of assets legally available for payment of distributions,
cumulative cash distributions at a rate of 9.75% per annum of the Liquidation
Preference per Series B Preferred Share, computed on the basis of a 360-day year
consisting of twelve 30-day months.
2. Distributions on the Series B Preferred Shares shall accrue and be
cumulative from the Initial Issue Date. Distributions shall be payable quarterly
in arrears for each Distribution Period when, as and if authorized by the Board
of Trustees, on January 20, April 20, July 20 and October 20 of each year (each,
a "Distribution Payment Date"), commencing on the first Distribution Payment
Date following the Initial Issue Date. If any Distribution Payment Date occurs
on a day that is not a Business Day, any accrued distributions otherwise payable
on such Distribution Payment Date shall be paid on the next succeeding Business
Day. The amount of distributions payable on Series B Preferred Shares for each
full Distribution Period shall be computed by dividing by four the annual
distribution rate set forth in Subparagraph (B)(1). Distributions payable in
respect of any Distribution Period which is less than a full Distribution
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Period in length will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Subject to Subparagraph (D)(1), distributions shall be
paid to the record holders of the Series B Preferred Shares as their names shall
appear on the share records of the Company at the close of business on the
Record Date for such distribution. Subject to Subparagraph (D)(1), distributions
in respect of any past Distribution Periods that are in arrears may be
authorized, declared, set apart for payment and paid at any time to record
holders on the Record Date therefor. Any distribution payment made on Series B
Preferred Shares shall be first credited against the earliest accrued but unpaid
distribution due which remains payable. Upon issuance, the Series B Preferred
Shares will rank on a parity as to distributions with the Series A Preferred
Shares.
3. Except as provided in the next sentence, if any Series B Preferred
Shares are outstanding, no distributions (other than in Junior Shares or Common
Shares) shall be authorized, declared, set apart for payment or paid on any
class or series of Junior Shares or Parity Shares unless all accrued
distributions on the Series B Preferred Shares for all prior Distribution
Periods and the then current Distribution Period have been or contemporaneously
are authorized, declared, set apart for payment or paid. When distributions are
not so paid in full (or a sum sufficient for such full payment is not so set
apart for payment) upon the Series B Preferred Shares and any other class or
series of Parity Shares, all distributions authorized or declared upon the
Series B Preferred Shares and any such class or series of Parity Shares shall be
authorized or declared pro rata so that the amount of distributions authorized
or declared per share on the Series B Preferred Shares and such class or series
of Parity Shares shall in all cases bear to each other the same ratio that
accrued and unpaid distributions per share on the Series B Preferred Shares and
such class or series of Parity Shares bear to each other.
4. Except as provided in Subparagraph (B)(3), unless all accrued
distributions on the Series B Preferred Shares have been or contemporaneously
are authorized, declared, set apart for payment or paid for all prior
Distribution Periods and the then current Distribution Period, no Junior Shares
or Parity Shares shall be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any such Shares) by the Company (except by conversion into or
exchange for Junior Shares or Common Shares). Holders of the Series B Preferred
Shares shall not be entitled to any distributions, whether payable in cash,
property or Shares, in excess of accrued and cumulative distributions as herein
provided. No interest or sum of money in lieu of interest shall be payable in
respect of any distribution payment or payments on the Series B Preferred Shares
that may be in arrears.
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5. No distribution on Series B Preferred Shares shall be required to be
authorized, declared, set apart for payment or paid by the Company to the extent
such authorization, declaration, setting apart for payment or payment shall be
restricted or prohibited by law. Notwithstanding that any distributions on
Series B Preferred Shares are restricted or prohibited by law, such
distributions shall accrue and be cumulative.
6. Distributions on the Series B Preferred Shares, if not paid on the
applicable Distribution Payment Date, will accrue whether or not distributions
are authorized or declared for such Distribution Payment Date, whether or not
the Company has earnings and whether or not there are assets legally available
for the payment of such distributions.
7. If, for any taxable year, the Board of Trustees elects to designate as
"capital gain dividends" (as defined in Section 857 of the Code) any portion
(the "Capital Gains Amount") of the distributions paid or made available for the
year to holders of all classes of Shares (the "Total Distributions"), then the
portion of the Capital Gains Amount that shall be allocable to holders of the
Series B Preferred Shares shall be the Capital Gains Amount multiplied by a
fraction, the numerator of which shall be the total distributions paid or made
available to the holders of the Series B Preferred Shares for the year and the
denominator of which shall be the Total Distributions.
C. Distributions Upon Liquidation, Dissolution or Winding Up.
1. Upon any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Company, before any distribution shall be made to the
holders of any Junior Shares, and subject to the payment or provision or reserve
for payment of the debts and liabilities (whether absolute, accrued, asserted or
unasserted, contingent or otherwise) and the preferences of Senior Shares, if
any, of the Company, the holders of Series B Preferred Shares shall be entitled
to receive, out of the assets of the Company legally available for payment of
distributions, liquidating distributions in cash (or property at its fair market
value as determined in good faith by the Board of Trustees (or a combination
thereof)) in the amount of the Liquidation Preference for each Series B
Preferred Share plus an amount equal to all accrued and unpaid distributions
pursuant to Paragraph (B) (whether or not authorized or declared, and whether or
not there would be assets legally available for the payment of such
distributions) to the date of such liquidation, dissolution or winding up. After
payment of the full amount of the liquidating distributions to which they are
entitled pursuant to this Subparagraph (C)(1), the holders of Series B Preferred
Shares will have no right or claim to any of the remaining assets
-10-
of the Company and shall not be entitled to any other distribution.
2. Notwithstanding any provision in Subparagraph (C)(1) to the contrary, in
the event that, upon any such voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Company, the assets legally available for
payment of distributions are insufficient to pay (x) the full amount of the
liquidating distributions to which holders of Series B Preferred Shares would
otherwise be entitled pursuant to Subparagraph (C)(1) and (y) the corresponding
amounts of the liquidating distributions to which holders of Parity Shares would
be entitled upon liquidation, dissolution or winding up of the affairs of the
Company, then the holders of the Series B Preferred Shares and the holders of
the Parity Shares shall share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they otherwise would
be respectively entitled. Upon issuance, the Series B Preferred Shares will rank
on a parity with the Series A Preferred Shares as to the distribution of assets
upon any liquidation, dissolution or winding up of the affairs of the Company.
D. Conversion.
1. Holders of Series B Preferred Shares shall have the right, exercisable
after _____, 1998 (unless otherwise exercisable earlier pursuant to this
Subparagraph (D)(1)), at any time and from time to time, to convert all or any
Series B Preferred Shares (except that upon any dissolution, liquidation or
winding up of the affairs of the Company the right of conversion shall terminate
at the close of business on the Business Day fixed for payment of the
liquidating distributions to which holders of Series B Preferred Shares are
entitled) into such number of fully paid Common Shares as is obtained by: (i)
multiplying the number of Series B Preferred Shares to be converted by $25.00
and (ii) dividing the result by the conversion price listed below that will be
in effect during the corresponding date of conversion listed below:
-11-
Date of Conversion Conversion Price
------------------ ----------------
Prior to the occurrence of a
Special Conversion Event:
_____, 1998 to and including
_____, 1999 $19.1750
_____, 1999 to and including
_____, 2000 $18.6875
_____, 2000 to and including
_____, 2001 $18.2000
_____, 2001 and thereafter $17.7125
At any time after a Special
Conversion Event shall have
occurred $17.7125
At any time after Notice of
Redemption pursuant to Paragraph
(G) hereof $16.2500
If, and each time, a conversion price listed above then in effect (the "Series B
Conversion Price") shall be adjusted pursuant to the terms of these Paragraphs
(A) through (N), all of the conversion prices listed above shall be so adjusted
as though such conversion prices were in effect on the date of adjustment. The
Series B Conversion Price shall be the conversion price as last adjusted and
then in effect. Notwithstanding anything else to the contrary, (x) after any
Special Conversion Event under clauses (i), (iv), (v), (vi), (vii), (viii) or
(ix) of the definition thereof and (y) immediately prior to any Special
Conversion Event under clauses (ii) or (iii) of the definition thereof, holders
of Series B Preferred Shares shall have the right, exercisable at any time, to
convert, in accordance with the terms of this Paragraph (D), all or any such
Series B Preferred Shares (except that upon any dissolution, liquidation or
winding up of the affairs of the Company the right of conversion shall terminate
at the close of business on the Business Day fixed for payment of the
liquidating distributions to which holders of Series B Preferred Shares are
entitled) into such number of fully paid Common Shares as is obtained by: (x)
multiplying the number of Series B Preferred Shares to be converted by $25.00
and (y) dividing the result by $17.7125, as adjusted pursuant to this Paragraph
(D).
Notwithstanding anything to the contrary, during the period from the date
the Company resolves to take any action that would constitute a Special
Conversion Event under clauses (ii) or (iii) of the definition thereof until the
consummation of such Special Conversion Event, the holders of Series B Preferred
Shares shall have the right to make an election to convert all or any Series B
Preferred Shares conditional upon approval of such Special Conversion Event by
the holders entitled to vote on such
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matter, in which case, if such Special Conversion Event is approved, conversion
of such Series B Preferred Shares as to which a conditional election has been
made shall occur immediately prior to such Special Conversion Event.
In the event that a tender offer or other similar offer shall have been
commenced which if consummated would result in a Special Conversion Event under
clause (iv) of the definition thereof, holders shall have the right to convert
their Series B Preferred Shares pursuant to the terms hereof within the five
business day period prior to the consummation of such tender offer or other
similar offer; provided, however, if such tender offer or other similar offer is
not consummated or, if consummated, does not result in a Special Conversion
Event under clause (iv) of the definition thereof, then the Company shall have
the right to redeem any and all Common Shares into which any Series B Preferred
Shares were converted pursuant to such clause (iv) for the same number of Series
B Preferred Shares converted pursuant thereto, upon written notice from the
Company notifying such holder of the election of the Company to redeem such
Series B Preferred Shares stating the number of Common Shares to be surrendered,
the number of Series B Preferred Shares to be issued therefor and the date and
the place(s) where the certificate(s) representing such Series B Preferred
Shares are to be surrendered. On or after the date specified in such notice,
each such holder shall present and surrender his certificate or certificates for
such Common Shares to the Company at the place designated in such notice for
redemption and thereupon such holder shall be issued the same number of Series B
Preferred Shares converted and each surrendered certificate shall be cancelled.
From and after the date of issuance of the number of Series B Preferred Shares
set forth in the notice, (i) all distributions on the Common Shares to be
redeemed shall cease to accrue, and (ii) all rights of the holders thereof as
holders of Common Shares shall cease and terminate, except for the right to
receive the number of Series B Preferred Shares upon the surrender of Common
Shares certificates as set forth in the notice.
In addition to any other notice required to be given hereunder, (i) if a
Special Conversion Event shall have occurred, or, (ii) if, prior to _____, 1998,
an Adjustment Event shall have occurred, the Company shall, within five Business
Days of such occurrence, send notice to all holders of Series B Preferred Shares
(1) that the Series B Preferred Shares are convertible and not subject to any
waiting period with respect to the conversion thereof, (2) of the date as of
which the Series B Preferred Shares became convertible, (3) of the ratio at
which the Series B Preferred Shares are convertible and (4) a description of the
nature of the Special Conversion Event or Adjustment Event, as the case may be.
The Company shall send notice to all holders of Series B Preferred Shares
describing any action that would
-13-
constitute a Special Conversion Event under clauses (ii) or (iii) of the
definition thereof, together with a form of conversion notice, at least 30
calendar days prior to any vote of holders of the Common Shares required to
approve such action, or, if no such vote is so required, prior to the
consummation of the transaction.
Notwithstanding the surrender of Series B Preferred Shares for conversion
into Common Shares, all accrued distributions with respect to such Series B
Preferred Shares for any past Distribution Periods that are in arrears at the
time of such conversion shall be paid to the registered holder of such Series B
Preferred Shares in the same manner as if such registered holder continued to be
the registered holder of such converted Series B Preferred Shares following such
conversion or, if upon conversion of such Series B Preferred Shares there will
be no more Series B Preferred Shares outstanding, then at the time of such
conversion. In addition, if any holder surrenders Series B Preferred Shares for
conversion into Common Shares, such holder shall be entitled to receive a
distribution on such Series B Preferred Shares converted for the portion of the
current Distribution Period such holder owned the Series B Preferred Shares
surrendered for conversion, notwithstanding that the record date for the
distribution payable for the current Distribution Period may not have occurred,
in an amount per Series B Preferred Share converted equal to the product of (i)
the distribution payable on each Series B Preferred Share converted for the
current Distribution Period, multiplied by (ii) a fraction, the numerator of
which is the number of calendar days in such Distribution Period elapsed to (but
not including) the date of conversion and the denominator of which is the total
number of calendar days in such Distribution Period.
If any holder surrenders Series B Preferred Shares for conversion into
Common Shares and as a result thereof such holder is or will be entitled to
receive distributions with respect to both such Series B Preferred Shares
converted and such Common Shares into which such Series B Preferred Shares were
converted for the same period of time (the "Overlapping Period"), then, at the
time of and as a condition precedent to such conversion (or, if at the time of
such conversion the amount of the distribution with respect to such Common
Shares has not yet been determined, at the time of such determination), the
Company shall withhold from any distribution payable on such Series B Preferred
Shares converted, an amount equal to the Excess Amount (defined below), if any.
If the amount of any distribution payable on such Series B Preferred Shares
converted shall not be sufficient to pay any Excess Amount, such holder hereby
authorizes the Company to withhold from any distribution payable to such holder
on any Series B Preferred Shares owned by such holder or, to the extent
permissible, on any Common Shares owned by such holder, an amount equal to the
Excess Amount. "Excess Amount" shall mean an amount
-14-
equal to the product of (i) the sum of the distributions payable on each Common
Share into which such Series B Preferred Shares were converted for the
distribution period relating to the Common Shares in which the Overlapping
Period occurs, multiplied by (ii) a fraction, the numerator of which is the
number of calendar days in the Overlapping Period and the denominator of which
is the total number of calendar days in such distribution period relating to the
Common Shares in which the Overlapping Period occurs.
2. Any holder of one or more Series B Preferred Shares electing to convert
such Share or Shares shall deliver the certificate or certificates therefor to
the principal office of the transfer agent for the Common Shares, with the form
of notice of election to convert prescribed by the Company fully completed and
duly executed and (if so required by the Company or any conversion agent)
accompanied by instruments of transfer in form reasonably satisfactory to the
Company and to any conversion agent, duly executed by the registered holder or
his duly authorized attorney, and any payments (or evidence of payment) required
pursuant to Subparagraph (D)(4). The conversion right with respect to any such
Series B Preferred Shares shall be deemed to have been exercised on the date
upon which the last of the conditions for conversion provided in this
Subparagraph (D)(2) have been satisfied by the holder of such Series B Preferred
Shares, and the Person or Persons entitled to receive the Common Shares issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such Common Shares on such date.
3. No fractional Common Share or scrip representing a fractional Common
Share shall be issued upon conversion of Series B Preferred Shares. If more than
one Series B Preferred Share shall be surrendered for conversion on any day by
the same holder, the number of full Common Shares which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
Series B Preferred Shares so surrendered by such holder on such day. Instead of
any fractional Common Share which would otherwise be issuable upon conversion of
any Series B Preferred Shares, the Company shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the Current
Market Price per Common Share.
4. If a holder converts Series B Preferred Shares, the Company shall pay,
at the time of and as a condition precedent to conversion, any documentary,
stamp or similar issue or transfer tax due on the issuance of Common Shares upon
the conversion. The holder, however, shall pay to the Company the amount of any
tax which is due (or shall establish to the satisfaction of the Company payment
thereof) if the shares are to be issued in a name other than the name of the
Person in whose name such Series B Preferred Shares are registered.
-15-
5. The Company shall reserve and shall at all times keep reserved out of
its authorized but unissued Common Shares a sufficient number of Common Shares
to permit the conversion of the then outstanding Series B Preferred Shares that
may then be converted. All Common Shares which may be issued upon conversion of
Series B Preferred Shares shall be validly issued and fully paid, and not
subject to preemptive or other similar rights. In order that the Company may
issue Common Shares upon conversion of Series B Preferred Shares, the Company
will endeavor to comply with all applicable Federal and State securities laws
and will endeavor to list such Common Shares to be issued upon conversion on
each securities exchange on which the Common Shares are listed.
The Series B Preferred Shares converted pursuant to the provisions of this
Paragraph (D) shall thereupon be retired and may not be reissued as Series B
Preferred Shares but shall thereafter have the status of authorized but unissued
Shares.
6. The conversion rate in effect at any time shall be subject to adjustment
from time to time upon the happening of certain events as follows:
(i) Distribution of Common Shares; Reclassification; Subdivision;
Combination. In case the Company shall (1) pay a dividend payable in,
effect a split up of, or make any other distribution in, Common Shares to
holders of the Common Shares, (2) reclassify the outstanding Common Shares
into Shares of some other class or series of Shares, (3) subdivide the
outstanding Common Shares into a greater number of Common Shares or (4)
combine the outstanding Common Shares into a smaller number of Common
Shares, the conversion rate immediately prior to such action shall be
adjusted so that the holder of any Series B Preferred Shares thereafter
surrendered for conversion shall be entitled to receive the number of
Common Shares which he would have owned immediately following such action
had such Series B Preferred Shares been converted immediately prior
thereto. An adjustment made pursuant to this Subparagraph (D)(6)(i) shall
become effective immediately after the record date in the case of a
distribution and shall become effective immediately after the effective
date in the case of a reclassification, subdivision or combination.
(ii) Issuance of Additional Common Equity. (A) If the Company shall
issue to a Person who is not a Company Affiliate (as defined below) at the
time of issuance any Additional Common Equity (as defined below) at a price
per share less than 85% of the Current Market Price per Common Share then
in effect on the date of such issuance, then the number of Common Shares
into which each Series B Preferred Share shall be convertible shall be
adjusted so that the
-16-
same shall be equal to the number determined by multiplying the number of
Common Shares into which such Series B Preferred Share was convertible
immediately prior to such issuance by a fraction of which the numerator
shall be the number of shares of Common Equity outstanding immediately
prior to such issuance plus the number of shares of Additional Common
Equity offered, and of which the denominator shall be the number of shares
of Common Equity outstanding immediately prior to such issuance plus the
number of shares of Common Equity which the aggregate offering price of the
Additional Common Equity offered would purchase at such Current Market
Price per Share. Such adjustments shall become effective immediately after
such issuance.
(B) If the Company shall issue to a Person who is a Company Affiliate
at the time of issuance, in any one or a series of related transactions,
any Additional Common Equity at a price per share less than the Current
Market Price per Common Share then in effect on the date of such issuance,
then the number of Common Shares into which each Series B Preferred Share
shall be convertible shall be adjusted so that the same shall be equal to
the number determined by multiplying the number of Common Shares into which
such Series B Preferred Share was convertible immediately prior to such
issuance by a fraction of which the numerator shall be the number of shares
of Common Equity outstanding immediately prior to such issuance plus the
number of shares of Additional Common Equity offered, and of which the
denominator shall be the number of shares of Common Equity outstanding
immediately prior to such issuance plus the number of shares of Common
Equity which the aggregate offering price of the Additional Common Equity
offered would purchase at such Current Market Price per Share. Such
adjustments shall become effective immediately after such issuance.
"Additional Common Equity" shall mean all Common Equity issued by the
Company except: (1) the Common Shares issued upon conversion of the Series
B Preferred Shares; (2) the Common Equity issued upon conversion of any
Senior Shares, Parity Shares, Common Share Equivalents or any other shares
of beneficial interest which, by their terms, are convertible into Common
Equity and (a) which were outstanding on November 12, 1996, (b) for which
no adjustment pursuant to this Subparagraph (D)(6) was required at the time
of issuance or the time of any amendment or change thereto or (c) for which
an adjustment is provided for in another provision of this Paragraph
(D)(6); (3) up to an aggregate of 250,000 shares of Common Equity and
shares of Common Equity into which Common Share Equivalents are
exercisable, exchangeable or convertible, in each case
-17-
issued to Affiliates of the Company from and after November 12, 1996, at a
price per share less than the Current Market Price per Common Share then in
effect on the date of such issuance, including, without limitation, shares
of Common Equity or Common Share Equivalents issued to directors, officers,
employees, or trustees of the Company or any Subsidiary of the Company and
those issued pursuant to stock option, stock purchase, performance or other
remuneration plans adopted by the Board of Trustees from time to time
(including, without limitation, the Company's 1992 Employee Share Option
Plan, 1992 Trustee Share Option Plan and 1995 Management Incentive Plan;
(4) the issuance of shares of Common Equity under any circumstances for
which an adjustment is provided in Subparagraph (D)(6)(i); or (5) Common
Equity issued pursuant to a dividend reinvestment plan or stock purchase
plan available to all holders of Common Equity.
"Company Affiliate" shall mean, with respect to any issuance of Additional
Common Equity, (i) any trustee, director, officer or employee of the
Company or of any subsidiary of the Company, (ii) any Person that is the
direct or indirect owner of more than five percent of the issued and
outstanding Common Equity of the Company, (iii) any Person that controls,
is controlled by or is under common control with, the Company, (iv) any
trustee, director, officer, employee or family member of any Person listed
in clauses (i), (ii) or (iii) of this definition or (v) any Person with
respect to which any Person listed in clauses (i) through (iv) of this
definition is a director, officer or the direct or indirect owner of more
than ten percent of the issued and outstanding equity securities of such
Person immediately prior to any such issuance.
"Common Share Equivalent" shall mean any evidence of indebtedness, shares
of stock or beneficial interest (other than Series B Preferred Shares) or
other securities which are or may be convertible into or exchangeable for
Additional Common Equity ("Convertible Securities"), or any warrant, option
or other right to subscribe for any Convertible Securities or for any
Additional Common Equity.
For purposes of this Subparagraph (D)(6)(ii), the number of Common Equity
at any time outstanding shall not include Common Equity held in the
treasury of the Company.
(iii) Issuance of Common Share Equivalents. (A) If the Company shall
issue to a Person who is not a Company Affiliate at the time of issuance
any Common Share Equivalent and the aggregate of the price per Common Share
Equivalent and the price per share for which shares of Additional Common
Equity may be issuable thereafter pursuant
-18-
to such Common Share Equivalent shall be below an amount equal to 85% of
the Current Market Price per Common Share on the record date for
determination of the holders of the Common Shares entitled to receive such
issue, or, if, after any such issuance, the price per share for which
shares of Additional Common Equity may be issuable thereafter is amended or
changed and the aggregate of such price, as so amended or changed, and the
price per Common Share Equivalent, shall be below an amount equal to 85% of
the Current Market Price per Common Share at the effective time of such
amendment or change, then the number of Common Shares into which each
Series B Preferred Share shall be convertible shall be adjusted so that the
same shall be equal to the number determined by multiplying the number of
Common Shares into which such Series B Preferred Share was convertible
immediately prior to such record date by a fraction of which the numerator
shall be the number of Common Shares outstanding on such record date plus
the number of Common Shares into which, or for which, the Common Share
Equivalents so offered are convertible or exercisable, and of which the
denominator shall be the number of Common Shares outstanding on such record
date plus the number of Common Shares which the aggregate offering price of
the Common Shares into which, or for which, the Common Share Equivalents so
offered are convertible or exercisable would purchase at such Current
Market Price per Common Share. Such adjustments shall become effective
immediately after such record date.
(B) If the Company shall issue to a Person who is a Company Affiliate
at the time of issuance, in any one or a series of related transactions,
any Common Share Equivalents and the aggregate of the price per Common
Share Equivalent and the price per share for which shares of Additional
Common Equity may be issuable thereafter pursuant to such Common Share
Equivalent shall be below an amount equal to the Current Market Price per
Common Share on the date of issue, or, if, after any such issuance, the
price per share for which shares of Additional Common Equity may be
issuable thereafter is amended or changed and the aggregate of such price,
as so amended or changed, and the price per Common Share Equivalent, shall
be below an amount equal to the Current Market Price per Common Share at
the effective time of such amendment or change, then the number of Common
Shares into which each Series B Preferred Share shall be convertible shall
be adjusted so that the same shall be equal to the number determined by
multiplying the number of Common Shares into which such Series B Preferred
Share was convertible immediately prior to such record date by a fraction
of which the numerator shall be the number of Common Shares outstanding on
such record date plus the number of Common Shares into which, or for which,
the Common
-19-
Share Equivalents so offered are convertible or exercisable, and of which
the denominator shall be the number of Common Shares outstanding on such
record date plus the number of Common Shares which the aggregate offering
price of the Common Shares into which, or for which, the Common Share
Equivalents so offered are convertible or exercisable would purchase at
such Current Market Price per Common Share. Such adjustments shall become
effective immediately after such issuance.
(iv) Conversion of Series A Preferred Shares or Series A-1 Preferred
Shares. Notwithstanding anything to the contrary contained in this
Subparagraph (D)(6), if the aggregate number of Common Shares into which
the Series A Preferred Shares or Series A-1 Preferred Shares are converted
exceeds 500,000 Common Shares, subject to adjustment pursuant to
Subparagraph (D)(6)(i) (the "Series A Conversion Limit"), then the number
of Common Shares into which each Series B Preferred Share shall be
convertible shall be adjusted so that the holder of any Series B Preferred
Shares thereafter surrendered for conversion shall be entitled to receive
such number of Common Shares as would have been received by such holder of
Series B Preferred Shares having the same percentage of the then
outstanding Common Shares upon such conversion as such holder would have
received upon conversion if the aggregate number of Common Shares into
which the Series A Preferred Shares or Series A-1 Preferred Shares were
converted equalled the Series A Conversion Limit at the time of conversion
of such Series B Preferred Shares.
(v) Additional Adjustments. In the event that the Company shall issue
to Affiliates of the Company in excess of an aggregate of 250,000 shares of
Common Equity and shares of Common Equity into which Common Share
Equivalents are exercisable, exchangeable or convertible, in each case
which are issued from and after November 12, 1996, at a price per share
less than the Current Market Price per Common Share then in effect on the
date of such issuance, then the calculation of the number of Common Shares
into which each Series B Preferred Share is convertible shall be adjusted
pursuant to the provisions of this Subparagraph (D)(6) for each such shares
of Common Equity and Common Share Equivalents to Affiliates of the Company
at a price per share less than the Current Market Price per Common Share
then in effect on the date of such issuance.
(vi) Limitation of Adjustments. For purposes of this Subparagraph
(D)(6), the number of Common Shares or Common Equity at any time
outstanding shall not include Common Shares or Common Equity held in the
treasury of the Company. No adjustment of the Series B Conversion Price
shall be made
-20-
under Subparagraph (D)(6)(iii), (1) upon the issuance of any Convertible
Security which is issued pursuant to the exercise of any warrants or
rights, if any adjustment shall previously have been made in the Series B
Conversion Price then in effect upon the issuance of such warrants or other
rights pursuant to Subparagraph (D)(6)(iii) or otherwise pursuant to this
Subparagraph (D)(6) or (2) upon the issuance of the Series A-1 Preferred
Shares in exchange for all of the issued and outstanding Series A Preferred
Shares.
(vii) Additional Distributions. If the Company shall make a dividend
or distribution of securities (other than Common Shares or Common Share
Equivalents) or other property to the holders of Junior Shares and not to
the holders of the Series B Preferred Shares, then, unless the holders of
the Series B Preferred Shares are entitled to receive such distribution at
a later time upon conversion of the Series B Preferred Shares and such
distribution has been set aside for such later distribution, each holder of
Series B Preferred Shares shall receive at the time of payment or issuance
of such dividend or distribution, without payment or any consideration
therefor, such securities or other property which he would have owned
immediately following such dividend or distribution had such holder's
Series B Preferred Shares been converted immediately prior thereto; and an
appropriate provision therefor shall be made a part of any such dividend or
distribution.
(viii) Computation of Consideration. In making adjustments to the
Series B Conversion Price pursuant to this Subparagraph (D)(6), the
consideration received by the Company shall be deemed to be the following:
to the extent that any Additional Common Equity, any Common Share
Equivalents or rights shall be issued for a cash consideration, the
consideration received by the Company therefor, or, if such Additional
Common Equity or Common Share Equivalents are offered by the Company for
subscription, the subscription price paid to and received by the Company,
or, if such Additional Common Equity or Common Share Equivalents are sold
to underwriters or dealers for public offering without a subscription
offering, the initial public offering price, in each such case excluding
any amounts paid or receivable for accrued interest or accrued dividends
and without deduction of any compensation, discounts, commissions or
expenses paid or incurred by the Company for and in the underwriting of, or
otherwise in connection with, the issue thereof; to the extent that such
issuance shall be for a consideration other than cash, then, except as
herein otherwise expressly provided, the consideration received by the
Company shall be the fair market value of such consideration at the time of
such issuance as determined in good faith by the Board of
-21-
Trustees. The consideration for any Additional Common Equity issuable
pursuant to any Common Share Equivalents shall be the consideration
received by the Company for issuing such Common Share Equivalents, plus the
additional consideration payable to the Company upon the exercise,
conversion or exchange of such Common Share Equivalents. In the case of the
issuance at any time of any Additional Common Equity or Common Share
Equivalents in payment or satisfaction of any dividend upon any class of
stock other than Common Shares, the Company shall be deemed to have
received for such Additional Common Equity or Common Share Equivalents a
consideration equal to the amount of such dividend so paid or satisfied. In
any case in which the consideration to be received or paid shall be other
than cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Trustees, without deduction of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith.
7. No adjustment in the conversion rate shall be required until cumulative
adjustments result in a change of 1% or more of the conversion price as in
effect prior to the last adjustment of the conversion rate; provided, that any
adjustment which by reason of this Subparagraph (D)(7) is not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Paragraph (D) shall be rounded up to the
nearest cent ($.01) or to the nearest one-thousandth (1/1000) of a share, as
the case may be. No adjustment to the conversion rate shall be made for cash
dividends.
8. In the event that, as a result of an adjustment made pursuant to
Subparagraph (D)(6), the holder of any Series B Preferred Shares thereafter
surrendered for conversion shall become entitled to receive any Shares other
than Common Shares, thereafter the number of such Shares so receivable upon
conversion of any Series B Preferred Shares shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Shares contained in this Paragraph (D).
9. The Company may make such increases in the number of Common Shares to be
received upon the conversion of Series B Preferred Shares, in addition to those
required by Subparagraph (D)(6), as is considered to be advisable by the Board
of Trustees in order that any event treated for Federal income tax purposes as a
distribution of shares or share rights shall not be taxable to the recipients
thereof.
-22-
10. Whenever the conversion rate is adjusted, the Company shall, in
addition to any notice required to be delivered pursuant to Subparagraphs (D)(1)
or (D)(11), promptly, but in no event later than ten days following such
adjustment, send notice to all holders of Series B Preferred Shares of the
adjustment and shall cause to be prepared a certificate signed by the principal
financial officer of the Company setting forth, in reasonable detail, the
adjusted conversion rate and a brief statement of the facts requiring such
adjustment and the computation thereof (including a description of the basis on
which the Board of Trustees made any determination relating to such adjustment);
such certificate shall forthwith be filed with each transfer agent for the
Series B Preferred Shares.
11. Each holder of Series B Preferred Shares shall be entitled to all
notices, including notice of the record dates for any votes with respect to the
Common Shares, delivered to holders of Common Shares. In addition, in the event
that:
(i) the Company resolves to take any action which, if it were to occur,
would require an adjustment in the conversion rate, or takes such
action, or
(ii) the Company resolves to take any action which, if it were to occur,
would constitute a Special Conversion Event, or a Special Conversion
Event occurs,
a holder of Series B Preferred Shares, if it has a right to convert, may wish to
convert, at the applicable conversion ratio, some or all of such shares into
Common Shares prior to the record date for, or the effective date of, the
transaction so that it may receive the rights, warrants, securities or assets
which a holder of Common Shares on that date may receive. Therefore, the Company
shall, in addition to any notice required to be delivered pursuant to
Subparagraphs (D)(1) or (D)(10), send notice to all holders of Series B
Preferred Shares stating the proposed record or effective date of the
transaction described in clauses (ii) or (iii) of the definition of Special
Conversion Event at least 30 days before such date.
In the event (a) that the Company shall authorize the granting to holders
of Common Shares of rights to subscribe for or purchase any shares of beneficial
interest of any class or of any other rights or (b) of any capital
reorganization or reclassification of the shares of beneficial interest of the
Company, then the Company shall provide to the holders of the Series B Preferred
Shares prompt notice stating (i) the date on which a record is to be taken for
the purpose of such distribution or subscription rights, or, if a record is not
to be taken, the date as of which the holders of Common Shares of record would
be entitled to such distribution or subscription
-23-
rights or (ii) the date on which a capital reorganization or reclassification is
expected to become effective.
12. In case of (i) any reclassification of outstanding Common Shares
issuable upon conversion of Series B Preferred Shares, or (ii) any consolidation
or merger of the Company with or into another corporation (other than a merger
with another corporation in which the Company is the surviving corporation and
which does not result in any reclassification of outstanding Common Shares
issuable upon such conversion), the rights of the holders of the outstanding
Series B Preferred Shares shall be adjusted in the manner described below:
(i) In the event that the Company is the surviving corporation, each Series
B Preferred Share shall, without payment of additional consideration therefor,
be deemed modified so as to provide that upon conversion of each Series B
Preferred Share, the holder thereof shall receive, in lieu of each Common Share
theretofore issuable upon such conversion, the kind and amount of shares of
stock, other securities, money and property receivable upon such
reclassification, consolidation or merger by the holder of one Common Share
issuable upon such conversion had such conversion occurred immediately prior to
such reclassification, consolidation or merger. Such Series B Preferred Share
shall be deemed to provide for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Subparagraph
(D)(12). The provisions of this Subparagraph (D)(12)(i) shall similarly apply to
successive reclassifications, consolidations and mergers.
(ii) In the event that the Company is not the surviving corporation, (A)
effective provision shall be made in the charter documents of the surviving
Person or otherwise for the recognition, preservation and protection of the
preferences, conversion and other rights, voting powers, restrictions and
limitations as to dividends or other distributions of the Series B Preferred
Shares or (B) the surviving corporation shall, without payment of any additional
consideration therefor, issue new Series B Preferred Shares providing that, upon
conversion thereof, the holder thereof shall receive, in lieu of each Common
Share theretofore issuable upon conversion of the Series B Preferred Shares, the
kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, consolidation or merger by the holder of
one Common Share issuable upon conversion of the Series B Preferred Shares had
such conversion occurred immediately prior to such reclassification,
consolidation or merger. Such new Series B Preferred Shares shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Subparagraph (D)(12)(ii). The provisions of
this Subparagraph (D)(12)(ii) shall similarly apply to successive
reclassifications, consolidations and mergers.
-24-
A change in par value, or from par value to no par value, or from no par value
to par value, or a change as a result of a subdivision or combination, shall not
be deemed a reclassification for purposes of these Paragraphs (A) through (N).
E. Voting Rights.
1. The holders of Series B Preferred Shares shall not be entitled to vote
at, or participate in, any meeting of shareholders of the Company, and shall
have no other right to vote, except (i) as provided in Paragraph (L), (ii) as
provided in Subparagraph (E)(2), or (iii) as required by law.
2. (i) (A) If (x) the Company shall have failed to pay the distributions on
the outstanding Series B Preferred Shares for any two quarterly Distribution
Periods (whether or not consecutive) or (y) a Special Conversion Event shall
have occurred (notwithstanding that such Special Conversion Event at any time
thereafter no longer continues), the holders of the Series B Preferred Shares
shall immediately and at all times thereafter vote together with the holders of
the Common Shares as a single class on all actions to be taken by the holders of
the Common Shares. Each holder of Series B Preferred Shares shall be entitled to
such number of votes as shall equal the number of Common Shares into which his
Series B Preferred Shares are then convertible, and be entitled to notice of all
shareholder meetings with respect to which the holders of Common Shares are then
entitled.
(B) If the Company resolves to take any action that would constitute a
Special Conversion Event under clauses (ii) or (iii) of the definition thereof,
and if the holders of the Common Shares are entitled to vote on such Special
Conversion Event, then the holders of the Series B Preferred Shares shall be
entitled to vote together with the holders of the Common Shares as a single
class on such Special Conversion Event. Each holder of Series B Preferred Shares
shall be entitled to such number of votes as shall equal the number of Common
Shares into which his Series B Preferred Shares are then convertible, and be
entitled to notice of all shareholder meetings with respect to which the holders
of Common Shares are then entitled with respect to such resolution.
(ii) If the Company shall have failed to authorize and pay or declare and
set apart for payment the distributions accumulated on the outstanding Series B
Preferred Shares for any four quarterly Distribution Periods (a "Four Quarter
Preferential Distribution Non-Payment"), the number of trustees of the Board of
Trustees shall be increased by one and the holders of the outstanding Series B
Preferred Shares, voting together as a separate class, shall be entitled to
elect one additional trustee
-25-
to the Board of Trustees (a "Preferred Shares Trustee") until the full
distributions accumulated on all outstanding Series B Preferred Shares for such
four quarterly Distribution Periods have been authorized and paid or declared
and set apart for payment.
The right of the holders of Series B Preferred Shares to elect a Preferred
Shares Trustee may be exercised at any annual meeting of shareholders, or,
within the limitations hereinafter provided, at a special meeting of holders of
Series B Preferred Shares held for such purpose. At any time after such voting
power shall have so vested in the holders of Series B Preferred Shares, the
Board of Trustees shall, at the request of holders of record of at least 25% of
the Series B Preferred Shares then outstanding, call a special meeting of the
holders of Series B Preferred Shares for the election of the Preferred Shares
Trustee to be elected by the holders of Series B Preferred Shares, to be held
within 90 days after such call and at the place and upon the notice provided by
law and in the By-laws for the holding of meetings of shareholders; provided,
however, that the Board of Trustees shall not be required to call such special
meeting in the case of any such request received less than 90 days before the
date fixed for any annual meeting of shareholders. At any meeting so called or
at any annual meeting, (a) holders of a majority of the outstanding Series B
Preferred Shares, voting together as a separate class, in person or by proxy,
shall be sufficient to constitute a quorum for the election of a Preferred
Shares Trustee as provided in this Subparagraph (E)(2)(ii), and (b) holders of a
plurality of the outstanding Series B Preferred Shares, voting together as a
separate class, shall have the power to elect a Preferred Shares Trustee. If any
such special meeting required to be called as above provided shall not be called
by the Board of Trustees within 90 days of a request pursuant to this
Subparagraph (E)(2)(ii), then the holders of record of at least 25% of the
Series B Preferred Shares then outstanding may designate in writing one of their
number to call such meeting, and the person so designated may, at the Company's
expense, call such meeting to be held at the place and upon the notice above
provided. No such special meeting and no adjournment thereof shall be held on a
date later than 30 days before the annual meeting of the shareholders or a
special meeting held in place thereof next succeeding the time when the holders
of Series B Preferred Shares become entitled to elect a Preferred Shares Trustee
as above provided. No Preferred Shares Trustee elected by the holders of the
Series B Preferred Shares may be removed except by the vote of the holders of a
majority of the outstanding Series B Preferred Shares, voting together as a
separate class, in person or by proxy, at a meeting called for such purpose. So
long as a Four Quarter Preferential Distribution Non-Payment shall continue, if
a Preferred Shares Trustee who has been elected by the holders of Series B
Preferred Shares to serve on the Board of
-26-
Trustees shall no longer serve on the Board of Trustees by reason of
resignation, death or removal, such vacancy shall be filled by holders of a
plurality of the outstanding Series B Preferred Shares, voting together as a
separate class, at a meeting called in accordance with the provisions of this
Subparagraph (E)(2)(ii).
If and when all accumulated distributions on the Series B Preferred Shares
have been authorized and paid or declared and set apart for payment, the holders
of the Series B Preferred Shares shall be divested of the special voting rights
provided by this Subparagraph (E)(2), subject to revesting in the event of each
and every subsequent Four Quarter Preferential Distribution Non-Payment. Upon
termination of such special voting rights attributable to all holders of the
Series B Preferred Shares, the term of office of the Preferred Shares Trustee
shall forthwith terminate and the number of trustees constituting the entire
Board of Trustees shall be reduced by one.
3. So long as any Series B Preferred Shares are outstanding, the number
of trustees constituting the entire Board of Trustees shall at all times be such
that the exercise, by the holders of the Series B Preferred Shares of the right
to elect a Preferred Shares Trustee under the circumstances provided for in
Subparagraph (E)(2) will not contravene any provision of the Declaration of
Trust restricting the number of trustees which may constitute the entire Board
of Trustees.
4. A Preferred Shares Trustee elected pursuant to Subparagraph (E)(2) shall
serve until the earlier of (x) the next annual meeting of the shareholders of
the Company and the election (by the holders of the Series B Preferred Shares)
and qualification of his successor or (y) the termination of the special voting
rights as provided for in Subparagraph (E)(2).
F. Trustees' Right to Refuse to Transfer Series B Preferred Shares; Limitation
on Holdings.
1. The terms and provisions of this Paragraph (F) shall apply in addition
to, and not in limitation of, the terms and provisions of Section 6.6 of the
Declaration of Trust.
2. Each Person who owns directly or indirectly more than five percent in
number or value of the total Shares outstanding shall, by January 30 of each
year, give written notice to the Company stating the Person's name and address,
the number of Shares directly or indirectly owned by such Person, and a
description of the capacity in which such Shares are held. For purposes of this
Paragraph (F), the number and value of the total Shares outstanding shall be
determined by the Board of Trustees in good faith, which determination shall be
conclusive for all purposes hereunder. In addition, each direct or indirect
holder
-27-
of Shares, irrespective of such shareholder's percentage "ownership" of
outstanding Shares, shall upon demand disclose to the Company in writing such
information with respect to the direct or indirect ownership of Shares as the
Board of Trustees deems reasonably necessary from time to time to enable the
Board of Trustees to determine whether the Company complies with the REIT
Provisions of the Code (as defined in Section 1.5 of the Declaration of Trust),
to comply with the requirements of any taxing authority or governmental agency
or to ensure or ascertain compliance with this Paragraph (F). For purposes of
this Paragraph (F), "ownership" shall be as defined in Subparagraph (F)(11).
3. If, in the opinion of the Board of Trustees, which shall be binding upon
any prospective acquiror of Series B Preferred Shares, any proposed transfer
or issuance would jeopardize the status of the Company as a REIT under the REIT
Provisions of the Code, the Board of Trustees shall have the right, but not the
duty, to refuse to permit such transfer or issuance or refuse to give effect to
such transfer or issuance and to take any action to cause any such transfer not
to occur or to void any such issuance.
4. As a condition to any transfer and/or registration of transfer on the
books of the Company of any Series B Preferred Shares which could result in
direct or indirect ownership of Shares exceeding 9.8% of the lesser of the
number or the value of the total Shares (such excess shares, the "Excess
Shares") by a Person other than a Series B Excepted Person, such prospective
transferee shall give written notice to the Company of the proposed transfer and
shall furnish such opinions of counsel, affidavits, undertakings, agreements and
information as may be required by the Board of Trustees no later than the 15th
day prior to any transfer which, if consummated, would result in such ownership.
On each date of determination, the calculation of the number of the total Shares
outstanding on such date shall be made assuming the conversion or exercise of
all Series B Preferred Shares, Common Share Equivalents and Convertible
Securities of such transferee on the date of determination in accordance with
the terms of these Paragraphs (A) through (N).
5. Any transfer or issuance of Series B Preferred Shares that would (i)
create a direct or indirect owner of Excess Shares other than a Series B
Excepted Person; or (ii) result in the Company being "closely held" within the
meaning of Section 856(h) of the Code, shall be void ab initio and the
prospective acquiror shall not be entitled to any rights afforded to owners of
Series B Preferred Shares hereunder and shall be deemed never to have had an
interest therein.
"Series B Excepted Person" shall mean (i) any Person defined as an
"Excepted Person" pursuant to the Declaration of
-28-
Trust, (ii) any Person approved prior to the Initial Issue Date by the Board of
Trustees, (iii) any Person approved after the Initial Issue Date by the Board of
Trustees, at its option and in its sole discretion, and (iv) each Person listed
below, for so long as its direct or indirect ownership of Shares, individually
or in the aggregate, in any combination, with those of any or all other Persons
listed below, do not and could not exceed, the number of Shares or the
percentage set forth below of the lesser of the number or the value of the
Shares outstanding. Notwithstanding anything contained in these Paragraphs (A)
through (N) to the contrary, the Board of Trustees shall not grant approval to
any Person, and no Person shall be or be deemed a Series B Excepted Person, if
such Person's direct or indirect ownership of Series B Excess Shares would or
could result, directly, indirectly or as a result of attribution of ownership,
in termination of the status of the Company as a REIT under the REIT provisions
of the Code.
Aggregate Number of Shares or Percentage For All Such
Names of Series B Excepted Persons Excepted Persons Combined
------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Concord The maximum number of shares of beneficial interest of
Milestone Partners L.P., Concord Associates, the Company, into which such holders' Series B
Concord Income Realty VI, L.P., Castle Plaza, Inc., Preferred Shares are then convertible, plus 33,200
Mill Neck Associates and/or Mountain View Mall, Common Shares, less any shares of beneficial interest
Inc. and/or their affiliates. of the Company transferred by any such holders to any
Person who is not one of the Series B Excepted Persons
listed herein, but in no event less than 9.8%.
6. The Company, by notice to the holder, transferor or transferee thereof,
as the case may be, may purchase any or all Excess Shares (i) that are or
proposed to be transferred in violation of any of the provisions hereof or (ii)
that are or proposed to be transferred pursuant to a transfer which, in the
opinion of the Board of Trustees (which shall be binding upon any proposed
transferor or transferee of Series B Preferred Shares), would result in any
Person acquiring Series B Excess Shares, or would otherwise jeopardize the
status of the Company as a real estate investment trust under the REIT
Provisions of the Code. The Company shall have the power, by lot or other means
deemed equitable by the Board of Trustees in its sole discretion, to purchase
such Series B Excess Shares. The purchase price for each Series B Excess Share
shall be equal to the greatest of (i) the average of the closing prices for a
Series B Preferred Share for the thirty trading days preceding the day on which
notice of such proposed transfer is sent, (ii) the product of (x) the average of
the closing prices for a Common Share for the thirty trading days preceding the
day on which notice of such proposed transfer is sent and (y) the number
(including fractions) of Common Shares into which such Series B Preferred Share
may be
-29-
converted on such day and (iii) the sum of (x) the Liquidation Preference for
such Series B Preferred Share and (y) the accrued and unpaid distributions on
such Series B Preferred Share. The closing price for such days shall be the last
reported sale price regular way or, in case no such reported sale takes place on
such date, the average of the reported closing bid and asked prices regular way,
in either case on the New York Stock Exchange, Inc., or if the Series B
Preferred Shares or Common Shares, as the case may be, are not listed or
admitted to trading on the New York Stock Exchange, Inc., on the principal
national securities exchange on which the Series B Preferred Shares or Common
Shares, as the case may be, are listed or admitted to trading or, if not listed
or admitted to trading on any national securities exchange, the closing sale
price of the Series B Preferred Shares or Common Shares, as the case may be, or
in case no reported sale takes place, the average of the closing bid and asked
prices, on NASDAQ or any comparable system. If the Series B Preferred Shares or
Common Shares, as the case may be, are not quoted on NASDAQ or any comparable
system, the Board of Trustees shall in good faith determine the current market
price on such basis as it considers appropriate. Prompt payment of the purchase
price shall be made in cash by the Company in such manner as may be determined
by the Board of Trustees, but in no event later than twenty Business Days after
the Board of Trustees elects to make such purchase. From and after the date
fixed for purchase by the Board of Trustees, and so long as payment of the
purchase price for the Series B Preferred Shares to be so purchased shall have
been made or duly provided for, the holder of any Series B Excess Shares so
called for purchase shall cease to be entitled to dividends, distributions,
voting rights and other benefits with respect to such Series B Preferred Shares,
excepting only the right to payment of the purchase price fixed as aforesaid.
Any dividend or distribution paid to a proposed transferee of Series B Excess
Shares prior to the discovery by the Company that the Series B Preferred Shares
have been transferred in violation of this Paragraph (F) shall be repaid to the
Company upon demand. The Series B Preferred Shares purchased pursuant to the
provisions of this Subparagraph (F)(6) shall thereupon be retired and may not be
reissued as Series B Preferred Shares but shall thereafter have the status of
authorized but unissued Shares.
7. If Subparagraph (F)(5), (6), (7) or (8) is determined to be void or
invalid by virtue of any legal decision, statute, rule or regulation, then the
acquiror of Series B Preferred Shares in violation of such subparagraphs shall
be deemed, at the option of the Company, to have acted as agent on behalf of the
Company in acquiring such Series B Preferred Shares on behalf of the Company.
The Company, by notice to the acquiror thereof, may purchase any or all Series B
Preferred Shares so acquired in the manner designated by Subparagraph (F)(6).
-30-
8. Subject to Subparagraph (F)(12), notwithstanding any other provision in
these Paragraphs (A) through (N) to the contrary, any purported transfer, sale
or acquisition of Series B Preferred Shares (whether such purported transfer,
sale or acquisition results from the direct or indirect ownership, or
attribution of ownership, of Series B Preferred Shares) which would result in
the termination of the status of the Company as a REIT under the REIT Provisions
of the Code shall be null and void ab initio. Any such Series B Preferred Shares
may be treated by the Board of Trustees in the manner prescribed for Series B
Excess Shares in Subparagraph (F)(6).
9. Subject to Subparagraph (F)(12), nothing contained in this Paragraph (F)
or in any other provision of these Paragraphs (A) through (N) shall limit the
authority of the Board of Trustees to take such other action as it deems
necessary or advisable to protect the Company and the interests of the
Shareholders by preservation of the Company's status as a REIT under the REIT
Provisions of the Code.
10. If any provision of this Paragraph (F) or any application of any such
provision is determined to be invalid by any federal or state court having
jurisdiction over the issues, the validity of the remaining provisions shall not
be affected and other applications of such provision shall be affected only to
the extent necessary to comply with the determination of such court. To the
extent this Paragraph (F) may be inconsistent with any other provision in these
Paragraphs (A) through (N), this Paragraph (F) shall be controlling.
11. For purposes of these Paragraphs (A) through (N), Series B Preferred
Shares not owned directly shall be deemed to be owned indirectly by a Person if
that Person or a group of which he is a member would be the beneficial owner of
such Series B Preferred Shares, as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, and/or would be considered to own such Series
B Preferred Shares by reason of the REIT Provisions of the Code.
12. Notwithstanding any other provision of Paragraph (F), nothing in these
Paragraphs (A) through (N) shall preclude the settlement of transactions entered
into through the facilities of the New York Stock Exchange, Inc. The fact that
the settlement of any transaction is permitted shall not negate the effect of
any other provision of this Paragraph (F) and any transferee in such a
transaction shall be subject to all of the provisions and limitations set forth
in this Paragraph (F).
G. Redemption at the Option of the Board of Trustees.
1. After the fifth anniversary of the Initial Issue Date, if the aggregate
Liquidation Preferences of all of the
-31-
outstanding Series B Preferred Shares shall at any time be less than $3,000,000,
the Board of Trustees may, at its option and in its sole discretion, redeem the
Series B Preferred Shares in whole, subject to the limitations set forth below,
at a redemption price equal to $25.00 per share (the "Call Price"), plus (i) all
distributions accrued and unpaid on such Series B Preferred Shares for past
Distribution Periods and (ii) the pro rata portion of the distributions on such
Series B Preferred Shares for the current Distribution Period through the
Redemption Date (together, the "Redemption Distributions"), upon giving notice
as provided below.
2. At least 30 days but not more than 90 days prior to the date fixed for
the redemption of the Series B Preferred Shares (the "Redemption Date"), the
Company shall mail a written notice (a "Notice of Redemption") to each holder of
record of the Series B Preferred Shares in a postage prepaid envelope addressed
to such holder at his address as shown on the records of the Company, notifying
such holder of the election of the Company to redeem such Series B Preferred
Shares, stating the Redemption Date, the Call Price, the number of Series B
Preferred Shares then outstanding and to be redeemed and the place(s) where the
certificate(s) representing such Series B Preferred Shares are to be surrendered
for payment.
3. On or after the Redemption Date each holder of the Series B Preferred
Shares shall present and surrender his certificate or certificates for such
Series B Preferred Shares to the Company at the place designated in such notice
for redemption and thereupon the Call Price and the Redemption Distributions for
such Series B Preferred Shares shall be paid to or on the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be cancelled. From and after the Redemption
Date (unless default shall be made by the Company in payment of the Call Price
or the Redemption Distributions), (i) all distributions on the Series B
Preferred Shares shall cease to accrue, and all rights of the holders thereof as
shareholders of the Company shall cease and terminate, except for the right (x)
to surrender their Series B Preferred Shares for conversion into Common Shares
as provided for, and in accordance with, the provisions of these Paragraphs (A)
through (N) (including, without limitation, Paragraph (D) hereof) at any time
prior to the Redemption Date or (y) to receive the Call Price and the Redemption
Distributions with respect to such Series B Preferred Shares upon the surrender
of certificates representing the same, (ii) the Series B Preferred Shares shall
no longer be deemed to be outstanding for any purpose whatsoever and (iii) the
Series B Preferred Shares redeemed pursuant to the provisions of this Paragraph
(G) shall thereupon be retired and may not be reissued as Series B Preferred
Shares but shall thereafter have the status of authorized but unissued Shares.
-32-
4. If a Notice of Redemption has been given pursuant to Subparagraph (G)(2)
above and any holder of Series B Preferred Shares shall, prior to the close of
business on the last Business Day preceding the Redemption Date, give written
notice to the Company pursuant to Paragraph (D) of the conversion of any or all
of the Series B Preferred Shares to be redeemed held by such holder (accompanied
by a certificate or certificates for such shares, duly endorsed or assigned to
the Company), then such redemption shall not become effective as to such Series
B Preferred Shares to be converted, such conversion shall become effective as
provided in Paragraph (D).
H. Exclusion of Other Rights.
Except as may otherwise be required by law, the Series B Preferred Shares
shall not have any preferences, conversion or other rights, voting powers,
restrictions or limitations as to dividends or other distributions other than as
specifically set forth in the Declaration of Trust.
I. Headings of Subdivisions.
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
J. Severability of Provisions.
If any of the preferences, conversion or other rights, voting powers,
restrictions, or limitations as to dividends or other distributions of the
Series B Preferred Shares set forth in the Declaration of Trust is invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, all other preferences, conversion or other rights, voting powers,
restrictions, or limitations as to distributions of Series B Preferred Shares
set forth in the Declaration of Trust which can be given effect without the
invalid, unlawful or unenforceable provision thereof shall, nevertheless, remain
in full force and effect and no preferences, conversion or other rights, voting
powers, restrictions, or limitations as to dividends or other distributions of
the Series B Preferred Shares herein set forth shall be deemed dependent upon
any other provision thereof unless so expressed therein.
K. Ranking.
With regard to rights to receive distributions and amounts payable upon
liquidation, dissolution or winding up of the Company, the Series B Preferred
Shares shall rank senior to any Junior Shares, the Common Shares and any Common
Share Equivalent and on a parity with any other preferred shares issued by the
Company, unless the terms of such other preferred shares provide
-33-
otherwise and, if applicable, the requirements of Paragraph (L) hereof have been
complied with. However, the Company may authorize or increase any class or
series of Parity Shares or Junior Shares, or both, without the vote or consent
of the holders of the Series B Preferred Shares.
L. Limitations.
In addition to any other rights provided to the holders of the Series B
Preferred Shares by applicable law, so long as any Series B Preferred Shares are
outstanding, the Company shall not, without the affirmative vote of the holders
of at least a majority of the total number of outstanding Series B Preferred
Shares, voting together as a separate class,
(i) authorize, create or issue, or increase the par value or
authorized or issued amount of, any class or series of Senior Shares,
or rights to subscribe to or acquire, any security convertible into,
any class or series of Senior Shares, or reclassify any shares of
beneficial interest into any such Senior Shares or reclassify any
Junior Shares into Parity Shares;
(ii) amend, alter or repeal, whether by merger, consolidation or
otherwise, any of the provisions of the Declaration of Trust
(including these Paragraphs (A) through (N)) so as to adversely affect
the preferences, right to convert, conversion price adjustments,
notice rights, special conversion rights, distribution and liquidation
rights, preferences, restrictions or limitations, redemption rights or
privileges, or voting powers or rights of the Series B Preferred
Shares; or
(iii) modify an express contract right of the Series B Preferred
Shares;
but (except as otherwise provided in these Paragraphs (A) through (N) or
required by applicable law) nothing herein contained shall require such a vote
or consent (i) in connection with any increase in the total number of authorized
Common Shares, or (ii) in connection with the authorization or increase of any
class or series of Parity Shares or Junior Shares. The Company with the written
consent or affirmative vote of the holders of a majority of the Series B
Preferred Shares shall have the right to amend, alter or repeal any of the
provisions of these Paragraphs (A) through (N) without the approval, consent or
vote of any other class of shares of beneficial interest of the Company.
-34-
M. No Preemptive Rights.
No holder of Series B Preferred Shares shall be entitled to any preemptive
rights to subscribe for or acquire any unissued Shares (whether now or hereafter
authorized) or securities of the Company convertible, including securities into
or carrying a right to subscribe to or acquire Shares.
N. Notices.
Except as may otherwise be provided in the Declaration of Trust, all
notices to holders of Series B Preferred Shares shall be written, and delivered
by first class mail, postage prepaid, addressed to record holders of the Series
B Preferred Shares as their names shall appear on the share records of the
Company on the applicable record date, or, if no record date has been set, then
on the date of delivery of such notice.
SECOND: The Series B Preferred Shares have been classified by the Board of
Trustees under a power contained in the Declaration of Trust.
THIRD: These Articles Supplementary have been approved by the Board of
Trustees in the manner and by the vote required by law.
FOURTH: Each of the undersigned acknowledges these Articles Supplementary
to be the act of the Company and as to all matters or facts required to be
verified under oath, the undersigned acknowledges that to the best of his
knowledge, information and belief, these matters and facts are true in all
material respects and that this statement is made under the penalties for
perjury.
FIFTH: These Articles Supplementary and all documents, agreements,
understandings and arrangements relating hereto have been entered into or
executed on behalf of the Company by the undersigned in his capacity as a
trustee of the Company, which has been formed as a Maryland real estate invest-
ment trust pursuant to a declaration of trust of the Company dated July 20,
1992, as amended and restated, and not individually, and neither the trustees,
officers nor shareholders of the Company shall be bound or have any personal
liability hereunder or thereunder. Holders of the Series B Preferred Shares
shall look solely to the assets of the Company for satisfaction of any liability
of the Company in respect of these Articles Supplementary and all documents,
agreements, understandings and arrangements relating hereto and will not seek
recourse or commence any action against any of the trustees,
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officers or shareholders of the Company or any of their personal assets for the
performance or payment of any obligation hereunder or thereunder. The foregoing
shall also apply to any future documents, agreements, understandings,
arrangements or transactions between the Company and holders of the Series B
Preferred Shares.
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These Articles Supplementary are executed on behalf of the Company by its
Board of Trustees this __ day of __________, 1997.
KRANZCO REALTY TRUST
(SEAL)
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Exhibit B
[Articles Supplementary for Acquiror's Series C Cumulative
Redeemable Preferred Shares]
ARTICLES SUPPLEMENTARY CLASSIFYING
__________ SHARES OF BENEFICIAL INTEREST
AS
SERIES C CUMULATIVE REDEEMABLE PREFERRED SHARES
OF
BENEFICIAL INTEREST OF KRANZCO REALTY TRUST
(Pursuant to Section 8-203(b) of the
Corporations and Associations Article
of the Annotated Code of Maryland)
Kranzco Realty Trust, a real estate investment trust organized
and existing under the laws of the State of Maryland (the "Company"), and having
its executive office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Pursuant to the authority granted to and vested in the
Board of Trustees of the Company (the "Board of Trustees") in accordance with
the Amended and Restated Declaration of Trust of the Company, dated November 4,
1992, as amended (the "Declaration of Trust"), the Board of Trustees at a
meeting duly convened and held on November __, 1996 adopted resolutions
authorizing and establishing a separate class of preferred shares of beneficial
interest, out of the 100,000,000 authorized shares of beneficial interest of the
Company (the "Shares"), consisting of __________ preferred shares of beneficial
interest to be known as the "Series C Cumulative Redeemable Preferred Shares of
Beneficial Interest" (the "Series C Preferred Shares"). The Series C Preferred
Shares shall have a par value of $.01 per share. The preferences, rights, voting
powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms and conditions of redemption of the Series C Preferred
Shares, which shall be deemed to be part of Article VI of the Declaration of
Trust, are as follows:
"Series C Cumulative Redeemable Preferred Shares of Beneficial Interest:
A. Dividends.
1. The holders of the Series C Preferred Shares shall be entitled to
receive dividends, as and when declared by the Board of Trustees, out of funds
legally available for the purpose, at the rate of eight percent (8%) per annum
of the Liquidation Preference, payable in quarterly installments on the last day
of January, April, July and October of each year (each such date being a
"Dividend Payment Date") with respect to the immediately
preceding calendar quarter. The first Dividend Payment Date shall be __________,
1997. If any Dividend Payment Date shall fall on a Saturday, Sunday or legal
holiday, then such dividend shall be paid on the next business day following
such Dividend Payment Date.
2. Each dividend shall be fully cumulative and shall accrue (whether or
not declared), on a daily basis without compounding and without interest, from
__________, 1996.
3. Dividends on the Series C Preferred Shares shall be paid in cash at
the close of business on each Dividend Payment Date to the holders of record on
the last day of the immediately preceding month (i.e., the last day of March,
June, September and December of each year). All dividends on the Series C
Preferred Shares shall be paid to each holder entitled thereto pro rata based on
the number of Series C Preferred Shares held by such holder.
4. The holders of shares of the Series C Preferred Shares shall be
entitled to receive dividends provided for in this Paragraph (A) in preference
to and with priority over any dividends on and other distributions in respect of
the Common Shares of Beneficial Interest of the Company or any other class or
series of shares or equity securities of the Company heretofore or hereafter
authorized which by its terms ranks junior to the Series C Preferred Shares in
respect of dividend rights and rights of liquidation, dissolution and winding up
of the affairs of the Company (the "Junior Securities"). So long as any shares
of the Series C Preferred Shares are outstanding, the Company shall not declare,
pay or set apart for payment any dividend on account of, or set apart for
payment money for a sinking or other similar fund for the purchase, redemption
or other retirement of any Junior Securities or any warrants, rights, calls or
options exercisable for or convertible into any Junior Security, or make any
distribution in respect thereof, either directly or indirectly, and whether in
cash, obligations or shares of the Company or other property (other than
distributions or dividends in Junior Securities to the holders of Junior
Securities), unless full dividends on all outstanding shares of the Series C
Preferred Shares shall have been paid in full or a sum set apart sufficient for
the full payment thereof.
5. Upon issuance, the Series C Preferred Shares will rank on a parity
as to distributions with (i) the Series A Increasing Rate Cumulative Convertible
Preferred Shares of Beneficial Interest of the Company (the "Series A Preferred
Shares") and (ii) the Series B Cumulative Convertible Preferred Shares of
Beneficial Interest of the Company (the "Series B Preferred Shares").
-2-
B. Voting Rights. Except as required by law, the holders of the Series C
Preferred Shares shall have no right to vote at any meeting of shareholders of
the Company. Except as required by law, holders of the Series C Preferred Shares
shall not be entitled to receive notice of any meeting of shareholders at which
they are not entitled to vote on or consent to any matter.
C. Liquidation Preference.
1. In the event of a voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Company, the holders of shares of the Series
C Preferred Shares then outstanding shall be entitled to receive, out of the
assets of the Company, $10.00 per share (the "Liquidation Preference") plus an
amount per share equal to all accrued and unpaid dividends thereon, if any, up
to the date of liquidation, dissolution or winding up of the affairs of the
Company, before any distribution or payment is made on the Common Shares of
Beneficial Interest of the Company or any other class of Junior Securities. If
upon any liquidation, dissolution or winding up of the affairs of the Company,
the assets distributable among the holders of Series C Preferred Shares and all
other classes and series of shares of beneficial interest which by their terms
rank (as to any such distribution of assets) on a parity with the Series C
Preferred Shares are insufficient to permit the payment in full to the holders
of all such shares of all preferential amounts payable to all such holders, then
the entire assets of the Company thus distributable shall be distributed ratably
among the holders of Series C Preferred Shares and such other classes and series
of shares of beneficial interest which by their terms rank (as to any such
distribution of assets) on a parity with the Series C Preferred Shares in
proportion to the respective amounts that would be payable per share if such
assets were sufficient to permit payment in full.
2. Neither the sale, lease or exchange (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
and assets of the Company, nor the merger or consolidation of the Company into
or with any corporation, nor the merger of any corporation with or into the
Company, shall be deemed to be a dissolution, liquidation or winding up of the
affairs of the Company within the meaning of this Paragraph (C), unless such
sale, lease or conveyance shall be in connection with a plan of liquidation,
dissolution or winding up of the affairs of the Company.
3. Upon issuance, the Series C Preferred Shares will rank on a parity
with the Series A Preferred Shares and the Series B Preferred Shares as to the
distribution of assets upon any liquidation, dissolution or winding up of the
affairs of the Company.
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D. Redemption.
1. Mandatory Redemption. The Company shall, to the extent that funds
are legally available therefor, redeem in eight equal quarterly installments on
the last day of January, April, July and October of each calendar year,
beginning __________, 1998, __________ shares for $__________, until all
outstanding shares of the Series C Preferred Shares have been redeemed, at a
redemption price per Series C Preferred Share (the "Redemption Price per Series
C Preferred Share") equal to the Liquidation Preference plus an amount equal to
the accrued and unpaid dividends, if any, allocable to such Series C Preferred
Share. All shares to be so redeemed shall be redeemed from each holder of Series
C Preferred Shares pro rata based on the number of Series C Preferred Shares
held by such holder. Notwithstanding the immediately preceding sentence, if (i)
the Company shall fail to discharge any mandatory redemption obligation
contained in this Subparagraph (D)(1) for any reason, (ii) the Company shall
have failed to pay a distribution on the outstanding Series C Preferred Shares
for any quarter within five days of the distribution payment date therefor or
(iii) the Company merges or consolidates with or into any entity, unless (A)
immediately following such merger or consolidation, more than 50% of the
surviving company's issued and outstanding voting securities are held by the
holders of the Company's issued and outstanding voting securities immediately
prior to such merger or consolidation and (B) effective provision is made in the
charter documents of the surviving person or entity or otherwise for the
recognition, preservation and protection of the preferences, conversion and
other rights, voting powers, restrictions and limitations as to dividends or
other distributions of the Series C Preferred Shares, then (x) no dividends or
other distributions shall be paid on the Common Shares of Beneficial Interest of
the Company, any other class of Junior Securities or any class or series of
shares or equity securities of the Company heretofore or hereafter authorized
which by its terms ranks on a parity with the Series C Preferred Shares in
respect of dividend rights and rights of liquidation, dissolution and winding up
of the affairs of the Company and (y) the Company shall immediately redeem all
outstanding shares of the Series C Preferred Shares at the Redemption Price per
Series C Preferred Share.
If the Company shall fail to discharge any mandatory
redemption obligation due to the fact that funds are not legally available, such
mandatory redemption obligation shall be discharged as soon as the Company has
funds legally available therefor to discharge such obligation.
2. Optional Redemption. The Board of Trustees shall have the right, but
not the obligation, to redeem an unlimited number of shares of the Series C
Preferred Shares at the Redemption Price per Series C Preferred Share at any
time, and from time to
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time. In the event of the redemption of only a part of the outstanding shares of
the Series C Preferred Shares, the shares to be redeemed shall be redeemed from
each holder of Series C Preferred Shares pro rata based on the number of Series
C Preferred Shares held by such holder. In the event of an optional redemption
of Series C Preferred Shares pursuant to these Articles Supplementary, the
Company shall have the right to apply any such optionally redeemed Series C
Preferred Shares in satisfaction of its mandatory redemption obligation pursuant
to these Articles Supplementary, in such order as the Company shall determine in
its sole discretion.
3. Redemption Procedures.
(a) In the event of any redemption of shares of the Series C
Preferred Shares, written notice of such redemption (a "Redemption Notice")
shall be given by the Company to the holders of record of such shares at such
holders' addresses as the same appear on the share register of the Company, by
certified or registered mail, postage prepaid; provided, however, that neither
the failure to give a Redemption Notice nor any defect therein shall affect the
validity of the proceeding for the redemption of any shares of the Series C
Preferred Shares except as to the holder to whom the Company has failed to give
a Redemption Notice or except as to the holder whose Redemption Notice was
defective. Each such Redemption Notice shall state (i) the proposed date of
redemption; (ii) the number of shares of the Series C Preferred Shares owned by
the shareholder receiving such notice to be redeemed; (iii) the Redemption Price
per Series C Preferred Share for such shares; and (iv) the place where
certificates for such shares are to be surrendered for payment of such
redemption price.
(b) Upon surrender of the certificates representing the Series
C Preferred Shares in accordance with the Redemption Notice, such shares shall
be redeemed by the Company at the applicable Redemption Price as provided for
herein.
(c) The Company shall have the right, on the date on which the
Redemption Notice has been given as above provided or any subsequent date, to
deposit in trust an amount equal to the aggregate Redemption Price of the shares
of the Series C Preferred Shares to be redeemed and in the event of such
deposit, notwithstanding that any certificates for shares of the Series C
Preferred Shares so called for redemption shall not have been surrendered for
cancellation, all rights of the holders of shares of the Series C Preferred
Shares to be redeemed shall cease from and after the date of such deposit, other
than the right to receive the redemption price as aforesaid.
Any moneys deposited by the Company pursuant to this Paragraph
(D) which shall not be required for such redemption
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because of the exercise of any right subsequent to the date of such deposit
shall be returned to the Company forthwith. Any interest accrued on any funds so
deposited shall belong to the Company and be paid to it from time to time. Any
funds so deposited and unclaimed at the end of four years from the date of
redemption, shall be paid to the Company, after which repayment the holders of
shares of the Series C Preferred Shares so called for redemption shall look only
to the Company for the payment thereof, without interest.
E. Status of Reacquired Shares. All shares of the Series C Preferred Shares that
have been issued and reacquired or redeemed in any manner by the Company shall
not be reissued or resold, but shall be cancelled, and the Company may from time
to time cause all such shares to be retired in the manner provided by law."
F. Limitations. So long as any Series C Preferred Shares are outstanding, the
Company shall not, without the affirmative vote of the holders of at least a
majority of the total number of outstanding Series C Preferred Shares, voting as
a class, authorize, create or issue any class or series of, or rights to
subscribe to or acquire, any security convertible into, any class or series of
shares of beneficial interest having mandatory redemption obligations on the
part of the Company senior to the Series C Preferred Shares, or reclassify any
shares of beneficial interest into any such senior shares.
In addition to any other rights provided to the holders of the
Series C Preferred Shares by applicable law, so long as any Series C Preferred
Shares are outstanding, the Company shall not, without the affirmative vote of
the holders of at least a majority of the total number of outstanding Series C
Preferred Shares, voting together as a separate class,
(i) amend, alter or repeal, whether by merger, consolidation
or otherwise, any of the provisions of its Declaration of
Trust (including, without limitation, these Paragraphs (A)
through (F)) so as to adversely affect the preferences, notice
rights, distribution and liquidation rights, preferences,
restrictions and limitations, redemption rights and privileges
or voting powers or rights of the Series C Preferred Shares;
or
(ii) modify an express contract right of the Series C
Preferred Shares.
The Company with the written consent of the holders of a majority of the Series
C Preferred Shares shall have the right to amend, alter or repeal any of the
provisions of these Paragraphs (A) through (F) without the approval, consent or
vote of any other class of shares of beneficial interest of the Company.
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SECOND: The Series C Preferred Shares have been classified by the Board
of Trustees under a power contained in the Declaration of Trust.
THIRD: These Articles Supplementary have been approved by the Board of
Trustees in the manner and by the vote required by law.
FOURTH: Each of the undersigned acknowledges these Articles
Supplementary to be the act of the Company and as to all matters or facts
required to be verified under oath, that to the best of his knowledge,
information and belief, these matters and facts are true in all material
respects and such statement is made under the penalties for perjury.
FIFTH: These Articles Supplementary and all documents, agreements,
understandings and arrangements relating hereto have been entered into or
executed on behalf of the Company by the undersigned in his capacity as a
trustee of the Company, which has been formed as a Maryland real estate
investment trust pursuant to a declaration of trust of the Company dated July
20, 1992, as amended and restated, and not individually, and neither the
trustees, officers nor shareholders of the Company shall be bound or have any
personal liability hereunder or thereunder. Holders of the Series C Preferred
Shares shall look solely to the assets of the Company for satisfaction of any
liability of the Company in respect of these Articles Supplementary and all
documents, agreements, understandings and arrangements relating hereto and will
not seek recourse or commence any action against any of the trustees, officers
or shareholders of the Company or any of their personal assets for the
performance or payment of any obligation hereunder or thereunder. The foregoing
shall also apply to any future documents, agreements, understandings,
arrangements or transactions between the Company and holders of the Series C
Preferred Shares.
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These Articles Supplementary are executed on behalf of the Company by
its Board of Trustees this __ day of __________, 199_.
KRANZCO REALTY TRUST (SEAL)
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