EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
Dated as of May 15, 2000
by and among
HERITAGE PROPERTY INVESTMENT TRUST, INC.,
HERITAGE-▇▇▇▇▇▇ ACQUISITION, INC.
and
▇▇▇▇▇▇▇ REAL ESTATE, INC.
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TABLE OF CONTENTS
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ARTICLE I THE MERGER........................................................1
Section 1.1. The Merger...................................................1
Section 1.2. Closing......................................................2
Section 1.3. Effective Time...............................................2
Section 1.4. Merger Consideration.........................................2
Section 1.5. Charter and By-laws..........................................2
Section 1.6. Directors and Officers of the Surviving Corporation..........3
Section 1.7. Termination of ▇▇▇▇▇▇▇ Dividend Reinvestment and
Stock Purchase Plan..........................................3
Section 1.8. ▇▇▇▇▇▇▇ Stock Options and Related Matters....................3
ARTICLE II EFFECTS OF THE MERGER; EXCHANGE OF CERTIFICATES...................3
Section 2.1. Effect on Capital Stock......................................3
(a) Capital Stock Owned by Heritage or ▇▇▇▇▇▇▇
Subsidiaries.................................................3
(b) Shares of Capital Stock of Heritage and the Heritage
Merger Sub...................................................3
Section 2.2. Payment for Securities/Exchange of Certificates..............4
(a) Exchange Agent...............................................4
(b) Exchange Procedures..........................................4
(c) Liquidating Distribution.....................................5
(d) No Further Ownership Rights..................................5
(e) Termination of Exchange Fund.................................5
(f) No Liability.................................................5
(g) Lost, Stolen, or Destroyed Certificates......................5
(h) Withholding of Tax...........................................5
(i) No Dissenters' Rights........................................6
(j) Series B and Series C Cumulative Redeemable Perpetual
Preferred Units of the ▇▇▇▇▇▇▇ OP............................6
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................6
Section 3.1. Representations and Warranties of ▇▇▇▇▇▇▇....................6
(a) Organization, Standing and Corporate Power of ▇▇▇▇▇▇▇........6
(b) ▇▇▇▇▇▇▇ Subsidiaries; Interests in Other Persons.............6
(c) Capital Structure............................................7
(d) Authority; No Violations; Consents and Approval; LP
Units........................................................9
(e) SEC Documents...............................................11
(f) Absence of Certain Changes or Events........................11
(g) No Undisclosed Material Liabilities.........................12
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(h) No Default..................................................12
(i) Compliance with Applicable Laws.............................12
(j) Litigation..................................................13
(k) Taxes.......................................................13
(l) Pension and Benefit Plans; ERISA............................15
(m) Labor and Employment Matters................................17
(n) Intangible Property.........................................18
(o) Environmental Matters.......................................19
(p) Properties..................................................20
(q) Insurance...................................................22
(r) Opinion of Financial Advisor................................22
(s) Vote Required...............................................22
(t) Beneficial Ownership of ▇▇▇▇▇▇▇ Common Stock................23
(u) Brokers.....................................................23
(v) Investment Company Act of 1940..............................23
(w) Contracts...................................................23
(x) Rule 16b-3..................................................23
(y) Amendment to the ▇▇▇▇▇▇▇ OP Agreement.......................24
(z) No Dissenters' Rights.......................................24
(aa) State Takeover Statutes.....................................24
Section 3.2. Representations and Warranties of Heritage..................24
(a) Organization, Standing and Corporate Power of
Heritage and the Heritage Merger Sub........................24
(b) Heritage OP; Interests in Other Persons.....................24
(c) Capital Structure...........................................24
(d) Authority; No Violations; Consents and Approvals............25
(e) Litigation..................................................26
(f) Interim Operations of the Heritage Merger Sub...............26
(g) Financial Condition of Heritage.............................26
(h) Financing Commitment Letters................................27
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS PENDING THE
MERGER...........................................................27
Section 4.1. Conduct of Business by ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ OP...........27
ARTICLE V ADDITIONAL COVENANTS.............................................30
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(continued)
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Section 5.1. Preparation of the Proxy Statement; Stockholders'
Meeting; Partners' Consents.................................30
Section 5.2. Access to Information; Confidentiality......................30
Section 5.3. Commercially Reasonable Efforts; Notification...............31
Section 5.4. Tax Treatment...............................................32
Section 5.5. No Solicitation of Transactions.............................32
Section 5.6. Public Announcements........................................33
Section 5.7. Transfer and Gains Taxes; Stockholder Demand Letters........33
Section 5.8. Employee Arrangements.......................................33
(a) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreements................................33
(b) Benefit Plans...............................................34
(c) Employee Loans..............................................34
Section 5.9. Indemnification; Directors' and Officers' Insurance.........34
Section 5.10. Interim Transactions Committee..............................35
Section 5.11. Transactions Relating to the ▇▇▇▇▇▇▇ OP.....................36
Section 5.12. Notice of the Merger to LP Unit Holders.....................37
Section 5.13. Assistance..................................................37
Section 5.14. Proxy Solicitor.............................................38
Section 5.15. ▇▇▇▇▇▇▇ Subsidiaries........................................38
Section 5.16. Environmental Matters.......................................38
Section 5.17. Amendment of ▇▇▇▇▇▇▇ OP and ▇▇▇▇▇▇▇ Subsidiary
Agreements..................................................38
Section 5.18. Information Supplied........................................39
Section 5.19. Required Financing..........................................39
ARTICLE VI CONDITIONS PRECEDENT.............................................39
Section 6.1. Conditions to Each Party's Obligation to Effect the
Merger......................................................39
(a) Stockholders Approval.......................................39
(b) No Injunctions or Restraints................................39
(c) Other Approvals.............................................40
Section 6.2. Conditions to Obligations of Heritage and the
Heritage Merger Sub.........................................40
(a) Representations and Warranties..............................40
(b) Performance of Obligations of ▇▇▇▇▇▇▇.......................40
(c) Material Adverse Change.....................................40
(d) Opinion Relating to REIT and Partnership Status.............40
(e) Consents....................................................40
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(continued)
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Section 6.3. Conditions to Obligations of ▇▇▇▇▇▇▇........................41
(a) Representations and Warranties..............................41
(b) Performance of Obligations of Heritage......................41
ARTICLE VII BOARD ACTIONS....................................................41
Section 7.1. Board Actions...............................................41
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER................................42
Section 8.1. Termination.................................................42
Section 8.2. Expenses....................................................43
Section 8.3. Effect of Termination.......................................47
Section 8.4. Amendment...................................................47
Section 8.5. Extension; Waiver...........................................47
ARTICLE IX GENERAL PROVISIONS...............................................47
Section 9.1. Nonsurvival of Representations and Warranties...............47
Section 9.2. Notices.....................................................48
Section 9.3. Interpretation..............................................48
Section 9.4. Counterparts................................................49
Section 9.5. Entire Agreement; No Third-Party Beneficiaries..............49
Section 9.6. Governing Law...............................................49
Section 9.7. Assignment..................................................49
Section 9.8. Enforcement.................................................49
Section 9.9. Exhibits; Disclosure Letter.................................49
ARTICLE X CERTAIN DEFINITIONS..............................................49
Section 10.1. Certain Definitions.........................................49
SCHEDULES
A List of ▇▇▇▇▇▇▇ Subsidiaries to be Liquidated.....................Sch. A
Exhibits
A Form of ▇▇▇▇▇▇▇ Irrevocable Proxy................................ A-1
B Financing Commitment Letters..................................... B-1
C Form of Amendment to the ▇▇▇▇▇▇▇ OP Agreement Relating to
Section 514(c)(9)(E) of the Code................................. C-1
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DEFINED TERMS
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Affiliate....................................................................49
Agreement.....................................................................1
▇▇▇▇▇▇▇.......................................................................1
▇▇▇▇▇▇▇ Break-Up Expenses....................................................45
▇▇▇▇▇▇▇ Break-Up Fee.........................................................44
▇▇▇▇▇▇▇ Break-Up Tax Opinion.................................................45
▇▇▇▇▇▇▇ By-laws...............................................................6
▇▇▇▇▇▇▇ Charter...............................................................6
▇▇▇▇▇▇▇ Common Stock..........................................................1
▇▇▇▇▇▇▇ Disclosure Letter.....................................................6
▇▇▇▇▇▇▇ DRSPP.................................................................3
▇▇▇▇▇▇▇ Employee Benefit Plans...............................................15
▇▇▇▇▇▇▇ ERISA Affiliate......................................................15
▇▇▇▇▇▇▇ Expense Base Amount..................................................45
▇▇▇▇▇▇▇ Fee Base Amount......................................................44
▇▇▇▇▇▇▇ Intangible Property..................................................18
▇▇▇▇▇▇▇ Irrevocable Proxies...................................................1
▇▇▇▇▇▇▇ Material Adverse Effect...............................................6
▇▇▇▇▇▇▇ OP....................................................................1
▇▇▇▇▇▇▇ OP Agreement..........................................................1
▇▇▇▇▇▇▇ OP Amendment.........................................................36
▇▇▇▇▇▇▇ OP Offer.............................................................36
▇▇▇▇▇▇▇ OP Offering Document.................................................36
▇▇▇▇▇▇▇ Option Plan...........................................................3
▇▇▇▇▇▇▇ Options...............................................................3
▇▇▇▇▇▇▇ Other Interests.......................................................7
▇▇▇▇▇▇▇ Pension Plans........................................................15
▇▇▇▇▇▇▇ Permits..............................................................12
▇▇▇▇▇▇▇ Preferred Units.......................................................8
▇▇▇▇▇▇▇ Properties...........................................................20
▇▇▇▇▇▇▇ Property.............................................................20
▇▇▇▇▇▇▇ Property Restrictions................................................21
▇▇▇▇▇▇▇ SEC Documents........................................................11
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreements.................................................17
▇▇▇▇▇▇▇ Stockholder Approval.................................................22
▇▇▇▇▇▇▇ Stockholder Meeting...................................................9
▇▇▇▇▇▇▇ Subsidiary...........................................................49
Cash Amount..................................................................36
CERCLA.......................................................................20
Certificate...................................................................4
Claim........................................................................35
Closing.......................................................................2
Closing Date..................................................................2
Code..........................................................................5
Commitment...................................................................28
Common Stock Merger Consideration.............................................1
Competing Transaction........................................................32
Confidentiality Agreement....................................................31
Effective Time................................................................2
Environmental Law............................................................19
ERISA........................................................................15
Exchange Act.................................................................10
Exchange Agent................................................................4
Exchange Fund.................................................................4
Financing....................................................................50
Financing Date...............................................................42
Financing Letters............................................................27
GAAP.........................................................................11
Governmental Entity...........................................................5
GP Units......................................................................8
Hazardous Material...........................................................19
Heritage......................................................................1
Heritage Break-Up Expenses...................................................44
Heritage Break-Up Fee........................................................43
Heritage Break-Up Tax Opinion................................................43
Heritage Common Stock........................................................24
Heritage Expense Base Amount.................................................44
Heritage Fee Base Amount.....................................................43
Heritage LP Units............................................................25
Heritage Material Adverse Effect.............................................24
Heritage Merger Sub...........................................................1
Heritage OP..................................................................24
Heritage Series A Preferred Stock............................................24
Heritage Series B Preferred Stock.............................................6
Heritage Series C Preferred Stock.............................................6
Heritage Subsidiary..........................................................50
HSR Act......................................................................10
Indemnified Parties..........................................................34
Interim Transactions Committee...............................................35
Knowledge....................................................................50
Law..........................................................................50
Letter of Transmittal.........................................................4
Liens.........................................................................7
Limited Partner Agreements...................................................50
LP Unit Consideration.........................................................1
LP Unit Holders...............................................................1
LP Units......................................................................1
Material Contracts...........................................................23
Merger........................................................................1
Merger Consideration..........................................................1
MGCL..........................................................................2
PCBs.........................................................................19
Person.......................................................................50
Preferred Stock Merger Consideration..........................................1
Property Agreements..........................................................21
Proxy Statement..............................................................10
Qualifying Income............................................................43
REIT.........................................................................13
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DEFINED TERMS
(continued)
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REIT Requirements............................................................43
Release......................................................................19
Rent Roll....................................................................22
SEC..........................................................................10
Securities Act...............................................................11
Series A Preferred Stock......................................................1
Series A Units................................................................8
Series B Preferred Stock......................................................6
Series B Units................................................................6
Series C Preferred Stock......................................................6
Series C Units................................................................6
Subsidiary...................................................................50
Superior Competing Transaction...............................................32
Surviving Corporation.........................................................2
Takeover Statute.............................................................24
Tax..........................................................................50
Tax Return...................................................................50
Taxes........................................................................50
Transaction Documents.........................................................9
Transfer and Gains Taxes.....................................................33
Unsecured Notes..............................................................10
Voting Debt..................................................................50
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AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of May 15, 2000,
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by and among HERITAGE PROPERTY INVESTMENT TRUST, INC., a Maryland corporation
("Heritage"), HERITAGE-▇▇▇▇▇▇ ACQUISITION, INC., a Maryland corporation and a
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wholly-owned subsidiary of Heritage (the "Heritage Merger Sub"), and ▇▇▇▇▇▇▇
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REAL ESTATE, INC., a Maryland corporation ("▇▇▇▇▇▇▇").
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RECITALS
A. The Board of Directors of ▇▇▇▇▇▇▇ and Heritage have determined that it
is advisable and in the best interest of ▇▇▇▇▇▇▇ and Heritage and their
stockholders that, upon the terms and subject to the conditions set forth in
this Agreement, ▇▇▇▇▇▇▇ will be merged with and into the Heritage Merger Sub,
with the Heritage Merger Sub continuing as the surviving corporation in the
merger (the "Merger"), in which each issued and outstanding share of common
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stock, par value $.01 per share, of ▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇ Common Stock") will be
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converted into the right to receive $22.00 in cash (the "Common Stock Merger
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Consideration") and each issued and outstanding share of 8.4% Series A
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Convertible Preferred Stock, par value $.01 per share, of ▇▇▇▇▇▇▇ (the "Series A
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Preferred Stock") will be converted into the right to receive approximately
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$22.45815 in cash (the "Preferred Stock Merger Consideration" and, together with
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the Common Stock Merger Consideration, the "Merger Consideration").
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B. In a transaction to be completed concurrently with the Merger, Heritage
will, upon the terms and subject to the conditions set forth in this Agreement,
offer to the holders of common units of limited partner interest (such units,
the "LP Units" and such holders, the "LP Unit Holders") of ▇▇▇▇▇▇▇ Operating
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Limited Partnership, a Delaware limited partnership and subsidiary of ▇▇▇▇▇▇▇
(the "▇▇▇▇▇▇▇ OP"), the opportunity to receive in exchange for each issued and
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outstanding LP Unit $22.00 in cash (the "LP Unit Consideration"). Upon
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completion of the Merger, the ▇▇▇▇▇▇▇ OP's Second Restated Agreement of Limited
Partnership, dated as of September 2, 1997 (the "▇▇▇▇▇▇▇ OP Agreement"), will be
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amended as set forth in Sections 5.11(b) and 5.17 hereof.
C. Heritage and ▇▇▇▇▇▇▇ intend that, for Federal income tax purposes, the
Merger will be treated as a taxable sale of assets by ▇▇▇▇▇▇▇ in exchange for
cash and the assumption of the liabilities and a liquidating distribution of
such cash to ▇▇▇▇▇▇▇ stockholders.
D. Contemporaneously with the execution and delivery of this Agreement,
certain ▇▇▇▇▇▇▇ stockholders, as contemplated in Section 5.1(c) hereof, have
entered into agreements, each substantially in the form of Exhibit A hereto (the
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"▇▇▇▇▇▇▇ Irrevocable Proxies"), with Heritage pursuant to which, among other
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things, such stockholders have granted to Heritage irrevocable proxies to vote
their shares in favor of the Merger, this Agreement and the other transactions
contemplated hereby.
AGREEMENT
In consideration of the representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger.
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(a) Upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time (as hereinafter defined), ▇▇▇▇▇▇▇ shall be
merged with and into the Heritage Merger Sub
in accordance with the Maryland General Corporation Law (the "MGCL"), whereupon
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the separate corporate existence of ▇▇▇▇▇▇▇ shall cease and the Heritage Merger
Sub shall continue as the surviving corporation in the Merger (in such capacity,
the "Surviving Corporation").
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(b) The Merger shall have the effects set forth in the MGCL.
Accordingly, from and after the Effective Time, the Surviving Corporation shall
have all the purposes and powers and liabilities of the Heritage Merger Sub and
▇▇▇▇▇▇▇.
Section 1.2. Closing. The closing of the Merger (the "Closing") will take
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place at 10:00 a.m. New York City time on the second business day after the
satisfaction or waiver of the conditions set forth in Article VI (the "Closing
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Date"), at the offices of ▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, unless another date or place is agreed to in writing
by the parties; provided, however, that Heritage shall not be obligated to
proceed with the Closing until the later of (A) 14 days following the date of
the ▇▇▇▇▇▇▇ Stockholder Approval (as hereinafter defined) or (B) August 31,
2000.
Section 1.3. Effective Time. On the Closing Date, the parties shall execute
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and file Articles of Merger in accordance with, and shall make all other filings
or recordings required with respect to the Merger under, the MGCL. The Merger
shall become effective when the Articles of Merger have been accepted for
recording by the State Department of Assessments and Taxation of the State of
Maryland or at such other time or times as may be agreed by Heritage and ▇▇▇▇▇▇▇
(not to exceed 30 days after the Articles of Merger are accepted for recording)
and specified in the Articles of Merger (the "Effective Time"), it being
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understood that the parties shall cause the Effective Time to occur as soon as
practicable after the Closing.
Section 1.4. Merger Consideration. At the Effective Time, by virtue of the
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Merger and without any further action on the part of Heritage, except as
provided in Section 2.1 hereof, ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇ stockholders, the
following shall occur:
(a) each share of ▇▇▇▇▇▇▇ Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive in cash the Common Stock Merger Consideration, without interest thereon,
upon surrender of the Certificate (as hereinafter defined) formerly representing
such share; and
(b) each share of Series A Preferred Stock issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive in cash the Preferred Stock Merger Consideration, without interest
thereon, upon surrender of the Certificate formerly representing such share.
All such shares of ▇▇▇▇▇▇▇ Common Stock and Series A Preferred Stock, when so
converted, shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a Certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Common Stock Merger Consideration or
the Preferred Stock Merger Consideration, as applicable, to be paid in
consideration therefor upon the surrender of such Certificates in accordance
with Section 2.2 hereof, without interest.
Section 1.5. Charter and By-laws. The charter and by-laws of the Heritage
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Merger Sub shall continue to be the charter and by-laws of the Surviving
Corporation following the Effective Time until further amended in accordance
with the MGCL.
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Section 1.6. Directors and Officers of the Surviving Corporation. From and
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after the Effective Time, the directors and officers of the Heritage Merger Sub
shall continue to be the directors and officers of the Surviving Corporation,
and such directors and officers shall serve until their successors have been
duly elected or appointed (in the case of officers) and qualified, or until
their death, resignation or removal from office in accordance with the Surviving
Corporation's charter and by-laws.
Section 1.7. Termination of ▇▇▇▇▇▇▇ Dividend Reinvestment and Stock
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Purchase Plan. Prior to the execution of this Agreement, the ▇▇▇▇▇▇▇ Board of
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Directors has authorized the termination of the ▇▇▇▇▇▇▇ Dividend Reinvestment
and Stock Purchase Plan (the "▇▇▇▇▇▇▇ DRSPP") and ▇▇▇▇▇▇▇ shall, as soon as
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reasonably practicable following the date hereof, take all actions necessary to
cause the termination of the ▇▇▇▇▇▇▇ DRSPP.
Section 1.8. ▇▇▇▇▇▇▇ Stock Options and Related Matters.
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(a) In connection with the Merger, each option (collectively, the
"▇▇▇▇▇▇▇ Options") to purchase ▇▇▇▇▇▇▇ Common Stock granted under ▇▇▇▇▇▇▇'▇ 1993
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Stock Option and Incentive Plan (the "▇▇▇▇▇▇▇ Option Plan") which is outstanding
-------------------
immediately prior to the Effective Time, whether or not then vested or
exercisable, shall become fully vested and exercisable. At the Effective Time,
Heritage shall pay to each holder of a ▇▇▇▇▇▇▇ Option cash in an amount equal to
the product of (i) the number of shares of ▇▇▇▇▇▇▇ Common Stock provided for in
such ▇▇▇▇▇▇▇ Option and (ii) the excess, if any, of the Common Stock Merger
Consideration over the exercise price per share provided for in such ▇▇▇▇▇▇▇
Option, which cash payment shall be treated as compensation and shall be net of
any applicable Tax (as defined in Article X). Notwithstanding the foregoing, if
the exercise price per share provided for in any ▇▇▇▇▇▇▇ Option exceeds the
Common Stock Merger Consideration, no cash shall be paid with regard to such
▇▇▇▇▇▇▇ Option to the holder of such ▇▇▇▇▇▇▇ Option. At and following the
Effective Time, all outstanding ▇▇▇▇▇▇▇ Options shall automatically be canceled.
(b) Except as may be otherwise agreed to by Heritage or the
Heritage Merger Sub and ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ covenants that the ▇▇▇▇▇▇▇ Option Plan
shall terminate as of the Effective Time and the provisions in any other plan,
program or arrangement providing for the issuance or grant of any other interest
in respect of the capital stock of ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries
(as defined in Article X) shall be of no further force or effect and shall be
deemed to be terminated as of the Effective Time and no holder of a ▇▇▇▇▇▇▇
Option or any participant in the ▇▇▇▇▇▇▇ Option Plan shall have any right
thereunder to acquire any equity securities of ▇▇▇▇▇▇▇, the Surviving
Corporation or any Subsidiary (as defined in Article X) thereof.
ARTICLE II
EFFECTS OF THE MERGER;
EXCHANGE OF CERTIFICATES
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Section 2.1. Effect on Capital Stock.
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(a) Capital Stock Owned by Heritage or ▇▇▇▇▇▇▇ Subsidiaries. As of
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the Effective Time, any shares of capital stock of ▇▇▇▇▇▇▇ that are owned by
Heritage or any ▇▇▇▇▇▇▇ Subsidiary automatically shall be canceled and retired
and all rights with respect thereto shall cease to exist and no consideration
shall be delivered in exchange therefor.
(b) Shares of Capital Stock of Heritage and the Heritage Merger
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Sub. Upon the Effective Time, each share of capital stock of Heritage and the
---
Heritage Merger Sub outstanding
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immediately prior to the Effective Time shall remain outstanding and shall
represent one share of validly issued, fully paid and nonassessable capital
stock of the same class and designation.
Section 2.2. Payment for Securities/Exchange of Certificates.
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(a) Exchange Agent. (i) Immediately after the Effective Time,
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Heritage or the Surviving Corporation shall deposit with a bank or trust company
designated by Heritage and reasonably acceptable to ▇▇▇▇▇▇▇ (the "Exchange
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Agent"), for the benefit of the holders of shares of ▇▇▇▇▇▇▇ Common Stock and
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Series A Preferred Stock, as applicable, for payment in accordance with this
Article II, through the Exchange Agent, cash in an amount sufficient to pay the
Common Stock Merger Consideration or Preferred Stock Merger Consideration, as
applicable (such cash being hereinafter referred to as the "Exchange Fund"),
payable pursuant to Section 1.4 hereof in exchange for outstanding shares of
▇▇▇▇▇▇▇ Common Stock and Series A Preferred Stock, as applicable.
(ii) Within five business days after the Effective Time, the
Exchange Agent, pursuant to irrevocable instructions, shall deliver the Merger
Consideration to be paid pursuant to Section 1.4 hereof out of the Exchange
Fund. The Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. (i) Within five business days 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 outstanding shares of ▇▇▇▇▇▇▇ Common Stock or Series A Preferred
Stock (each, a "Certificate"), which holder's shares of ▇▇▇▇▇▇▇ Common Stock
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and/or Series A Preferred Stock were converted into the right to receive the
Common Stock Merger Consideration or Preferred Stock Merger Consideration, as
applicable, in each case as set forth in Section 1.4 hereof: (A) a letter of
transmittal (a "Letter of Transmittal") which shall specify that delivery shall
---------------------
be effected and risk of loss and title to the Certificates shall pass only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as the Surviving Corporation may reasonably specify;
and (B) instructions for use in effecting the surrender of the Certificates in
exchange for the applicable Merger Consideration.
(ii) Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with a Letter of Transmittal, duly executed, and any
other documents reasonably required by the Exchange Agent or the Surviving
Corporation, (A) the holder of a Certificate formerly representing shares of
▇▇▇▇▇▇▇ Common Stock or Series A Preferred Stock shall be entitled to receive in
exchange therefor the applicable amount of the Common Stock Merger Consideration
or the Preferred Stock Merger Consideration, as the case may be, which such
holder has the right to receive pursuant to the provisions of Section 1.4; and
(B) the Certificate so surrendered shall forthwith be canceled.
(iii) In the event of a transfer of ownership of ▇▇▇▇▇▇▇
Common Stock or Series A Preferred Stock, which is not registered in the
transfer records of ▇▇▇▇▇▇▇, the appropriate amount of the Common Stock Merger
Consideration or Preferred Stock Merger Consideration, as applicable, may be
paid to a transferee if the Certificate representing such ▇▇▇▇▇▇▇ Common Stock
or Series A Preferred Stock is presented to the Exchange Agent properly endorsed
or accompanied by appropriate stock powers and otherwise in proper form for
transfer and accompanied by all documents reasonably required by the Exchange
Agent to evidence and effect such transfer and to evidence that any applicable
Taxes have been paid. Until surrendered as contemplated by this Section 2.2,
each such Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the appropriate amount
of the applicable Merger Consideration.
-4-
(c) Liquidating Distribution. ▇▇▇▇▇▇▇ hereby confirms that this
-------------------------
Agreement shall constitute its plan of liquidation within the meaning of Section
562(b)(1) of the Internal Revenue Code of 1986, as amended (the "Code").
----
(d) No Further Ownership Rights. All Merger Consideration paid upon
---------------------------
the surrender for exchange of the Certificates representing shares of ▇▇▇▇▇▇▇
Common Stock or Series A Preferred Stock in accordance with the terms hereof
shall be deemed to have been paid in full satisfaction of all rights pertaining
to such shares of ▇▇▇▇▇▇▇ Common Stock or Series A Preferred Stock and, after
the Effective Time, there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of ▇▇▇▇▇▇▇
Common Stock or Series A Preferred Stock that were outstanding immediately prior
to the Effective Time. If, after the Effective Time, Certificates are presented
to the Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article II.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
----------------------------
that remains undistributed to the former ▇▇▇▇▇▇▇ stockholders on the six-month
anniversary of the Effective Time shall be delivered to the Surviving
Corporation upon demand and any former ▇▇▇▇▇▇▇ stockholders who have not
theretofore received any applicable Merger Consideration and any other dividends
or distributions to which they are entitled under this Article II shall
thereafter look only to the Surviving Corporation for payment of their claims
with respect thereto and only as general creditors thereof.
(f) No Liability. Neither Heritage nor the Surviving Corporation
------------
be liable to any holder of shares of ▇▇▇▇▇▇▇ Common Stock or Series A Preferred
Stock, as the case may be, for any part of the Merger Consideration or for
dividends or distributions with respect thereto delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Law (as
defined in Article X). Any amounts remaining unclaimed by holders of any such
shares five years after the Effective Time or at such earlier date as is
immediately prior to the time at which such amounts would otherwise escheat to,
or become property of, any Federal, state or local government or any court,
regulatory or administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "Governmental Entity"),
-------------------
shall, to the extent permitted by applicable Law, become the property of the
Surviving Corporation free and clear of any claims or interest of any such
holders or their successors, assigns or personal representatives previously
entitled thereto.
(g) Lost, Stolen, or Destroyed Certificates. If any Certificate
---------------------------------------
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, 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 Certificate, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificate the appropriate amount of the applicable Merger
Consideration.
(h) Withholding of Tax. The Surviving Corporation or the Exchange
------------------
Agent shall be entitled to deduct and withhold from the Merger Consideration and
any dividends or distributions otherwise payable pursuant to this Agreement to
any holder of a Certificate, if any, such amount as the Surviving Corporation,
or any Affiliate (as defined in Article X) of the Surviving Corporation, or the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code or any provision of state, local or foreign Tax Law.
To the extent that amounts are so withheld by the Surviving Corporation or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the former holder of a Certificate in respect
of which such deduction and withholding was made by the Surviving Corporation or
the Exchange Agent.
-5-
(i) No Dissenters' Rights. No dissenters' or appraisal rights shall
---------------------
be available with respect to the Merger or the other transactions contemplated
hereby.
(j) Series B and Series C Cumulative Redeemable Perpetual Preferred
---------------------------------------------------------------
Units of the ▇▇▇▇▇▇▇ OP. The 8.875% Series B Cumulative Redeemable Perpetual
-----------------------
Preferred Units of the ▇▇▇▇▇▇▇ OP (the "Series B Units") and the 8.875% Series C
--------------
Cumulative Redeemable Perpetual Preferred Units of the ▇▇▇▇▇▇▇ OP (the "Series C
--------
Units") will continue to remain outstanding as Series B Units and Series C Units
-----
in the ▇▇▇▇▇▇▇ OP following the completion of the Merger. Immediately prior to
the completion of the Merger, Heritage will amend its charter to authorize and
establish a class of preferred stock (the "Heritage Series B Preferred Stock")
---------------------------------
that is substantially similar to ▇▇▇▇▇▇▇'▇ Series B Cumulative Redeemable
Perpetual Preferred Stock (the "Series B Preferred Stock") and a class of
------------------------
preferred stock (the "Heritage Series C Preferred Stock") that is substantially
---------------------------------
similar to ▇▇▇▇▇▇▇'▇ Series C Cumulative Redeemable Perpetual Preferred Stock
(the "Series C Preferred Stock"). Heritage and ▇▇▇▇▇▇▇ agree that, upon
------------------------
completion of the Merger, the Series B Units and the Series C Units will become
exchangeable, pursuant to their terms, for shares of Heritage Series B Preferred
Stock and shares of Heritage Series C Preferred Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.1. Representations and Warranties of ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ represents
-----------------------------------------
and warrants to Heritage and the Heritage Merger Sub as follows:
(a) Organization, Standing and Corporate Power of ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇
-----------------------------------------------------
is a corporation duly incorporated, validly existing and in good standing under
the Laws of the State of Maryland and has the requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. ▇▇▇▇▇▇▇ is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the nature of the business it
is conducting, or the ownership, operation or leasing of its properties or the
management of properties for others makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed, individually or in the aggregate, would not have a material adverse
effect on the business, properties, condition (financial or otherwise) or
results of operations of ▇▇▇▇▇▇▇, the ▇▇▇▇▇▇▇ OP and the ▇▇▇▇▇▇▇ Subsidiaries
taken as a whole (a "▇▇▇▇▇▇▇ Material Adverse Effect"). ▇▇▇▇▇▇▇ has heretofore
-------------------------------
made available to Heritage complete and correct copies of ▇▇▇▇▇▇▇'▇ charter, as
amended (the "▇▇▇▇▇▇▇ Charter"), and by-laws, as amended (the "▇▇▇▇▇▇▇
--------------- -------
By-laws"). Each jurisdiction in which ▇▇▇▇▇▇▇ is qualified or licensed to do
-------
business and each assumed name under which it conducts business in any
jurisdiction are identified in Section 3.1(a) of the disclosure letter dated as
of the date of this Agreement and delivered to Heritage in connection with the
execution hereof (the "▇▇▇▇▇▇▇ Disclosure Letter").
-------------------------
(b) ▇▇▇▇▇▇▇ Subsidiaries; Interests in Other Persons. (i) Each
------------------------------------------------
▇▇▇▇▇▇▇ Subsidiary that is a corporation is duly incorporated, validly existing
and in good standing under the Laws of its jurisdiction of incorporation and has
the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Each ▇▇▇▇▇▇▇
Subsidiary, including the ▇▇▇▇▇▇▇ OP, that is a partnership, limited liability
company or trust is duly organized, validly existing and in good standing under
the Laws of its jurisdiction of organization and has the requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each ▇▇▇▇▇▇▇ Subsidiary, including the ▇▇▇▇▇▇▇ OP, is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership, operation or
leasing of its properties or the management of properties for others makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed, individually or
-6-
in the aggregate, would not reasonably be expected to have a ▇▇▇▇▇▇▇ Material
Adverse Effect. All outstanding shares of capital stock of each ▇▇▇▇▇▇▇
Subsidiary that is a corporation have been duly authorized, are validly issued,
fully paid and nonassessable, and are not subject to any preemptive rights and
are owned by ▇▇▇▇▇▇▇ and/or another ▇▇▇▇▇▇▇ Subsidiary, except as disclosed in
Section 3.1(b)(i) of the ▇▇▇▇▇▇▇ Disclosure Letter, and are so owned free and
clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens"). All equity
-----
interests in each ▇▇▇▇▇▇▇ Subsidiary, including ▇▇▇▇▇▇▇ OP, that is a
partnership, limited liability company, trust or other entity that have been
duly authorized and are validly issued and are owned by ▇▇▇▇▇▇▇ and/or another
▇▇▇▇▇▇▇ Subsidiary, except as disclosed in Section 3.1(b)(i) of the ▇▇▇▇▇▇▇
Disclosure Letter, and are so owned free and clear of all Liens. ▇▇▇▇▇▇▇ has
heretofore made available to Heritage complete and correct copies of the
charter, by-laws or other organizational documents of each of the ▇▇▇▇▇▇▇
Subsidiaries, each as amended to date. Section 3.1(b)(i) of the ▇▇▇▇▇▇▇
Disclosure Letter sets forth (A) all ▇▇▇▇▇▇▇ Subsidiaries and their respective
jurisdictions of incorporation or organization, (B) each owner and the
respective amount of such owner's equity interest in each ▇▇▇▇▇▇▇ Subsidiary and
(C) a list of each jurisdiction in which each ▇▇▇▇▇▇▇ Subsidiary is qualified or
licensed to do business and each assumed name under which each such ▇▇▇▇▇▇▇
Subsidiary conducts business in any jurisdiction.
(ii) Except for the capital stock of, or other equity
interests in, the ▇▇▇▇▇▇▇ Subsidiaries and the other interests disclosed in
Section 3.1(b)(ii) of the ▇▇▇▇▇▇▇ Disclosure Letter (the "▇▇▇▇▇▇▇ Other
-------------
Interests"), neither ▇▇▇▇▇▇▇ nor any of the ▇▇▇▇▇▇▇ Subsidiaries owns any
---------
capital stock or other ownership interest in any Person (as defined in Article
X). Neither ▇▇▇▇▇▇▇ nor any ▇▇▇▇▇▇▇ Subsidiary has materially violated any
provision of any organizational documents governing or otherwise relating to its
rights in any ▇▇▇▇▇▇▇ Other Interest.
(c) Capital Structure.
-----------------
(i) Capital Stock
-------------
(A) As of the date of this Agreement, the authorized
capital stock of ▇▇▇▇▇▇▇ consists of (1) 80,000,000 shares of ▇▇▇▇▇▇▇
Common Stock and (2) 20,000,000 shares of preferred stock, par value $0.01
per share, of which 3,570,301 shares have been designated as Series A
Preferred Stock, 2,000,000 shares have been designated as the Series B
Preferred Stock and 1,000,000 shares have been designated as the Series C
Preferred Stock.
(B) As of the date of this Agreement, (1) 22,135,786
shares of ▇▇▇▇▇▇▇ Common Stock are issued and outstanding, (2) 3,478,219
shares of Series A Preferred Stock are issued and outstanding and (3) no
shares of Series B Preferred Stock or Series C Preferred Stock are issued
and outstanding.
(C) As of the date of this Agreement, (1) 1,365,050
shares of ▇▇▇▇▇▇▇ Common Stock were reserved for issuance upon exercise of
outstanding ▇▇▇▇▇▇▇ Options, (2) 1,250,682 shares of ▇▇▇▇▇▇▇ Common Stock
were reserved for issuance upon exchange of LP Units for shares of ▇▇▇▇▇▇▇
Common Stock pursuant to the ▇▇▇▇▇▇▇ OP Agreement, (3) 2,000,000 shares of
Series B Preferred Stock were reserved for issuance upon redemption and
exchange of the outstanding Series B Units pursuant to the ▇▇▇▇▇▇▇ OP
Agreement, and (4) 1,000,000 shares of Series C Preferred Stock were
reserved for issuance upon redemption and exchange of the outstanding
Series C Units pursuant to the ▇▇▇▇▇▇▇ OP Agreement.
(D) As of the date of this Agreement, except as set
forth above in this Section 3.1(c), no shares of capital stock or other
voting securities of ▇▇▇▇▇▇▇ are issued, reserved
-7-
for issuance or outstanding. There are no outstanding restricted shares of
▇▇▇▇▇▇▇ Common Stock, performance share awards, stock appreciation rights
or dividend equivalent rights relating to the capital stock of ▇▇▇▇▇▇▇. All
outstanding shares of capital stock of ▇▇▇▇▇▇▇ are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
(E) There is no Voting Debt (as defined in Article X)
of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary outstanding.
(F) Except as set forth in Section 3.1(c)(i)(F) of the
▇▇▇▇▇▇▇ Disclosure Letter, all dividends or distributions on securities of
▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary that have been declared or authorized
prior to the date of this Agreement have been paid in full.
(ii) Partnership Units
-----------------
(A) As of the date of this Agreement, 1,250,682 LP
Units; 22,135,786 units of common general partner interest in the ▇▇▇▇▇▇▇
OP (the "GP Units"), 3,478,219 units of 8.4% Series A Convertible Preferred
--------
Units of the ▇▇▇▇▇▇▇ OP (the "Series A Units" and together with the Series
--------------
B Units and the Series C Units, the "▇▇▇▇▇▇▇ Preferred Units"), 2,000,000
-----------------------
Series B Units, and 1,000,000 Series C Units are validly issued and
outstanding, fully paid and nonassessable and not subject to preemptive
rights.
(B) Each LP Unit may, under certain circumstances set
forth in the ▇▇▇▇▇▇▇ OP Agreement, be redeemed for shares of ▇▇▇▇▇▇▇ Common
Stock on a one-for-one basis. The holders of Series B Units have the right,
under certain circumstances, to exchange such units for shares of Series B
Preferred Stock on a one-for-one basis pursuant to the terms of the Series
B Units. The holders of Series C Units have the right, under certain
circumstances, to exchange such units for shares of Series C Preferred
Stock on a one-for-one basis pursuant to the terms of the Series C Units.
(C) ▇▇▇▇▇▇▇ is the sole general partner of the ▇▇▇▇▇▇▇
OP and holds 22,135,786 GP Units representing a 100% general partner
interest in the ▇▇▇▇▇▇▇ OP. Section 3.1(c)(ii)(C) of the ▇▇▇▇▇▇▇ Disclosure
Letter sets forth the name, number and class of GP Units, LP Units and
▇▇▇▇▇▇▇ Preferred Units held by each partner in the ▇▇▇▇▇▇▇ OP.
(iii) Miscellaneous
-------------
(A) Except as set forth in this Section 3.1(c) or in
Section 3.1(c)(iii)(A) of the ▇▇▇▇▇▇▇ Disclosure Letter, there are issued
and outstanding or reserved for issuance: (1) no shares of capital stock,
Voting Debt or other voting securities of ▇▇▇▇▇▇▇; (2) no securities of
▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary or securities or assets of any other
entity convertible into or exchangeable for shares of capital stock, Voting
Debt or other voting securities of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary; and
(3) no options, warrants, calls, rights (including preemptive rights),
commitments or agreements to which ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary is a
party or by which it is bound in any case obligating ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇
Subsidiary to issue, deliver, sell, purchase, redeem or acquire, or cause
to be issued, delivered, sold, purchased, redeemed or acquired, additional
shares of capital stock, Voting Debt or other voting securities of ▇▇▇▇▇▇▇
or of any ▇▇▇▇▇▇▇ Subsidiary, or obligating ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇
Subsidiary to grant, extend or enter into any such option, warrant, call,
right, commitment or agreement.
-8-
(B) Except for the Transaction Documents (as herein-
after defined), there are not any stockholder agreements, voting trusts or
other agreements or understandings to which ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇
Subsidiary is a party or by which it is bound relating to the voting of any
shares of capital stock of ▇▇▇▇▇▇▇ or partnership interests in the ▇▇▇▇▇▇▇
OP. Except as set forth in the applicable organizational documents of any
▇▇▇▇▇▇▇ Subsidiary or as imposed and required by lenders in connection with
bankruptcy remote or special purpose entities that are Subsidiaries, there
are no restrictions on ▇▇▇▇▇▇▇'▇ ability to vote the equity interests of
any of the ▇▇▇▇▇▇▇ Subsidiaries.
(C) Except as set forth in Section 3.1(c)(iii)(C) of
the ▇▇▇▇▇▇▇ Disclosure Letter, no holder of securities in ▇▇▇▇▇▇▇ or any
▇▇▇▇▇▇▇ Subsidiary has any right to have such securities registered by
▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary, as the case may be.
(D) Except as set forth in Section 3.1(c)(iii)(D) of
the ▇▇▇▇▇▇▇ Disclosure Letter, there are not any ▇▇▇▇▇▇▇ Subsidiaries in
which any officer or director of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary owns any
capital stock or other securities. Section 3.1 (c)(iii)(D) of the ▇▇▇▇▇▇▇
Disclosure Letter sets forth a true, accurate and complete list of (1) the
name of any such officer or director owning capital stock or other
securities in any ▇▇▇▇▇▇▇ Subsidiary, (2) the name of the entity or
entities in which such officer or director owns an interest, and (3) the
type and amount of capital stock or other securities owned by such officer
or director in such entities. There are no agreements or understandings
between ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary and any Person listed in Section
3.1(c)(iii)(D) of the ▇▇▇▇▇▇▇ Disclosure Letter that could cause such
Person to be treated as holding any capital stock or security in ▇▇▇▇▇▇▇ or
any ▇▇▇▇▇▇▇ Subsidiary as an agent for, or nominee of, ▇▇▇▇▇▇▇ or any
▇▇▇▇▇▇▇ Subsidiary.
(d) Authority; No Violations; Consents and Approval; LP Units.
---------------------------------------------------------
(i) The Board of Directors of ▇▇▇▇▇▇▇ has approved and
declared advisable the Merger and the other transactions contemplated by the
Transaction Documents and has directed that the Merger be submitted for
consideration at a special meeting of the ▇▇▇▇▇▇▇ stockholders (the "▇▇▇▇▇▇▇
-------
Stockholder Meeting"). ▇▇▇▇▇▇▇ has all requisite power and authority to enter
-------------------
into this Agreement and all other documents to be executed by ▇▇▇▇▇▇▇ in
connection with the transactions contemplated hereby and thereby (collectively,
the "Transaction Documents") and, subject, with respect to the consummation of
---------------------
the Merger, to receipt of the ▇▇▇▇▇▇▇ Stockholder Approval, to consummate the
transactions contemplated hereby and thereby. Each ▇▇▇▇▇▇▇ Subsidiary that is a
party to any Transaction Document has all requisite power and authority to enter
into such Transaction Document and to consummate the transactions contemplated
thereby. The execution and delivery of the Transaction Documents and the
consummation of the transactions contemplated hereby or thereby have been duly
authorized by all necessary action on the part of ▇▇▇▇▇▇▇ and each applicable
▇▇▇▇▇▇▇ Subsidiary, subject, with respect to the consummation of the Merger, to
receipt of the ▇▇▇▇▇▇▇ Stockholder Approval. The Transaction Documents have been
duly executed and delivered by ▇▇▇▇▇▇▇ and each applicable ▇▇▇▇▇▇▇ Subsidiary
and, subject, with respect to the consummation of the Merger, to receipt of the
▇▇▇▇▇▇▇ Stockholder Approval and assuming the Transaction Documents to which
Heritage and the Heritage Merger Sub are parties constitute the valid and
binding obligation of Heritage and the Heritage Merger Sub, constitute valid and
binding obligations of ▇▇▇▇▇▇▇ and each applicable ▇▇▇▇▇▇▇ Subsidiary,
enforceable in accordance with their terms, subject, as to enforceability, to
bankruptcy, insolvency, reorganization, moratorium and other Laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at Law).
-9-
(ii) Except as set forth in Section 3.1(d)(ii) of the
▇▇▇▇▇▇▇ Disclosure Letter, the execution and delivery of the Transaction
Documents by ▇▇▇▇▇▇▇ or each applicable ▇▇▇▇▇▇▇ Subsidiary does not, and the
consummation of the transactions contemplated hereby or thereby, and compliance
with the provisions hereof or thereof, will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any material obligation, or give rise to a right of purchase under, result in
the creation of any Lien upon any of the properties or assets of ▇▇▇▇▇▇▇ or any
of the ▇▇▇▇▇▇▇ Subsidiaries under, require the consent or approval of any third
party or otherwise result in a material detriment or default to ▇▇▇▇▇▇▇ or any
of the ▇▇▇▇▇▇▇ Subsidiaries under, any provision of (A) the ▇▇▇▇▇▇▇ Charter or
the ▇▇▇▇▇▇▇ By-laws or any provision of the comparable charter or organizational
documents of any of the ▇▇▇▇▇▇▇ Subsidiaries, (B) any loan or credit agreement,
note, including, but not limited to, the Unsecured Notes (as defined below) (it
being understood that no representation is being given as to whether the
Surviving Corporation and the ▇▇▇▇▇▇▇ Subsidiaries will be in compliance with
any financial covenants contained therein following the Merger) or any bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries,
or their respective properties or assets or any guarantee by ▇▇▇▇▇▇▇ or any of
the ▇▇▇▇▇▇▇ Subsidiaries of any of the foregoing, (C) any joint venture or other
ownership arrangement or any Material Contract (as hereinafter defined) or (D)
assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 3.1(d)(iii) are duly and timely obtained or
made and the ▇▇▇▇▇▇▇ Stockholder Approval has been obtained, any judgment,
order, decree, statute, Law, ordinance, rule or regulation applicable to ▇▇▇▇▇▇▇
or any of the ▇▇▇▇▇▇▇ Subsidiaries, or any of their respective properties or
assets, other than, in the case of clauses (B) (except with respect to the
Unsecured Notes), (C) and (D), any such conflicts, violations, defaults, rights,
Liens or detriments that, individually or in the aggregate, (1) would not
reasonably be expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect or (2) would
not reasonably be expected to materially impair the ability of ▇▇▇▇▇▇▇ or any of
the ▇▇▇▇▇▇▇ Subsidiaries to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby. For the purposes of
this Agreement, the term "Unsecured Notes" means the ▇▇▇▇▇▇▇ OP's (i) $100
---------------
million of 7.0% unsecured senior notes due 2004, (ii) $100 million of 7.2%
unsecured senior notes due 2008, and (iii) $75 million of 8.875% unsecured
senior notes due 2006.
(iii) Except as set forth in Section 3.1(d)(iii) of the
▇▇▇▇▇▇▇ Disclosure Letter, no consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any Governmental
Entity, is required by or with respect to ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇
Subsidiaries in connection with the execution and delivery of the Transaction
Documents by ▇▇▇▇▇▇▇ or each of the applicable ▇▇▇▇▇▇▇ Subsidiaries or the
consummation by ▇▇▇▇▇▇▇ or the applicable ▇▇▇▇▇▇▇ Subsidiaries of the
transactions contemplated hereby or thereby, except for: (A) the filing with the
Securities and Exchange Commission (the "SEC") of (1) (a) a proxy statement in
---
preliminary and definitive form relating to the ▇▇▇▇▇▇▇ Stockholder Meeting held
in connection with the Merger (the "Proxy Statement") or (b) other documents
---------------
otherwise required in connection with the transactions contemplated hereby and
(2) such reports under Section 13(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and such other compliance with the Exchange Act
------------
and the rules and regulations thereunder, as may be required in connection with
the Transaction Documents and the transactions contemplated hereby or thereby;
(B) the filing of the Articles of Merger with, and the acceptance for record of
the Articles of Merger by, the State Department of Assessments and Taxation of
the State of Maryland; (C) such filings and approvals as may be required by any
applicable state takeover Laws or Environmental Laws (as hereinafter defined) as
more specifically described in Section 3.1(d)(iii) of the ▇▇▇▇▇▇▇ Disclosure
Letter; (D) the filing, if applicable, of a pre-merger notification and report
by ▇▇▇▇▇▇▇ under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the expiration or termination of the applicable
-------
waiting period thereunder; and (E) any such consent, approval, order,
authorization, registration, declaration, filing or permit that the failure to
obtain or make (1) individually or in the aggregate, would not reasonably be
expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect or
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(2) individually or in the aggregate, would not reasonably be expected to,
materially impair the ability of ▇▇▇▇▇▇▇ to perform its obligations hereunder or
prevent or delay in any material respect the consummation of any of the
transactions contemplated hereby.
(iv) The holders of Series B Units and Series C Units do not
currently have, and as a result of the Merger or the other transactions
contemplated by the Transaction Documents will not have, any right to (A) cause
the redemption of such Series B Units and/or Series C Units, (B) exchange such
Series B Units and/or Series C Units for any other securities or (C) convert,
redeem or receive a distribution (other than the right to receive the regular
8.875% preferential distribution) with respect to such Series B Units and/or
Series C Units.
(e) SEC Documents.
-------------
(i) ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ OP have made available to
Heritage and the Heritage Merger Sub a true and complete copy of each report,
schedule, registration statement and definitive proxy statement filed by either
▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇ OP with the SEC since January 1, 1997 and prior to or on
the Closing Date (the "▇▇▇▇▇▇▇ SEC Documents"), which are all the documents
---------------------
(other than preliminary material) that each of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ OP were
required to file with the SEC between January 1, 1997 and the Closing Date. As
of their respective dates, the ▇▇▇▇▇▇▇ SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be, and the rules and
--------------
regulations of the SEC thereunder applicable to such ▇▇▇▇▇▇▇ SEC Documents and
none of the ▇▇▇▇▇▇▇ SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except to the extent such statements have
been modified or superseded by later ▇▇▇▇▇▇▇ SEC Documents filed and publicly
available prior to the date of this Agreement. Neither ▇▇▇▇▇▇▇ nor the ▇▇▇▇▇▇▇
OP has any outstanding and unresolved comments from the SEC with respect to any
of the ▇▇▇▇▇▇▇ SEC Documents except to the extent such statements have been
amended, modified or superseded by later filed ▇▇▇▇▇▇▇ SEC Documents. None of
the ▇▇▇▇▇▇▇ SEC Documents is the subject of any confidential treatment request
by ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇ OP. The consolidated financial statements of ▇▇▇▇▇▇▇
and the ▇▇▇▇▇▇▇ OP included in the ▇▇▇▇▇▇▇ SEC Documents complied as to form in
all material respects with the applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles ("GAAP")
----
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto, or, in the case of the unaudited statements, as
permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly presented, in
accordance with applicable requirements of GAAP and the applicable rules and
regulations of the SEC (subject, in the case of the unaudited statements, to
normal, recurring adjustments, none of which are material), the consolidated
financial position of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries, taken as a whole, as
of their respective dates and the consolidated statements of income and the
consolidated cash flows of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries for the periods
presented therein. The books of account and other financial records of ▇▇▇▇▇▇▇
and the ▇▇▇▇▇▇▇ OP are accurately reflected in all material respects in the
financial statements included in the ▇▇▇▇▇▇▇ SEC Documents. Other than ▇▇▇▇▇▇▇
and the ▇▇▇▇▇▇▇ OP, no other ▇▇▇▇▇▇▇ Subsidiary is required to make any filing
with the SEC.
(ii) The LP Units and the ▇▇▇▇▇▇▇ Preferred Units are not
registered under Section 12 of the Exchange Act.
(f) Absence of Certain Changes or Events. Except as disclosed or
------------------------------------
reflected in the ▇▇▇▇▇▇▇ SEC Documents filed with the SEC prior to the date of
this Agreement or as disclosed in Section 3.1(f) of the ▇▇▇▇▇▇▇ Disclosure
Letter, since December 31, 1999, ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇
-11-
Subsidiaries have conducted their business only in the ordinary course and there
has not been: (i) (A) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to any
of ▇▇▇▇▇▇▇'▇ capital stock; (B) any amendment of any term of any outstanding
equity security of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary; (C) any repurchase,
redemption or other acquisition by ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary of any
outstanding shares of capital stock or other equity securities of, or other
ownership interests in, ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary; (D) any change in any
method of accounting or accounting practice or any tax method, practice or
election by ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary; (E) any amendment of any
employment, consulting, severance, retention or any other agreement between
▇▇▇▇▇▇▇ and any officer or director of ▇▇▇▇▇▇▇; or (F) any change, event,
effect, damage, destruction or loss that has had, or would reasonably be
expected to have, a ▇▇▇▇▇▇▇ Material Adverse Effect; and (ii) any split,
combination or reclassification of any of ▇▇▇▇▇▇▇'▇ capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for, or giving the right to acquire by
exchange or exercise, shares of its capital stock or any issuance of an
ownership interest in, any ▇▇▇▇▇▇▇ Subsidiary.
(g) No Undisclosed Material Liabilities. Except as disclosed in the
-----------------------------------
▇▇▇▇▇▇▇ SEC Documents, as set forth in Section 3.1(g) of the ▇▇▇▇▇▇▇ Disclosure
Letter or as otherwise would not reasonably be expected to have a ▇▇▇▇▇▇▇
Material Adverse Effect, there are no liabilities of ▇▇▇▇▇▇▇ or any of the
▇▇▇▇▇▇▇ Subsidiaries, whether accrued, contingent, absolute or determined, other
than: (i) liabilities adequately provided for on the balance sheet of ▇▇▇▇▇▇▇
and the ▇▇▇▇▇▇▇ OP dated as of December 31, 1999 (including the notes thereto)
contained in the Annual Report on Form 10-K for the fiscal year ended December
31, 1999 of ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇ OP, as the case may be; or (ii) liabilities
incurred in the ordinary course of business subsequent to December 31, 1999.
(h) No Default. Neither ▇▇▇▇▇▇▇ nor any of the ▇▇▇▇▇▇▇ Subsidiaries
----------
is in default or violation (and no event has occurred which, with notice or the
lapse of time or both, would constitute a default or violation) of any term,
condition or provision of (i) the ▇▇▇▇▇▇▇ Charter or the ▇▇▇▇▇▇▇ By-laws or the
comparable charter or organizational documents of any of the ▇▇▇▇▇▇▇
Subsidiaries, (ii) any loan or credit agreement, note, including, but not
limited to, the Unsecured Notes or any bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license to which ▇▇▇▇▇▇▇
or any of the ▇▇▇▇▇▇▇ Subsidiaries is now a party or by which ▇▇▇▇▇▇▇ or any of
the ▇▇▇▇▇▇▇ Subsidiaries or any of their respective properties or assets is
bound, or (iii) any order, writ, injunction, decree, statute, rule or regulation
applicable to ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries, except in the case of
(ii) and (iii) for defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a ▇▇▇▇▇▇▇ Material Adverse
Effect.
(i) Compliance with Applicable Laws. ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇
-------------------------------
Subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "▇▇▇▇▇▇▇ Permits"), except where the
---------------
failure so to hold, individually or in the aggregate, would not reasonably be
expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect. ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇
Subsidiaries are in compliance with the terms of the ▇▇▇▇▇▇▇ Permits, except
where the failure to so comply, individually or in the aggregate, would not
reasonably be expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect. Except as
disclosed in the ▇▇▇▇▇▇▇ SEC Documents, the businesses of ▇▇▇▇▇▇▇ and the
▇▇▇▇▇▇▇ Subsidiaries are not being conducted in violation of any Law of any
Governmental Entity, except for violations which, individually or in the
aggregate, would not reasonably be expected to have a ▇▇▇▇▇▇▇ Material Adverse
Effect. As of the Closing Date, no investigation or review by any Governmental
Entity with respect to ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries is pending and
of which ▇▇▇▇▇▇▇ has Knowledge (as defined in Article X) or, to the Knowledge of
▇▇▇▇▇▇▇ as of the Closing Date, is threatened, other than those the outcome of
which, individually or in the aggregate, would not reasonably be expected to
have a ▇▇▇▇▇▇▇ Material Adverse Effect.
-12-
(j) Litigation. Except as disclosed in the ▇▇▇▇▇▇▇ SEC Documents or
----------
as set forth in Section 3.1(j) of the ▇▇▇▇▇▇▇ Disclosure Letter and except for
routine litigation arising from the ordinary course of business of ▇▇▇▇▇▇▇ and
the ▇▇▇▇▇▇▇ Subsidiaries which are adequately covered by insurance (it being
understood that litigation arising from or related in any way to Hazardous
Material (as hereinafter defined) shall not be considered routine litigation),
there is no suit, action or proceeding pending or, to the Knowledge of ▇▇▇▇▇▇▇,
threatened against or affecting ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary that,
individually or in the aggregate, would reasonably be expected to (i) have a
▇▇▇▇▇▇▇ Material Adverse Effect; or (ii) prevent the consummation of any of the
transactions contemplated herein, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary having, or which, would reasonably be expected
to have a ▇▇▇▇▇▇▇ Material Adverse Effect.
(k) Taxes. (i) Each of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries has
-----
timely filed all Tax Returns (as defined in Article X) required to be filed by
it (after giving effect to any filing extension properly granted by a
Governmental Entity having authority to do so) for periods beginning after
December 31, 1989. Each such Tax Return is true, correct and complete in all
material respects. ▇▇▇▇▇▇▇ and each ▇▇▇▇▇▇▇ Subsidiary has paid (or ▇▇▇▇▇▇▇ has
paid on its behalf), within the time and in the manner prescribed by Law, all
material Taxes that are due and payable for periods beginning after December 31,
1989. The most recent financial statements contained in the ▇▇▇▇▇▇▇ SEC
Documents filed with the SEC prior to the date of this Agreement reflect an
adequate reserve for all material Taxes payable by ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇
Subsidiaries for all taxable periods and portions thereof through the date of
such financial statements. ▇▇▇▇▇▇▇ and each ▇▇▇▇▇▇▇ Subsidiary has established
(and until the Closing Date shall continue to establish and maintain) on its
books and records reserves that are adequate for the payment of all Taxes not
yet due and payable. Since December 31, 1999, ▇▇▇▇▇▇▇ has incurred no liability
for any material Taxes under Sections 857(b), 860(c) or 4981 of the Code or IRS
Notice 88-19 or Treasury Regulation Section 1.337(d)-5T, including, without
limitation, any material Tax arising from a prohibited transaction described in
Section 857(b)(6) of the Code, and neither ▇▇▇▇▇▇▇ nor any of the ▇▇▇▇▇▇▇
Subsidiaries has incurred any material liability for Taxes other than in the
ordinary course of business. To the Knowledge of ▇▇▇▇▇▇▇, no event has occurred,
and no condition or circumstance exists, which presents a risk that any material
Tax described in the preceding sentence will be imposed on ▇▇▇▇▇▇▇ or any
▇▇▇▇▇▇▇ Subsidiary prior to the Effective Time. No deficiencies for any Taxes
have been asserted or assessed in writing (or to the Knowledge of ▇▇▇▇▇▇▇ or any
▇▇▇▇▇▇▇ Subsidiary, proposed) against ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇
Subsidiaries, including claims by any taxing authority in a jurisdiction where
▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary does not file Tax Returns but in which any of
them is or may be subject to taxation for periods beginning after December 31,
1989, and no requests for waivers of the time to assess any such Taxes have been
granted and remain in effect or are pending.
(ii) ▇▇▇▇▇▇▇ (A) for each taxable year beginning with the
taxable year ended on December 31, 1990 and ending at the Effective Time, has
been and will be subject to taxation as a real estate investment trust (a
"REIT") within the meaning of the Code and has satisfied the requirements to
----
qualify as a REIT for such years, (B) has operated, and intends to continue to
operate, consistent with the requirements for qualification and taxation as a
REIT through the end of its taxable year ending at the Effective Time, and (C)
has not taken or omitted to take any action which could reasonably be expected
to result in a challenge to its status as a REIT, and no such challenge is
pending, or to ▇▇▇▇▇▇▇'▇ Knowledge, threatened, provided, that ▇▇▇▇▇▇▇ makes no
representation as to whether it will satisfy the distribution requirements of
Section 857 of the Code for its taxable year ending at the Effective Time. The
nature of the assets of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries is such that the
sale of all of the assets owned by them at their respective fair market values
would not cause ▇▇▇▇▇▇▇ to fail to qualify as a REIT under Section 856(c)(2) or
(3) of the Code for the taxable year ending at the Effective Time. Each ▇▇▇▇▇▇▇
Subsidiary which is a partnership or limited liability company or files Tax
Returns as a partnership for Federal income tax purposes has since its
acquisition by ▇▇▇▇▇▇▇ been classified for
-13-
Federal income tax purposes as a partnership or disregarded entity and not as an
association taxable as a corporation, or a "publicly traded partnership" within
the meaning of Section 7704(b) of the Code that is treated as a corporation for
Federal income tax purposes under Section 7704(a) of the Code. Neither ▇▇▇▇▇▇▇
nor any ▇▇▇▇▇▇▇ Subsidiary holds any asset (x) the disposition of which would be
subject to rules similar to Section 1374 of the Code as announced in IRS Notice
88-19 or Treasury Regulation Section 1.337(d)-5T or (y) that is subject to a
consent filed pursuant to Section 341(f) of the Code and the regulations
thereunder.
(iii) As of the date of this Agreement, ▇▇▇▇▇▇▇ does not
have any earnings and profits attributable to ▇▇▇▇▇▇▇ or any other corporation
in any non-REIT year within the meaning of Section 857 of the Code.
(iv) All material Taxes which ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇
Subsidiaries are required by Law to withhold or collect, including material
Taxes required to have been withheld in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder or other third party
and sales, gross receipts and use taxes, have been duly withheld or collected
and, to the extent required, have been paid over to the proper Governmental
Entities or are held in separate bank accounts for such purpose. There are no
Liens for Taxes upon the assets of ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇ Subsidiaries except
for statutory Liens for Taxes not yet due.
(v) For periods beginning after December 31, 1989, except
as set forth in Section 3.1(k) of the ▇▇▇▇▇▇▇ Disclosure Letter, (a) the Tax
Returns of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary have not been audited by any taxing
authority and (b) there are no audits by any taxing authority currently being
conducted with regard to Taxes or Tax Returns of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇
Subsidiary and, to the Knowledge of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary, there are
no pending or proposed inquiries being made by any taxing authority with respect
to any Taxes or Tax Returns.
(vi) Neither ▇▇▇▇▇▇▇ nor the ▇▇▇▇▇▇▇ Subsidiaries (A) have
filed a consent under Section 341(f) of the Code concerning collapsible
corporations, (B) are a party to any Tax allocation or sharing agreement or (C)
has failed to distribute realized net capital gains as designated capital gain
dividends pursuant to Section 857(b)(3) of the Code on or prior to the last day
of ▇▇▇▇▇▇▇'▇ taxable year to which such designation relates.
(vii) ▇▇▇▇▇▇▇ does not have any material liability for the
Taxes of any Person other than ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries and the
▇▇▇▇▇▇▇ Subsidiaries do not have any material liability for the Taxes of any
Person other than ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries (A) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
Law), (B) as a transferee or successor, (C) by contract or (D) otherwise.
(viii) Except as set forth in Section 3.1(k)(viii) of the
▇▇▇▇▇▇▇ Disclosure Letter, neither ▇▇▇▇▇▇▇ nor the ▇▇▇▇▇▇▇ Subsidiaries have
made any payments, are obligated to make any payments, or are parties to an
agreement that could obligate them to make any payments that will not be
deductible under Section 280G of the Code. ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries
have disclosed to the IRS all positions taken on their Federal income Tax
Returns which could give rise to a substantial understatement of Tax under
Section 6662 of the Code.
(ix) Neither ▇▇▇▇▇▇▇ nor any of the ▇▇▇▇▇▇▇ Subsidiaries
has entered into or is subject, directly or indirectly, to any Limited Partner
Agreements (as defined in Article X), except as disclosed in Section 3.1(k)(ix)
of the ▇▇▇▇▇▇▇ Disclosure Letter, true and correct copies of which have been
made available to Heritage and the Heritage Merger Sub.
-14-
(x) As of the acquisition date of each of Mid-America
Realty Investments, Inc. and ▇▇▇▇▇▇ Properties Corporation, each such acquired
entity was properly qualified as a REIT under the Code.
(l) Pension and Benefit Plans; ERISA. Except as set forth in the
--------------------------------
▇▇▇▇▇▇▇ SEC Documents: (i) All "employee pension benefit plans," as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), maintained or contributed to by ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇
-----
Subsidiaries or any trade or business (whether or not incorporated) which is
under common control, or which is treated as a single employer, with ▇▇▇▇▇▇▇
under Section 414(b), (c), (m) or (o) of the Code (a "▇▇▇▇▇▇▇ ERISA Affiliate")
-----------------------
or to which ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries or any ▇▇▇▇▇▇▇ ERISA
Affiliate contributed or is obligated to contribute thereunder within six years
prior to the Effective Time (the "▇▇▇▇▇▇▇ Pension Plans") intended to qualify
---------------------
under Section 401 of the Code so qualify and either (A) are not required to
receive a determination letter from the IRS or (B) have been determined by the
IRS to be qualified under Section 401 of the Code and such determination has not
been modified, revoked or limited, and, to the Knowledge of ▇▇▇▇▇▇▇ as of the
Closing Date, nothing has occurred with respect to the operation of the ▇▇▇▇▇▇▇
Pension Plans that could reasonably be expected to cause the loss of such
qualification or the imposition of any material liability, penalty or Tax under
ERISA or the Code.
(ii) Neither ▇▇▇▇▇▇▇ nor any ▇▇▇▇▇▇▇ ERISA Affiliate or
B radley Subsidiary currently sponsors, contributes to, maintains or has
liability (whether contingent or otherwise) under (i) a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) or (ii) an employee benefit plan that
was subject to Part 3 of Subtitle B of Title I of ERISA, or Section 412 of the
Code, or Title IV of ERISA.
(iii) There is no material violation of ERISA or the Code
with respect to (A) the filing of applicable reports, documents, and notices
with the Secretary of Labor and the Secretary of the Treasury regarding all
"employee benefit plans," as defined in Section 3(3) of ERISA, ▇▇▇▇▇▇▇ Pension
Plans and all other employee compensation and benefit arrangements or payroll
practices, including, without limitation, severance pay, sick leave, vacation
pay, salary continuation for disability, consulting or other compensation
agreements, retirement, deferred compensation, bonus (including, without
limitation, any retention bonus plan), long-term incentive, stock option, stock
purchase, hospitalization, medical insurance, life insurance and scholarship
programs maintained by ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries or with
respect to which ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries has any liability
(all such plans, including ▇▇▇▇▇▇▇ Pension Plans, being hereinafter referred to
as the "▇▇▇▇▇▇▇ Employee Benefit Plans") or (B) the furnishing of such documents
to the participants or beneficiaries of ▇▇▇▇▇▇▇ Employee Benefit Plans.
(iv) Each ▇▇▇▇▇▇▇ Employee Benefit Plan, related trust (or
other funding or financing arrangement) and all amendments thereto are listed in
Section 3.1(l)(iv) of the ▇▇▇▇▇▇▇ Disclosure Letter, true and complete copies of
which have been made available to Heritage, as have the most recent summary plan
descriptions, administrative service agreements, Form 5500s and, with respect to
any ▇▇▇▇▇▇▇ Employee Benefit Plan intended to be qualified pursuant to Section
401 of the Code, a current determination letter.
(v) Each of the ▇▇▇▇▇▇▇ Employee Benefit Plans is, and its
administration is and has been in material compliance with, and none of ▇▇▇▇▇▇▇
nor any of the ▇▇▇▇▇▇▇ Subsidiaries has received any claim or notice that any
such ▇▇▇▇▇▇▇ Employee Benefit Plan is not in compliance with, its terms and all
applicable Laws, regulations, rulings and other authority issued thereunder and
all other applicable governmental Laws, regulations and orders, and prohibited
transaction exemptions, including, without limitation, the requirements of ERISA
and all Tax rules for which favorable Tax treatment is intended, bonding
requirements and requirements for the filing of applicable reports, documents,
and
-15-
notices with the Secretary of Labor or the Secretary of the Treasury and the
furnishing of documents to the participants and beneficiaries (and other
individuals entitled to such documents) of each such plan. There is no material
liability for breaches of fiduciary duty in connection with ▇▇▇▇▇▇▇ Employee
Benefit Plans, and neither ▇▇▇▇▇▇▇ nor any of the ▇▇▇▇▇▇▇ Subsidiaries or any
"party in interest" or "disqualified person" with respect to the ▇▇▇▇▇▇▇
Employee Benefit Plans has engaged in a material "prohibited transaction" within
the meaning of Section 4975 of the Code or Section 406 of ERISA.
(vi) There are no actions, disputes, suits, claims,
arbitration or legal, administrative or other proceeding or governmental
investigation pending (other than routine claims for benefits) or, to the
Knowledge of ▇▇▇▇▇▇▇, threatened alleging any breach of the terms of any ▇▇▇▇▇▇▇
Employee Benefit Plan or of any fiduciary duties thereunder or violation of any
applicable Law with respect to any such plan.
(vii) Except as described in Section 3.1(l)(vii) of the
▇▇▇▇▇▇▇ Disclosure Letter, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (A) result in
any payment (including any retention bonuses or noncompetition payments)
becoming due to any employee or former employee or group of employees or former
employees of ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries; (B) increase any
benefits otherwise payable under any ▇▇▇▇▇▇▇ Employee Benefit Plan or ▇▇▇▇▇▇▇
Pension Plan; (C) result in the acceleration of the time of payment or vesting
of any such rights or benefits; or (D) otherwise result in the payment of any
"excess parachute payment" within the meaning of Section 280G of the Code with
respect to a current or former employee of ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇
Subsidiaries. Except as described in Section 3.1(l)(vii) of the ▇▇▇▇▇▇▇
Disclosure Letter, there are no severance agreements, noncompetition agreements
or employment agreements between ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries and
any employee of ▇▇▇▇▇▇▇ or such ▇▇▇▇▇▇▇ Subsidiary. True and complete copies of
all severance agreements and employment agreements described in Section
3.1(l)(vii) of the ▇▇▇▇▇▇▇ Disclosure Letter have been provided to Heritage and
the Heritage Merger Sub.
(viii) Neither ▇▇▇▇▇▇▇ nor any of the ▇▇▇▇▇▇▇ Subsidiaries
has any consulting agreement or arrangement, whether oral or written, with any
Person involving compensation in excess of $100,000 except as are terminable
upon one month's notice or less.
(ix) All contributions, premiums and other payments
required by Law or any ▇▇▇▇▇▇▇ Employee Benefit Plan or applicable collective
bargaining agreement to have been made under any such plan to any fund, trust or
account established thereunder or in connection therewith have been made by the
due date thereof, and no amounts are or will be due to the Pension Benefit
Guaranty Corporation (except for premiums in the ordinary course of business);
and any and all contributions, premiums and other payments with respect to
compensation or service before and through the Closing Date, or otherwise with
respect to periods before and through the Closing Date, due from any of ▇▇▇▇▇▇▇
or its Affiliates to, under or on account of each ▇▇▇▇▇▇▇ Employee Benefit Plan
shall have been paid prior to the Closing Date or shall have been fully reserved
and provided for on the ▇▇▇▇▇▇▇ financial statements.
(x) No stock or other security issued by ▇▇▇▇▇▇▇ or any of
the ▇▇▇▇▇▇▇ Subsidiaries forms or has formed a part of the assets of any ▇▇▇▇▇▇▇
Employee Benefit Plan.
(xi) No ▇▇▇▇▇▇▇ Employee Benefit Plan that is a "welfare
benefit plan" as defined in Section 3(1) of ERISA provides for continuing
benefits or coverage for any participant or beneficiary or covered dependent of
a participant after such participant's termination of employment, except to the
extent required by Law. All ▇▇▇▇▇▇▇ Employee Benefit Plans which provide
medical, dental health or long-term disability benefits are fully insured and
claims with respect to any participant or covered dependent under such ▇▇▇▇▇▇▇
Employee Benefit Plan could not result in any uninsured liability
-16-
to ▇▇▇▇▇▇▇, any ▇▇▇▇▇▇▇ Subsidiary or Heritage or the Heritage Merger Sub.
▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ ERISA Affiliates have complied in all material respects
with the requirements of Section 4980B of the Code and Parts 6 and 7 of Subtitle
B of Title I of ERISA regarding health care coverage under ▇▇▇▇▇▇▇ Employee
Benefit Plans.
(xii) Except as set forth in Section 3.1(l)(xii) of the
▇▇▇▇▇▇▇ Disclosure Letter, no amount has been paid by ▇▇▇▇▇▇▇ or any of the
▇▇▇▇▇▇▇ ERISA Affiliates, and no amount is expected to be paid by ▇▇▇▇▇▇▇ or any
of the ▇▇▇▇▇▇▇ ERISA Affiliates, which would be subject to the provisions of
Section 162(m) of the Code such that all or a part of such payments would not be
deductible by the payor.
(xiii) As to any ▇▇▇▇▇▇▇ Pension Plan intended to be
qualified pursuant to Section 401(a) of the Code, there has been no termination
or partial termination of the plan within the meaning of Section 411(d)(3) of
the Code.
(xiv) Without limiting any other provision of this Section
3.1(l), no event has occurred and no condition exists, with respect to any
employee benefit plan, that has subjected or could subject ▇▇▇▇▇▇▇ or any
▇▇▇▇▇▇▇ Subsidiary, or any ▇▇▇▇▇▇▇ Employee Benefit Plan or any successor
thereto, to any Tax, fine, penalty or other liability (other than, in the case
of ▇▇▇▇▇▇▇, a ▇▇▇▇▇▇▇ Subsidiary and the ▇▇▇▇▇▇▇ Employee Benefit Plans, a
liability arising in the normal course to make contributions or payments, as
applicable, when ordinarily due under a ▇▇▇▇▇▇▇ Employee Benefit Plan with
respect to employees of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries). No event has
occurred and no condition exists, with respect to any employee benefit plan that
could subject Heritage or the Heritage Merger Sub or any of its Affiliates, or
any plan maintained by Heritage or the Heritage Merger Sub or any Affiliate
(other than an Affiliate which becomes such pursuant to the transactions
contemplated by this Agreement) thereof, to any Tax, fine, penalty or other
liability, that would not have been incurred by Heritage or the Heritage Merger
Sub or any of its Affiliates, or any such plan, but for the transactions
contemplated hereby. No plan other than a ▇▇▇▇▇▇▇ Employee Benefit Plan is or
will be directly or indirectly binding on Heritage or the Heritage Merger Sub by
virtue of the transactions contemplated hereby. Heritage, the Heritage Merger
Sub and their Affiliates, including on and after the Closing Date, ▇▇▇▇▇▇▇ and
any ▇▇▇▇▇▇▇ Subsidiary, shall have no liability for, under, with respect to or
otherwise in connection with any plan, which liability arises under ERISA or the
Code, by virtue of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary being aggregated in a
controlled group or affiliated service group with any ▇▇▇▇▇▇▇ ERISA Affiliate
for purposes of ERISA or the Code at any relevant time prior to the Closing Date
(other than a liability from providing benefits arising in the ordinary course
of business).
(xv) Each ▇▇▇▇▇▇▇ Employee Benefit Plan may be unilaterally
amended or terminated in its entirety by ▇▇▇▇▇▇▇ or the surviving corporation
without liability except as to benefits accrued thereunder prior to amendment or
termination.
(xvi) All individual employment, termination, severance,
change in control, retention bonus, post-employment and other compensation
agreements, arrangements and plans existing prior to the execution of this
Agreement or which will exist prior to the Closing, which are between ▇▇▇▇▇▇▇ or
a ▇▇▇▇▇▇▇ Subsidiary and any current or former director, officer or employee
thereof, including the name and title of such current or former director,
officer or employee, the type of agreement and the amount of any estimated
severance payment (including estimated gross-up) owed thereunder, are listed in
Section 3.1(l)(xvi) of the ▇▇▇▇▇▇▇ Disclosure Letter (collectively, the "▇▇▇▇▇▇▇
-------
Severance Agreements").
--------------------
(m) Labor and Employment Matters. Except as set forth in the
------------------------------
▇▇▇▇▇▇▇ SEC Documents or as would not be reasonably expected to have a ▇▇▇▇▇▇▇
Material Adverse Effect:
-17-
(i) Neither ▇▇▇▇▇▇▇ nor any of the ▇▇▇▇▇▇▇ Subsidiaries is
a party to any collective bargaining agreement or other current labor agreement
with any labor union or organization, and there is no question involving current
union representation of employees of ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries,
nor does ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries know of any activity or
proceeding of any labor organization (or representative thereof) or employee
group (or representative thereof) to organize any such employees.
(ii) There is no unfair labor practice charge or grievance
arising out of a collective bargaining agreement or other grievance procedure
pending, or, to the Knowledge of ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries,
threatened against ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries.
(iii) Except as set forth in Section 3.1(j) of the ▇▇▇▇▇▇▇
Disclosure Letter or as otherwise provided above, there is no complaint, lawsuit
or proceeding in any forum by or on behalf of any present or former employee,
any applicant for employment or any classes of the foregoing, alleging breach of
any express or implied contract of employment, any Law or regulation governing
employment or the termination thereof or other discriminatory, wrongful or
tortuous conduct in connection with the employment relationship pending, or, to
the Knowledge of ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries, threatened against
▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries.
(iv) There is no strike, slowdown, work stoppage or lockout
pending, or, to the Knowledge of ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries,
threatened, against or involving ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries.
(v) The employees of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries
are lawfully authorized to work in the United States according to Federal
immigration Laws.
(vi) ▇▇▇▇▇▇▇ and each of the ▇▇▇▇▇▇▇ Subsidiaries are in
compliance with all applicable Laws in respect of employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health.
(vii) There is no proceeding, claim, suit, action or
governmental investigation pending or, to the Knowledge of ▇▇▇▇▇▇▇ or any of the
▇▇▇▇▇▇▇ Subsidiaries, threatened, with respect to which any current or former
director, officer, employee or agent of ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇
Subsidiaries is claiming indemnification from ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇
Subsidiaries.
(n) Intangible Property. ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries own,
-------------------
possess or have adequate rights to use all trademarks, trade names, patents,
service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights necessary for the operation of the businesses
of each of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries (collectively, the "▇▇▇▇▇▇▇
-------
Intangible Property"), except where the failure to possess or have adequate
-------------------
rights to use such properties, individually or in the aggregate, would not
reasonably be expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect. All of the
▇▇▇▇▇▇▇ Intangible Property is owned or licensed by ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇
Subsidiaries free and clear of any and all Liens, except those that,
individually or in the aggregate, would not reasonably be expected to have a
▇▇▇▇▇▇▇ Material Adverse Effect, and neither ▇▇▇▇▇▇▇ nor any such ▇▇▇▇▇▇▇
Subsidiary has forfeited or otherwise relinquished any ▇▇▇▇▇▇▇ Intangible
Property which forfeiture has resulted in, individually or in the aggregate, or
would reasonably be expected to result in a ▇▇▇▇▇▇▇ Material Adverse Effect. To
the Knowledge of ▇▇▇▇▇▇▇, the use of ▇▇▇▇▇▇▇ Intangible Property by ▇▇▇▇▇▇▇ or
the ▇▇▇▇▇▇▇ Subsidiaries does not, or in any material respect, conflict with,
infringe upon, violate or interfere with or constitute an appropriation of any
right, title, interest or goodwill, including, without limitation, any
intellectual property right, trademark, trade name, patent, service ▇▇▇▇, brand
▇▇▇▇, brand name, computer program, database, industrial design, copyright or
any pending application therefor, of any other
-18-
Person, and there have been no claims made, and neither ▇▇▇▇▇▇▇ nor any of the
▇▇▇▇▇▇▇ Subsidiaries has received any notice of any claim or otherwise knows
that any of the ▇▇▇▇▇▇▇ Intangible Property is invalid or conflicts with the
asserted rights of any other Person or has not been used or enforced or has
failed to have been used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of any of the ▇▇▇▇▇▇▇ Intangible
Property, except for any such conflict, infringement, violation, interference,
claim, invalidity, abandonment, cancellation or unenforceability that,
individually or in the aggregate, would not reasonably be expected to have a
▇▇▇▇▇▇▇ Material Adverse Effect.
(o) Environmental Matters. For purposes of this Agreement, (x)
---------------------
"Environmental Law" means any Law of any Governmental Entity relating to human
-----------------
health, safety or protection of the environment, and (y) "Hazardous Material"
------------------
means (A) any petroleum or petroleum products, radioactive materials,
asbestos-containing materials, urea formaldehyde foam insulation, and
transformers and other equipment that contain dielectric fluid containing
greater than 50 parts per million polychlorinated biphenyls ("PCBs"); (B) any
chemicals, materials, substances or wastes which are defined as or included in
the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants" or words of similar import, under any applicable
Environmental Law. Except as disclosed in Section 3.1(o) of the ▇▇▇▇▇▇▇
Disclosure Letter or in the environmental audits/reports listed thereon or other
audits/reports obtained by Heritage, and except as would not have a ▇▇▇▇▇▇▇
Material Adverse Effect:
(i) No administrative or compliance order has been issued
that is still in effect, no complaint has been filed that has not been resolved,
no penalty has been assessed that has not been paid and no investigation or
review is pending or, to the Knowledge of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries,
threatened by any Governmental Entity with respect to any alleged failure by
▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary to have any ▇▇▇▇▇▇▇ Permit required under any
applicable Environmental Law or with respect to any treatment, storage,
recycling, transportation, disposal or "release" (as defined in 42 U.S.C. (S)
9601(22) ("Release")) by ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary of any Hazardous
-------
Material.
(ii) Neither ▇▇▇▇▇▇▇ nor any ▇▇▇▇▇▇▇ Subsidiary nor, to the
Knowledge of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries, any owner or lessee of any
property owned, operated or leased by ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary, has
handled any Hazardous Material on such property, except in material compliance
with applicable Environmental Laws. To the Knowledge of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇
Subsidiaries, (A) there are no asbestos-containing materials present on any
property owned or operated by ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary, (B) there are
no regulated levels of PCBs present on any property owned or operated by ▇▇▇▇▇▇▇
or any ▇▇▇▇▇▇▇ Subsidiary, and (C) there are no underground storage tanks,
active or abandoned, used for the storage of Hazardous Materials currently
present on any property owned or operated by ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary,
except in each case where in material compliance with applicable Environmental
Laws.
(iii) ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries have not received
notice of a claim, that has not been resolved, to the effect that it is liable
to a third party, including a Governmental Entity, as a result of a Release of a
Hazardous Material into the environment at any property currently or formerly
owned or operated by ▇▇▇▇▇▇▇ or a ▇▇▇▇▇▇▇ Subsidiary, and to the Knowledge of
▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries, there is no reasonable basis for such
claim.
(iv) Neither ▇▇▇▇▇▇▇ nor any ▇▇▇▇▇▇▇ Subsidiary has
transported or arranged for the transportation of any Hazardous Material to any
location which is the subject of any action, suit or proceeding that could be
reasonably expected to result in claims against ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇
Subsidiary related to such Hazardous Material for clean-up costs, remedial work,
damages to natural resources or personal injury claims, including, but not
limited to, claims under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and the rules and
-19-
regulations promulgated thereunder ("CERCLA") and, to the Knowledge of ▇▇▇▇▇▇▇
------
and the ▇▇▇▇▇▇▇ Subsidiaries, there is no reasonable basis for such claim.
(v) ▇▇▇▇▇▇▇ has made notification of Releases of a
Hazardous Material where required by applicable Environmental Law, and no
property now or, to the Knowledge of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries,
previously owned or operated by ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary is listed or,
to the Knowledge of ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇ Subsidiaries, proposed for listing on
the National Priorities List promulgated pursuant to CERCLA or on any similar
state list of sites where such listing requires active investigation or
clean-up.
(vi) There are no Liens arising under or pursuant to any
applicable Environmental Law on any ▇▇▇▇▇▇▇ Property (as hereinafter defined),
and no action of any Governmental Entity has been taken or, to the Knowledge of
▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries, is in process which could subject any of
such properties to such Liens. To the Knowledge of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇
Subsidiaries, neither ▇▇▇▇▇▇▇ nor any ▇▇▇▇▇▇▇ Subsidiary currently has a duty
under any applicable Environmental Law to place any restriction relating to the
presence of Hazardous Material at any such ▇▇▇▇▇▇▇ Property.
(vii) ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries (which for
purposes of this sentence shall exclude ▇▇▇▇▇▇ Properties Corporation,
Mid-America Realty Investments, Inc. or their respective affiliated entities)
have not entered into any agreements to provide indemnification to any third
party purchaser pursuant to Environmental Laws in relation to any property or
facility previously owned or operated by ▇▇▇▇▇▇▇ or a ▇▇▇▇▇▇▇ Subsidiary.
(viii) To the Knowledge of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇
Subsidiaries, neither ▇▇▇▇▇▇▇ nor any ▇▇▇▇▇▇▇ Subsidiary has in its possession
or control any environmental assessment or investigation reports prepared within
the last four years that (A) have not been provided to Heritage prior to the
execution of this Agreement and (B) that disclose a material environmental
condition which has not been addressed or remediated with respect to properties
currently owned or operated by ▇▇▇▇▇▇▇, except for such reports that (1) contain
information regarding the environmental condition of any such property that has
been superceded by information contained in a subsequently dated report that has
been provided to Heritage or (2) reflect the results of an asbestos survey
and/or abatement work performed in the ordinary course of renovation or
demolition activities.
(p) Properties.
----------
(i) (A) Except as listed in Section 3.1(p)(i)(A) of the
▇▇▇▇▇▇▇ Disclosure Letter, ▇▇▇▇▇▇▇ or a ▇▇▇▇▇▇▇ Subsidiary owns fee simple title
to or has a valid leasehold interest in, each of the real properties reflected
on the most recent balance sheet of ▇▇▇▇▇▇▇ and/or the ▇▇▇▇▇▇▇ OP included in
the ▇▇▇▇▇▇▇ SEC Documents and as identified in Section 3.1(p)(i)(A) of the
▇▇▇▇▇▇▇ Disclosure Letter (each, a "▇▇▇▇▇▇▇ Property" and collectively, the
----------------
"▇▇▇▇▇▇▇ Properties"), which are all of the real estate properties owned by
------------------
them, free and clear of Liens except for (1) debt and other matters identified
on Section 3.1(p)(i)(A)(1) of the ▇▇▇▇▇▇▇ Disclosure Letter, (2) inchoate Liens
imposed for construction work in progress or otherwise incurred in the ordinary
course of business, (3) mechanics', workmen's and repairmen's Liens (other than
inchoate Liens for work in progress) which have heretofore been bonded or
insured; (4) leases, reciprocal easement agreements and all matters disclosed on
existing title policies or as would be disclosed on current title reports or
instrument surveys (excluding outstanding indebtedness listed in Section
3.1(p)(i)(A)(1) of the ▇▇▇▇▇▇▇ Disclosure Letter) and (5) real estate Taxes and
special assessments; (B) except as listed in Section 3.1(p)(i)(B) of the ▇▇▇▇▇▇▇
Disclosure Letter or as would not reasonably be expected to have a ▇▇▇▇▇▇▇
Material Adverse Effect, the ▇▇▇▇▇▇▇ Properties are not subject to any rights of
way, written agreements, Laws, ordinances and regulations affecting building
-20-
use or occupancy, or reservations of an interest in title (collectively,
"▇▇▇▇▇▇▇ Property Restrictions"), except for (1) ▇▇▇▇▇▇▇ Property Restrictions
-----------------------------
imposed or promulgated by Law with respect to real property, including zoning
regulations, (2) other ▇▇▇▇▇▇▇ Property Restrictions and other limitations of
any kind, if any, (3) leases, reciprocal easement agreements and all matters
disclosed on existing title policies or as would be disclosed on current title
reports or instrument surveys (excluding outstanding indebtedness listed in
Section 3.1(p)(i)(A)(1) of the ▇▇▇▇▇▇▇ Disclosure Letter) and (4) real estate
Taxes and special assessments; (C) except as listed in Section 3.1(p)(i)(C) of
the ▇▇▇▇▇▇▇ Disclosure Letter or as would not reasonably be expected to have a
▇▇▇▇▇▇▇ Material Adverse Effect, valid policies of title insurance have been
issued insuring ▇▇▇▇▇▇▇'▇ or a ▇▇▇▇▇▇▇ Subsidiary's or a predecessor in
interest's fee simple title or leasehold estate to the ▇▇▇▇▇▇▇ Properties except
as noted therein, and, to the Knowledge of ▇▇▇▇▇▇▇, such policies are, at the
date of this Agreement, in full force and effect and no claim has been made
against any such policy; (D) except as listed in Section 3.1(p)(i)(D) of the
▇▇▇▇▇▇▇ Disclosure Letter or as would not reasonably be expected to have a
▇▇▇▇▇▇▇ Material Adverse Effect, to the Knowledge of ▇▇▇▇▇▇▇, there is no
certificate, permit or license from any Governmental Entity having jurisdiction
over any of the ▇▇▇▇▇▇▇ Properties or any agreement, easement or any other right
which is necessary to permit the lawful use and operation of the buildings and
improvements on any of the ▇▇▇▇▇▇▇ Properties or which is necessary to permit
the lawful use and operation of all driveways, roads and other means of egress
and ingress to and from any of the ▇▇▇▇▇▇▇ Properties (collectively, the
"Property Agreements") that has not been obtained and is not in full force and
-------------------
effect, or of any pending threat of modification or cancellation of any of same;
(E) except as listed in Section 3.1(p)(i)(E) of the ▇▇▇▇▇▇▇ Disclosure Letter or
as would not reasonably be expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect,
neither ▇▇▇▇▇▇▇ nor a ▇▇▇▇▇▇▇ Subsidiary has received written notice of any
violation of any Federal, state or municipal Law, ordinance, order, regulation
or requirement affecting any portion of any of the ▇▇▇▇▇▇▇ Properties issued by
any Governmental Entity that has not otherwise been resolved; (F) except as
listed in Section 3.1(p)(i)(F) of the ▇▇▇▇▇▇▇ Disclosure Letter or as would not
reasonably be expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect, neither
▇▇▇▇▇▇▇ nor a ▇▇▇▇▇▇▇ Subsidiary has received written notice to the effect that
and there are no (1) condemnation or rezoning or proceedings that are pending
or, to the Knowledge of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries, threatened with
respect to any material portion of any of the ▇▇▇▇▇▇▇ Properties or (2) zoning,
building or similar Laws or orders that are presently being violated or will be
violated by the continued maintenance, operation or use of any buildings or
other improvements on any of the ▇▇▇▇▇▇▇ Properties or by the continued
maintenance, operation or use of the parking areas; (G) except as listed in
Section 3.1(p)(i)(G) of the ▇▇▇▇▇▇▇ Disclosure Letter or as would not reasonably
be expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect, neither ▇▇▇▇▇▇▇ nor any
▇▇▇▇▇▇▇ Subsidiary has received written notice that it is currently in default
or violation of any ▇▇▇▇▇▇▇ Property Restrictions; and (H) except as listed in
Section 3.1(p)(i)(H) of the ▇▇▇▇▇▇▇ Disclosure Letter or as would not reasonably
be expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect, neither ▇▇▇▇▇▇▇ nor any
▇▇▇▇▇▇▇ Subsidiary has received written notice that it is currently in default
of any material Property Agreements.
(ii) Except as listed in Section 3.1(p)(ii) of the ▇▇▇▇▇▇▇
Disclosure Letter or, individually or in the aggregate, as would not reasonably
be expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect, each ▇▇▇▇▇▇▇ Property
complies with the ▇▇▇▇▇▇▇ Property Restrictions.
(iii) Except as listed in Section 3.1(p)(iii) of the ▇▇▇▇▇▇▇
Disclosure Letter or, individually or in the aggregate, as would not reasonably
be expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect, all properties currently
under development or construction by ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇ Subsidiaries and all
properties currently proposed for acquisition, development or commencement of
construction prior to the Effective Time by ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries
are listed as such in Section 3.1(p)(iii) of the ▇▇▇▇▇▇▇ Disclosure Letter.
Except as listed in Section 3.1(p)(iii) of the ▇▇▇▇▇▇▇ Disclosure Letter or as,
individually or in the aggregate, would not reasonably be expected to have a
▇▇▇▇▇▇▇ Material Adverse Effect, all executory agreements entered into by
▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries relating to the development or
construction of real estate properties (other than agreements
-21-
for architectural, engineering, planning, accounting, legal or other
professional services or agreements for material or labor) are listed in Section
3.1(p)(iii) of the ▇▇▇▇▇▇▇ Disclosure Letter.
(iv) Section 3.1(p)(iv) of the ▇▇▇▇▇▇▇ Disclosure Letter
sets forth the rent roll for each of the ▇▇▇▇▇▇▇ Properties (the "Rent Roll") as
---------
of May 1, 2000. Except as disclosed in Section 3.1(p)(iv) of the ▇▇▇▇▇▇▇
Disclosure Letter and for discrepancies that, either individually or in the
aggregate, would not reasonably be expected to have a ▇▇▇▇▇▇▇ Material Adverse
Effect, the information set forth in the Rent Roll is true, correct and complete
as of the date thereof. Except as disclosed in Section 3.1(p)(iv) of the ▇▇▇▇▇▇▇
Disclosure Letter and as set forth in a delinquency report made available to
Heritage, neither ▇▇▇▇▇▇▇ or a ▇▇▇▇▇▇▇ Subsidiary, on the one hand, nor, to the
Knowledge of ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇ OP, any other party, on the other hand, is
in material monetary default under any lease which, individually or in the
aggregate, would reasonably be expected to result in a ▇▇▇▇▇▇▇ Material Adverse
Effect.
(v) Section 3.1(p)(v) of the ▇▇▇▇▇▇▇ Disclosure Letter
sets forth a complete and correct list, as of the date of this Agreement, of all
material leases which have been executed, but are either not yet included on the
Rent Roll or not yet open for business.
(vi) Except as would not, individually or in the aggregate,
be reasonably expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect, no tenants
have been granted options to purchase or rights of first refusal under their
applicable leases which would require consent or be triggered by the Merger.
(vii) Section 3.1(p)(vii) of the ▇▇▇▇▇▇▇ Disclosure Letter
contains a list of any unfunded tenant improvements being conducted by ▇▇▇▇▇▇▇
or any ▇▇▇▇▇▇▇ Subsidiary in excess of $250,000 in any one instance.
(q) Insurance. Section 3.1(q) of the ▇▇▇▇▇▇▇ Disclosure Letter sets
---------
forth an insurance schedule of ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ and each of the ▇▇▇▇▇▇▇
Subsidiaries maintains insurance with financially responsible insurers in such
amounts and covering such risks as are in accordance with normal industry
practice for companies engaged in businesses similar to those of ▇▇▇▇▇▇▇ and
each of the ▇▇▇▇▇▇▇ Subsidiaries (taking into account the cost and availability
of such insurance). Except as set forth in this Section 3.1(q), neither ▇▇▇▇▇▇▇
nor any of the ▇▇▇▇▇▇▇ Subsidiaries has received any written notice of
cancellation or termination with respect to any existing material insurance
policy of ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries.
(r) Opinion of Financial Advisor. ▇▇▇▇▇▇▇ has received the written
----------------------------
opinion of Deutsche Bank Securities, Inc. to the effect that on the basis of and
subject to the assumptions set forth therein, (i) the Common Merger
Consideration to be paid to the holders of ▇▇▇▇▇▇▇ Common Stock and (ii) the LP
Unit Consideration to be offered to LP Unit Holders in the transactions
contemplated hereby, is fair from a financial point of view to such holders. A
copy of the written opinion of Deutsche Bank Securities, Inc. has been delivered
to Heritage.
(s) Vote Required. The affirmative vote of the holders of a
-------------
majority of the ▇▇▇▇▇▇▇ Common Stock and Series A Preferred Stock, voting
together as a single class (the "▇▇▇▇▇▇▇ Stockholder Approval"), is the only
----------------------------
vote required to approve the Merger and the other transactions contemplated by
the Transaction Documents. There is no requirement for any separate vote or
approval of the holders of Series A Preferred Stock. Neither the ▇▇▇▇▇▇▇ OP
Agreement nor any other agreement with any partner requires the approval of any
LP Unit Holder or any holder of the Series B Units or the Series C Units with
respect to this Agreement or any of the transactions contemplated hereby.
-22-
(t) Beneficial Ownership of ▇▇▇▇▇▇▇ Common Stock. Neither ▇▇▇▇▇▇▇
--------------------------------------------
nor the ▇▇▇▇▇▇▇ Subsidiaries "beneficially own" (as defined in Rule 13d-3
promulgated under the Exchange Act) any of the outstanding ▇▇▇▇▇▇▇ Common Stock
or any of the Unsecured Notes.
(u) Brokers. Except for the fees and expenses payable to Deutsche
-------
Bank Securities, Inc. (which fees have been disclosed to Heritage), no broker,
investment banker or other Person is entitled to any broker's, finder's or other
similar fee or commission in connection with the transactions contemplated by
the Transaction Documents based upon arrangements made by or on behalf of
▇▇▇▇▇▇▇.
(v) Investment Company Act of 1940. Neither ▇▇▇▇▇▇▇ nor any of the
------------------------------
▇▇▇▇▇▇▇ Subsidiaries is, or at the Effective Time will be, required to be
registered as an investment company under the Investment Company Act of 1940, as
amended.
(w) Contracts.
---------
(i) Section 3.1(w)(i) of the ▇▇▇▇▇▇▇ Disclosure Letter
lists all Material Contracts of ▇▇▇▇▇▇▇. Except as set forth on Section
3.1(w)(i) of the ▇▇▇▇▇▇▇ Disclosure Letter or in the ▇▇▇▇▇▇▇ SEC Documents, each
Material Contract is valid, binding and enforceable and in full force and
effect, except where such failure to be so valid, binding and enforceable and in
full force and effect would not, individually or in the aggregate, reasonably be
expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect, and there are no defaults
thereunder, except those defaults that would not, individually or in the
aggregate, reasonably be expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect. For
purposes of this Agreement, "Material Contracts" shall mean (i) any loan
------------------
agreement, indenture, note, bond, debenture or any other document or agreement
evidencing a capitalized lease obligation or other indebtedness to any Person,
other than indebtedness in a principal amount less than $500,000, (ii) each
material commitment, contractual obligation, borrowing, capital expenditure or
transaction entered into by ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary which may result
in total payments by or liability of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary in excess
of $500,000, (iii) any other agreements filed or required to be filed as
exhibits to the ▇▇▇▇▇▇▇ SEC Documents pursuant to Item 601(b)(10) of Regulation
S-K of Title 17, Part 229 of the Code of Federal Regulations, (iv) the Limited
Partner Agreements; provided, however, any contract, agreement or other
arrangement that, by its terms, is terminable within 30 days (without penalty)
of the date of this Agreement shall not be deemed to be a Material Contract.
(ii) All mortgages on any of the assets of ▇▇▇▇▇▇▇ or the
▇▇▇▇▇▇▇ OP are listed in Section 3.1(w)(ii) of the ▇▇▇▇▇▇▇ Disclosure Letter
hereto. The Merger and the other transactions contemplated by the Transaction
Documents will not trigger any due-on-sale provision on any of such mortgages,
except as set forth in Section 3.1(w)(ii) of the ▇▇▇▇▇▇▇ Disclosure Letter and
will not require the consent of any mortgage lender, except as set forth in
Section 3.1(w)(ii) of the ▇▇▇▇▇▇▇ Disclosure Letter.
(iii) Except as set forth in Section 3.1(w)(iii) of the
▇▇▇▇▇▇▇ Disclosure Letter, there is no confidentiality agreement,
non-competition agreement or other contract or agreement that contains covenants
that restrict ▇▇▇▇▇▇▇'▇ ability to conduct its business in any location in a
manner that is material to the business of ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇ Subsidiaries.
(iv) Except as set forth in Section 3.1(w)(iv) of the
▇▇▇▇▇▇▇ Disclosure Letter, there are no indemnification agreements entered into
by and between ▇▇▇▇▇▇▇ and any director or officer of ▇▇▇▇▇▇▇ or any of the
▇▇▇▇▇▇▇ Subsidiaries.
(x) Rule 16b-3. ▇▇▇▇▇▇▇ has taken all necessary action, including
----------
(without limitation) causing its Board of Directors to adopt resolutions
authorizing and approving the Merger, this Agreement
-23-
and the other transactions contemplated by the Transaction Documents to exempt
such transactions under Rule 16b-3 of the Exchange Act from the provisions of
Section 16(b) of the Exchange Act.
(y) Amendment to the ▇▇▇▇▇▇▇ OP Agreement. After the Effective
-------------------------------------
Time, Heritage will be permitted to cause the Surviving Corporation, as general
partner of the ▇▇▇▇▇▇▇ OP, to amend the ▇▇▇▇▇▇▇ OP Agreement, in accordance with
Section 5.11(b).
(z) No Dissenters' Rights. No dissenters' or appraisal rights
---------------------
shall be available with respect to the Merger or the other transactions
contemplated by the Transaction Documents.
(aa) State Takeover Statutes. ▇▇▇▇▇▇▇ has taken all action
-----------------------
necessary to exempt the transactions contemplated by this Agreement between
Heritage and ▇▇▇▇▇▇▇ and its Affiliates from operation of any "fair price,"
"business combination," "moratorium," "control share acquisition" or any other
anti-takeover statute or similar statute enacted under Federal or state Laws of
the United States or similar statute or regulation (a "Takeover Statute").
----------------
Section 3.2. Representations and Warranties of Heritage. Heritage
------------------------------------------
represents and warrants to ▇▇▇▇▇▇▇ as follows:
(a) Organization, Standing and Corporate Power of Heritage and the
--------------------------------------------------------------
Heritage Merger Sub. Heritage is a corporation duly formed and validly existing
-------------------
under the MGCL and is in good standing with the State Department of Assessments
and Taxation of Maryland. The Heritage Merger Sub is a corporation duly formed
and validly existing under the MGCL and is in good standing with the State
Department of Assessments and Taxation of Maryland. Heritage has made available
to ▇▇▇▇▇▇▇ complete and correct copies of its charter and by-laws and complete
and correct copies of the Heritage Merger Sub's charter and by-laws.
(b) Heritage OP; Interests in Other Persons. Heritage Realty
---------------------------------------
Limited Partnership (the "Heritage OP") is a partnership duly organized, validly
-----------
existing and in good standing under the Laws of the State of Delaware and has
the requisite power and authority to carry on its business as now being
conducted. The Heritage OP is duly qualified or licensed to do business and is
in good standing in each jurisdiction in which the nature of its business or the
ownership, operation or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be so
qualified or licensed individually or in the aggregate, would not have a
material adverse effect on the business, properties, condition (financial or
otherwise) or results of operations of Heritage, the Heritage Merger Sub and the
Heritage Subsidiaries (as defined in Article X), taken as a whole (a "Heritage
--------
Material Adverse Effect"). All partnership interests in the Heritage OP have
-----------------------
been duly authorized and are validly issued and are owned by Heritage and/or
another Heritage Subsidiary and are so owned free and clear of all Liens.
Heritage has heretofore made available to ▇▇▇▇▇▇▇ complete and correct copies of
the partnership agreement of the Heritage OP.
(c) Capital Structure.
-----------------
(i) Capital Stock
-------------
(A) As of the date of this Agreement, the authorized
capital stock of Heritage consists of (1) 70,000,000 shares of Heritage
common stock, par value $0.001 per share (the "Heritage Common Stock"), and
---------------------
(2) 25,000,000 shares of Heritage preferred stock, par value $0.001 per
share, of which 25,000,000 shares are designated as Heritage Series A
Preferred Stock (the "Heritage Series A Preferred Stock").
---------------------------------
-24-
(B) As of the date of this Agreement, (1) 5,857,394
shares of Heritage Common Stock are issued and outstanding and (2)
17,221,066 shares of Heritage Series A Preferred Stock are issued and
outstanding.
(C) As of the date of this Agreement, (1) no shares of
Heritage Common Stock were reserved for issuance upon exchange of units of
limited partner interest in the Heritage OP (the "Heritage LP Units") for
-----------------
shares of Heritage Common Stock and (2) 17,221,066 shares of Heritage
Common Stock were reserved for issuance upon conversion of the Heritage
Series A Preferred Stock.
(D) As of the date of this Agreement, except as set
forth above in this Section 3.2(c), no shares of capital stock or other
voting securities of Heritage were issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of Heritage are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights.
(E) There is no Voting Debt of Heritage or any
Heritage Subsidiary outstanding.
(d) Authority; No Violations; Consents and Approvals.
------------------------------------------------
(i) Heritage and the Heritage Merger Sub have all
requisite power and authority to enter into the Transaction Documents to which
they are parties and to consummate the transactions contemplated hereby or
thereby. The execution and delivery of the Transaction Documents and the
consummation of the transactions contemplated hereby or thereby have been duly
authorized by all necessary action on the part of Heritage and the Heritage
Merger Sub. Heritage has obtained the approval of the Heritage stockholder
holding approximately 94% of Heritage's outstanding capital stock to the
amendment to the Heritage charter for the purpose of creating the Heritage
Series B Preferred Stock and the Heritage Series C Preferred Stock.
(ii) The Transaction Documents to which Heritage and the
Heritage Merger Sub are parties have been duly executed and delivered by each of
Heritage and the Heritage Merger Sub, as the case may be, and assuming the
Transaction Documents to which ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries is a
party constitute the valid and binding obligation of ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇
Subsidiary, as the case may be, constitute a valid and binding obligation of
each of Heritage and the Heritage Merger Sub, as the case may be, enforceable in
accordance with its terms, subject as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium and other Laws of general applicability
relating to or affecting creditors' rights and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at Law).
(iii) The execution and delivery of the Transaction
Documents to which it is a party do not, and the consummation of the
transactions contemplated hereby or thereby, and compliance with the provisions
hereof or thereof, will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any material
obligation, or give rise to a right of purchase under, result in the creation of
any Lien upon any of the properties or assets of Heritage or the Heritage Merger
Sub or any of the Heritage Subsidiaries under, require the consent or approval
of any third-party lender or otherwise result in a material detriment to
Heritage or the Heritage Merger Sub or any of the Heritage Subsidiaries under,
any provision of (A) the charter or by-laws of Heritage, the charter or by-laws
of the Heritage Merger Sub or any provision of the comparable charter or
organizational documents of any of the Heritage Subsidiaries, (B) any Material
Contract applicable to Heritage or the Heritage Merger Sub or any of the
Heritage Subsidiaries, the respective properties or assets of Heritage, or any
guarantee by Heritage or the
-25-
Heritage Merger Sub or any of the Heritage Subsidiaries, (C) any joint venture
or other ownership arrangement or (D) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in Section
3.2(d)(iv) are duly and timely obtained or made, any judgment, order, decree or
Law applicable to Heritage or the Heritage Merger Sub or any of the Heritage
Subsidiaries or any of the Heritage respective properties or assets, other than,
in the case of clauses (B), (C) and (D), any such conflicts, violations,
defaults, rights, Liens or detriments that, individually or in the aggregate,
would not reasonably be expected to materially impair the ability of Heritage or
the Heritage Merger Sub to perform its obligations hereunder or thereunder or
prevent the consummation of any of the transactions contemplated hereby or
thereby or result in a Heritage Material Adverse Effect.
(iv) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any Governmental Entity
is required by or with respect to Heritage or the Heritage Merger Sub or any of
the Heritage Subsidiaries in connection with the execution and delivery by
Heritage or the Heritage Merger Sub of the Transaction Documents to which
Heritage or the Heritage Merger Sub is a party or the consummation by Heritage
or the Heritage Merger Sub of the transactions contemplated hereby or thereby,
except for: (A) the filing with the SEC of such reports under Section 13(a) of
the Exchange Act and such other compliance with the Securities Act and the
Exchange Act and the rules and regulations thereunder as may be required in
connection with this Agreement and the transactions contemplated hereby; (B) the
filing of the Articles of Merger and the charter amendment described in Section
3.2(d)(i) with, and acceptance for recording of the Articles of Merger and such
charter amendment by, the State Department of Assessments and Taxation of
Maryland; (C) such filings and approvals as may be required by any applicable
state takeover Laws or environmental Laws; (D) filings under the HSR Act, if
applicable; and (E) any such consent, approval, order, authorization,
registration, declaration, filing or permit that the failure to obtain or make
would not reasonably be expected to materially impair the ability of Heritage or
the Heritage Merger Sub to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby or thereby or result
in a Heritage Material Adverse Effect.
(e) Litigation. There is no suit, action or proceeding pending, or,
----------
to the Knowledge of Heritage or the Heritage Merger Sub, threatened against or
affecting Heritage or the Heritage Merger Sub or any other Heritage Subsidiary
that would be likely to prevent the consummation of the transactions
contemplated by this Agreement.
(f) Interim Operations of the Heritage Merger Sub. The Heritage
---------------------------------------------
Merger Sub was formed solely for the purpose of engaging in the transactions
contemplated hereby and, as of the Closing Date and as of the Effective Time,
except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions, agreements and arrangements
contemplated by this Agreement, has engaged in no other business or activities,
has incurred no other obligations or liabilities, has no assets and has
conducted its operations only as contemplated hereby.
(g) Financial Condition of Heritage. Heritage has provided to
-------------------------------
▇▇▇▇▇▇▇ true, complete and correct copies of the audited consolidated financial
statements of Heritage and the Heritage Subsidiaries for the fiscal year ended
December 31, 1999 and the unaudited consolidated Financial Statements of
Heritage and the Heritage Subsidiaries for the interim period ended February 29,
2000. Such financial statements have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented, in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited financial
statements, to normal recurring adjustments, none of which are material), the
consolidated financial position of Heritage and the Heritage Subsidiaries as of
their respective dates and the consolidated statements of income and the
consolidated statements of cash flows of Heritage and the Heritage Subsidiaries
for the periods presented therein.
-26-
(h) Financing Commitment Letters. Heritage has provided to ▇▇▇▇▇▇▇
----------------------------
copies of the financing commitment letters, attached as Exhibit B hereto,
---------
including any exhibits, schedules or amendments thereto (the "Financing
---------
Letters"). To the Knowledge of Heritage, the conditions set forth in the
-------
Financing Letters will be able to be satisfied prior to the Effective Time.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS PENDING THE MERGER
------------------------------------------------------------
Section 4.1. Conduct of Business by ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ OP.
-------------------------------------------------
(a) During the period from the date of this Agreement to the
Effective Time, ▇▇▇▇▇▇▇ shall, and shall cause each of the ▇▇▇▇▇▇▇ Subsidiaries
(including the ▇▇▇▇▇▇▇ OP) to, carry on its businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and, to
the extent consistent therewith, use commercially reasonable efforts to preserve
intact its current business organization, goodwill, ongoing businesses and
▇▇▇▇▇▇▇'▇ status as a REIT within the meaning of the Code. ▇▇▇▇▇▇▇ will promptly
notify Heritage of any litigation having potential liability to ▇▇▇▇▇▇▇ or any
of the ▇▇▇▇▇▇▇ Subsidiaries in excess of $50,000 or any complaint, investigation
or hearing by a Governmental Entity involving ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇
Subsidiaries.
(b) Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the earlier of the termination of this
Agreement or the Effective Time, except as set forth in Section 4.1(b) of the
▇▇▇▇▇▇▇ Disclosure Letter, as otherwise contemplated by this Agreement or to the
extent consented to by Heritage, ▇▇▇▇▇▇▇ shall not and shall cause the ▇▇▇▇▇▇▇
Subsidiaries (including the ▇▇▇▇▇▇▇ OP) not to (and not to authorize or commit
or agree to):
(i) (A) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of ▇▇▇▇▇▇▇'▇ capital stock or
the partnership interests, stock or other equity interests in any ▇▇▇▇▇▇▇
Subsidiary that is not directly or indirectly wholly-owned by ▇▇▇▇▇▇▇, except
(1) the regular June 30, 2000 and September 30, 2000 quarterly dividends payable
(in accordance with normal payment schedules and without proration for partial
periods) to ▇▇▇▇▇▇▇ stockholders in an amount per share not to exceed the
dividend per share paid in the prior quarters, the corresponding regular
quarterly distributions payable to LP Unit Holders in an amount per LP Unit not
to exceed the distribution per LP Unit paid in the prior quarters and the
regular quarterly 8.875% preferential distributions payable to the holders of
the Series B Units and the Series C Units; provided, however, that the regular
September 30, 2000 quarterly dividend payable to ▇▇▇▇▇▇▇ stockholders and the
corresponding regular quarterly distribution payable to LP Unit Holders shall
not be declared or have a record date prior to September 30, 2000 or (2) to the
minimum extent necessary to prevent ▇▇▇▇▇▇▇ from having positive REIT taxable
income for the taxable year ending at the Effective Time, taking into account
liquidating distributions for tax purposes, (B) split, combine or reclassify any
capital stock, partnership interests or other equity interests or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of such capital stock, partnership interests or other
equity interests or (C) purchase, redeem (except for the redemption of LP Units
in accordance with their terms) or otherwise acquire any shares of ▇▇▇▇▇▇▇'▇
capital stock or the partnership interests, stock or other equity interests in
any ▇▇▇▇▇▇▇ Subsidiary or any options, warrants or rights to acquire, or
security convertible into, shares of ▇▇▇▇▇▇▇'▇ capital stock or the partnership
interests, stock or other equity interests in any ▇▇▇▇▇▇▇ Subsidiary, except in
connection with the use of ▇▇▇▇▇▇▇ Common Stock to pay the exercise price or Tax
withholding obligation upon the exercise of a ▇▇▇▇▇▇▇ Stock Option as presently
permitted under the ▇▇▇▇▇▇▇ Option Plan;
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(ii) issue, deliver, sell or grant any option or other
right in respect of any shares of capital stock, any other voting or redeemable
securities (including LP Units or other partnership interests) of ▇▇▇▇▇▇▇ or any
▇▇▇▇▇▇▇ Subsidiary or any securities convertible into, or any rights, warrants
or options to acquire, any such shares, voting securities or convertible or
redeemable securities, except (A) to ▇▇▇▇▇▇▇ or a ▇▇▇▇▇▇▇ Subsidiary, (B) as
permitted or required under the ▇▇▇▇▇▇▇ OP Agreement as presently in effect, and
(C) in connection with the exercise of outstanding ▇▇▇▇▇▇▇ Stock Options under
the ▇▇▇▇▇▇▇ Option Plan or the exchange of LP Units for shares of ▇▇▇▇▇▇▇ Common
Stock;
(iii) amend the ▇▇▇▇▇▇▇ Charter or the ▇▇▇▇▇▇▇ By-laws, the
▇▇▇▇▇▇▇ OP Agreement or any other comparable charter or organizational documents
of any ▇▇▇▇▇▇▇ Subsidiary, except as otherwise contemplated by this Agreement;
(iv) merge, consolidate or enter into any other business
combination transaction with any Person;
(v) (A) make any capital expenditures, except in
accordance with ▇▇▇▇▇▇▇'▇ 2000 Budget, or with respect to unbudgeted capital
expenditures in excess of $10,000 per occurrence or $200,000 in the aggregate,
(B) acquire, enter into any option to acquire, or exercise an option or other
right or election or enter into any other commitment or contractual obligation
(each, a "Commitment") for the acquisition of any real property or other
transaction (other than any Commitment referred to in Section 4.1(b)(v) of the
▇▇▇▇▇▇▇ Disclosure Letter) involving nonrefundable deposits in excess of
$250,000 and, in any event, not in excess of $2,000,000 in the aggregate;
provided, further, that on a weekly basis, ▇▇▇▇▇▇▇ shall provide Heritage with
notice of any new Commitments entered into irrespective of the amount of any
such deposit, (C) commence construction of, or enter into any Commitment to
develop or construct, other real estate projects involving in excess of $250,000
(other than any Commitment referred to in Section 4.1(b)(v) of the ▇▇▇▇▇▇▇
Disclosure Letter), (D) incur additional indebtedness (secured or unsecured)
except under its revolving line(s) of credit and Commitments for indebtedness
described in Section 4.1(b)(v) of the ▇▇▇▇▇▇▇ Disclosure Letter; or (E) enter
into any lease in excess of 7,500 square feet and incur any expenditures related
thereto.
(vi) sell, mortgage, subject to Lien or otherwise dispose
of any of the ▇▇▇▇▇▇▇ Properties, except that are disclosed in Section
4.1(b)(vi) of the ▇▇▇▇▇▇▇ Disclosure Letter;
(vii) sell, lease, mortgage, subject to Lien or otherwise
dispose of any of its personal or intangible property, except those made in the
ordinary course of business and which is not material, individually or in the
aggregate;
(viii) guarantee the indebtedness of another Person, enter
into any "keep well" or other agreement to maintain any financial statement
condition of another Person or enter into any arrangement having the economic
effect of any of the foregoing or prepay, refinance or amend any existing
indebtedness or make any investments in any other Person in excess of $100,000;
(ix) make or rescind any election relating to Taxes (unless
▇▇▇▇▇▇▇ reasonably determines, after prior consultation with Heritage, that such
action is required by Law or necessary to preserve ▇▇▇▇▇▇▇'▇ status as a REIT or
the partnership status of the ▇▇▇▇▇▇▇ OP or any other ▇▇▇▇▇▇▇ Subsidiary which
files Tax Returns as a partnership for Federal tax purposes) provided, that
nothing in this Agreement shall preclude ▇▇▇▇▇▇▇ from designating dividends paid
by it as "capital gain dividends" within the meaning of Section 857 of the Code
(with the prior consent of Heritage, such consent not to be unreasonably
withheld);
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(x) elect to treat any portion of the liquidating
distribution made in connection with the Merger as a dividend paid in a prior
taxable year pursuant to Section 858(a) of the Code or elect to pay Tax on any
capital gain realized after January 1, 2000;
(xi) (A) change any of its methods, principles or
practices of accounting in effect other than as required by GAAP or (B) settle
or compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, except in the case of
settlements or compromises relating to Taxes on real property or sales Taxes in
an amount not to exceed, individually or in the aggregate, $250,000, or change
any of its methods of reporting income or deductions for Federal income tax
purposes from those employed in the preparation of its Federal income Tax Return
for the taxable year ended December 31, 1999, except as may be required by the
SEC, applicable Law or GAAP;
(xii) except as set forth in Section 4.1(b)(xii) of the
▇▇▇▇▇▇▇ Disclosure Letter, adopt any new employee benefit plan, incentive plan,
severance plan, bonus plan, stock option or similar plan, grant new stock
appreciation rights or amend any existing plan or rights, or enter into or amend
any employment agreement or similar agreement or arrangement or, except in the
ordinary course consistent with past practice, grant or become obligated to
grant any increase in the compensation of officers or employees, except such
changes as are required by Law or which are not more favorable to participants
than provisions presently in effect;
(xiii) settle any stockholder derivative or class action
claims arising out of or in connection with any of the transactions contemplated
by this Agreement;
(xiv) enter into or amend or otherwise modify any agreement
or arrangement with persons that are Affiliates or, as of the date of this
Agreement, are officers or directors of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary
without prior written notice to Heritage and the approval of a majority of the
"independent" members of the Board of Directors of ▇▇▇▇▇▇▇;
(xv) except as otherwise permitted or contemplated by this
Agreement, authorize, recommend, propose or announce an intention to adopt a
plan of complete or partial liquidation or dissolution of ▇▇▇▇▇▇▇ or any of the
▇▇▇▇▇▇▇ Subsidiaries;
(xvi) fail to use all commercially reasonable efforts to
maintain with financially responsible insurance companies insurance in such
amounts and against such risks and losses as are a customary for companies
engaged in their respective businesses;
(xvii) materially amend or terminate, or waive compliance
with the terms of or breaches under, any Material Contract or enter into a new
contract, agreement or arrangement that, if entered into prior to the date of
this Agreement, would have been required to be listed in Section 3.1(w)(i) of
the ▇▇▇▇▇▇▇ Disclosure Letter;
(xviii) fail to use all commercially reasonable efforts to
comply or remain in compliance with all material terms and provisions of any
agreement relating to any outstanding indebtedness of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇
Subsidiary; and
(xix) agree in writing or otherwise to take any action
inconsistent with any of the foregoing.
(c) During the period from the date of this Agreement to the
Effective Time, ▇▇▇▇▇▇▇ shall deliver, or cause to be delivered, to Heritage (i)
prior notice of at least 24 hours before any draw by
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▇▇▇▇▇▇▇ on its revolving line(s) of credit in excess of $3,000,000, (ii) on a
weekly basis, a status report detailing all activity by ▇▇▇▇▇▇▇ relating to its
revolving line(s) of credit and (iii) on a monthly basis, a balance sheet, a
statement of operations and a statement of cash flows, prepared internally by
▇▇▇▇▇▇▇. Further, by no later than May 16, 2000, ▇▇▇▇▇▇▇ shall deliver, or cause
to be delivered, to Heritage (i) a current status report with respect to its
Redevelopment Budget, (ii) a current status report with respect to its 2000
Capital Budget, (iii) a cash flow forecast for and through the period ending
August 31, 2000 and (iv) a leasing activity report relating to the ▇▇▇▇▇▇▇
Properties.
ARTICLE V
ADDITIONAL COVENANTS
--------------------
Section 5.1. Preparation of the Proxy Statement; Stockholders' Meeting;
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Partners' Consents.
------------------
(a) As soon as practicable following the date of this Agreement,
▇▇▇▇▇▇▇ shall prepare and file with the SEC a preliminary Proxy Statement, in
form and substance reasonably satisfactory to Heritage, with indication of such
satisfaction not to be unreasonably withheld or delayed. Each of ▇▇▇▇▇▇▇ and
Heritage shall use its commercially reasonable efforts to have the Proxy
Statement cleared by the SEC for mailing to the ▇▇▇▇▇▇▇ stockholders as promptly
as practicable after such filing. ▇▇▇▇▇▇▇ will notify Heritage promptly
following the receipt by ▇▇▇▇▇▇▇ of any comments from the SEC and of any request
by the SEC for amendments or supplements to the Proxy Statement or for
additional information and will supply Heritage with copies of all
correspondence between ▇▇▇▇▇▇▇ or any of its representatives and the SEC with
respect to the Proxy Statement. The Proxy Statement shall comply in all material
respects with all applicable requirements of the Law. ▇▇▇▇▇▇▇ shall agree to
date the Proxy Statement as of the approximate date of mailing to its
stockholders and shall use its commercially reasonable efforts to cause the
Proxy Statement to be mailed to its stockholders at the earliest practicable
date. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Proxy Statement, (i) Heritage or ▇▇▇▇▇▇▇, as the
case may be, shall promptly inform the other of such occurrences, (ii) ▇▇▇▇▇▇▇
shall prepare and file with the SEC any such amendment or supplement to the
Proxy Statement, in a form reasonably satisfactory to Heritage, with indication
of such satisfaction not to be unreasonably withheld or delayed, (iii) each of
▇▇▇▇▇▇▇ and Heritage shall use its commercially reasonable efforts to have any
such amendment or supplement cleared for mailing, to the extent necessary, to
▇▇▇▇▇▇▇ stockholders as promptly as practicable after such filing and (iv)
▇▇▇▇▇▇▇ shall use its commercially reasonable efforts to have any such amendment
or supplement mailed to its stockholders at the earliest practicable date.
(b) ▇▇▇▇▇▇▇ will, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold the ▇▇▇▇▇▇▇ Stockholder
Meeting (but in no event shall such meeting be held sooner than 30 days
following the date the Proxy Statement is mailed to its stockholders), for the
purpose of obtaining the ▇▇▇▇▇▇▇ Stockholder Approval. ▇▇▇▇▇▇▇ covenants that,
subject to Section 7.1, ▇▇▇▇▇▇▇ will, through its Board of Directors, recommend
to its stockholders approval of the Merger and the other transactions
contemplated by the Transaction Documents and further covenants that the Proxy
Statement will include such recommendation.
(c) The officers of ▇▇▇▇▇▇▇ listed in Section 5.1(c) of the ▇▇▇▇▇▇▇
Disclosure Letter shall execute the ▇▇▇▇▇▇▇ Irrevocable Proxies, dated the date
of this Agreement, covering all shares beneficially owned, agreeing to vote in
favor of the Merger and the other transactions contemplated by the Transaction
Documents.
Section 5.2. Access to Information; Confidentiality. ▇▇▇▇▇▇▇ shall, and
shall cause each of the ▇▇▇▇▇▇▇ Subsidiaries to, afford to Heritage and its
officers, employees, accountants, counsel, financial
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advisors and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time to all its properties,
books, contracts, commitments, personnel and records and, during such period,
▇▇▇▇▇▇▇ shall, and shall cause each of the ▇▇▇▇▇▇▇ Subsidiaries to, furnish
promptly to Heritage (a) a copy of each report, schedule, registration statement
and other document filed by it during such period pursuant to the requirements
of Federal or state securities Laws and (b) all other information concerning its
business, properties and personnel as Heritage may reasonably request. Each of
▇▇▇▇▇▇▇ and Heritage will hold, and will cause its respective officers,
employees, accountants, counsel, financial advisors and other representatives
and Affiliates to hold, any nonpublic information in confidence to the extent
required by, and in accordance with, and will comply with the provisions of the
letter agreement between ▇▇▇▇▇▇▇ and Heritage dated as of February 10, 2000, as
amended to date (as so amended, the "Confidentiality Agreement").
-------------------------
Section 5.3. Commercially Reasonable Efforts; Notification.
---------------------------------------------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of Heritage and ▇▇▇▇▇▇▇ agrees to use its commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, and to assist and cooperate with the other in doing, all
things necessary, proper or advisable to fulfill all conditions applicable to
such party pursuant to this Agreement and to consummate and make effective, in
the most expeditious manner practicable, the Merger, the ▇▇▇▇▇▇▇ OP Offer (as
hereinafter defined) and the other transactions contemplated by the Transaction
Documents, including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of all
necessary registrations and filings and the taking of all reasonable steps as
may be necessary to obtain an approval, waiver or exemption from any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals,
waivers or exemption from non-governmental third parties; and (iii) the
execution and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement. In addition, each of Heritage and ▇▇▇▇▇▇▇ agrees to use their best
efforts to defend any lawsuits or other legal proceedings, whether judicial or
administrative, challenging the Merger, this Agreement or the transactions
contemplated by the Transaction Documents, including seeking to have any stay,
temporary restraining order, injunction, or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated by the Transaction Documents entered by any court or other
Governmental Entity vacated or reversed. For purposes of this Section 5.3(a),
the obligations of the parties hereto to use their "commercially reasonable
efforts" to obtain consents, approvals, waivers or exemptions shall not include
any obligation by a party without the consent of the other party to agree to an
adverse modification of the terms of any agreement, arrangement, instrument or
understanding, to prepay existing or incur additional obligations to any other
party, to incur liabilities or to make payments for all such matters in an
aggregate amount that exceeds $5,000,000. 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 ▇▇▇▇▇▇▇ and Heritage shall
take all such necessary action. From the date of this Agreement through the
Effective Time, ▇▇▇▇▇▇▇ shall timely file, or cause to be filed, with the SEC
all ▇▇▇▇▇▇▇ SEC Documents required to be so filed.
(b) ▇▇▇▇▇▇▇ shall give prompt notice to Heritage, and Heritage
shall give prompt notice to ▇▇▇▇▇▇▇, if (i) any representation or warranty made
by it contained in this Agreement that is qualified as to materiality becomes
untrue or inaccurate in any respect or any such representation or warranty that
is not so qualified becomes untrue or inaccurate in any material respect or (ii)
it fails to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that (A) such notification shall only be required
of ▇▇▇▇▇▇▇ to the extent that the matter in question would prevent satisfaction
of the condition specified in Section 6.2(a) or (b), (B) such notification shall
only be required of Heritage to the extent that the matter in question would
prevent satisfaction of the condition specified in Section 6.3(a) or (b), and
(C) no such
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notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
Section 5.4. Tax Treatment.
-------------
(a) Each of Heritage and ▇▇▇▇▇▇▇ shall use its commercially
reasonable efforts to cause the Merger to be treated, for Federal income tax
purposes, as a taxable sale of assets by ▇▇▇▇▇▇▇ in exchange for cash and the
assumption of liabilities and a liquidating distribution of such cash to ▇▇▇▇▇▇▇
stockholders within the meaning of Section 562(b)(1) of the Code including,
without limitation, filing ▇▇▇▇▇▇▇'▇ final Tax Returns (which such Tax Returns
shall be filed by Heritage) for the period ending on the Effective Time.
(b) Neither Heritage nor ▇▇▇▇▇▇▇ will take (or permit its
Affiliates to take) any action following the Closing that is inconsistent with
▇▇▇▇▇▇▇'▇ status as a REIT for any period.
Section 5.5. No Solicitation of Transactions.
-------------------------------
(a) Subject to Section 7.1, ▇▇▇▇▇▇▇ shall not, and shall not
authorize or permit, directly or indirectly, any officer, director, employee,
agent, investment banker, financial advisor, attorney, accountant, broker,
finder or other representative of ▇▇▇▇▇▇▇ to initiate, solicit, encourage or
facilitate (including by way of furnishing nonpublic information or assistance)
any inquiries or the making of any proposal or other action that constitutes, or
may reasonably be expected to lead to, any Competing Transaction (as hereinafter
defined), or enter into, maintain, or continue discussions or negotiate with any
Person in furtherance of such inquiries or to obtain a Competing Transaction.
(b) ▇▇▇▇▇▇▇ shall notify Heritage in writing (as promptly as
practicable but in any event within 24 hours) of all of the relevant details
relating to all initial inquiries and initial proposals (including the identity
of the parties, price and other terms thereof) which it or any of the ▇▇▇▇▇▇▇
Subsidiaries or any such officer, director, employee, agent, investment banker,
financial advisor, attorney, accountant, broker, finder or other representative
may receive relating to any of such matters and shall promptly inform Heritage
in writing with respect to any such inquiry or proposal that becomes reasonably
likely to lead to a Superior Competing Transaction (as hereinafter defined).
(c) For purposes of this Agreement, a "Competing Transaction" shall
---------------------
mean any of the following (other than the transactions expressly provided for in
this Agreement): (i) any merger, consolidation, share exchange, business
combination or similar transaction involving ▇▇▇▇▇▇▇ (or any of the ▇▇▇▇▇▇▇
Subsidiaries, including the ▇▇▇▇▇▇▇ OP); (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 20% or more of the assets of
▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries, taken as a whole, in a single transaction
or series of related transactions, excluding any bona fide financing
transactions which do not, individually or in the aggregate, have as a purpose
or effect the sale or transfer of control of such assets; (iii) any tender offer
or exchange offer for 20% or more of the outstanding equity securities of
▇▇▇▇▇▇▇ (or any of the ▇▇▇▇▇▇▇ Subsidiaries, including the ▇▇▇▇▇▇▇ OP); or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
(d) For purposes of this Agreement, a "Superior Competing
------------------
Transaction" means a bona fide proposal for a Competing Transaction made by a
-----------
third party which the Board of Directors of ▇▇▇▇▇▇▇ determines, in good faith
(after consultation with its financial advisor), to be more favorable to the
▇▇▇▇▇▇▇ stockholders than the Merger.
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Section 5.6. Public Announcements. ▇▇▇▇▇▇▇ and Heritage shall consult with
--------------------
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any of the transactions
contemplated by the Transaction Documents and shall not issue any such press
release or make any such public statement without the prior consent of the other
party, which consent shall not be unreasonably withheld; provided, however, that
a party may, without the prior consent of the other party, issue such press
release or make such public statement as may be required by Law or the
applicable rules of any stock exchange if it has used its best efforts to
consult with the other party and to obtain such party's consent but has been
unable to do so in a timely manner. In this regard, the parties shall make a
joint public announcement of the transactions contemplated by the Transaction
Documents no later than (i) the close of trading on the New York Stock Exchange
on the day this Agreement is signed, if such signing occurs during a business
day or (ii) the opening of trading on the New York Stock Exchange on the
business day following the date on which this Agreement is signed, if such
signing does not occur during a business day.
Section 5.7. Transfer and Gains Taxes; Stockholder Demand Letters. Heritage
----------------------------------------------------
shall, with ▇▇▇▇▇▇▇'▇ good faith, cooperation and assistance, prepare, execute
and file, or cause to be prepared, executed and filed, all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added stock transfer and stamp
Taxes, any transfer, recording, registration and other fees and any similar
Taxes which become payable in connection with the transactions contemplated by
this Agreement (together, with any related interests, penalties or additions to
Tax, "Transfer and Gains Taxes"). From and after the Effective Time, Heritage
------------------------
shall cause the ▇▇▇▇▇▇▇ OP to pay or cause to be paid all Transfer and Gains
Taxes. Within 30 days after the Effective Time, Heritage shall send the
stockholder demand letters required by Treasury Regulation Section 1.857-8 to
the appropriate ▇▇▇▇▇▇▇ stockholders for ▇▇▇▇▇▇▇'▇ taxable year ended on the
Effective Time. Heritage shall, with the good faith cooperation and assistance
of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries, make, or cause to be made, an election
under Section 754 of the Code for each ▇▇▇▇▇▇▇ Subsidiary that is treated as a
partnership for Federal tax purposes.
Section 5.8. Employee Arrangements.
---------------------
(a) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreements. Following the Closing Date,
----------------------------
Heritage shall honor, and shall cause the Heritage Subsidiaries to honor, in
accordance with their terms all ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreements and Heritage will
not, and will not cause any of the Heritage Subsidiaries to, challenge the
validity of any obligation of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary under any such
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreement. Without limiting the foregoing, Heritage expressly
agrees that, with respect to the Persons who are parties to the ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Agreements, the Merger shall constitute a change in control for
purposes of their respective ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreements. In addition, Heritage
expressly agrees that in the event that any such Person is offered employment
with Heritage and such Person accepts such employment with Heritage, Heritage
shall pay to such Person, in equal monthly installments over a four-month period
following the Closing Date, the aggregate benefits to which such Person would be
entitled to receive under his or her respective ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreement
following a "Termination Event" (as defined therein), in satisfaction of such
Person's rights and benefits under such ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreement; provided,
however, that if, following the Closing Date and prior to the expiration of the
four-month period after the Closing Date, the employment of such Person with
Heritage is terminated by Heritage, Heritage shall pay to such Person on the
date of such termination of employment all of the remaining installment payments
due to such Person under such ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreement and as described
hereunder. Prior to the Closing Date, Heritage and ▇▇▇▇▇▇▇ hereby jointly agree
that KPMG LLP shall review all of the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreements to determine
the maximum amount of the benefits to which each of the Persons set forth in
Section 3.1(l)(xvi) of the ▇▇▇▇▇▇▇ Disclosure Letter are entitled under their
respective ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreements. ▇▇▇▇▇▇▇ agrees to provide to KPMG, on
or before May 22, 2000, all materials which KPMG reasonably requests from
▇▇▇▇▇▇▇ in order for KPMG
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to determine the maximum amount of the benefits to which each of the Persons set
forth in Section 3.1(l)(xvi) of the ▇▇▇▇▇▇▇ Disclosure Letter are entitled under
their respective ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Agreements.
(b) Benefit Plans. Subject to subsection (c) below, upon and after
-------------
the Effective Time, Heritage (or its successors or assigns) shall provide
benefits to the employees of ▇▇▇▇▇▇▇ that are no less favorable in the aggregate
to such employees of ▇▇▇▇▇▇▇ than those provided to other similarly situated
employees of Heritage at any applicable time after the termination of the
benefits provided to such employees of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries.
With respect to any benefit plan of Heritage which is an "employee benefit plan"
as defined in Section 3(3) of ERISA and any other service based benefits
(including vacations) in which the employees of ▇▇▇▇▇▇▇ may participate, solely
for purposes of determining eligibility to participate, vesting and entitlement
to benefits but not for purposes of accrual of benefits (except in the case of
accrued vacation, sick or personal time), service with ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇
Subsidiary shall be treated as service with Heritage; provided, however, that
such service shall not be recognized to the extent that such recognition would
result in a duplication of benefits under both a ▇▇▇▇▇▇▇ Employee Benefit Plan
and a benefit plan of Heritage (or is not otherwise recognized for such purposes
under the benefit plans of Heritage). Without limiting the foregoing, Heritage
shall not treat any ▇▇▇▇▇▇▇ employee as a "new" employee for purposes of any
exclusions under any health or similar plan of Heritage for a pre-existing
medical condition, and will make appropriate arrangements with its insurance
carrier(s) to ensure such result.
(c) Employee Loans. Prior to the Effective Time, ▇▇▇▇▇▇▇ shall
--------------
cause each officer, director or other employee who has any outstanding loan
from, or other debt obligations to, ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary, for any
purpose, to repay such loan.
Section 5.9. Indemnification; Directors' and Officers' Insurance.
---------------------------------------------------
(a) In the event of any threatened or actual claim, action, suit,
demand, proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, demand, proceeding
or investigation in which any person who is now, or has been at any time prior
to the date hereof, or who becomes prior to the Effective Time, a director,
officer, employee, fiduciary or agent of ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇
Subsidiaries (the "Indemnified Parties") is, or is threatened to be, made a
-------------------
party based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director, officer, employee,
fiduciary or agent of ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries, or is or was
serving at the request of ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries as a
director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (ii) the negotiation,
execution or performance of this Agreement or any of the transactions
contemplated hereby, whether in any case asserted or arising before or after the
Effective Time, the parties hereto agree to cooperate and use their reasonable
best efforts to defend against and respond thereto. It is understood and agreed
that ▇▇▇▇▇▇▇ shall indemnify and hold harmless, and after the Effective Time the
Surviving Corporation and Heritage shall indemnify and hold harmless, as and to
the full extent permitted by applicable law, each Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including attorneys' fees
and expenses), judgments, fines and amounts paid in settlement in connection
with any such threatened or actual claim, action, suit, demand, proceeding or
investigation, and in the event of any such threatened or actual claim, action,
suit, demand, proceeding or investigation (whether asserted or arising before or
after the Effective Time), (A) ▇▇▇▇▇▇▇, and the Surviving Corporation and
Heritage after the Effective Time, shall promptly pay expenses in advance of the
final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the full extent permitted by law, subject to the provision
by such Indemnified Party of an undertaking to reimburse the amounts so advanced
in the event of a final non-appealable determination by a court of competent
jurisdiction that such Indemnified Party is not entitled to such amounts, (B)
the Indemnified
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Parties may retain one counsel satisfactory to them, and ▇▇▇▇▇▇▇, and the
Surviving Corporation and Heritage after the Effective Time, shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties within
30 days after statements therefor are received, and (C) ▇▇▇▇▇▇▇, the Surviving
Corporation and Heritage will use their respective reasonable best efforts to
assist in the vigorous defense of any such matter; provided that none of
▇▇▇▇▇▇▇, the Surviving Corporation or Heritage shall be liable for any
settlement effected without its prior written consent (which consent shall not
be unreasonably withheld); and provided further that the Surviving Corporation
and Heritage shall have no obligation hereunder to any Indemnified Party when
and if a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and non-appealable, that indemnification
of such Indemnified Party in the manner contemplated hereby is prohibited by
applicable law. Any Indemnified Party wishing to claim indemnification under
this Section 5.9, upon learning of any such claim, action, suit, demand,
proceeding or investigation, shall notify ▇▇▇▇▇▇▇ and, after the Effective Time,
the Surviving Corporation and Heritage, thereof; provided that the failure to so
notify shall not affect the obligations of ▇▇▇▇▇▇▇, the Surviving Corporation
and Heritage except to the extent such failure to notify materially prejudices
such party.
(b) Heritage and the Heritage Merger Sub agree that all rights to
indemnification existing in favor of, and all limitations of the personal
liability of, the directors, officers, employees and agents of ▇▇▇▇▇▇▇ and the
▇▇▇▇▇▇▇ Subsidiaries provided for in the articles of incorporation or bylaws of
▇▇▇▇▇▇▇ as in effect as of the date hereof with respect to matters occurring
prior to the Effective Time, including the Merger, shall continue in full force
and effect for a period of not less then six years from the Effective Time;
provided, however, that all rights to indemnification in respect of any claims
(each a "Claim") asserted or made within such period shall continue until the
disposition of such Claim. Prior to the Effective Time, ▇▇▇▇▇▇▇ shall purchase
an extended reporting period endorsement under ▇▇▇▇▇▇▇'▇ existing directors' and
officers' liability insurance coverage for ▇▇▇▇▇▇▇'▇ directors and officers, in
a form acceptable to ▇▇▇▇▇▇▇ which shall provide such directors and officers
with coverage for six years following the Effective Time of not less than the
existing coverage under, and have other terms not materially less favorable on
the whole to, the insured persons than the directors' and officers' liability
insurance coverage presently maintained by ▇▇▇▇▇▇▇ so long as the cost of such
policy is less than $400,000. In the event that $400,000 is insufficient for the
above-referenced coverage, ▇▇▇▇▇▇▇ may spend up to that amount to purchase such
lesser coverage as is possible.
(c) This Section 5.9 is intended for the irrevocable benefit of,
to grant third party rights to, the Indemnified Parties and shall be binding on
all successors and assigns of Heritage, ▇▇▇▇▇▇▇ and the Surviving Corporation.
Each of the Indemnified Parties shall be entitled to enforce the covenants
contained in this Section 5.9.
(d) In the event that Heritage or the Surviving Corporation or any
of its successors or assigns (i) consolidates with or merges into any other
person or entity and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers or conveys all or
substantially all of its properties and assets to any person or entity, then,
and in each such case, proper provision shall be made so that the successors and
assigns of Heritage and the Surviving Corporation, as the case may be, assume
the obligations set forth in this Section 5.9. The parties agree that, as of the
Effective Time, Heritage will assume the obligations of ▇▇▇▇▇▇▇ set forth in
Section 7.12(h) of that certain Agreement and Plan of Merger, dated as of
October 30, 1995 by and between ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Properties Corporation and
Section 7.11(e) of that certain Agreement and Plan of Merger, dated as of May
30, 1998 by and between ▇▇▇▇▇▇▇ and Mid-America Realty Investments, Inc.
Section 5.10. Interim Transactions Committee. ▇▇▇▇▇▇▇ and Heritage shall
------------------------------
establish an interim transactions committee (the "Interim Transactions
--------------------
Committee") consisting of three individuals nominated by each. The Interim
---------
Transactions Committee shall review and jointly evaluate (but will not have the
-35-
power to approve or disapprove) acquisition, budget and capital improvement
activities of ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries between the date of this
Agreement and the Effective Time.
Section 5.11. Transactions Relating to the ▇▇▇▇▇▇▇ OP.
---------------------------------------
(a) In accordance with the procedures outlined in Section 5.11(c)
below, Heritage shall offer to the LP Unit Holders the opportunity to receive in
cash, in exchange for each issued and outstanding LP Unit, the LP Unit
Consideration (the "▇▇▇▇▇▇▇ OP Offer"). Any LP Unit Holder who elects not to
----------------
accept the ▇▇▇▇▇▇▇ OP Offer shall remain as a limited partner of the ▇▇▇▇▇▇▇ OP
holding LP Units with substantially the same rights, terms and conditions,
except as provided in Section 5.11(b) below, set forth in the ▇▇▇▇▇▇▇ OP
Agreement and shall not be entitled to receive any distributions in respect of
such LP Units in connection with the Merger.
(b) Concurrently with the Effective Time, ▇▇▇▇▇▇▇ and Heritage
shall cause the ▇▇▇▇▇▇▇ OP Agreement to be amended (in addition to the amendment
contemplated by Section 5.17), as permitted by Section 17.2 of such agreement,
substantially as follows to provide that:
(i) the regular distribution per LP Unit for each
quarterly period shall be an amount equivalent to the regular distribution per
GP Unit for each quarterly period (it being understood that the foregoing
amendment will reflect the current structure of the ▇▇▇▇▇▇▇ OP such that each GP
Unit and LP Unit will continue to represent an equivalent economic interest in
the ▇▇▇▇▇▇▇ OP following the Merger); and
(ii) each LP Unit Holder's right of redemption with respect
to the ▇▇▇▇▇▇▇ OP shall be exercisable beginning after the dissemination of
Heritage's 2000 annual valuation report (which dissemination shall be no later
than 120 days following the end of Heritage's fiscal year) (A) if the Heritage
Common Stock is not publicly traded, during each of two 30-day periods per year
(i.e., (1) within 30 days after the dissemination of Heritage's annual valuation
report and (2) over the course of the 30-day period beginning six months after
such dissemination) for cash in an amount equal to the fair market value of each
LP Unit on the date of redemption, which fair market value is to be based on the
immediately prior annual valuation of the ▇▇▇▇▇▇▇ OP, adjusted to reflect the
value of any properties acquired or disposed of since such most recent annual
valuation and changes in other non-real property assets or in liabilities since
the date of such valuation, or (B) if the Heritage Common Stock is publicly
traded, at any time (subject to customary black-out periods) for cash in an
amount equal to the fair market value of each LP Unit on the date of redemption,
which fair market value will be based on the trading value of the Heritage
Common Stock and an LP Unit/Heritage Common Stock exchange ratio to be initially
fixed at the time the Heritage Common Stock becomes publicly traded (in either
of the cases listed under clauses (A) and (B), such cash in an amount being the
"Cash Amount"), with the redemption obligation able to be assumed, at the option
-----------
of Heritage, by Heritage in lieu of ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇ OP through the
payment of the Cash Amount or, during the period that the Heritage Common Stock
is publicly traded, through the issuance of Heritage Common Stock (the "▇▇▇▇▇▇▇
-------
OP Amendment"). Heritage will agree that, subject to the preferential rights of
------------
the Series B Units and the Series C Units, for not less than the three-year
period following the Closing of the Merger, the regular distribution for each
quarterly period will not be less than $0.38 per LP Unit. Heritage and ▇▇▇▇▇▇▇
agree that the text of the ▇▇▇▇▇▇▇ OP Amendment shall be substantially in
conformity with this Section 5.11(b) and otherwise in a form reasonably
satisfactory to ▇▇▇▇▇▇▇ and Heritage.
(c) As soon as practicable following the date of this Agreement,
▇▇▇▇▇▇▇ shall prepare a document describing the ▇▇▇▇▇▇▇ OP Offer and the ▇▇▇▇▇▇▇
OP Amendment, in form and substance reasonably satisfactory to, and subject to
the final review of, Heritage, and the indication of such satisfaction shall not
be unreasonably withheld or delayed (the "▇▇▇▇▇▇▇ OP Offering Document"). The
----------------------------
-36-
▇▇▇▇▇▇▇ OP Offering Document shall comply in all material respects with all
applicable requirements of Law. In the ▇▇▇▇▇▇▇ OP Offering Document, ▇▇▇▇▇▇▇
shall, as general partner of the ▇▇▇▇▇▇▇ OP, take a position with respect to the
▇▇▇▇▇▇▇ OP Offer in compliance with Rule 14e-2(a) under the Exchange Act.
▇▇▇▇▇▇▇ shall agree to date the ▇▇▇▇▇▇▇ OP Offering Document as of the
approximate date of mailing to LP Unit Holders and shall use its commercially
reasonable efforts to cause the ▇▇▇▇▇▇▇ OP Offering Document to be mailed to LP
Unit Holders at the earliest practicable date following the mailing of the Proxy
Statement to ▇▇▇▇▇▇▇ stockholders. Whenever any event occurs which is required
to be set forth in an amendment or supplement to the ▇▇▇▇▇▇▇ OP Offering
Document, (i) Heritage or ▇▇▇▇▇▇▇, as the case may be, shall promptly inform the
other of such occurrences, (ii) ▇▇▇▇▇▇▇ and Heritage shall, in cooperation with
each other, prepare any such amendment or supplement to the ▇▇▇▇▇▇▇ OP Offering
Document, in a form reasonably satisfactory to Heritage, the indication of such
satisfaction shall not be unreasonably withheld or delayed and (iii) each of
▇▇▇▇▇▇▇ and Heritage shall use its commercially reasonable efforts to have any
such amendment or supplement cleared, to the extent necessary, for mailing to LP
Unit Holders as promptly as practicable after such clearance.
(d) ▇▇▇▇▇▇▇ and Heritage agree that (i) the ▇▇▇▇▇▇▇ OP Offer shall
held open for a minimum of 20 business days following the mailing of the ▇▇▇▇▇▇▇
OP Offering Document to LP Unit Holders, (ii) the LP Unit Holders shall have the
right to revoke any election made in connection with the ▇▇▇▇▇▇▇ OP Offer at any
time prior to the expiration of the stated offering period and (iii) the ▇▇▇▇▇▇▇
OP Offer will be conducted in accordance with all applicable Law and the ▇▇▇▇▇▇▇
OP Agreement. ▇▇▇▇▇▇▇ and Heritage further agree that they will cooperate with
each other in connection with the determination of reasonable procedures
relating to, and the preparation of all documents for, the ▇▇▇▇▇▇▇ OP Offer.
(e) The obligation of Heritage and ▇▇▇▇▇▇▇ to consummate the
▇▇▇▇▇▇▇ OP Offer shall be conditioned upon, and shall be subject to, the
concurrent Closing of the Merger as provided in this Agreement. The obligation
of Heritage and ▇▇▇▇▇▇▇ to close the Merger shall be conditioned upon, and shall
be subject to, the concurrent consummation of the ▇▇▇▇▇▇▇ OP Offer as provided
in this Agreement. Notwithstanding the foregoing, in the event that all of the
conditions to the obligations of Heritage and/or the Heritage Merger Sub to the
Merger set forth in Section 6.2 have been satisfied or waived, then, after
September 20, 2000, Heritage may, at its option, cause the Closing to occur
without the concurrent consummation of the ▇▇▇▇▇▇▇ OP Offer provided that it
agrees that the ▇▇▇▇▇▇▇ OP Offer shall remain outstanding until such time as any
and all conditions thereto have been satisfied or waived and that, promptly
following the satisfaction or waiver of such conditions, all LP Unit Holders who
have elected to receive cash in the ▇▇▇▇▇▇▇ OP Offer shall receive the LP Unit
Consideration in accordance with the ▇▇▇▇▇▇▇ OP Offer.
Section 5.12. Notice of the Merger to LP Unit Holders. In accordance with
---------------------------------------
Section 19.14 of the ▇▇▇▇▇▇▇ OP Agreement, ▇▇▇▇▇▇▇, as general partner of the
▇▇▇▇▇▇▇ OP, agrees to give written notice of the Merger, which notice shall be
in form and substance reasonably satisfactory to Heritage, the indication of
such satisfaction shall not be unreasonably withheld or delayed, to each limited
partner of the ▇▇▇▇▇▇▇ OP at least 20 Trading Days (as such term is defined in
the ▇▇▇▇▇▇▇ OP Agreement) prior to the Effective Time or, to the extent
applicable, the record date for the Merger, whichever comes first.
Section 5.13. Assistance. From and after the date of this Agreement, if
----------
Heritage requests, ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ Subsidiaries shall cooperate, and
shall use their commercially reasonable efforts to cause ▇▇▇▇▇▇▇'▇ attorneys,
accountants and other representatives to cooperate, in all reasonable respects
in connection with any financing efforts (including, without limitation, the
refinancing or assumption of existing indebtedness) of Heritage or its
Affiliates (including providing reasonable assistance in the preparation of one
or more offering circulars, private placement memoranda, registration statements
or other offering documents relating to debt and/or equity financing) and any
other filings that may be made by Heritage or its Affiliates, including, if
applicable, with the SEC, all at the sole expense of Heritage (or
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its Affiliates). From and after the date of this Agreement, if Heritage
requests, ▇▇▇▇▇▇▇ shall create new subsidiaries and effect mergers and/or
conversions of or among wholly-owned ▇▇▇▇▇▇▇ Subsidiaries at the direction of
Heritage and, immediately prior to the Effective Time, shall transfer any assets
and/or liabilities to such entities at the direction of Heritage; provided,
however, that ▇▇▇▇▇▇▇ shall not be required to undertake any action pursuant to
this sentence if doing so would result in ▇▇▇▇▇▇▇ being unable to satisfy the
conditions to the obligations of Heritage and/or the Heritage Merger Sub to
close the Merger set forth in Section 6.2. ▇▇▇▇▇▇▇ shall reasonably cooperate
with Heritage and the Heritage Merger Sub in obtaining surveys, title
commitments and/or policies, engineering reports, environmental reports and
appraisals with respect to the ▇▇▇▇▇▇▇ Properties (it being understood that such
activities shall be conducted at Heritage's expense).
Section 5.14. Proxy Solicitor. ▇▇▇▇▇▇▇ shall engage MacKenzie Partners as
---------------
its proxy solicitor to assist in the solicitation of proxies from stockholders
relating to the ▇▇▇▇▇▇▇ Stockholder Approval and, to the extent necessary,
responses from the LP Unit Holders relating to the ▇▇▇▇▇▇▇ OP Offer.
Section 5.15. ▇▇▇▇▇▇▇ Subsidiaries. On or before the Effective Time,
--------------------
▇▇▇▇▇▇▇ shall (i) cause the directors and officers of each of the ▇▇▇▇▇▇▇
Subsidiaries to submit their resignations from such positions and (ii) subject
to the approval of voting security holders, cause the liquidation and
dissolution of the ▇▇▇▇▇▇▇ Subsidiaries listed on Schedule A hereto. On or
----------
before the Effective Time, all persons listed in Section 3.1(c)(iii)(D) of the
▇▇▇▇▇▇▇ Disclosure Letter shall sell to Heritage, or as directed by Heritage,
for $1,000, the capital stock and other securities listed next to their names in
such Section 3.1(c)(iii)(D).
Section 5.16. Environmental Matters.
---------------------
(a) If requested by Heritage, and under Heritage's direction,
▇▇▇▇▇▇▇ shall promptly take such actions as set forth in Section 5.16 of the
▇▇▇▇▇▇▇ Disclosure Letter to address environmental conditions for which an
operation and maintenance program is recommended as set forth in Section 5.16 of
the ▇▇▇▇▇▇▇ Disclosure Letter and for any other material matters identified by
environmental reports delivered after the date of this Agreement.
(b) At Heritage's reasonable request, ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇
Subsidiaries shall make available to Heritage such environmental investigations,
studies, tests, reviews, or other written analysis within the possession or
control of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary in relation to any property or
facility now or previously owned or operated by ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇
Subsidiary which have previously not been provided to Heritage.
Section 5.17. Amendment of ▇▇▇▇▇▇▇ OP and ▇▇▇▇▇▇▇ Subsidiary Agreements.
---------------------------------------------------------
Concurrently with the Effective Time, ▇▇▇▇▇▇▇ and Heritage shall cause the
▇▇▇▇▇▇▇ OP Agreement to be amended (in addition to the amendments contemplated
by Section 5.11(b)), as permitted by Section 17.2 of such agreement, and the
limited partnership or limited liability company agreements, as applicable, of
each of the other ▇▇▇▇▇▇▇ Subsidiaries (other than ▇▇▇▇▇▇▇▇▇▇ Square Limited
Partnership) which are organized as partnerships or limited liability companies
or which file their Tax Returns as partnerships to be amended (if necessary), so
that the allocations of profits and losses in such agreements will comply with
the "fractions rule" of Section 514(c)(9)(E) of the Code and Treasury Regulation
Section 1.514(c)-2. Heritage and ▇▇▇▇▇▇▇ agree that the text of any such
amendment to the ▇▇▇▇▇▇▇ OP Agreement shall be substantially in the form of
Exhibit C hereto and any such amendment to the relevant limited partnership or
---------
limited liability company agreements of the other ▇▇▇▇▇▇▇ Subsidiaries shall be
substantially in conformity with this Section 5.17 and otherwise in a form(s)
reasonably satisfactory to ▇▇▇▇▇▇▇ and Heritage. This Section 5.17 shall be
deemed satisfied if the ▇▇▇▇▇▇▇ OP Agreement is amended in substantial
conformity with Exhibit C and (i) the other partnerships or limited liability
---------
company
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agreements referred to in this Section 5.17 are amended to comply with Section
514(c)(9)(E) of the Code and Treasury Regulation Section 1.514(c)-2, or (ii) if
such other partnerships or limited liability companies are converted into
disregarded entities for Federal income tax purposes as mutually agreed to by
Heritage and ▇▇▇▇▇▇▇.
Section 5.18. Information Supplied. None of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ OP or Heritage
--------------------
shall supply information for inclusion or incorporation by reference in the
Proxy Statement that will, at the date mailed to ▇▇▇▇▇▇▇ stockholders, at the
time of the ▇▇▇▇▇▇▇ Stockholder Meeting or at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. None of
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ OP or Heritage shall supply information for inclusion or
incorporation by reference in the ▇▇▇▇▇▇▇ OP Offering Document that will, at the
date mailed to LP Unit Holders or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇ OP
or the other ▇▇▇▇▇▇▇ Subsidiaries, or with respect to other information supplied
by ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ OP for inclusion in the Proxy Statement or the ▇▇▇▇▇▇▇ OP
Offering Document, as the case may be, shall occur which is required to be
described in an amendment of, or a supplement to, the Proxy Statement or the
▇▇▇▇▇▇▇ OP Offering Document, ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇ OP, as the case may be,
shall so describe such event, and shall promptly file such amendment or
supplement (if required to be filed) with the SEC. ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇ OP
shall use their commercially reasonable efforts to cause the Proxy Statement and
the ▇▇▇▇▇▇▇ OP Offering Document, insofar as they relate to ▇▇▇▇▇▇▇, the ▇▇▇▇▇▇▇
OP or the other ▇▇▇▇▇▇▇ Subsidiaries, or other information supplied by ▇▇▇▇▇▇▇
or the ▇▇▇▇▇▇▇ OP for inclusion or incorporation by reference therein, to comply
as to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Section 5.19. Required Financing. Heritage agrees to use its best efforts
------------------
to arrange the Financing (as defined in Article X) and to satisfy the conditions
set forth in the Financing Letters. Heritage shall keep ▇▇▇▇▇▇▇ informed of the
status of its arrangements with respect to the Financing. Heritage shall provide
written notice to ▇▇▇▇▇▇▇ within 24 hours if either the lender or equity
investor under the Financing Letters have indicated to Heritage that it will be
unable to provide the financing contemplated by the applicable Financing Letter.
ARTICLE VI
CONDITIONS PRECEDENT
--------------------
Section 6.1. Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligations of ▇▇▇▇▇▇▇ and Heritage to effect the Merger and to
consummate the other transactions contemplated by the Transaction Documents on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a) Stockholders Approval. The ▇▇▇▇▇▇▇ Stockholder Approval shall
---------------------
have been obtained.
(b) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or any of the other transactions or agreements
contemplated by the Transaction Documents shall be in effect.
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(c) Other Approvals. All consents, approvals, permits and
---------------
authorizations required to be obtained from any Governmental Entity as indicated
in Section 3.1(d)(iii) of the ▇▇▇▇▇▇▇ Disclosure Letter in connection with the
execution and delivery of this Agreement and the other Transaction Documents and
the consummation of the transactions contemplated hereby or thereby shall have
been made or obtained (as the case may be).
Section 6.2. Conditions to Obligations of Heritage and the Heritage Merger
-------------------------------------------------------------
Sub. The obligations of Heritage and the Heritage Merger Sub to effect the
---
Merger and to consummate the other transactions contemplated by the Transaction
Documents on the Closing Date are further subject to the following conditions,
any one or more of which may be waived by Heritage:
(a) Representations and Warranties. The representations and
------------------------------
warranties of ▇▇▇▇▇▇▇ set forth in this Agreement shall be true and correct in
all material respects on and as of the Closing Date, as though made on and as of
the Closing Date, except to the extent any representation or warranty is
expressly limited by its terms to another date, and Heritage shall have received
a certificate (which certificate may be qualified by knowledge to the same
extent as such representations and warranties are so qualified) signed on behalf
of ▇▇▇▇▇▇▇ by the Chief Executive Officer and the Chief Financial Officer of
▇▇▇▇▇▇▇ to such effect. This condition shall be deemed to have been satisfied
unless (i) the representations and warranties of ▇▇▇▇▇▇▇ contained in Section
3.1 are not true and correct in all material respects or (ii) all breaches of
▇▇▇▇▇▇▇'▇ representations and warranties in this Agreement (without giving
effect to any materiality, any ▇▇▇▇▇▇▇ Material Adverse Effect or any similar
qualification or limitation) would, individually or in the aggregate, reasonably
be expected to have a ▇▇▇▇▇▇▇ Material Adverse Effect.
(b) Performance of Obligations of ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ shall have
-------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and Heritage shall
have received a certificate signed on behalf of ▇▇▇▇▇▇▇ by the Chief Executive
Officer and the Chief Financial Officer of ▇▇▇▇▇▇▇ to such effect.
(c) Material Adverse Change. Since the date of this Agreement,
-----------------------
there shall have occurred no ▇▇▇▇▇▇▇ Material Adverse Effect. Heritage shall
have received a certificate signed on behalf of ▇▇▇▇▇▇▇ by the Chief Executive
Officer and the Chief Financial Officer of ▇▇▇▇▇▇▇ to such effect.
(d) Opinion Relating to REIT and Partnership Status. Heritage
-----------------------------------------------
shall have received an opinion dated as of the Closing Date of ▇▇▇▇▇▇▇, Procter
& ▇▇▇▇ LLP, in a form and substance reasonably satisfactory to Heritage,
regarding the qualification of ▇▇▇▇▇▇▇ as a REIT under the Code and the
treatment of the ▇▇▇▇▇▇▇ OP and all ▇▇▇▇▇▇▇ Subsidiaries (which are organized as
partnerships or limited liability companies or which file Tax Returns as
partnerships) as partnerships and not as associations taxable as corporations or
publicly traded partnerships for Federal income tax purposes since the
acquisition of such ▇▇▇▇▇▇▇ Subsidiaries by ▇▇▇▇▇▇▇. For purposes of such
opinion, ▇▇▇▇▇▇▇ Procter & ▇▇▇▇ LLP may rely on (in addition to customary
assumptions and representations for opinions of this type) assumptions to the
effect that (A) ▇▇▇▇▇▇▇ will satisfy its REIT distribution requirements for its
final taxable year (as a result of the Merger or otherwise), and (B) no action
will be taken following the Merger that is inconsistent with ▇▇▇▇▇▇▇'▇ status as
a REIT for any period prior to the Merger.
(e) Consents. Except as set forth in Section 6.2(e) of the ▇▇▇▇▇▇▇
--------
Disclosure Letter, all consents and waivers from third parties necessary in
connection with the consummation of the Merger and the other transactions
contemplated by the Transaction Documents shall have been obtained, other than
such consents and waivers from third parties, which, if not obtained, would not
reasonably be expected to have, individually or in the aggregate, a ▇▇▇▇▇▇▇
Material Adverse Effect.
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Section 6.3. Conditions to Obligations of ▇▇▇▇▇▇▇. The obligations of
------------------------------------
▇▇▇▇▇▇▇ to effect the Merger and to consummate the other transactions
contemplated by the Transaction Documents on the Closing Date are further
subject to the following conditions, any one or more of which may be waived by
▇▇▇▇▇▇▇:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Heritage set forth in this Agreement shall be true and correct in
all material respects on and as of the Closing Date, as though made on and as of
the Closing Date, except to the extent the representation or warranty is
expressly limited by its terms to another date, and ▇▇▇▇▇▇▇ shall have received
a certificate (which certificate may be qualified by knowledge to the same
extent as such representations and warranties are so qualified) signed on behalf
of Heritage by the Chief Executive Officer and the Chief Financial Officer of
Heritage to such effect.
(b) Performance of Obligations of Heritage. Heritage shall have
--------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and ▇▇▇▇▇▇▇ shall
have received a certificate signed on behalf of Heritage by the Chief Executive
Officer and the Chief Financial Officer of Heritage to such effect.
ARTICLE VII
BOARD ACTIONS
-------------
Section 7.1. Board Actions. Notwithstanding Section 5.5 or any other
-------------
provision of this Agreement to the contrary, to the extent required by the
fiduciary obligations of the Board of Directors of ▇▇▇▇▇▇▇, as determined by
such board in good faith after consultation with outside counsel, ▇▇▇▇▇▇▇ may:
(a) disclose to its stockholders any information required to be
disclosed under applicable Law;
(b) to the extent applicable, comply with Rule 14e-2(a) promulgated
under the Exchange Act with respect to a Competing Transaction; provided,
however, that neither ▇▇▇▇▇▇▇ nor its Board of Directors shall be permitted to
approve or recommend a Competing Transaction which is not a Superior Competing
Transaction;
(c) if it receives a proposal for a Competing Transaction that was
unsolicited and its Board of Directors determines in good faith (after
consulting with its outside counsel and its financial advisor) that such
proposal is reasonably likely to lead to a Superior Competing Transaction, (x)
furnish non-public information with respect to ▇▇▇▇▇▇▇, the ▇▇▇▇▇▇▇ OP and the
▇▇▇▇▇▇▇ Subsidiaries to the Person who made such proposal (provided that ▇▇▇▇▇▇▇
shall furnish such information pursuant to a confidentiality agreement which is
at least as favorable to it as the Confidentiality Agreement, but without any
expense reimbursement or standstill obligations) and (y) participate in
negotiations regarding such proposal; and
(d) approve or recommend (and in connection therewith withdraw or
modify its approval or recommendation of this Agreement and the Merger) a
Superior Competing Transaction or enter into an agreement with respect to such
Superior Competing Transaction.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 8.1. Termination. This Agreement may be terminated at any time
-----------
prior to the filing of the Articles of Merger with the State Department of
Assessments and Taxation of the State of Maryland, whether before or after the
▇▇▇▇▇▇▇ Stockholder Approval is obtained:
(a) by mutual written consent duly authorized by the respective
Boards of Directors of Heritage and ▇▇▇▇▇▇▇;
(b) by Heritage, upon a breach of any representation, warranty,
covenant or agreement on the part of ▇▇▇▇▇▇▇ set forth in this Agreement, or if
any representation or warranty of ▇▇▇▇▇▇▇ shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or (b), as the case
may be, would be incapable of being satisfied by October 31, 2000 (as otherwise
extended);
(c) by ▇▇▇▇▇▇▇, upon a breach of any representation, warranty,
covenant or agreement on the part of Heritage set forth in this Agreement, or if
any representation or warranty of Heritage shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or (b), as the case
may be, would be incapable of being satisfied by October 31, 2000 (as otherwise
extended);
(d) by either Heritage or ▇▇▇▇▇▇▇, if any judgment, injunction,
order, decree or action by any Governmental Entity of competent authority
preventing the consummation of the Merger shall have become final and
nonappealable; provided, however, that a party in breach of its obligations
under Section 5.3 shall not be entitled to exercise its right to terminate under
this Section 8.1(d);
(e) by either Heritage or ▇▇▇▇▇▇▇, if the Merger shall not have
been consummated before October 31, 2000; provided, however, that a party that
has materially breached a representation, warranty or covenant of such party set
forth in this Agreement shall not be entitled to exercise its right to terminate
under this Section 8.1(e);
(f) by Heritage or ▇▇▇▇▇▇▇ (unless ▇▇▇▇▇▇▇ is in breach of its
obligations under Section 5.1(b)) if, upon a vote at a duly held ▇▇▇▇▇▇▇
Stockholder Meeting or any adjournment thereof, the ▇▇▇▇▇▇▇ Stockholder Approval
shall not have been obtained, as contemplated by Section 5.1;
(g) by ▇▇▇▇▇▇▇, if prior to the ▇▇▇▇▇▇▇ Stockholder Meeting the
Board of Directors of ▇▇▇▇▇▇▇ or any committee thereof shall have withdrawn or
modified in any manner adverse to Heritage or the Heritage Merger Sub its
approval or recommendation of the Merger or this Agreement in connection with,
or approved or recommended, a Superior Competing Transaction;
(h) by Heritage, if (i) prior to the ▇▇▇▇▇▇▇ Stockholder Meeting
the Board of Directors of ▇▇▇▇▇▇▇ or any committee thereof shall have withdrawn
or modified in any manner adverse to Heritage or the Heritage Merger Sub its
approval or recommendation of the Merger or this Agreement in connection with,
or approved or recommended, any Superior Competing Transaction, (ii) ▇▇▇▇▇▇▇ or
the ▇▇▇▇▇▇▇ OP shall have entered into any agreement with respect to any
Competing Transaction or (iii) the Board of Directors of ▇▇▇▇▇▇▇ or any
committee thereof shall have resolved to do any of the foregoing; or
(i) by Heritage or ▇▇▇▇▇▇▇, if Heritage has not obtained the
Financing necessary for the completion of the Merger by the later of (A) 14 days
following the date of the ▇▇▇▇▇▇▇ Stockholder Approval or (B) August 31, 2000
(such later date being referred to as the "Financing Date"); provided, however,
--------------
that ▇▇▇▇▇▇▇ shall be permitted to terminate this Agreement under this Section
8.1(i) only if the
conditions to the obligations of Heritage and/or the Heritage Merger Sub set
forth in Sections 6.2 and 5.11(e) have been satisfied or waived on or prior to
the Financing Date, which satisfaction shall be evidenced by ▇▇▇▇▇▇▇ delivering,
on or prior to the Financing Date, the relevant certificates and opinions
required by Section 6.2 or, to the extent applicable, by tendering, on or prior
to the Financing Date, performance thereof. Notwithstanding the foregoing, if
▇▇▇▇▇▇▇ has materially breached a representation, warranty or covenant set forth
in this Agreement, ▇▇▇▇▇▇▇ shall not be entitled to exercise its rights to
termination under any of the provisions of this Section 8.1(i).
A terminating party shall provide written notice of termination to the other
parties specifying with particularity the reason for such termination. If more
than one provision in this Section 8.1 is available to a terminating party in
connection with a termination, a terminating party may rely on any and all
available provisions in this Section 8.1 for any such termination.
Section 8.2. Expenses.
--------
(a) Except as otherwise specified in this Section 8.2 or agreed in
writing by the parties, all out-of-pocket costs and expenses incurred in
connection with this Agreement, the Merger and the other transactions
contemplated hereby shall be paid by the party incurring such cost or expense.
(b) ▇▇▇▇▇▇▇ agrees that if this Agreement shall be terminated
pursuant to Section 8.1(b), then ▇▇▇▇▇▇▇ will pay to Heritage, or as directed by
Heritage, an amount equal to the Heritage Break-Up Expenses (as defined below).
▇▇▇▇▇▇▇ also agrees that if this Agreement (i) is terminated pursuant to Section
8.1(b) or (f) and (A) prior to such termination a Person has made any inquiry or
proposal relating to a Competing Transaction and (B) within one year of any such
termination ▇▇▇▇▇▇▇ or the ▇▇▇▇▇▇▇ OP shall consummate a Competing Transaction
or execute a definitive agreement providing for a Competing Transaction with
such Person or its Affiliates or associates or Persons acting in concert with
such Person or (ii) is terminated pursuant to Section 8.1(g) or (h), then,
▇▇▇▇▇▇▇ shall pay to Heritage, or as directed by Heritage, an amount equal to
the Heritage Break-Up Fee (as defined below) less any Heritage Break-Up Expenses
previously paid. Payment of any of such amounts shall be made, as directed by
Heritage, by wire transfer of immediately available funds promptly, but in no
event later than two business days after the amount is due as provided herein.
(i) For purposes of this Agreement, the "Heritage Break-Up
-----------------
Fee" shall be an amount equal to the lesser of (i) $15,000,000 (the "Heritage
--- --------
Fee Base Amount") or (ii) if Heritage continues to elect to qualify as a REIT,
---------------
the sum of (A) the maximum amount that can be paid to Heritage or the Heritage
OP for the taxable year in which this Agreement is terminated without causing
Heritage to fail to meet the requirements of Section 856(c)(2) and (3) of the
Code determined as if the payment of such amount did not constitute income
described in Section 856(c)(2) and (3) of the Code ("Qualifying Income"), as
-----------------
determined by outside counsel or independent accountants to Heritage, and (B) in
the event Heritage receives a letter from outside counsel (the "Heritage
-------
Break-Up Tax Opinion") indicating that Heritage has received a ruling from the
--------------------
IRS holding that the receipt by Heritage or the Heritage OP of the Heritage Base
Amount would either constitute Qualifying Income as to Heritage with respect to
Heritage's proportionate share thereof or would be excluded from Heritage's
gross income for purposes of Section 856(c)(2) and (3) of the Code (the "REIT
----
Requirements"), the Heritage Fee Base Amount less the amount payable under
------------
clause (A) above. In the event that Heritage or the Heritage OP is not able to
receive the full Heritage Fee Base Amount, ▇▇▇▇▇▇▇ shall place the unpaid amount
(i.e., the difference between the Heritage Fee Base Amount and the Heritage
Break-Up Fee) in escrow and shall not release any portion thereof to Heritage or
the Heritage OP unless and until ▇▇▇▇▇▇▇ receives any one or a combination of
the following: (i) a letter(s) from Heritage's outside counsel or independent
accountants indicating the maximum amount that can be paid at that time to
Heritage or the Heritage OP without causing Heritage to fail to meet the REIT
Requirements for any relevant taxable year, together with an
-43-
IRS ruling or opinion of tax counsel to the effect that such payment should not
be treated as included in the income of Heritage for any prior taxable year, in
which event such maximum amount shall be paid to Heritage or the Heritage OP, or
(ii) a Heritage Break-Up Tax Opinion indicating that Heritage's receipt of the
Heritage Fee Base Amount would satisfy, in whole or in part, the REIT
Requirements, in which event ▇▇▇▇▇▇▇ shall pay to Heritage or the Heritage OP
the unpaid Heritage Fee Base Amount. ▇▇▇▇▇▇▇'▇ obligation to pay any unpaid
portion of the Heritage Break-Up Fee (provided ▇▇▇▇▇▇▇ has otherwise complied
with its obligations under this provision) shall terminate (and any amount still
held in such escrow shall be released to ▇▇▇▇▇▇▇) on the date that is five years
from the date the Heritage Break-Up Fee first becomes due under this Agreement.
(ii) For purposes of this Agreement, the "Heritage Break-Up
-----------------
Expenses" shall be an amount equal to the lesser of (i) Heritage's out-of-pocket
--------
expenses incurred in connection with this Agreement and the other transactions
contemplated hereby (including, without limitation, all attorneys', accountants'
and investment bankers' fees and expenses) but in no event in an amount greater
than $3,000,000 (such amount being referred to in this Section 8.2(b) as the
"Heritage Expense Base Amount") or (ii) the sum of (A) the maximum amount that
----------------------------
can be paid to Heritage or the Heritage OP without causing Heritage to fail to
meet the REIT Requirements determined as if the payment of such amount did not
constitute Qualifying Income, as determined by outside counsel or independent
accountants to Heritage and (B) in the event Heritage receives a Heritage
Break-Up Tax Opinion indicating that Heritage has received a ruling from the IRS
holding that Heritage or the Heritage OP's receipt of the Heritage Expense Base
Amount would either constitute Qualifying Income as to Heritage with respect to
Heritage's proportionate share thereof or would be excluded from Heritage's
gross income for purposes of the REIT Requirements, the Heritage Expense Base
Amount less the amount payable under clause (A) above. In the event that
Heritage or the Heritage OP is not able to receive the full Heritage Expenses
Base Amount, ▇▇▇▇▇▇▇ shall place the unpaid amount (i.e., the difference between
the Heritage Expense Base Amount and the Heritage Break-Up Expenses) in escrow
and shall not release any portion thereof to Heritage or the Heritage OP unless
and until ▇▇▇▇▇▇▇ receives any one or combination of the following: (i) a
letter(s) from Heritage's outside counsel or independent accountants indicating
the maximum amount that can be paid at that time to Heritage or the Heritage OP
without causing Heritage to fail to meet the REIT Requirements for any relevant
taxable year, together with an IRS ruling or opinion of tax counsel to the
effect that such payment should not be treated as included in income of Heritage
for any prior taxable year, in which event such maximum amount shall be paid to
Heritage or the Heritage OP, or (ii) a Heritage Break-Up Tax Opinion indicating
that Heritage's receipt of the Heritage Expense Base Amount would satisfy, in
whole or in part, the REIT Requirements, in which event ▇▇▇▇▇▇▇ shall pay to
Heritage or the Heritage OP the unpaid portion of the Heritage Expense Base
Amount. ▇▇▇▇▇▇▇'▇ obligation to pay any unpaid portion of the Heritage Break-Up
Expenses (provided ▇▇▇▇▇▇▇ has otherwise complied with its obligations under
this provision) shall terminate (and any amount still held in such escrow shall
be released to ▇▇▇▇▇▇▇) on the date that is five years from the date the
Heritage Break-Up Expenses first become due under this Agreement.
(c) Heritage also agrees that if this Agreement is terminated
pursuant to Section 8.1(i), then Heritage shall pay to ▇▇▇▇▇▇▇, as directed by
▇▇▇▇▇▇▇, an amount equal to the ▇▇▇▇▇▇▇ Break-Up Fee (as defined below) less any
▇▇▇▇▇▇▇ Break-Up Expenses (as defined below) previously paid. Heritage agrees
that if this Agreement is terminated pursuant to Section 8.1(c), then Heritage
shall pay to ▇▇▇▇▇▇▇, as directed by ▇▇▇▇▇▇▇, an amount equal to the ▇▇▇▇▇▇▇
Break-Up Expenses.
(i) For purposes of this Agreement, the "▇▇▇▇▇▇▇ Break-Up
----------------
Fee" shall be an amount equal to the lesser of (i) $15,000,000 (the "▇▇▇▇▇▇▇ Fee
--- -----------
Base Amount") or (ii) if ▇▇▇▇▇▇▇ continues to elect to qualify as a REIT, the
-----------
sum of (A) the maximum amount that can be paid to ▇▇▇▇▇▇▇ without causing it to
fail to meet the REIT Requirements determined as if the payment of such amount
did not constitute Qualifying Income, as determined by independent accountants
to ▇▇▇▇▇▇▇, and (B) in the
-44-
event ▇▇▇▇▇▇▇ receives a letter from outside counsel (the "▇▇▇▇▇▇▇ Break-Up Tax
--------------------
Opinion") indicating that either (x) ▇▇▇▇▇▇▇ has received a ruling from the IRS
-------
holding that ▇▇▇▇▇▇▇'▇ receipt of the ▇▇▇▇▇▇▇ Fee Base Amount would either
constitute Qualifying Income or would be excluded from ▇▇▇▇▇▇▇'▇ gross income
for purposes of the REIT Requirements or that receipt by ▇▇▇▇▇▇▇ of the
remaining balance of the ▇▇▇▇▇▇▇ Fee Base Amount following the receipt of and
pursuant to such ruling would not be deemed constructively received prior
thereto or (y) in outside counsel's opinion the receipt by ▇▇▇▇▇▇▇ of the
▇▇▇▇▇▇▇ Fee Base Amount should not cause ▇▇▇▇▇▇▇ to fail to qualify as a REIT,
the ▇▇▇▇▇▇▇ Fee Base Amount less the amount payable under clause (A) above. In
the event that ▇▇▇▇▇▇▇ is not able to receive the full ▇▇▇▇▇▇▇ Fee Base Amount,
Heritage shall place the unpaid amount (i.e., the difference between the ▇▇▇▇▇▇▇
Fee Base Amount and the ▇▇▇▇▇▇▇ Break-Up Fee) in escrow and shall not release
any portion thereof to ▇▇▇▇▇▇▇ unless and until Heritage receives any one or
combination of the following: (i) a letter(s) from ▇▇▇▇▇▇▇'▇ outside counsel or
independent accountants indicating the maximum amount that can be paid at that
time to ▇▇▇▇▇▇▇ without causing it to fail to meet the REIT Requirements for any
relevant taxable year, together with an IRS ruling or opinion of tax counsel to
the effect that such payment would not be treated as included in income for any
prior taxable year, in which event such maximum amount shall be paid to ▇▇▇▇▇▇▇,
or (ii) a ▇▇▇▇▇▇▇ Break-Up Tax Opinion indicating that either ▇▇▇▇▇▇▇'▇ receipt
of the ▇▇▇▇▇▇▇ Fee Base Amount would satisfy, in whole or in part, the REIT
Requirements or ▇▇▇▇▇▇▇'▇ receipt of the ▇▇▇▇▇▇▇ Fee Base Amount should not
cause ▇▇▇▇▇▇▇ to fail to qualify as a REIT, in which event Heritage shall pay to
▇▇▇▇▇▇▇ the unpaid ▇▇▇▇▇▇▇ Fee Base Amount. Heritage's obligation to pay any
unpaid portion of the ▇▇▇▇▇▇▇ Break-Up Fee (provided Heritage has otherwise
complied with its obligations under this provision) shall terminate (and any
amount still held in such escrow shall be released to Heritage) on the date that
is five years from the date the ▇▇▇▇▇▇▇ Break-Up Fee first becomes due under
this Agreement.
(ii) For purposes of this Agreement, the "▇▇▇▇▇▇▇ Break-Up
----------------
Expenses" shall be an amount equal to the lesser of (i) ▇▇▇▇▇▇▇'▇ out-of-pocket
--------
expenses incurred in connection with this Agreement and the other transactions
contemplated hereby (including, without limitation, all attorneys', accountants'
and investment bankers' fees and expenses) but in no event in an amount greater
than $3,000,000 (such amount being referred to in this Section 8.2(c) as the
"▇▇▇▇▇▇▇ Expense Base Amount") and (ii) the sum of (A) the maximum amount that
---------------------------
can be paid to ▇▇▇▇▇▇▇ without causing it to fail to meet the REIT Requirements
determined as if the payment of such amount did not constitute Qualifying
Income, as determined by independent accountants to ▇▇▇▇▇▇▇ and (B) in the event
▇▇▇▇▇▇▇ receives a ▇▇▇▇▇▇▇ Break-Up Tax Opinion indicating that either (x)
▇▇▇▇▇▇▇ has received a ruling from the IRS holding that ▇▇▇▇▇▇▇'▇ receipt of the
▇▇▇▇▇▇▇ Expense Base Amount would either constitute Qualifying Income or would
be excluded from ▇▇▇▇▇▇▇'▇ ▇▇▇▇▇ income for purposes of the REIT Requirements or
that receipt by ▇▇▇▇▇▇▇ of the remaining balance of the ▇▇▇▇▇▇▇ Expense Base
Amount following the receipt of and pursuant to such ruling would not be deemed
constructively received prior thereto or (y) in outside counsel's opinion the
receipt by ▇▇▇▇▇▇▇ of the ▇▇▇▇▇▇▇ Expense Base Amount should not cause ▇▇▇▇▇▇▇
to fail to qualify as a REIT, the ▇▇▇▇▇▇▇ Expense Base Amount less the amount
payable under clause (A) above. In the event that ▇▇▇▇▇▇▇ is not able to receive
the full ▇▇▇▇▇▇▇ Expense Base Amount, Heritage shall place the unpaid amount
(i.e., the difference between the ▇▇▇▇▇▇▇ Expense Base Amount and the ▇▇▇▇▇▇▇
Break-Up Expenses) in escrow and shall not release any portion thereof to
▇▇▇▇▇▇▇ unless and until Heritage receives any one or combination of the
following: (i) a letter(s) from ▇▇▇▇▇▇▇'▇ outside counsel or independent
accountants indicating the maximum amount that can be paid at that time to
▇▇▇▇▇▇▇ without causing ▇▇▇▇▇▇▇ to fail to meet the REIT Requirements for any
relevant taxable year, together with an IRS ruling or opinion of tax counsel to
the effect that such payment would not be treated as included in income for any
prior taxable year, in which event such maximum amount shall be paid to ▇▇▇▇▇▇▇,
or (ii) a ▇▇▇▇▇▇▇ Break-Up Tax Opinion indicating that either ▇▇▇▇▇▇▇'▇ receipt
of the ▇▇▇▇▇▇▇ Expense Base Amount would satisfy, in whole or in part, the REIT
Requirements or ▇▇▇▇▇▇▇'▇ receipt of the ▇▇▇▇▇▇▇ Expense Base Amount should not
cause ▇▇▇▇▇▇▇ to fail to qualify as a REIT, in which event Heritage shall pay to
▇▇▇▇▇▇▇ the unpaid ▇▇▇▇▇▇▇ Expense Base Amount. Heritage's obligation to pay any
-45-
unpaid portion of the ▇▇▇▇▇▇▇ Break-Up Expenses (provided Heritage has otherwise
complied with its obligations under this provision) shall terminate (and any
amount still held in such escrow shall be released to Heritage) on the date that
is five years from the date the ▇▇▇▇▇▇▇ Break-Up Expenses first become due under
this Agreement.
(d) In the event that either Heritage or ▇▇▇▇▇▇▇ is required to
file suit to seek all or a portion of the amounts payable under this Section
8.2, and such party prevails in such litigation, such party shall be entitled to
all expenses, including attorneys' fees and expenses, which it has incurred in
enforcing its rights under this Section 8.2; provided, however, that such
expenses shall be considered part of out-of-pocket expenses incurred in
connection with this Agreement and the other transactions within the definition
of Heritage Break-Up Expenses or ▇▇▇▇▇▇▇ Break-Up Expenses, as the case may be.
(e) Notwithstanding anything to the contrary in this Agreement
(other than in the case of a willful breach), Heritage expressly acknowledges
and agrees that, with respect to any termination of this Agreement pursuant to
Section 8.1(b), (f), (g) or (h) in circumstances where the Heritage Break-Up Fee
and/or the Heritage Break-Up Expenses are payable in accordance with Section
8.2(b), the payment of the Heritage Break-Up Fee and/or the Heritage Break-Up
Expenses shall constitute liquidated damages with respect to any claim for
damages or any other claim which Heritage would otherwise be entitled to assert
against ▇▇▇▇▇▇▇, the ▇▇▇▇▇▇▇ OP or any of the ▇▇▇▇▇▇▇ Subsidiaries or any of
their respective assets, or against any of their respective directors, officers,
employees, partners, managers, members or stockholders, with respect to this
Agreement and the transactions contemplated by the Transaction Documents and
shall constitute the sole and exclusive remedy available to Heritage. The
parties hereto expressly acknowledge and agree that, in light of the difficulty
of accurately determining actual damages with respect to the foregoing upon any
termination of this Agreement pursuant to Section 8.1(b), (f), (g) or (h) in
circumstances where the Heritage Break-Up Fee and/or the Heritage Break-Up
Expenses are payable in accordance with Section 8.2(b), the right to payment
under any of such subsections of Section 8.1: (i) constitutes a reasonable
estimate of the damages that will be suffered by reason of any such proposed or
actual termination of this Agreement pursuant to said section, and (ii) shall be
in full and complete satisfaction of any and all damages arising as a result of
the foregoing (other than in the case of a willful breach). Except for
nonpayment of the amounts set forth in Section 8.2(b), Heritage hereby agrees
that, upon any termination of this Agreement pursuant to Section 8.1(b), (f),
(g) or (h) in circumstances where the Heritage Break-Up Fee and/or the Heritage
Break-Up Expenses are payable in accordance with Section 8.2(b), in no event
(other than in the case of a willful breach) shall Heritage (A) seek to obtain
any recovery or judgment against ▇▇▇▇▇▇▇, the ▇▇▇▇▇▇▇ OP or any of the ▇▇▇▇▇▇▇
Subsidiaries or any of their respective assets, or against any of their
respective directors, officers, employees, partners, managers, members or
stockholders, or (B) be entitled to seek or obtain any other damages of any
kind, including, without limitation, consequential, indirect or punitive
damages.
(f) Notwithstanding anything to the contrary in this Agreement
(other than in the case of a willful breach), ▇▇▇▇▇▇▇ expressly acknowledges and
agrees that, with respect to any termination of this Agreement pursuant to
Section 8.1(c) or (i) in circumstances where the ▇▇▇▇▇▇▇ Break-Up Fee or the
▇▇▇▇▇▇▇ Break-Up Expenses are payable in accordance with Section 8.2(c), the
payment of the ▇▇▇▇▇▇▇ Break-Up Fee or the ▇▇▇▇▇▇▇ Break-Up Expenses shall
constitute liquidated damages with respect to any claim for damages or any other
claim which ▇▇▇▇▇▇▇ would otherwise be entitled to assert against Heritage or
any of the Heritage Subsidiaries or any of their respective assets, or against
any of their respective directors, officers, employees, partners, managers,
members or stockholders, with respect to this Agreement and the transactions
contemplated by the Transaction Documents and shall constitute the sole and
exclusive remedy available to ▇▇▇▇▇▇▇. The parties hereto expressly acknowledge
and agree that, in light of the difficulty of accurately determining actual
damages with respect to the foregoing upon any termination of this Agreement
pursuant to Section 8.1(c) or (i) in circumstances where the ▇▇▇▇▇▇▇ Break-Up
Fee or the ▇▇▇▇▇▇▇ Break-Up Expenses are payable in accordance with Section
8.2(c), the right to
-46-
payment under any of such subsections of Section 8.1: (i) constitutes a
reasonable estimate of the damages that will be suffered by reason of any such
proposed or actual termination of this Agreement pursuant to said section, and
(ii) shall be in full and complete satisfaction of any and all damages arising
as a result of the foregoing (other than in the case of a willful breach).
Except for nonpayment of the amounts set forth in Section 8.2(c), ▇▇▇▇▇▇▇ hereby
agrees that, upon any termination of this Agreement pursuant to Section 8.1(c)
or (i) hereof in circumstances where the ▇▇▇▇▇▇▇ Break-Up Fee or the ▇▇▇▇▇▇▇
Break-Up Expenses are payable in accordance with Section 8.2(c), in no event
(other than in the case of willful breach), shall ▇▇▇▇▇▇▇ (A) seek to obtain any
recovery or judgment against Heritage or any of the Heritage Subsidiaries or any
of their respective assets, or against any of their respective directors,
officers, employees, partners, managers, members or stockholders, or (B) be
entitled to seek or obtain any other damages of any kind, including, without
limitation, consequential, indirect or punitive damages. Further, ▇▇▇▇▇▇▇
expressly acknowledges that its sole and exclusive remedy in the event that
Heritage is unable to proceed with the Closing due to Heritage's inability to
obtain the Financing on or prior to the dates specified in Section 1.2 will be
to terminate this Agreement under Section 8.1(i).
Section 8.3. Effect of Termination. In the event of termination of this
---------------------
Agreement by either ▇▇▇▇▇▇▇ or Heritage as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Heritage or ▇▇▇▇▇▇▇, other than the last sentence
of Section 5.2, Section 8.2, this Section 8.3 and Article IX and except to the
extent that such termination results from a willful breach by a party of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.
Section 8.4. Amendment. This Agreement may be amended by the parties in
---------
writing by action of their respective Boards of Directors at any time before or
after the ▇▇▇▇▇▇▇ Stockholder Approval is obtained and prior to the filing of
the Articles of Merger for the Merger with the State Department of Assessments
and Taxation of the State of Maryland; provided, however, that, after the
▇▇▇▇▇▇▇ Stockholder Approval is obtained, no such amendment, modification or
supplement shall alter the amount or change the form of the Merger Consideration
to be delivered to ▇▇▇▇▇▇▇'▇ stockholders or alter or change any of the terms or
conditions of this Agreement if such alteration or change would adversely affect
▇▇▇▇▇▇▇'▇ stockholders.
Section 8.5. Extension; Waiver. At any time prior to the Effective Time,
-----------------
each of ▇▇▇▇▇▇▇ and Heritage may (a) extend the time for the performance of any
of the obligations or other acts of the other party, (b) waive any inaccuracies
in the representations and warranties of the other party contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the provisions of Section 8.4, waive compliance with any of the agreements or
conditions of the other party contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE IX
GENERAL PROVISIONS
------------------
Section 9.1. Nonsurvival of Representations and Warranties. None of the
---------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
-47-
Section 9.2. Notices. All notices, requests, claims, demands and other
-------
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, sent by overnight courier (providing proof of
delivery) to the parties or sent by telecopy (providing confirmation of
transmission) at the following addresses or telecopy numbers (or at such other
address or telecopy number for a party as shall be specified by like notice):
(a) if to Heritage, to
Heritage Property Investment Trust, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Chief Executive Officer and President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to:
▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to ▇▇▇▇▇▇▇, to
▇▇▇▇▇▇▇ Real Estate, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. D'Arcy, Chief Executive Officer and President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III, P.C.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.3. Interpretation. When a reference is made in this Agreement to
--------------
a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and
-48-
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
Section 9.4. Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.5. Entire Agreement; No Third-Party Beneficiaries. This
----------------------------------------------
Agreement, the Confidentiality Agreement and the other agreements entered into
in connection with the transactions (i) constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter of this Agreement and,
(ii) except for the provisions of Article II and Sections 5.8(a) and (b) and
5.9, are not intended to confer upon any Person other than the parties hereto
any rights or remedies.
Section 9.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND.
Section 9.7. Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations under this Agreement shall be assigned or delegated, in
whole or in part, by operation of Law or otherwise by any of the parties without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
Section 9.8. Enforcement. The parties agree that irreparable damage would
-----------
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Maryland or in any Maryland State court, this being in
addition to any other remedy to which they are entitled at Law or in equity. In
addition, each of the parties hereto (i) consents to submit itself (without
making such submission exclusive) to the personal jurisdiction of any Federal
court located in the State of Maryland or any Maryland State court in the event
any dispute arises out of this Agreement or any of the transactions contemplated
by this Agreement and (ii) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such
court.
Section 9.9. Exhibits; Disclosure Letter. All Exhibits referred to herein
---------------------------
and in the ▇▇▇▇▇▇▇ Disclosure Letter are intended to be and hereby are
specifically made a part of this Agreement.
ARTICLE X
CERTAIN DEFINITIONS
-------------------
Section 10.1. Certain Definitions. For purposes of this Agreement:
-------------------
"Affiliate" of any Person means another Person that directly or indirectly,
---------
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first Person.
"▇▇▇▇▇▇▇ Subsidiary" means the ▇▇▇▇▇▇▇ OP and each other Subsidiary of
------------------
▇▇▇▇▇▇▇.
-49-
"Financing" means equity and debt financing that will be sufficient to fund
---------
the Merger Consideration and the LP Unit Consideration.
"Heritage Subsidiary" means the Heritage Merger Sub and each other
-------------------
Subsidiary of Heritage.
"Knowledge" where used herein with respect to ▇▇▇▇▇▇▇ and any ▇▇▇▇▇▇▇
---------
Subsidiary shall mean the actual (and not constructive or imputed) knowledge of
the persons named in Section 10.1 of the ▇▇▇▇▇▇▇ Disclosure Letter and where
used with respect to Heritage and the Heritage Merger Sub shall mean the actual
(and not constructive or imputed) knowledge of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇.
"Law" means any statute, law, regulation, rule or ordinance of any
---
Governmental Entity applicable to Heritage or ▇▇▇▇▇▇▇ or any of their respective
Subsidiaries.
"Limited Partner Agreements" means written agreements, each of which (i)
--------------------------
has as one of its purposes to permit a Person to take the position that such
Person could defer Federal taxable income that otherwise might have been
recognized upon a transfer of property to any ▇▇▇▇▇▇▇ Subsidiary that is treated
as a partnership for Federal income tax purposes and (ii) (A) prohibits or
restricts in any manner the disposition of any assets of ▇▇▇▇▇▇▇ or any of the
▇▇▇▇▇▇▇ Subsidiaries (including, without limitation, requiring ▇▇▇▇▇▇▇ or any of
the ▇▇▇▇▇▇▇ Subsidiaries to indemnify any Person for any Tax liabilities
resulting from any such disposition), (B) requires that ▇▇▇▇▇▇▇ or any of the
▇▇▇▇▇▇▇ Subsidiaries maintain, put in place, or replace indebtedness, whether or
not secured by one or more properties of ▇▇▇▇▇▇▇ or any ▇▇▇▇▇▇▇ Subsidiary or
(C) requires that ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries offer to any Person
at any time the opportunity to guarantee or otherwise assume, directly or
indirectly, the risk of loss for Federal income tax purposes for indebtedness or
other liabilities of ▇▇▇▇▇▇▇ or any of the ▇▇▇▇▇▇▇ Subsidiaries.
"Person" means an individual, corporation, partnership, limited liability
------
company, joint venture, association, trust, unincorporated organization or other
entity.
"Subsidiary" of any Person means any corporation, partnership, limited
----------
liability company, joint venture or other legal entity of which such Person
(either directly or through or together with another Subsidiary of such Person)
owns 50% or more of the voting stock, value of or other equity interests (voting
or non-voting) of such corporation, partnership, limited liability company,
joint venture or other legal entity.
"Tax" or "Taxes" shall mean any Federal, state, local and foreign income,
--------------
gross receipts, license, withholding, property, recording, stamp, sales, use,
franchise, employment, payroll, excise, environmental and other taxes, tariffs
or governmental charges of any nature whatsoever, together with penalties,
interest or additions thereto.
"Tax Return" shall mean any return, declaration, report, claim for refund,
----------
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Voting Debt" shall mean bonds, debentures, notes or other indebtedness
-----------
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which holders of equity interests in
▇▇▇▇▇▇▇, any ▇▇▇▇▇▇▇ Subsidiary, Heritage or the Heritage Merger Sub, as
applicable, may vote.
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IN WITNESS WHEREOF, Heritage, the Heritage Merger Sub and ▇▇▇▇▇▇▇ have
caused this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
HERITAGE PROPERTY INVESTMENT TRUST, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer and President
HERITAGE-▇▇▇▇▇▇ ACQUISITION, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
▇▇▇▇▇▇▇ REAL ESTATE, INC.
By: /s/ ▇▇▇▇▇▇ ▇. D'Arcy
-------------------------------------------
Name: ▇▇▇▇▇▇ ▇. D'Arcy
Title: Chairman, Chief Executive Officer &
President
-51-
SCHEDULE A
LIST OF BRADLEY SUBSIDIARIES TO BE LIQUIDATED
Bradley Management Corp.
BTR Development Corp.
BTR Development LP
Bradley Management LP
Sch. A
EXHIBIT A
FORM OF AGREEMENT AND IRREVOCABLE PROXY
AGREEMENT and IRREVOCABLE PROXY (this "Agreement"), dated as of May __,
---------
2000, by and among the undersigned holder of shares of common stock (the
"Bradley Common Shares") of Bradley Real Estate, Inc., a Maryland corporation
---------------------
("Bradley"), [and shares of 8.4% Series A Convertible Preferred Stock of
-------
Bradley, par value $0.01 per share (the "Bradley Preferred Shares")] and
------------------------
Heritage Property Investment Trust, Inc., a Maryland corporation ("Heritage").
--------
A. The undersigned is the owner, beneficially or of record, of
certain Bradley Common Shares [and Bradley Preferred Shares] (together, the
"Bradley Shares"), as set forth on Schedule A;
-------------- ----------
B. Simultaneously with the execution and delivery of this
Agreement, Heritage, Heritage Merger Sub and Bradley are entering into an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which Bradley
----------------
will merge with and into Heritage Merger Sub, a Maryland corporation and a
wholly-owned subsidiary of Heritage (the "Merger");
------
C. As a condition to the willingness of Heritage to enter into the
Merger Agreement, the undersigned has agreed to enter into this Agreement.
In consideration of the promises and mutual covenants provided herein, and
other good and sufficient consideration, the receipt of which is acknowledged by
each party hereto, the parties hereto agree as follows:
1. Proxy.
-----
(a) The undersigned hereby irrevocably constitutes and
appoints Heritage as its true and lawful proxy and attorney-in-fact, for
and in the name, place and stead of the undersigned, solely to vote or
cause to be voted all of the Bradley Shares, together with any additional
Bradley Shares that the undersigned shall acquire, between the date of this
Agreement and the date of termination of this Agreement (i) in favor of the
Merger Agreement and any other actions and transactions contemplated in
connection therewith and (ii) against any Competing Transaction (as defined
in the Merger Agreement), in each case, at any annual, special or other
meeting of the shareholders of Bradley and at any adjournment or
postponements thereof (a "Meeting"), or pursuant to any written consent in
-------
lieu of a meeting or otherwise.
(b) In the event that Heritage is unable or declines to
exercise the power and authority granted by the Proxy for any reason, the
undersigned covenants and agrees to vote or cause to be voted all of such
Bradley Shares in favor of approval and adoption of the Merger Agreement
and any other actions and transactions contemplated in connection therewith
at any Meeting and, upon written request of Heritage, to provide their
written consent thereto.
(c) The undersigned hereby covenants and agrees not to vote,
cause to be voted or take any action by written consent of shareholders in
lieu of a meeting on any matter which is subject to this Agreement without
the prior written consent of Heritage, and will promptly provide Heritage
with copies of any shareholder notices given by Bradley and received by the
undersigned.
2. Covenants. The undersigned, hereby covenants and agrees not to, and not
---------
to agree to, directly or indirectly, sell, transfer, assign, pledge,
hypothecate, cause to be redeemed or otherwise
A-1
dispose of any of the Bradley Shares, or grant any proxy, power-of-attorney or
other authorization or interest in or with respect to such Bradley Shares, or
deposit such Bradley Shares into a voting trust or enter into a voting agreement
or arrangement with respect to such Bradley Shares unless and until they shall
have taken all actions (including, without limitation, the endorsement of a
legend on the certificates evidencing such Bradley Shares) necessary to ensure
that such Bradley Shares shall at all times be subject to the rights, powers and
privileges granted or conferred, and subject to all restrictions, covenants and
limitations imposed, by this Agreement and shall have caused any transferee of
any of the Bradley Shares to execute and deliver to the other party hereto, an
Agreement and Irrevocable Proxy consistent with the terms contained herein.
3. Representation and Warranty. The undersigned represents and warrants to
----------------------------
Heritage that the undersigned has full power and authority to enter into this
Agreement, to grant the Proxy and to perform the undersigned's obligations
hereunder.
4. Miscellaneous.
-------------
(a) The terms and provisions of this Agreement shall be
governed by and construed in accordance with the laws of the State of
Maryland without giving effect to the conflicts of law provisions thereof.
(b) EACH OF THE UNDERSIGNED AND HERITAGE AGREE THAT THE PROXY
AND ALL OTHER POWER AND AUTHORITY INTENDED TO BE CONFERRED HEREBY ARE
COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN IRREVOCABLE POWER
AND SHALL NOT BE TERMINATED BY ANY ACT OF THE UNDERSIGNED OR HERITAGE, BY
LACK OF APPROPRIATE POWER OR AUTHORITY OR BY THE OCCURRENCE OF ANY OTHER
EVENT OR EVENTS EXCEPT AS PROVIDED HEREIN.
(c) THIS POWER OF ATTORNEY SHALL NOT BE AFFECTED BY THE DEATH
OR DISABILITY OF THE UNDERSIGNED.
(d) This Agreement and the Proxy granted hereunder shall
terminate immediately upon the termination of the Merger Agreement or the
consummation of the transactions contemplated thereby.
(e) The undersigned acknowledges and agrees that performance
of the undersigned's obligations hereunder will confer a unique benefit on
Heritage and that a failure of performance will result in irreparable harm
to the other and will not be compensable by money damages. The parties
therefore agree that this Agreement, including the Proxy, shall be
specifically enforceable and that specific enforcement and injunctive
relief shall be remedies properly available for any breach of any
agreement, covenant or representation of the other hereunder. The terms and
provisions of this Agreement shall be binding upon, inure to the benefit
of, and be enforceable by and against the personal representatives, heirs,
successors and assigns of the parties hereto.
(f) The undersigned will, upon request, execute and deliver
any additional documents and take such further actions as may reasonably be
deemed by Heritage to be necessary or desirable to complete the proxies
granted herein or to carry out the provisions hereof.
A-2
(g) If any term, provision, covenant or restriction of this
Agreement, or the application thereof to any circumstance, shall, to any
extent, be held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement or the application thereof to any other
circumstance, shall remain in full force and effect, shall not in any way
be affected, impaired or invalidated and shall be enforced to the fullest
extent permitted by law.
(h) This Agreement may be executed in counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same document.
A-3
IN WITNESS WHEREOF, the undersigned and Heritage have duly executed this
Agreement or caused this Agreement to be duly executed as of the date first
above written.
HERITAGE PROPERTY INVESTMENT TRUST, INC.
By:_________________________
Name:
Title:
BRADLEY SHAREHOLDER
By:_________________________
Name:
Title:
A-4
SCHEDULE A
----------
-------------------------------------------------------------------------------
Bradley Bradley
Common Ownership Voting Preferred Voting
Name Shares Percentage Percentage Shares Percentage
---- ------ ---------- ---------- ------ ----------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
A-5
EXHIBIT B
FINANCING COMMITMENT LETTERS
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EXHIBIT C
AMENDMENT TO THE BRADLEY OP AGREEMENT
RELATING TO SECTION 514(c)(9)(E) OF THE CODE
Provisions of the Bradley OP's Second Restated Agreement of Limited
Partnership, as amended by a first amendment dated July 31, 1998, as further
amended by a second amendment dated August 6, 1998, as further amended by a
third amendment dated February 23, 1999, and as further amended by a fourth
amendment dated September 7, 1999 (the "Partnership Agreement"), to be amended
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(effective as of the Effective Time (as such term is defined in this Agreement))
as set forth below. Terms not otherwise defined in this Exhibit C shall have the
meanings assigned to them in the Partnership Agreement:
1. Partnership Agreement (including, without limitation, the amendment to
the Partnership Agreement relating to the designation and issuance of the 8.4%
Series A Convertible Preferred Units (the "Series A Units")) to be amended to
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convert the Series A Units into General Partner Units or Limited Partner Units,
as determined by the General Partner, that are not Preferred Units, so that the
8.875% Series B Cumulative Redeemable Perpetual Preferred Units (the "Series B
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Units") and the 8.875% Series C Cumulative Redeemable Perpetual Preferred Units
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(the "Series C Units") are the only two classes of Preferred Units outstanding
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at the Effective Time.
2. Section 1.1 of the Partnership Agreement to be amended to add definition
of "Adjusted Capital Account" to mean: the Capital Account maintained for each
Partner (i) increased by any amounts which such Partner is obligated to restore
pursuant to any provision of this Agreement or the penultimate sentences of
Treas. Reg. (S)(S) 1.704-2(g)(1) and 1.704-2(i)(5), and (ii) decreased by the
items described in Treas. Reg. (S) 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The
foregoing definition of Adjusted Capital Account is intended to comply with the
provisions of Treas. Reg. (S) 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
3. Section 8.4 of the Partnership Agreement to be amended to provide for
the distribution of Operating Cash Flow and Capital Cash Flow in the following
order of priority: (i) first, pro rata (based on the respective number of Units
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held by them) to the holders of the Preferred Units until they have received
aggregate distributions equal to the amount of their cumulative Priority Return;
and (ii) thereafter, pro rata (based on the respective number of Units held by
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them) to the holders of Units other than the Preferred Units (such holders of
Units other than the Preferred Units referred to as the "Common Unitholders");
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provided, that, after making the distributions specified in clause (i), the
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Common Unitholders shall receive an annual distribution under this clause (ii)
of at least $0.38 per Unit for three years (the "Minimum Distribution Amount").
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4. Section 7.1 of the Partnership Agreement to be amended in one of two
alternative ways:
Alternative 1: to provide for the allocation of Profits in the
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following order of priority: (i) first, to the General
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Partner to the extent that the cumulative Losses
allocated to the General Partner pursuant to Section
[5(ii)] exceed the cumulative Profits allocated to the
General Partner pursuant to this Section __; (ii)
second, pro rata (based on the respective number of
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Units held by them) to the holders of the Preferred
Units until the cumulative amount of Profits allocated
pursuant to this clause (ii) equals their cumulative
Priority Return through the end of the applicable year
(whether or not distributed); (iii) third, to the
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Common Unitholders to the extent that the cumulative
Losses allocated to the Common Unitholders pursuant to
Section [5(i)] exceed the cumulative Profits allocated
to the Common Unitholders
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pursuant to this Section __; and (iv) thereafter, pro
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rata (based on the respective number of Units held by
them) to the Common Unitholders.
Alternative 2: provide for the allocation of Profits in the following
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order of priority: (i) first, to the General Partner
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to the extent that the cumulative Losses allocated to
the General Partner pursuant to Section [5(iii)]
exceed the cumulative Profits allocated to the General
Partner pursuant to this Section __; (ii) second, to
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the holders of Preferred Units to the extent that the
cumulative Losses allocated to the holders of
Preferred Units pursuant to Section [5(ii)] exceed the
cumulative Profits allocated to the holders of
Preferred Units pursuant to this Section __; (iii)
third, pro rata (based on the respective number of
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Units held by them) to the holders of the Preferred
Units until the cumulative amount of Profits allocated
pursuant to this clause (iii) equals their cumulative
Priority Return through the end of the applicable year
(whether or not distributed); (iv) fourth, to the
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Common Unitholders to the extent that the cumulative
Losses allocated to the Common Unitholders pursuant to
Section [5(i)] exceed the cumulative Profits allocated
to the Common Unitholders pursuant to this Section __;
and (v) thereafter, pro rata (based on the respective
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number of Units held by them) to the Common
Unitholders.
5. Section 7.1 of the Partnership Agreement to be amended in one of two
alternative ways:
Alternative 1: to provide for the allocation of Losses in the
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following order of priority: (i) first, pro rata
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(based on the respective number of Units held by them)
to the Common Unitholders; provided, that Losses
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allocated to a Common Unitholder pursuant to this
Section __ shall not exceed the maximum amount of
Losses that can be allocated without causing that
Common Unitholder to have a negative Adjusted Capital
Account balance; and (ii) thereafter, one hundred
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percent (100%) to the General Partner. If this
alternative is selected, Section 7 of the Partnership
Agreement will be amended to impose a Capital Account
deficit restoration obligation on the General Partner.
Alternative 2: to provide for the allocation of Losses in the
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following order of priority: (i) first, pro rata
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(based on the respective number of Units held by them)
to the Common Unitholders; provided, that Losses
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allocated to a Common Unitholder pursuant to this
Section __ shall not exceed the maximum amount of
Losses that can be allocated without causing that
Common Unitholder to have a negative Adjusted Capital
Account balance; (ii) second, pro rata (based on the
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respective number of Units held by them) to the
holders of Preferred Units; provided, that Losses
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allocated to a holder of Preferred Units pursuant to
this Section __ shall not exceed the maximum amount of
Losses that can be allocated without causing that
holder of Preferred Units to have a negative Adjusted
Capital Account balance; and (iii) thereafter, one
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hundred percent (100%) to the General Partner.
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6. Section 15 of the Partnership Agreement to be amended to provide that,
following the repayment of the Partnership's debts and the establishment of
adequate reserves, liquidating distributions will be made in proportion to and
solely to the extent of positive Capital Account balances (after taking into
account all allocations of Profits and Losses).
7. Partnership Agreement to be amended to remove the special distribution
and allocation provisions of Section 8.9.
8. Section 7.2 of the Partnership Agreement to be amended to add a
"qualified income offset" provision.
9. Section 7 of the Partnership Agreement to be amended to add a provision
indicating that the Partnership Agreement shall be construed so as to comply
with the requirements of Section 514(c)(9)(E) of the Internal Revenue Code of
1986, as amended, and the Treasury Regulations promulgated thereunder, and that
all interpretations of the Partnership Agreement and such amendments shall be
made accordingly.
10. To the extent determined desirable by the General Partner or determined
necessary by Bradley and permitted under applicable Treasury Regulations, the
Partnership's assets will be revalued on its books and records and the partners'
Capital Accounts will be adjusted as of the Effective Time in the manner
provided for in Treas. Reg. (S) 1.704-1(b)(2)(iv)(f).
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