<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 20, 2006
BY AND AMONG
INLAND RETAIL REAL ESTATE TRUST, INC.,
DEVELOPERS DIVERSIFIED REALTY CORPORATION
AND
DDR IRR ACQUISITION LLC
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TABLE OF CONTENTS
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PAGE
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ARTICLE I
THE MERGER
Section 1.1
THE
MERGER..............................................................................
2
Section 1.2
EFFECTIVE
TIME..........................................................................
2
Section 1.3
CLOSING OF
THE
MERGER...................................................................
2
Section 1.4
EFFECTS OF
THE
MERGER...................................................................
2
Section 1.5
LIMITED
LIABILITY COMPANY
AGREEMENT.....................................................
2
Section 1.6
MEMBERS
AND OFFICERS OF SURVIVING
ENTITY................................................ 3
ARTICLE II
MERGER CONSIDERATION; CONVERSION OF STOCK; EFFECTS ON MERGER SUB
INTERESTS
Section 2.1
CONVERSION
OF COMPANY CAPITAL STOCK; EFFECTS OF MERGER ON MERGER SUB
INTERESTS.......... 3
Section 2.2
EXCHANGE
OF
CERTIFICATES................................................................
4
Section 2.3
COMPANY
WARRANTS........................................................................
6
Section 2.4
NO
FRACTIONAL SHARES OF PARENT COMMON
SHARES............................................ 6
Section 2.5
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED
SHARES........................................ 7
Section 2.6
NO
LIABILITY............................................................................
7
Section 2.7
DISSENTERS'
RIGHTS......................................................................
7
Section 2.8
STOCK
OPTIONS AND RESTRICTED
STOCK......................................................
8
Section 2.9
SECTION 16
MATTERS......................................................................
8
Section 2.10
PARENT STOCK
ELECTION...................................................................
8
Section 2.11
ADJUSTMENT TO
STOCK
CONSIDERATION.......................................................
9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1
ORGANIZATION AND QUALIFICATION;
SUBSIDIARIES............................................
10
Section 3.2
CAPITALIZATION..........................................................................
11
Section 3.3
AUTHORITY
RELATIVE TO THIS AGREEMENT; STOCKHOLDER
APPROVAL.............................. 13
Section 3.4
REPORTS;
FINANCIAL
STATEMENTS...........................................................
13
Section 3.5
NO
UNDISCLOSED
LIABILITIES..............................................................
15
Section 3.6
ABSENCE OF
CHANGES......................................................................
15
Section 3.7
CONSENTS
AND APPROVALS; NO
VIOLATIONS...................................................
15
Section 3.8
LITIGATION..............................................................................
16
Section 3.9
COMPLIANCE
WITH APPLICABLE
LAW..........................................................
17
Section 3.10
PROPERTIES..............................................................................
17
Section 3.11
EMPLOYEE
PLANS..........................................................................
19
Section 3.12
LABOR
MATTERS...........................................................................
22
Section 3.13
ENVIRONMENTAL
MATTERS...................................................................
23
Section 3.14
TAX
MATTERS.............................................................................
25
Section 3.15
MATERIAL
CONTRACTS......................................................................
30
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Section 3.16
OPINION OF
FINANCIAL
ADVISOR............................................................
31
Section 3.17
BROKERS.................................................................................
32
Section 3.18
TAKEOVER
STATUTES.......................................................................
32
Section 3.19
RELATED PARTY
TRANSACTIONS..............................................................
32
Section 3.20
INVESTMENT
COMPANY ACT OF
1940..........................................................
32
Section 3.21
TRADEMARKS,
PATENTS AND
COPYRIGHTS......................................................
32
Section 3.22
INSURANCE...............................................................................
32
Section 3.23
INFORMATION IN
PROXY
STATEMENT/PROSPECTUS...............................................
33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Section 4.1
ORGANIZATION AND
QUALIFICATION..........................................................
33
Section 4.2
CAPITALIZATION..........................................................................
33
Section 4.3
AUTHORITY
RELATIVE TO THIS AGREEMENT; STOCKHOLDER
APPROVAL.............................. 34
Section 4.4
CONSENTS
AND APPROVALS; NO
VIOLATIONS...................................................
35
Section 4.5
REPORTS;
FINANCIAL
STATEMENTS...........................................................
35
Section 4.6
NO
UNDISCLOSED
LIABILITIES..............................................................
36
Section 4.7
ABSENCE OF
CHANGES......................................................................
37
Section 4.8
LITIGATION..............................................................................
37
Section 4.9
COMPLIANCE
WITH APPLICABLE
LAW..........................................................
37
Section 4.10
TAXES...................................................................................
38
Section 4.11
BROKERS.................................................................................
38
Section 4.12
TAKEOVER
STATUTES.......................................................................
38
Section 4.13
AUTHORIZATION
FOR PARENT COMMON
SHARES..................................................
38
Section 4.14
INVESTMENT
COMPANY ACT OF
1940..........................................................
38
Section 4.15
NO PRIOR
ACTIVITIES; INTERIM
OPERATIONS.................................................
38
Section 4.16
SUFFICIENT
CONSIDERATION; NO OWNERSHIP OF COMPANY
STOCK................................. 39
Section 4.17
INFORMATION IN
COMPANY
STATEMENT/PROSPECTUS.............................................
39
Section 4.18
PROPERTIES..............................................................................
39
ARTICLE V
COVENANTS RELATED TO CONDUCT OF BUSINESS
Section 5.1
COVENANTS
OF THE
COMPANY................................................................
39
Section 5.2
COVENANTS
OF
PARENT.....................................................................
44
Section 5.3
ACCESS TO
INFORMATION...................................................................
44
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1
PREPARATION OF FORM S-4 AND THE PROXY
STATEMENT/PROSPECTUS.............................. 45
Section 6.2
COMPANY
STOCKHOLDERS'
MEETING...........................................................
46
Section 6.3
REASONABLE
BEST
EFFORTS.................................................................
47
Section 6.4
COMPANY
ACQUISITION
PROPOSALS...........................................................
48
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Section 6.5
RESIGNATIONS............................................................................
51
Section 6.6
PUBLIC
ANNOUNCEMENTS....................................................................
51
Section 6.7
INDEMNIFICATION; DIRECTORS' AND OFFICERS'
INSURANCE..................................... 51
Section 6.8
EMPLOYEE
MATTERS........................................................................
53
Section 6.9
NOTIFICATION OF CERTAIN
MATTERS.........................................................
55
Section 6.10
COORDINATION OF
DISTRIBUTIONS...........................................................
55
Section 6.11
TAXES...................................................................................
55
Section 6.12
EXTENSION OF INSURANCE
POLICIES.........................................................
57
Section 6.13
OBTAINING
CONSENTS......................................................................
57
Section 6.14
SUSPENSION OF
PLANS.....................................................................
57
Section 6.15
ASSET
SALES.............................................................................
57
Section 6.16
TERMINATION OF
RELATED SERVICES AGREEMENTS; CAPTIVE INSURANCE
COMPANY................... 58
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1
CONDITIONS
TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
MERGER............................. 58
Section 7.2
CONDITIONS
TO THE OBLIGATIONS OF PARENT AND MERGER SUB TO EFFECT THE
MERGER.............
59
Section 7.3
CONDITIONS
TO OBLIGATIONS OF THE COMPANY TO EFFECT THE
MERGER........................... 61
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1
TERMINATION.............................................................................
61
Section 8.2
EFFECT OF
THE
TERMINATION...............................................................
63
Section 8.3
FEES AND
EXPENSES.......................................................................
63
Section 8.4
AMENDMENT...............................................................................
66
Section 8.5
EXTENSION;
WAIVER.......................................................................
66
ARTICLE IX
MISCELLANEOUS
Section 9.1
NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES; SURVIVAL OF
CONFIDENTIALITY.............. 66
Section 9.2
ENTIRE
AGREEMENT; DISCLOSURE SCHEDULES; ASSIGNMENT; OBLIGATION OF PARENT
ENTITIES....... 66
Section 9.3
NOTICES.................................................................................
67
Section 9.4
GOVERNING
LAW...........................................................................
68
Section 9.5
DESCRIPTIVE
HEADINGS....................................................................
68
Section 9.6
PARTIES IN
INTEREST.....................................................................
68
Section 9.7
SEVERABILITY............................................................................
68
Section 9.8
REMEDIES................................................................................
68
Section 9.9
SPECIFIC
PERFORMANCE....................................................................
68
Section 9.10
COUNTERPARTS............................................................................
69
Section 9.11
INTERPRETATION..........................................................................
69
Section 9.12
DEFINITIONS.............................................................................
69
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
October
20, 2006, is by and among Inland Retail Real Estate Trust, Inc., a
Maryland
corporation (the "Company"), Developers Diversified Realty
Corporation, an Ohio
corporation ("Parent"), and DDR IRR Acquisition LLC, a Delaware
limited
liability company and a wholly owned subsidiary of Parent ("Merger
Sub").
W I T N E S S E T H:
WHEREAS,
the Board of Directors of the Company (the "Company Board"), on
the recommendation of a sub committee of the Company Board (the
"Sub
Committee"), has unanimously determined that the merger of the
Company with and
into Merger Sub (the "Merger") is advisable and fair to, and in the
best
interests of, the Company and the holders of the common stock of
the Company,
par value $.01 per share (the "Company Common Stock");
WHEREAS,
the Board of Directors of Parent has unanimously determined
that
the Merger and this Agreement are advisable and fair to, and in the
best
interests of, Parent and the holders of common shares of the
Parent, par value
$0.01 per share ("Parent Common Shares");
WHEREAS,
Parent, as the sole member of Merger Sub, has determined that
the
Merger and this Agreement are advisable and fair to, and in the
best interests
of, Merger Sub and Parent as its sole member;
WHEREAS,
each of the Board of Directors of Parent and the Company Board
have approved this Agreement, the Merger and the other transactions
contemplated
by this Agreement on the terms and conditions contained in this
Agreement;
WHEREAS,
Parent, as the sole member of Merger Sub, has approved this
Agreement, the Merger and the transactions contemplated by this
Agreement
pursuant to action taken by unanimous written consent in accordance
with the
requirements of the Delaware Limited Liability Company Act (the
"DLLC Act") and
the certificate of formation and limited liability company
agreement of Merger
Sub; and
WHEREAS,
Parent, the Company and Merger Sub intend that for U.S. federal
and applicable state income tax purposes the Merger shall be
treated as a
taxable disposition by the Company of all of the Company's assets
in exchange
for the Merger Consideration (as hereinafter defined), and the
assumption of the
Company's liabilities, followed by a liquidating distribution of
such Merger
Consideration to the holders of the Company Common Stock pursuant
to Section 331
and Section 562 of the Code.
NOW,
THEREFORE, in consideration of the premises and the
representations,
warranties, covenants and agreements herein contained, and for
other good and
valuable consideration, the receipt and sufficiency of which is
hereby
acknowledged, and intending to be legally bound hereby, the parties
hereto
hereby agree as follows:
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ARTICLE I
THE MERGER
Section
1.1 THE MERGER. At the Effective Time (as hereinafter defined)
and
upon the terms and subject to the conditions of this Agreement and
in accordance
with the Maryland General Corporation Law (the "MGCL") and the DLLC
Act, the
Company shall be merged with and into Merger Sub. Following the
Merger, the
separate corporate existence of the Company shall cease and Merger
Sub shall
continue as the surviving entity (the "Surviving Entity") and as a
wholly owned
subsidiary of Parent. The limited liability company existence of
Merger Sub,
with all its purposes, rights, privileges, franchises, powers and
objects, shall
continue unaffected and unimpaired by the Merger and, as the
Surviving Entity,
it shall be governed by the laws of the State of Delaware.
Section
1.2 EFFECTIVE TIME. Subject to the provisions of this
Agreement, Parent, Merger Sub and the Company shall cause the
Merger to be
consummated by filing such articles and certificate of merger or
other
appropriate documents (in any such case, the "Articles of Merger")
with the
State Department of Assessments and Taxation of Maryland and the
Secretary of
State of the State of Delaware, as applicable, in such form as
required by, and
executed in accordance with, the relevant provisions of the MGCL
and the DLLC
Act and shall make all other filings, recordings or publications
required by the
MGCL and the DLLC Act in connection with the Merger. The Merger
shall become
effective at the time specified in the Articles of Merger (the time
the Merger
becomes effective being the "Effective Time").
Section
1.3 CLOSING OF THE MERGER. Unless this Agreement shall have
been
terminated by either Parent or the Company pursuant to the
provisions of Section
8.1, the closing of the Merger (the "Closing") will take place (a)
at 10:00
a.m., Chicago time, as soon as practicable, but in no event later
than the
second Business Day after satisfaction or waiver of all of the
conditions set
forth in Article VII (other than those conditions that by their
nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver
of those
conditions), at the offices of Duane Morris LLP Chicago, Illinois;
or (b) at
such other time, date or place as agreed to in writing by the
parties hereto
(such date and time on and at which the Closing occurs being
referred to herein
as the "Closing Date"). At the Closing, the documents,
certificates, opinions
and instruments referred to in Article VII shall be executed and
delivered to
the applicable party.
Section
1.4 EFFECTS OF THE MERGER. The Merger shall have the effects
set
forth in the MGCL and the DLLC Act. Without limiting the generality
of the
foregoing, and subject thereto, at the Effective Time, all the
properties,
rights, privileges, powers and franchises of the Company and Merger
Sub shall
vest in the Surviving Entity, and all debts, liabilities, duties
and obligations
of the Company and Merger Sub shall become the debts, liabilities,
duties and
obligations of the Surviving Entity.
Section
1.5 LIMITED LIABILITY COMPANY AGREEMENT. The limited liability
company agreement of Merger Sub, as in effect immediately prior to
the Effective
Time, shall be the limited liability company agreement of Surviving
Entity until
thereafter amended as provided therein or by law (the "LLC
Agreement").
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Section
1.6 MEMBERS AND OFFICERS OF SURVIVING ENTITY.
(a) Parent, the sole member of Merger Sub immediately prior to
the
Effective Time, shall be the sole member of the Surviving Entity,
and the
officers of Merger Sub, if any, immediately prior to the Effective
Time shall be
the initial officers of Surviving Entity, each to hold office in
accordance with
the terms of the LLC Agreement.
(b) Each of the current directors and officers of the Company
shall
resign from such positions and any other position that each such
director or
officer may hold in any of the Company's subsidiaries, such
resignation to be
effective as of and upon the Effective Time.
ARTICLE II
MERGER CONSIDERATION; CONVERSION OF STOCK;
EFFECTS ON MERGER SUB INTERESTS
Section
2.1 CONVERSION OF COMPANY CAPITAL STOCK; EFFECTS OF MERGER ON
MERGER SUB INTERESTS. At the Effective Time, by virtue of the
Merger and without
any action on the part of any holder thereof:
(a) Subject to this Article II, each share of Company Common
Stock
issued and outstanding immediately prior to the Effective Time
(other than
shares to be canceled in accordance with Section 2.1(c) but
including restricted
shares granted pursuant to the Company Option Plans (as hereinafter
defined))
shall automatically be converted into, and shall be cancelled in
exchange for,
the right to receive the Merger Consideration. The "Merger
Consideration" means
the Cash Consideration, together with, if applicable, the Stock
Consideration
(as hereinafter defined). The "Cash Consideration" means an amount
in cash,
without interest, equal to the sum of (i) $14.00 and (ii) $0.069167
multiplied
by the quotient obtained by dividing (x) the number of days between
(I) the last
day of the last month for which full monthly dividends on the
Company Common
Stock have been declared and paid and (II) the Closing Date
(including the
Closing Date), by (y) the total number of days in the month during
which the
Closing Date occurs, without interest, subject to adjustment as
provided in
Section 2.10 and Section 6.10.
(b) All shares of Company Common Stock converted into the right
to
receive the Merger Consideration pursuant to Section 2.1(a) shall
cease to be
outstanding and shall be canceled and retired and shall cease to
exist, and each
holder of a certificate that immediately prior to the Effective
Time represented
such shares of Company Common Stock (a "Certificate") shall
thereafter cease to
have any rights with respect to such shares of Company Common
Stock, except the
right to receive (i) the Merger Consideration, (ii) any cash in
lieu of
fractional Parent Common Shares, if any, to be issued or paid in
consideration
therefor upon surrender of such Certificate in accordance with
Section 2.4(b),
(iii) with respect to the Stock Consideration, if any, any
dividends or
distributions in accordance with Section 2.5 and (iv) any unpaid
dividend
declared by the Company in respect of Company Common Stock in
accordance with
Section 6.10, in each case without interest.
- 3 -
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(c) Each share of Company Common Stock held in treasury and not
outstanding immediately prior to the Effective Time shall be
canceled and
retired and cease to exist and no payment or distribution shall be
made with
respect thereto.
(d) Each limited liability company interest in Merger Sub issued
and
outstanding immediately prior to the Effective Time shall remain as
issued and
outstanding limited liability company interest of the Surviving
Entity.
Section
2.2 EXCHANGE OF CERTIFICATES.
(a) Prior to the Effective Time, Parent shall designate KeyCorp
or
another agent reasonably acceptable to Parent and the Company to
act as agent
(the "Paying Agent") for the payment of the Merger Consideration.
At or prior to
the Effective Time, Parent shall deliver to the Paying Agent (i)
certificates
(or have entered by way of book-entry) representing Parent Common
Shares
sufficient to deliver the aggregate Stock Consideration, if any,
(ii) cash
sufficient to deliver the Cash Consideration payable to holders of
Certificates,
(iii) cash in respect of the Company Warrant Consideration payable
to holders of
Company Warrants who have executed Warrant Cash Out Agreements at
or prior to
the Effective Time, and (iv) an estimated amount of cash in lieu of
fractional
shares, if any, payable pursuant to Section 2.4(b). The Paying
Agent shall not
be entitled to vote or exercise any rights of ownership with
respect to the
Parent Common Shares held by it from time to time hereunder, except
that it
shall receive and hold all dividends or other distributions paid or
distributed
with respect to such shares for the account of the Persons entitled
thereto. The
Paying Agent shall cause the cash, Parent Common Shares, if any,
dividends or
distributions with respect thereto and cash in lieu of fractional
shares, if
any, deposited by Parent to be (x) held for the benefit of holders
of
Certificates and holders of Company Warrants who executed and
delivered a Cash
Out Agreement at or prior to the Effective Time and, as applicable,
(ii)
promptly applied to making the exchanges and payments provided for
in this
Section 2.2 and in Sections 2.3 and 2.4(b). Such cash, Parent
Common Shares,
dividends or distributions with respect thereto and cash in lieu of
fractional
shares shall not be used for any purpose that is not provided for
herein.
(b) As soon as reasonably practicable after the Effective Time
(and
in any event not later than five (5) Business Days after the
Effective Time),
the Paying Agent shall mail to each holder of record of a
Certificate or
Certificates whose shares were converted into the right to receive
the Merger
Consideration a letter of transmittal in a form prepared prior to
the Effective
Time and reasonably acceptable to the Company and Parent (which
shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates
shall pass, only upon delivery of the Certificates to the Paying
Agent) and
instructions for use in effecting the surrender of the Certificates
in exchange
for the Merger Consideration and the cash, if any, in lieu of
fractional shares
pursuant to Section 2.4(b). Upon surrender to the Paying Agent of a
Certificate,
together with such letter of transmittal, duly completed and
validly executed in
accordance with the instructions thereto, and such other documents
as may be
reasonably required pursuant to such instructions, the holder of
such
Certificate shall be entitled to receive in exchange therefor,
after giving
effect to any required Tax withholding pursuant to Section 2.2(e),
(i) cash in
respect of the Cash Consideration which such holder has the right
to receive
pursuant to Section 2.1(a), (ii) a certificate in respect of the
Stock
Consideration representing that number of whole Parent Common
Shares, if any,
which such holder has the right to receive pursuant to
- 4 -
<PAGE>
Section 2.1(a), (iii) cash in lieu of any fractional Parent Common
Share to
which such holder is entitled pursuant to Section 2.4(b), (iv) any
dividends or
distributions to which such holder is entitled pursuant to Section
2.5, in each
case without interest, and the Certificate so surrendered shall
forthwith be
canceled, and (v) any unpaid dividend or distribution declared by
the Company in
respect of Company Common Stock in accordance with Section 6.10, in
each case
without interest. The Paying Agent shall accept such Certificates
upon
compliance with such reasonable terms and conditions as the Paying
Agent may
impose to effect an orderly exchange thereof in accordance with
normal exchange
practices.
(c) Each outstanding Certificate that prior to the Effective
Time
represented Company Common Stock and which is not surrendered to
the Paying
Agent in accordance with the procedures provided for herein shall,
except as
otherwise herein provided, until duly surrendered to the Paying
Agent, be deemed
to evidence the right to receive the Merger Consideration into
which such
Company Common Stock shall have been converted. After the Effective
Time, (i)
there shall be no further transfer on the records of the Company of
Certificates
representing shares of Company Common Stock and if such
Certificates are
presented to the Company for transfer, they shall be cancelled
against delivery
of certificates for the Merger Consideration, and (ii) the holders
of
Certificates shall cease to have rights with respect to the Company
Common Stock
represented by such Certificates, except the right to receive the
Merger
Consideration against delivery of such Certificates in accordance
with the terms
of this Agreement. Parent shall not be obligated to deliver the
Merger
Consideration to which a holder of Company Common Stock would
otherwise be
entitled as a result of the Merger until such holder surrenders the
Certificate
or Certificates representing the shares of Company Common Stock for
exchange as
provided in this Section 2.2, or, in default thereof, an
appropriate affidavit
of loss and indemnity agreement and/or a bond as may be required by
Parent or
the Paying Agent. If any certificates evidencing Parent Common
Shares are to be
issued in a name other than that in which the Certificate
evidencing Company
Common Stock surrendered in exchange therefor is registered, it
shall be a
condition of the issuance thereof that the Certificate so
surrendered shall be
properly endorsed or accompanied by an executed form of assignment
separate from
the Certificate and otherwise in proper form for transfer and that
the Person
requesting such exchange pay to the Paying Agent any transfer or
other tax
required by reason of the issuance of a certificate for Parent
Common Shares in
any name other than that of the registered holder of the
Certificate
surrendered, or otherwise establish to the satisfaction of the
Paying Agent that
such tax has been paid or is not payable.
(d) Any portion of the Merger Consideration that remains
unclaimed
by the stockholders of the Company for one year after the Effective
Time (as
well as any proceeds from any investment thereof) shall upon demand
be delivered
by the Paying Agent to Parent. Any stockholders of Company who have
not
theretofore complied with this Article II shall thereafter look
only to Parent
for the consideration deliverable in respect of each share of
Company Common
Stock such stockholder holds as determined pursuant to this
Agreement, without
any interest thereon. Neither the Paying Agent nor any party to
this Agreement
shall be liable to any holder of stock represented by any
Certificate for any
consideration paid to a public official pursuant to applicable
abandoned
property, escheat or similar laws. Parent and the Paying Agent
shall be entitled
to rely upon the stock transfer books of the Company to establish
the identity
of those Persons entitled to receive the Merger Consideration
specified in this
Agreement, which books shall be conclusive with respect
thereto.
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(e) Parent, Merger Sub (in its capacity as the Surviving Entity
or
otherwise), the Company, and/or the Paying Agent shall be entitled
to deduct and
withhold from the Merger Consideration, the Company Option
Consideration or the
Company Warrant Consideration, as the case may be, otherwise
payable pursuant to
this Agreement to the holders of shares of Company Common Stock,
Company Stock
Options, Dissenting Shares or Company Warrants, as applicable, such
amounts, if
any, as are required to be deducted or withheld under any provision
of U.S.
federal tax Law, or any provision of state, local or foreign tax
Law, with
respect to the making of such payment. Amounts so withheld shall be
treated for
all purposes of this Agreement as having been paid to the holders
of shares of
Company Common Stock, Company Stock Options, Dissenting Shares or
Company
Warrants, as applicable, in respect of which such deduction or
withholding was
made.
(f) The Paying Agent shall invest any cash it so receives, as
directed by Parent, on a daily basis. Any interest and other income
resulting
from such investments shall be paid to Parent.
(g) If any Certificate has 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
Entity, the
posting by such Person of a bond in such reasonable amount as the
Surviving
Entity may direct as indemnity against any claim that may be made
against it
with respect to such Certificate, the Paying Agent shall issue, in
exchange for
such lost, stolen or destroyed Certificate, the Merger
Consideration and, if
applicable, any unpaid dividend or distribution on the Parent
Common Shares
deliverable in respect thereof and any cash in lieu of fractional
shares, in
each case, due to such Person pursuant to this Agreement.
Section
2.3 COMPANY WARRANTS. From and after the date hereof until the
Effective Time, the Company shall use its reasonable best efforts
in accordance
with applicable law to (a) cause each outstanding Company Warrant
to be
exercised and cancelled in accordance with its terms or (b) cause
the holder of
any unexercised Company Warrant to enter into an agreement with the
Company, in
form and substance reasonably satisfactory to Parent (each, a
"Warrant Cash Out
Agreement"), pursuant to which the holder of such Company Warrant
agrees to
receive from the Surviving Entity, subject to the consummation of
the Merger and
in exchange for the cancellation of such Company Warrant, an amount
equal to the
excess, if any, of (x) $14.00 over (y) the per share exercise price
of such
Company Warrant, multiplied by the number of shares subject to such
Company
Warrant at the Effective Time (such amount, the "Company
Warrant
Consideration"). If the exercise price per share of any Company
Warrant is equal
to or greater than the Merger Consideration, the Company shall use
its
reasonable best efforts to cause the holder thereof to enter into
an agreement
pursuant to which such Company Warrant shall be canceled at the
Effective Time
without any cash payment being made in respect thereof ("Warrant
Cancellation
Agreement").
Section
2.4 NO FRACTIONAL SHARES OF PARENT COMMON SHARES.
(a) No certificates or scrip of Parent Common Shares
representing
fractional Parent Common Shares shall be issued upon the surrender
for exchange
of Certificates and such fractional share interests will not
entitle the owner
thereof to vote or to have any rights of a shareholder of Parent or
a holder of
Parent Common Shares.
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<PAGE>
(b) Notwithstanding any other provision of this Agreement, each
holder of shares of Company Common Stock exchanged pursuant to the
Merger who
would otherwise have been entitled to receive a fraction of a
Parent Common
Share shall receive from Parent, in lieu thereof, cash (without
interest) in an
amount equal to the product of (i) such fractional part of an
applicable Parent
Common Share multiplied by (ii) the Parent Common Share Value (as
hereinafter
defined).
Section
2.5 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends
or other distributions declared or made with respect to Parent
Common Shares
with a record date after the Effective Time shall be paid to the
holder of any
unsurrendered Certificate with respect to the Parent Common Shares
that such
holder would be entitled to receive upon surrender of such
Certificate and no
cash payment in lieu of fractional Parent Common Shares shall be
paid to any
such holder pursuant to Section 2.4(b) until such holder shall
surrender such
Certificate in accordance with Section 2.2. Subject to the effect
of applicable
Laws, following surrender of any such Certificate, there shall be
paid to such
holder of Parent Common Shares issuable in exchange therefor,
without interest,
(a) promptly after the time of such surrender, the amount of any
cash payable in
lieu of fractional Parent Common Shares to which such holder is
entitled
pursuant to Section 2.4(b) and the amount of dividends or other
distributions
with a record date after the Effective Time theretofore paid with
respect to
such whole Parent Common Shares, and (b) at the appropriate payment
date, the
amount of dividends or other distributions with a record date after
the
Effective Time but prior to such surrender and a payment date
subsequent to such
surrender payable with respect to such Parent Common Shares.
Section
2.6 NO LIABILITY. None of Parent, Merger Sub, the Company, the
Surviving Entity or the Paying Agent shall be liable to any Person
in respect of
any Merger Consideration, any dividends or distributions with
respect thereto or
any cash in lieu of fractional Parent Common Shares, in each case
delivered to a
public official pursuant to any applicable abandoned property,
escheat or
similar Law. If any Certificate shall not have been surrendered
prior to one (1)
year after the Effective Time (or immediately prior to such earlier
date on
which any Merger Consideration, any dividends or distributions
payable to the
holder of such Certificate or any cash payable in lieu of
fractional Parent
Common Shares pursuant to this Article II, would otherwise escheat
to or become
the property of any Governmental Entity (as hereinafter defined)),
any such
Merger Consideration, dividends or distributions in respect thereof
or such cash
shall, to the extent permitted by applicable Law, be delivered to
Parent, upon
demand, and any holders of Company Common Stock who have not
theretofore
complied with the provisions of this Article II shall thereafter
look only to
Parent only as general creditors thereof for satisfaction of their
claims for
the payment of such Merger Consideration (without any interest
thereon).
Section
2.7 DISSENTERS' RIGHTS. Notwithstanding any provision hereof,
shares of Company Common Stock issued and outstanding immediately
prior to the
Effective Time and held by a holder who has properly exercised and
perfected
appraisal rights, if any, under Title 3, Subtitle 2, of the MGCL
(the
"Dissenting Shares") shall not be converted into the right to
receive the Merger
Consideration, but the holders of Dissenting Shares shall be
entitled to receive
such consideration as shall be determined pursuant to Title 3,
Subtitle 2, of
the MGCL; PROVIDED, HOWEVER, that if any such holder shall have
failed to
perfect or shall effectively withdraw or lose his, her or its
right, if any, to
appraisal and payment under the MGCL, such holder's shares
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<PAGE>
of Company Common Stock shall thereupon be deemed to have been
converted as of
the Effective Time into the right to receive Merger Consideration,
and such
shares of Company Common Stock shall no longer be Dissenting
Shares. The Company
shall give Parent prompt notice of any demands for appraisal
received by the
Company, withdrawals of such demands, and any other instruments
served pursuant
to the MGCL by a holder of Dissenting Shares and received by the
Company. The
Parent shall conduct and control all negotiations and proceedings
with respect
to demands for appraisal under the MGCL. The Company shall not,
except with the
prior written consent of Parent, make any payment with respect to
any demands
for appraisal or offer to settle or settle any such demands.
Section
2.8 STOCK OPTIONS AND RESTRICTED STOCK.
(a) Effective as of the Effective Time, the Company shall (i)
terminate the Company Option Plans, and (ii) cancel at the
Effective Time each
Company Stock Option (as hereinafter defined) that is outstanding
and
unexercised as of the Effective Time. Each holder of a Company
Stock Option that
is outstanding and unexercised at the Effective Time pursuant to
any Company
Option Plan shall be entitled to receive from the Surviving Entity,
subject to
the consummation of the Merger and in exchange for cancellation of
the Company
Stock Option, an amount equal to the excess, if any, of (x) $14.00
over (y) the
per share exercise price of such Company Stock Option, multiplied
by the number
of shares subject to the Company Stock Option at the Effective Time
(the
"Company Option Consideration"). Any such payments shall be subject
to all
applicable Tax withholding requirements and shall be made as soon
as practicable
following the Effective Time. If the exercise price per share of
any such
Company Stock Option is equal to or greater than the Merger
Consideration, the
Company shall take all necessary and appropriate actions so that
such Company
Stock Option shall be canceled at the Effective Time without any
cash payment
being made in respect thereof.
(b) Immediately prior to the Effective Time, and subject to the
consummation of the Merger, the Company and Company Board (or, if
appropriate,
any committee thereof) shall cause the vesting of each share of
outstanding
restricted Company Common Stock granted under the Company Option
Plans to be
fully accelerated and the contractual restrictions thereon to
terminate. Each
share of restricted Company Common Stock will be considered an
outstanding share
of Company Common Stock for all purposes of this Agreement,
including the right
to receive the Merger Consideration.
(c) The Company shall take all corporate actions necessary to
effectuate the treatment of Company Stock Options and restricted
Company Common
Stock contemplated by this Section 2.8, and to ensure that (i) all
awards issued
under any Company Option Plans shall be settled as of the Effective
Time, and
(ii) neither any holder of Company Stock Options and restricted
Company Common
Stock nor any other participant in any Company Option Plan shall
have any right
thereunder to acquire any securities of the Company, the Surviving
Entity,
Parent, or any of their respective subsidiaries or to receive any
payment or
benefit with respect to any award previously granted under the
Company Option
Plans except as provided in this Section 2.8.
Section
2.9 SECTION 16 MATTERS.
(a) Each individual party to this Agreement, including the
Company,
Parent, Merger Sub, and Surviving Entity shall take such steps, if
any,
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<PAGE>
as may be required to provide that, with respect to each Section 16
Affiliate
(as defined below) any dispositions of Company equity securities
(including
Company Stock Options and other derivative securities) or other
acquisitions of
Parent equity securities (including derivative securities) in
connection with
this Agreement, shall be exempt under Rule 16b-3 promulgated under
the Exchange
Act (as hereinafter defined), in accordance with the terms and
conditions set
forth in that certain No-Action Letter, dated January 12, 1999 (CCH
Fed. Sec. L.
Rep. 77.515). For purposes of this Agreement, "Section 16
Affiliate" shall mean
each individual who (i) immediately prior to the Effective Time is
a director or
officer of the Company, or (ii) at the Effective Time will become a
director or
officer of Parent or Surviving Entity.
Section
2.10 PARENT STOCK ELECTION.
(a) Parent shall be entitled, by delivery to the Company of
written
notice at any time prior to the date which is 15 days prior to the
date of the
Company Stockholders' Meeting (as hereinafter defined) (the date
such notice is
delivered, "Announcement Date"), to elect (the "Stock Election") to
include
Stock Consideration as a part of the Merger Consideration and to
reduce the
amount of the Cash Consideration, all in accordance with and as set
forth in the
following and the definitions of the various terms set forth below.
In the event
the Stock Election is made, and not revoked in accordance with
paragraph (c)
below, the following adjustments shall be made:
(i) the Cash Consideration shall be decreased by an amount
specified by Parent pursuant to the notice of Stock Election (the
"Stock
Election Amount"); PROVIDED, HOWEVER, that in no event shall the
Stock Election
Amount exceed $4.00 per share; and
(ii) the Stock
Consideration shall be a number of Parent
Common Shares equal to the Stock Election Amount divided by the
Parent Common
Share Value.
(b) As soon as
practicable after the Announcement Date, Parent and
the Company shall issue a joint press release announcing Parent's
election,
subject to its right of revocation, to include Stock Consideration
in the Merger
Consideration, the Cash Consideration and the Stock Election
Amount, and as soon
as the Parent Common Share Value is determinable, Parent and the
Company shall
issue a joint press release announcing the amount of the Stock
Consideration.
(c) Parent may
revoke the Stock Election at any time, provided
that no such revocation may be made if such revocation would make
it reasonably
necessary, based upon the advice of the Company's outside counsel,
to delay the
Company Stockholders' Meeting for more than 10 Business Days.
Following any such
revocation, the Cash Consideration shall again be as defined in
Section 2.1(a)
and the Merger Consideration shall not include any Stock
Consideration. As soon
as practicable after any such revocation, Parent and the Company
shall issue a
joint press release announcing such revocation.
Section
2.11 ADJUSTMENT TO STOCK CONSIDERATION. In the event that,
after
the date on which the Parent Common Share Value is determined and
prior to the
Effective Time, the Parent Common Shares or Company Common Stock,
as the case
may be, issued and outstanding shall, through a reorganization,
recapitalization, reclassification, stock dividend,
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<PAGE>
stock split, reverse stock split or other similar change in the
capitalization
of Parent or the Company, as the case may be, increase or decrease
in number or
be changed into or exchanged for a different kind or number of
securities, then
an appropriate and proportionate adjustment shall be made to the
Stock
Consideration, if any.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as
set forth in the disclosure schedule delivered by the Company
to
Parent prior to the execution of this Agreement (the "Company
Disclosure
Schedule"), the Company hereby represents and warrants to each of
Parent and
Merger Sub as follows (provided, that for purposes of Article III
only, each
Company Non-Subsidiary Entity shall be deemed to be a subsidiary of
the Company,
except that each representation and warranty as to such Company
Non-Subsidiary
Entity shall only be made to the Knowledge of the Company):
Section
3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company and each of its subsidiaries is a corporation
or
legal entity duly organized, validly existing and in good standing
under the
Laws of the jurisdiction of its incorporation or organization
(except where the
failure to be in good standing would not have or would not
reasonably be likely
to have, individually or in the aggregate, a Material Adverse
Effect (as
hereinafter defined) on the Company) and has all requisite
corporate,
partnership, limited liability company or similar power and
authority to own,
lease and operate its properties and to carry on its businesses as
now conducted
and proposed by the Company to be conducted.
(b) The articles of incorporation of the Company are in effect,
and
no dissolution, revocation or forfeiture proceedings regarding the
Company or
any of the Company's subsidiaries have been commenced.
(c) SECTION 3.1(c) OF THE COMPANY DISCLOSURE SCHEDULE sets
forth:
(i) each subsidiary of the Company;
(ii) the legal form of each of the Company's subsidiaries,
including the state or country of formation;
(iii) the identity and ownership interest of each of the
Company's subsidiaries that is held by the Company or its
subsidiaries, and with
respect to third party owners, the identity and ownership interest
as set forth
in the operative documents, in each case, including but not limited
to the
amount of securities of such subsidiary owned by such owner;
and
(iv) each jurisdiction in which each of the Company's
subsidiaries is qualified or licensed to do business.
Except as
listed in SECTION 3.1(c) OF THE COMPANY DISCLOSURE SCHEDULE,
the
Company does not own, directly or indirectly, beneficially or of
record, any
shares of stock or other
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<PAGE>
security of any other entity or any other investment in any other
entity, which
would be a subsidiary of the Company.
(d) The Company and each of its subsidiaries is duly qualified
or
licensed and in good standing to do business in each jurisdiction
in which the
property owned, leased or operated by it or the nature of the
business conducted
by it makes such qualification or licensing necessary, except where
the failure
to be so duly qualified or licensed and in good standing would not
have,
individually or in the aggregate, a Material Adverse Effect on the
Company.
(e) Except as set forth in SECTION 3.1(e) OF THE COMPANY
DISCLOSURE
SCHEDULE, all the outstanding shares of capital stock or other
voting securities
of each of the Company's subsidiaries that is a corporation (A)
have been
validly issued and are fully paid and nonassessable, (B) are owned
by the
Company or by one of the Company's subsidiaries, and (C) are owned,
directly or
indirectly, free and clear of any Lien (as hereinafter defined)
(including any
restriction on the right to vote or sell the same, except as may be
provided as
a matter of Law), and all equity interests in each of the Company's
subsidiaries
that is a partnership, joint venture, limited liability company or
trust which
are owned by the Company, by one of the Company's subsidiaries or
by the Company
and one of the Company's subsidiaries are owned free and clear of
any Lien
(including any restriction on the right to vote or sell the same,
except as may
be provided as a matter of Law). For purposes of this Agreement,
"Lien" means,
with respect to any asset (including any security), any mortgage,
claim, lien,
pledge, charge, security interest or encumbrance of any kind in
respect of such
asset.
(f) The Company has made available to Parent correct and
complete
copies of (i) the articles of incorporation and bylaws of the
Company and the
articles of incorporation, articles of organization, bylaws,
partnership
agreements, joint ventures and operating agreements or similar
organizational
documents of each of the Company's subsidiaries, each as currently
in effect
(collectively, the "Organizational Documents"), and (ii) minute
books of the
Company for which minute books are maintained for the period since
January 1,
2003. All Organizational Documents are in full force and effect.
The minute
books referred to in clause (ii) of this Section 3.1(f) accurately
reflect in
all material respects all action of the stockholders, the Company
Board and any
committees of the Company Board taken during the period referred to
in such
clause.
Section
3.2 CAPITALIZATION.
(a) As of the date of this Agreement, the authorized stock of
the
Company consists of: (i) 500,000,000 shares of Company Common
Stock, $0.01 par
value, of which 263,984,740 shares are issued and outstanding,
which includes
9,203 shares of restricted Company Common Stock issued and
outstanding pursuant
to the Company Option Plans, and (ii) 10,000,000 shares of Company
Preferred
Stock, $0.01 par value (the "Company Preferred Stock"), of which
none have been
classified by the Company Board and of which none are issued and
outstanding.
All of the issued and outstanding shares of Company Common Stock
have been
validly issued, and are duly authorized, fully paid, non-assessable
and free of
preemptive rights. As of the date of this Agreement, (i) 46,848
shares of
Company Common Stock are reserved for issuance and issuable upon or
otherwise
deliverable in connection with the exercise of outstanding options
to purchase
shares of Company Common Stock ("Company
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<PAGE>
Stock Options"), (ii) 1,567 shares of Company Common Stock are
reserved for
issuance or otherwise deliverable pursuant to outstanding elections
to purchase
Company Common Stock under the Distribution Reinvestment Plan or
the Employee
Stock Purchase Plan, and (iii) 5,977,242 shares of Company Common
Stock are
reserved for issuance and issuable upon or otherwise deliverable in
connection
with the exercise of outstanding warrants to purchase shares of
Company Common
Stock (the "Company Warrants"), and there are no shares of Company
Common Stock
that are reserved or set aside for issuance other than with respect
to the
foregoing. Since June 30, 2006, no shares of Company Common Stock
have been
issued or reserved for issuance or have become outstanding except
as set forth
in SECTION 3.2(a) OF THE COMPANY DISCLOSURE SCHEDULE or as a result
of issuance
of Company Common Stock pursuant to the Distribution Reinvestment
Plan or
exercise of Company Stock Options or Company Warrants already in
existence on
such date. Except as set forth above or in SECTION 3.2(a) OF THE
COMPANY
DISCLOSURE SCHEDULE, there are no outstanding (i) shares of stock
or other
voting securities of the Company; (ii) securities of the Company
convertible
into or exchangeable for shares of stock or voting securities of
the Company;
(iii) options or other rights to acquire from the Company, and no
obligations of
the Company to issue, any stock, voting securities or securities
convertible
into or exchangeable for stock or voting securities of the Company;
and (iv)
equity equivalents, interests in the ownership or earnings of the
Company or
other similar rights ((i) through (iv) collectively, "Company
Securities").
Other than pursuant to the Share Repurchase Program, there are no
outstanding
obligations of the Company to repurchase, redeem or otherwise
acquire any
Company Securities. SECTION 3.2(a) OF THE COMPANY DISCLOSURE
SCHEDULE sets forth
for each holder of Company Stock Options and Company Warrants the
following
information: name of holder, exercise price, date of grant, and
number of shares
of Company Common Stock subject to issuance thereunder.
(b) Except as set forth in SECTION 3.2(b) OF THE COMPANY
DISCLOSURE
SCHEDULE, there are (i) no securities of the Company's subsidiaries
convertible
into or exchangeable for shares of stock or voting securities of
the Company's
subsidiaries; (ii) no options or other rights to acquire from the
Company's
subsidiaries, and no other contract, understanding, arrangement or
obligation
(whether or not contingent) providing for the issuance or sale,
directly or
indirectly of, any stock or other ownership interests in, or any
other
securities of, any subsidiary of the Company; (iii) no obligations
of the
Company's subsidiaries to issue any stock, voting securities or
securities
convertible into or exchangeable for stock or voting securities of
the Company's
subsidiaries; and (iv) no equity equivalents, interests in the
ownership or
earnings of the Company's subsidiaries or other similar rights.
There are no
outstanding obligations of the Company or its subsidiaries to
repurchase, redeem
or otherwise acquire any outstanding shares of stock or other
ownership
interests in any subsidiary of the Company. Except as set forth in
SECTION
3.2(b) OF THE COMPANY DISCLOSURE SCHEDULE, there are no stockholder
agreements,
voting trusts or other agreements or understandings to which the
Company or any
of its subsidiaries is bound relating to the voting of any shares
of stock of
the Company or any subsidiary of the Company.
(c) All dividends or distributions on shares of Company Common
Stock
and Company Preferred Stock which have been authorized or declared
prior to the
date of this Agreement have been paid in full.
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<PAGE>
(d) Except as set forth in SECTION 3.2(d) OF THE COMPANY
DISCLOSURE
SCHEDULE, neither the Company nor any of the Company's subsidiaries
owns
directly or indirectly any interest or investment (whether equity
or debt, other
than intercompany loans) in any corporation, partnership, limited
liability
company, joint venture, business trust or entity (other than
investments in
short-term investment securities). With respect to such interests
and
investments, the Company and each of the Company's subsidiaries
owns such
interests and investments free and clear of all Liens.
Section
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT; STOCKHOLDER APPROVAL.
(a) The Company has all necessary corporate power and authority
to
execute and deliver this Agreement and to consummate the Merger and
the other
transactions contemplated hereby. No other corporate proceedings on
the part of
the Company or any of its subsidiaries are necessary to authorize
this Agreement
or to consummate the Merger and the other transactions contemplated
hereby
(other than, with respect to the Merger and this Agreement, to the
extent
required by Law (as hereinafter defined), and the Company Requisite
Vote (as
hereinafter defined)). This Agreement has been duly and validly
executed and
delivered by the Company and constitutes a valid, legal and binding
agreement of
the Company, enforceable against the Company in accordance with its
terms,
except as enforceability may be limited by the Bankruptcy
Exceptions.
(b) The Sub Committee, by unanimous vote, duly and validly
determined that the Merger is advisable to the stockholders of the
Company,
authorized the execution and delivery of this Agreement and
approved the
consummation of the Merger and the other transactions contemplated
hereby, and
resolved to recommend that the Company Board approve and declare
the
advisability of Merger. The Company Board has, by unanimous vote,
duly and
validly determined that the Merger is advisable to the stockholders
of the
Company, authorized the execution and delivery of this Agreement
and approved
the consummation of the Merger and the other transactions
contemplated hereby,
and taken all corporate actions required to be taken by the Company
Board for
the consummation of the Merger and the other transactions
contemplated hereby.
No other corporate proceedings on the part of the Company or any of
its
subsidiaries are necessary to authorize this Agreement, the
performance by the
Company of its obligations hereunder or the consummation of the
Merger and the
other transactions contemplated hereby (other than, with respect to
the Merger
and this Agreement, the Company Requisite Vote). The Company Board
has directed
that this Agreement and the Merger be submitted to the stockholders
of the
Company for their approval to the extent required by Law. The
affirmative
approval of the Merger by the holders of shares of Company Common
Stock
representing at least two-thirds of all votes entitled to be cast
by the holders
of all outstanding shares of Company Common Stock as of the record
date for the
Company Stockholder' Meeting (the "Company Requisite Vote") is the
only vote of
the holders of any class or series of stock of the Company
necessary to adopt
this Agreement and approve the Merger.
Section
3.4 REPORTS; FINANCIAL STATEMENTS. Except as set forth in
SECTION
3.4 OF THE COMPANY DISCLOSURE SCHEDULE, the Company has timely
filed all
required forms, reports and documents with the SEC since January 1,
2004, each
of which has complied in all material respects with all applicable
requirements
of the Securities Act of 1933, as amended (the
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<PAGE>
"Securities Act"), and the Securities Exchange Act of 1934, as
amended (the
"Exchange Act"), and, in each case, the rules and regulations
promulgated
thereunder applicable to such forms, reports and documents, each as
in effect on
the dates such forms, reports and documents were filed, except to
the extent
that such forms, reports and documents have been modified, amended
or superseded
by later forms, reports and documents filed prior to the date of
this Agreement.
The Company has made available to Parent, in the form filed with
the SEC
(including any amendments thereto), (i) its Annual Reports on Form
10-K for each
of the fiscal years ended December 31, 2003, 2004 and 2005,
respectively, (ii)
all definitive proxy statements relating to the Company's meetings
of
stockholders (whether annual or special) held since January 1,
2004, and (iii)
all other reports or registration statements filed by the Company
with the SEC
since January 1, 2004 (collectively, the "Company SEC Reports").
The Company has
made available to the Parent copies of all SEC comment letters
addressed to the
Company since January 1, 2004. Except as set forth in SECTION 3.4
OF THE COMPANY
DISCLOSURE SCHEDULE, none of such forms, reports or documents,
including any
financial statements or schedules included or incorporated by
reference therein,
contained, when filed, any untrue statement of a material fact or
omitted to
state a material fact required to be stated or incorporated by
reference therein
or necessary in order to make the statements therein, in light of
the
circumstances under which they were made, not misleading, except to
the extent
that such statements have been modified, amended or superseded by
later Company
SEC Reports filed prior to the date of this Agreement. The Company
has complied
in all material respects with the requirements of the
Sarbanes-Oxley Act of 2002
(the "S-Ox Act"), including, without limitation, all certifications
and internal
controls required pursuant to the S-Ox Act. Except as set forth in
SECTION 3.4
OF THE COMPANY DISCLOSURE SCHEDULE, the consolidated financial
statements of the
Company included in the Company SEC Reports (except to the extent
such
statements have been amended or modified by later Company SEC
Reports filed
prior to the date of this Agreement) filed prior to the date of
this Agreement
complied as to form in all material respects with applicable
accounting
standards and the published rules and regulations of the SEC with
respect
thereto and fairly present in all material respects, in conformity
with
generally accepted accounting principles ("GAAP") (except, in the
case of
interim financial statements, as permitted by the applicable rules
and
regulations of the SEC) applied on a consistent basis during the
periods
involved (except as may be indicated in the notes thereto), the
consolidated
financial position of the Company and its consolidated subsidiaries
as of the
dates thereof and the consolidated results of their operations and
cash flows
for the periods then ended (subject, in the case of the unaudited
interim
financial statements, to normal year-end adjustments). There are no
outstanding
or unresolved comments in comment letters received from the SEC
staff with
respect to any Company SEC Reports. The Company maintains a system
of internal
control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) of
the Exchange Act) sufficient to provide reasonable assurance (i)
that the
Company maintains records that in reasonable detail accurately and
fairly
reflect its transactions and dispositions of assets, (ii) that
transactions are
recorded as necessary to permit preparation of financial statements
in
accordance with GAAP, (iii) that receipts and expenditures are
executed only in
accordance with authorizations of management and the Company Board
and (iv)
regarding prevention of timely detection of the unauthorized
acquisition, use or
disposition of the Company's assets that could have a material
effect on the
Company's consolidated financial statements. Except as disclosed in
the Company
SEC Reports, the Company has not identified as of the date hereof
any material
weaknesses in the design or operation of the Company's internal
control over
financial reporting. There are no SEC inquiries or
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<PAGE>
investigations, other governmental inquiries or investigations or
internal
investigations pending or, to the Knowledge of the Company,
threatened in each
case regarding any accounting practices of the Company or any
malfeasance by any
director or executive officer of the Company.
Section
3.5 NO UNDISCLOSED LIABILITIES. Except as set forth in SECTION
3.5
OF THE COMPANY DISCLOSURE SCHEDULE or the Company SEC Reports filed
prior to the
date of this Agreement, none of the Company or its subsidiaries had
any
liabilities or obligations of any nature (whether accrued,
absolute, contingent
or otherwise) required by GAAP to be set forth in a consolidated
balance sheet
of the Company or in the notes thereto, except for any such
liabilities or
obligations which would not have or would not reasonably be likely
to have,
individually or in the aggregate, a Material Adverse Effect on the
Company,
after taking into account any assets acquired or services provided
in connection
with the incurrence of such liabilities or obligations.
Section
3.6 ABSENCE OF CHANGES. Except as disclosed in SECTION 3.6 OF
THE
COMPANY DISCLOSURE SCHEDULE or the Company SEC Reports filed prior
to the date
of this Agreement, since the date of the most recent audited
financial
statements included in the Company SEC Reports filed prior to the
date of this
Agreement (the "Company Financial Statement Date"), the Company and
its
subsidiaries have conducted their business only in the usual,
regular and
ordinary course consistent with past practice, and (a) there have
not been any
events, occurrences, developments or state of circumstances or
facts that have
had, individually or in the aggregate, a Material Adverse Effect on
the Company,
nor has there been any event, occurrence or development that would
have or would
reasonably be likely to have, individually or in the aggregate, a
Material
Adverse Effect on the Company, (b) except for regular monthly
distributions (in
the case of the Company) not in excess of $0.069167 per share of
Company Common
Stock with customary record and payment dates, there has not been
any
declaration, setting aside or payment of any dividend or other
distribution
(whether in cash, stock or property) with respect to any shares of
Company
Stock, (c) there has not been any split, combination or
reclassification of any
shares of Company Stock or any capital stock of any subsidiary or
any issuance
or the authorization of any issuance of any other securities in
respect of, in
lieu of or in substitution for, or giving the right to acquire by
exchange or
exercise, shares of its beneficial interest or any issuance of an
ownership
interest in, any of the Company's subsidiaries, except as
contemplated by this
Agreement, (d) there has not been any damage, destruction or loss,
whether or
not covered by insurance, that has had, would have or would
reasonably be likely
to have, individually or in the aggregate, a Material Adverse
Effect on the
Company, (e) there has not been any change made prior to the date
of this
Agreement in accounting principles or material accounting practices
by the
Company or any of the Company's subsidiaries, except insofar as may
have been
disclosed in the Company SEC Reports filed prior to the date of
this Agreement
or required by a change in GAAP, or (f) there has not been any
amendment of any
employment, consulting, severance, retention or any other agreement
between the
Company or any subsidiary and any officer of the Company or any
subsidiary.
Section
3.7 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings,
permits, authorizations, consents and approvals as may be required
under, and
other applicable requirements of, the Securities Act, the Exchange
Act, state
securities or blue sky Laws, the Hart-Scott-Rodino Antitrust
Improvements Act of
1976, as amended (the "HSR Act") or any
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other Antitrust Law (as hereinafter defined), the filing and
recordation of the
Articles of Merger as required by the MGCL and the DLLC Act and as
otherwise set
forth in SECTION 3.7 TO THE COMPANY DISCLOSURE Schedule, no filing
with or
notice to, and no permit, authorization, consent or approval of,
(i) any court
or tribunal or administrative, governmental or regulatory body,
agency or
authority (a "Governmental Entity") or (ii) any other third party,
is necessary
for the execution and delivery by the Company of this Agreement or
the
consummation by the Company of the Merger or any of the other
transactions
contemplated hereby, except where the failure to obtain such
permits,
authorizations, consents or approvals or to make such filings or
give such
notice would not have or would not reasonably be likely to have,
individually or
in the aggregate, a Material Adverse Effect on the Company. Except
as set forth
in SECTION 3.7 OF THE COMPANY DISCLOSURE SCHEDULE, neither the
execution,
delivery or performance of this Agreement by the Company nor the
consummation by
the Company of the Merger or any of the other transactions
contemplated hereby
will (i) conflict with or result in any breach of any provision of
the
respective articles or bylaws (or similar organizational documents)
of the
Company or any of its subsidiaries, (ii) result in a violation or
breach of, or
constitute (with or without due notice or lapse of time or both) a
default (or
give rise to any right of termination, amendment, cancellation or
acceleration
or Lien or result in the reduction or loss of any material benefit)
under, any
of the terms, conditions or provisions of any loan, note, bond,
mortgage, credit
agreement, reciprocal easement agreement, permit, concession,
franchise,
indenture, lease, license, contract, agreement or other instrument
or obligation
to which the Company or any of its subsidiaries is a party or by
which any of
them or any of their respective properties or assets may be bound
or any Company
Permit (as hereinafter defined), or (iii) violate any foreign or
domestic law,
Order, ordinance, award, stipulation, statute, judicial or
administrative
doctrine, rule or regulation entered by a Governmental Entity
("Law") applicable
to the Company or any of its subsidiaries or any of their
respective properties
or assets, in each case with respect to (ii) and (iii) above,
except as would
not have or would not reasonably be likely to have, individually or
in the
aggregate, a Material Adverse Effect on the Company. For purposes
of this
Agreement, "Antitrust Law" means the Sherman Act, as amended, the
Clayton Act,
as amended, the HSR Act, and the Federal Trade Commission Act, as
amended.
Section
3.8 LITIGATION. As of the date of this Agreement, except (i) as
listed in SECTION 3.8 OF THE COMPANY DISCLOSURE SCHEDULE, (ii) as
set forth in
the Company SEC Reports filed prior to the date of this Agreement,
or (iii) for
suits, claims, actions, proceedings or investigations arising from
the usual,
regular and ordinary course of operations of the Company involving
(A) eviction
or collection matters or (B) personal injury or other tort
litigation which are
covered by insurance (subject to customary deductibles) or for
which all
material costs and liabilities arising therefrom are reimbursable
pursuant to
common area maintenance or similar agreements, there is no suit,
claim, action,
proceeding or investigation pending or, to the Company's Knowledge,
threatened
in writing against the Company or any of its subsidiaries or any of
its or their
respective properties or assets that (1) involves amounts in excess
of
$1,000,000 individually or $5,000,000 in the aggregate or (2)
questions the
validity of this Agreement or any action to be taken by the Company
in
connection with the consummation of the Merger. Except as set forth
in SECTION
3.8 OF THE COMPANY DISCLOSURE SCHEDULE and other than as set forth
in the
Company SEC Reports filed prior to the date of this Agreement, none
of the
Company or its subsidiaries is subject to any outstanding
Order.
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Section
3.9 COMPLIANCE WITH APPLICABLE LAW. The Company and each of its
subsidiaries hold all permits, licenses, variances, exemptions,
Orders and
approvals of all Governmental Entities necessary for the lawful
conduct of their
respective businesses (the "Company Permits"), except for Company
Permits the
absence of which would not have or would not reasonably be likely
to have,
individually or in the aggregate, a Material Adverse Effect on the
Company. The
Company and each of its subsidiaries are in compliance with the
terms of the
Company Permits, except as would not have or would not reasonably
be likely to
have, individually or in the aggregate, a Material Adverse Effect
on the
Company. The businesses of the Company and each of its subsidiaries
are not
being conducted in violation of any Law applicable to the Company
or its
subsidiaries, except as would not have or would not reasonably be
likely to
have, individually or in the aggregate, a Material Adverse Effect
on the
Company. No investigation or review by any Governmental Entity with
respect to
the Company or its subsidiaries is pending or, to the Company's
Knowledge,
threatened in writing, nor, to the Company's Knowledge, has any
Governmental
Entity indicated an intention to conduct the same, except to the
extent any such
investigation would not have a Material Adverse Effect on the
Company.
Section
3.10 PROPERTIES.
(a) SECTION 3.10(a) OF THE COMPANY DISCLOSURE SCHEDULE sets forth
a
correct and complete list and location of (i) all operating real
property owned
or leased by the Company and its subsidiaries (including its
headquarters and
leases of office space) as of the date of this Agreement (the
"Operating
Properties"), (ii) all real property currently under development,
expansion,
renovation or rehabilitation owned or leased by the Company and its
subsidiaries
as of the date of this Agreement (the "Development Properties"),
and (iii) all
parcels of undeveloped non-income producing land owned or leased by
the Company
and its subsidiaries (the "Land") (collectively, the Operating
Properties, the
Development Properties and the Land, together with all buildings,
structures and
other improvements and fixtures located on or under such real
property and all
easements, rights and other appurtenances to such real property,
are referred to
herein as the "Company Properties"). Each Company Property is owned
or leased by
the Company or a subsidiary of the Company as indicated in SECTION
3.10(a) OF
THE COMPANY DISCLOSURE SCHEDULE. The Company and its subsidiaries
own fee simple
title to or, if so indicated in SECTION 3.10(a) OF THE COMPANY
DISCLOSURE
SCHEDULE, lease each of the Company Properties, in each case free
and clear of
any Liens, title defects, contractual restrictions, covenants or
reservations of
interests in title (collectively, "Property Restrictions"), except
for (i)
Permitted Liens, (ii) Property Restrictions imposed or promulgated
by Law or by
any Governmental Entity which are customary and typical for similar
properties
or (iii) Property Restrictions which do not, individually or in the
aggregate,
interfere materially with the current use of such property. None of
the matters
described in clauses (i), (ii) and (iii) above would have or would
reasonably be
likely to have, individually or in the aggregate, a Material
Adverse Effect on
the Company. For purposes of this Agreement, "Permitted Liens"
means (i) Liens
for Taxes not yet due or delinquent or as to which there is a good
faith dispute
and for which there are adequate reserves on the financial
statements of the
Company (if such reserves are required pursuant to GAAP), (ii) with
respect to
real property, any Lien, encumbrance or other title defect
disclosed on the
Company Title Insurance Policies (as hereinafter defined) or on any
existing
lender's title insurance policy made available to Purchaser
(whether material or
immaterial), Liens and obligations arising under the Company
Material Contracts,
the Company Space Leases
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<PAGE>
(as hereinafter defined) and any other Lien which does not,
individually or in
the aggregate, interfere materially with the current use of such
property
(assuming its continued use in the manner in which it is currently
used) and
(iii) inchoate materialmen's, mechanics', carriers', workmen's and
repairmen's
liens arising in the usual, regular and ordinary course and not
past due and
payable or the payment of which is being contested in good faith by
appropriate
proceedings and for which there are adequate reserves on the
financial
statements of the Company (if such reserves are required pursuant
to GAAP).
(b) The Company and each of its subsidiaries have good and
sufficient title to all the material personal and non-real
properties and assets
reflected in their books and records as being owned by them
(including those
reflected in the consolidated balance sheet of the Company and its
subsidiaries
as of June 30, 2006, except as since sold or otherwise disposed of
in the usual,
regular and ordinary course of business), free and clear of all
Liens, except
for Permitted Liens.
(c) Except as provided for in SECTION 3.10(c) OF THE COMPANY
DISCLOSURE SCHEDULE, neither the Company nor any of its
subsidiaries has
received any written notice to the effect that any condemnation or
rezoning
proceedings are pending or threatened with respect to any of the
Operating
Properties, in any case which would have a material adverse effect
on such
Operating Property or Development Properties.
(d) Except as set forth in SECTION 3.10(d) OF THE COMPANY
DISCLOSURE
SCHEDULE, neither the Company nor any of its subsidiaries, on the
one hand, nor,
to the Knowledge of the Company, any other party, on the other
hand, is in
monetary default under any Company Space Lease, except for defaults
that would
not have or would not reasonably be likely to have, individually or
in the
aggregate, a Material Adverse Effect on the Company. Except as set
forth in
SECTION 3.10(d) OF THE COMPANY DISCLOSURE SCHEDULE, no defaults by
the Company
or its Subsidiaries have been alleged in writing by the lessees
thereunder that
have not been cured in all material respects and, to the Company's
Knowledge,
neither the Company nor any of its subsidiaries is in default under
any Company
Space Lease except for defaults that would not have or would not
reasonably be
likely to have, individually or in the aggregate, a Material
Adverse Effect on
the Company.
(e) Except as provided for in SECTION 3.10(e) OF THE COMPANY
DISCLOSURE SCHEDULE, all work required to be performed, payments
required to be
made and actions required to be taken prior to the date hereof
pursuant to any
agreement entered into with a Governmental Entity in connection
with a site
approval, zoning reclassification or other similar action relating
to any
Operating Properties (e.g., local improvement district, road
improvement
district) have been performed, paid or taken, as the case may be,
other than
those where the failure would not have or would not reasonably be
likely to
have, individually or in the aggregate, a Material Adverse Effect
on the
Company.
(f) Except as listed in SECTION 3.10(f) OF THE COMPANY
DISCLOSURE
SCHEDULE or which would not have, or would not reasonably be likely
to have,
individually or in the aggregate, a Material Adverse Effect on the
Company, (i)
the Company and all of its subsidiaries have performed all
obligations required
to be performed by it to date under each ground lease pursuant to
which the
Company or any of its subsidiaries is a lessee (individually,
"Ground
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<PAGE>
Lease" and collectively, "Ground Leases") and (ii) neither the
Company nor any
of its subsidiaries, nor to the Knowledge of the Company, any other
party, is in
default under any Ground Lease (and to the Company's Knowledge, no
event has
occurred which, with due notice or lapse of time or both, would
constitute such
a default).
(g) Except as set forth in SECTION 3.10(g) OF THE COMPANY
DISCLOSURE
SCHEDULE, as of the date hereof, neither the Company nor any of its
subsidiaries
has delivered written notice to any tenant under any Company Space
Lease,
alleging that such tenant is in default thereunder, other than with
respect to
defaults that have been cured or waived or which would not,
individually or in
the aggregate, reasonably be likely to have a Material Adverse
Effect on the
Company.
(h) Except for those contracts or agreements set forth in
SECTION
3.10(h) OF THE COMPANY DISCLOSURE SCHEDULE, neither the Company nor
any of its
subsidiaries has entered into any contract or agreement
(collectively, the
"Participation Agreements") with any third party or any employee,
consultant,
Affiliate (as hereinafter defined) or other person (the
"Participation Party")
which provides for a right of such Participation Party to
participate, invest,
join, partner, have any interest in whatsoever (whether
characterized as a
contingent fee, profits interest, equity interest or otherwise) or
have the
right to any of the foregoing in any proposed or anticipated
investment
opportunity, joint venture, partnership or any other current or
future
transaction or property in which the Company or any subsidiary has
or will have
an interest, including but not limited to those transactions or
properties
identified, sourced, produced or developed by such Participation
Party (a
"Participation Interest"). SECTION 3.10(h) OF THE COMPANY
DISCLOSURE SCHEDULE
sets forth the only transactions or Company Properties for which
any
Participation Party currently has a Participation Interest pursuant
to such
Participation Agreements.
(i) There are no agreements, written or oral, between the Company
or
any of its subsidiaries and any other Person relating to the use or
occupancy of
any Company Property by a Person other than the Company or any of
its
subsidiaries, other than the Company Space Leases and reciprocal
easement
agreements.
(j) Except as would not, individually or in the aggregate,
reasonably be likely to have a Material Adverse Effect on the
Company, all
properties currently under development or construction by the
Company or any
subsidiary and all properties currently proposed for acquisition,
development or
commencement of construction prior to the Effective Time by the
Company or any
subsidiary are reflected in the Company's capital budget ("2006
Budget"),
delivered to Parent prior to the date hereof.
Section
3.11 EMPLOYEE PLANS.
(a) SECTION 3.11(a) OF THE COMPANY DISCLOSURE SCHEDULE sets forth
a
list of all "employee benefit plans," as defined in Section 3(3) of
the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and
all other
employee benefit plans or other benefit arrangements including
bonus plans,
executive compensation, consulting or other compensation
agreements, change in
control agreements, incentive, equity or equity-based compensation,
or deferred
compensation arrangements, stock purchase, severance pay, sick
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<PAGE>
leave, vacation pay, salary continuation for disability,
hospitalization,
medical insurance, life insurance, scholarship programs, directors'
benefit,
bonus or other incentive compensation, which the Company or any of
its
subsidiaries or any trade or business (whether or not incorporated)
which is or
has ever been under common control, or which is or has ever been
treated as a
single employer, with the Company or any subsidiary under Section
414(b), (c),
(m) or (o) of the Code ("Company ERISA Affiliate") sponsors,
maintains,
participates in, contributes to or has any obligation to contribute
to (each a
"Company Employee Benefit Plan" and collectively, the "Company
Employee Benefit
Plans") on behalf of its officers, directors, independent
contractors or
employees, or former directors, independent contractors or
employees. Except as
disclosed in SECTION 3.11(a) OF THE COMPANY DISCLOSURE SCHEDULE,
none of the
Company Employee Benefit Plans is subject to Title IV of ERISA, or
is or has
been subject to Sections 4063 or 4064 of ERISA, nor has the Company
or any
Company ERISA Affiliate ever been obligated to contribute to or
ever
participated in a multiemployer plan, as defined in Section 3(37)
of ERISA (a
"Multiemployer Plan"). Neither the Company nor any Company ERISA
Affiliate has
incurred any present or contingent liability under Title IV of
ERISA, nor does
any condition exist which could reasonably be likely to result in
any such
liability. No Company Employee Benefit Plan is a voluntary
employees'
beneficiary association, as defined by Code Section 501(c)(9).
(b) Correct and complete copies of the following documents,
with
respect to each of the Company Employee Benefit Plans have been
made available
to Parent by the Company: (i) any plans and related trust
documents, group
annuity contracts, contracts for insurance, and amendments thereto;
(ii) the
three most recent Forms 5500 and schedules thereto, if applicable
that have been
filed by the Company or the Company ERISA Affiliates; (iii) the
most recent
Internal Revenue Service ("IRS") determination letter, if
applicable; (iv) the
three most recent financial statements and actuarial valuations, if
applicable;
(v) the current summary plan descriptions and summaries of any
material
modifications thereto, if any, (vi) all material correspondence
with the IRS or
DOL concerning the Company with respect to the Company Employee
Benefit Plans.
(c) Except as disclosed in SECTION 3.11(c) OF THE COMPANY
DISCLOSURE
SCHEDULE, (i) the Company and the Company ERISA Affiliates have
performed all
material obligations required to be performed by them under any
Company Employee
Benefit Plan; (ii) the Company Employee Benefit Plans have been
administered in
material compliance with their terms and the requirements of ERISA,
the Code and
other applicable Laws; (iii) all contributions (including all
employer
contributions and employee salary reduction contributions) required
to have been
made under any of the Company Employee Benefit Plans to any funds
or trusts
established thereunder, or in connection therewith, have been made
by the due
date thereof, as prescribed by ERISA or the Code, and all
contributions for any
period ending on or before the Effective Time which are not yet due
will have
been paid or accrued prior to the Effective Time and are properly
disclosed in
the footnotes in accordance with GAAP, in the financial statements
of the
Company; (iv) there are no material actions, suits, arbitrations or
claims
(other than routine claims for benefits) filed, or to the Company's
Knowledge,
threatened with respect to any Company Employee Benefit Plan; (v)
with respect
to the Company Employee Plans, individually and in the aggregate,
no event has
occurred, and to the Knowledge (as hereinafter defined) of the
Company, there
exists no condition or set of circumstances in connection with
which the Company
could be subject to any liability (other than liability for the
payment of
benefits
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<PAGE>
accrued but not yet paid as of the Effective Time) that,
individually or in the
aggregate, would reasonably be likely to have a Material Adverse
Effect on the
Company under ERISA, the Code or any other applicable law; (vi) the
Company and
the Company ERISA Affiliates have no material liability as a result
of any
"prohibited transaction" (as defined in Section 406 of ERISA and
Section 4975 of
the Code), for any excise Tax or civil penalty or otherwise; and
(vii) to the
Company's Knowledge, there have been no breaches of fiduciary
obligations under
Title I of ERISA with respect to any Company Employee Benefit
Plan.
(d) Each of the Company Employee Benefit Plans which is intended
to
be "qualified" within the meaning of Section 401(a) of the Code has
received a
determination letter from the IRS to the effect that such plan is
"qualified"
and that the trusts maintained pursuant thereto are exempt from
U.S. federal
income taxation under Section 501 of the Code. The Company knows of
no fact
which would adversely affect the qualified status of any such
Company Employee
Benefit Plan or the tax exemption of any trust maintained pursuant
thereto.
(e) Except as set forth in SECTION 3.11(e) OF THE COMPANY
DISCLOSURE
SCHEDULE, none of the Employee Benefit Plans provide benefits,
including death
or medical benefits (whether or not insured), with respect to
current or former
employees after retirement or other termination of service other
than (i) death
benefits or retirement benefits under any "employee pension plan,"
as that term
is defined in Section 3(2) of ERISA; (ii) deferred compensation
benefits accrued
as liabilities on the books of the Company or an ERISA Affiliate;
(iii)
benefits, the full cost of which is borne by the current or former
employee (or
his beneficiary); or (iv) for continuing post-employment health,
medical, life
insurance coverage, or other welfare benefits for any participant
or any
beneficiary of a participant except as may be required under the
Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA").
(f) Except as set forth in SECTION 3.11(f) OF THE COMPANY
DISCLOSURE
SCHEDULE, no stock or other security issued by the Company forms or
has formed a
material part of the assets of any Company Employee Benefit
Plan.
(g) Except as specifically identified and quantified in SECTION
3.11(g) of THE COMPANY DISCLOSURE SCHEDULE, neither the execution
and delivery
of this Agreement nor the consummation of the Merger will (i)
result in any
material payment becoming due, or materially increase the amount of
compensation
due, to any current or former officer, director, independent
contractor, or
employee of the Company or any of its subsidiaries; (ii) materially
increase any
benefits otherwise payable under any Company Employee Benefit Plan
to such
individuals set forth in Section 3.11(g)(i); (iii) result in any
limitation on
the right of the Company or any of its Subsidiaries to amend,
merge, terminate
or receive a reversion of assets from any Company Employee Plan or
a related
trust; (iv) result in the acceleration of the time of payment or
vesting of any
such benefits; or (v) result in any payment that will not be
deductible for U.S.
federal Tax purposes under Section 280G or Section 162(m) of the
Code.
(h) Except as identified in SECTION 3.11(h) OF THE COMPANY
DISCLOSURE SCHEDULE, no "leased employee" as that term is defined
in Section
414(n) of the Code, performs services for the Company. No leased
employee is
eligible to participate in any Company Employee Benefit Plan at the
exclusion of
any such person who does not cause any such plan to
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<PAGE>
lose qualification under Section 401(a) of the Code, nor does it
violate the
terms of any Company Employee Benefit Plan.
(i) With respect to the Company Employee Plans, individually and
in
the aggregate, there are no funded benefit obligations for which
contributions
have not been made or properly accrued and there are no unfunded
benefit
obligations which have not been accrued or otherwise properly
disclosed in the
footnotes in accordance with GAAP, in the financial statements of
the Company,
which obligations would not, individually or in the aggregate,
reasonably be
likely to have a Material Adverse Effect on the Company.
(j) The aggregate amount of (i) severance payable under any and
all
Company Employee Plans, including but not limited to severance
programs,
employment agreements, and change of control agreements or programs
to all
eligible directors, officers, independent contractors, and/or
employees who were
or will be terminated and entitled to benefits under such plan as a
result of
the Merger, (ii) bonuses payable pursuant to the bonus pool
disclosed on SECTION
3.11(a) OF THE COMPANY DISCLOSURE SCHEDULE and (iii) amounts
payable pursuant to
the Senior and Executive Officer Incentive Plan, disclosed on
SECTION 3.11(A) OF
THE COMPANY DISCLOSURE SCHEDULE, as well as any other incentive
programs under
which an officer, directors, independent contractor, and/or
employee would
receive a benefit will not exceed $15,800,000.
(k) No assets of the Company Employee Plans are invested,
directly
or indirectly, in any obligation of, or security or other
instrument issued by,
the Company or any ERISA Affiliate. No assets of any of the Company
Employee
Plans are invested, directly or indirectly, in real or personal
property used by
the Company or an ERISA Affiliate. There is sufficient liquidity of
assets in
each of the funded Company Employee Plans to promptly pay for the
benefits
earned and other liabilities owed under such Plan. With respect to
each of the
Company Employee Plans, no insurance contract, annuity contract, or
other
agreement or arrangement with any financial or other organization
would impose
any penalty, discount or other reduction on account of the
withdrawal of assets
from such organization or the change in the investment of such
assets.
(l) With respect to each Company Employee Plan that is funded
wholly
or partially through an insurance policy, there will be no
liability of the
Company as of the Closing Date, under any such insurance policy or
ancillary
agreement with respect to such insurance policy in the nature of a
retroactive
rate adjustment, loss sharing arrangement or other actual or
contingent
liability arising wholly or partially out of events occurring prior
to the
Closing Date.
Section
3.12 LABOR MATTERS.
(a) SECTION 3.12(a) OF THE COMPANY DISCLOSURE SCHEDULE sets forth
a
list of all employment, consulting, independent contractor,
temporary staffing,
labor or collective bargaining agreements to which the Company or
any subsidiary
is party (excluding personal services contracts) and, except as set
forth
therein, there are no such employment, consulting, independent
contractor,
temporary staffing, labor or collective bargaining agreements that
pertain to
the Company or any of its subsidiaries. The Company has heretofore
made
available to Parent correct and complete copies of (i) the
employment agreements
listed on SECTION 3.12(A) OF THE
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<PAGE>
COMPANY DISCLOSURE SCHEDULE and (ii) the labor or collective
bargaining
agreements listed on SECTION 3.12(a) OF THE COMPANY DISCLOSURE
SCHEDULE,
together with all material amendments, modifications, supplements
and side
letters affecting the duties, rights and obligations of any party
thereunder.
(b) Except as disclosed in SECTION 3.12(b) OF THE COMPANY
DISCLOSURE
SCHEDULE, (i) no employees of the Company or any of its
subsidiaries are
represented by any labor organization; (ii) no labor organization
or group of
employees of the Company or any of its subsidiaries has made a
written demand
for recognition or certification; (iii) to the Company's Knowledge,
there are no
representation or certification proceedings or petitions seeking
a
representation proceeding presently filed, or to the Company's
Knowledge,
threatened in writing to be brought or filed with the National
Labor Relations
Board or any other labor relations tribunal or authority; (iv) to
the Company's
Knowledge, there are no organizing activities involving the Company
or any of
its subsidiaries pending with any labor organization or group of
employees of
the Company or any of its subsidiaries, and (v) the Company is not
affected and
has not been affected in the past by any actual or threatened work
stoppage
strike or other labor disturbance.
(c) There are no unfair labor practice charges, grievances or
complaints filed or, to the Company's Knowledge, threatened in
writing by or on
behalf of any employee or group of employees of the Company or any
of its
subsidiaries.
(d) Except as set forth in SECTION 3.12(d) OF THE COMPANY
DISCLOSURE
SCHEDULE, there are no complaints, charges or claims against the
Company or any
of its subsidiaries filed or, to the Knowledge of the Company,
threatened in
writing to be brought or filed, with any federal, state or local
Governmental
Entity or arbitrator based on, arising out of, in connection with,
or otherwise
relating to the employment or termination of employment of any
individual by the
Company or any of its subsidiaries.
(e) Except as set forth in SECTION 3.12(e) OF THE COMPANY
DISCLOSURE
SCHEDULE, (i) the Company and each of its subsidiaries is in
compliance in all
material respects with all Laws relating to the employment of
labor, including
all such Laws relating to wages, hours, the Worker Adjustment and
Retraining
Notification Act and any similar state or local "mass layoff" or
"plant closing"
Law ("WARN"), collective bargaining, discrimination, civil rights,
safety and
health, workers' compensation and the collection and payment of
withholding
and/or social security Taxes and any similar Tax, except for
immaterial
non-compliance; and (ii) there has been no "mass layoff" or "plant
closing" as
defined by WARN with respect to the Company or any of its
subsidiaries within
the last six (6) months.
Section
3.13 ENVIRONMENTAL MATTERS. Except as disclosed in SECTION 3.13
OF
THE COMPANY DISCLOSURE SCHEDULE, (i) the Company and its
subsidiaries and, to
the Knowledge of the Company, all real property owned, leased or
operated by the
Company and its subsidiaries are in compliance with and have
complied with
Environmental Laws, except as would not have or would not
reasonably be likely
to have, individually or in the aggregate, a Material Adverse
Effect on the
Company; (ii) the Company and its subsidiaries have obtained and
currently
possess and maintain all permits, licenses and other authorizations
required by
Environmental Laws (collectively, "Company Environmental Permits")
for each of
their respective operations,
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<PAGE>
all such Company Environmental Permits are in good standing, and
the Company and
its subsidiaries have complied with the terms and conditions of
such Company
Environmental Permits, except in each such case as would not have
or would not
reasonably be likely to have, individually or in the aggregate, a
Material
Adverse Effect on the Company; (iii) neither the Company and its
subsidiaries
nor any real property currently or, to the Knowledge of the
Company, formerly
owned, leased or operated by the Company or its subsidiaries is
subject to any
pending or, to the Knowledge of the Company, threatened
Environmental Claim;
(iv) neither the Company nor any of its subsidiaries has generated,
arranged for
the disposal of or otherwise caused to be disposed of any Hazardous
Material at
any off-site location at which the Company and its subsidiaries
would reasonably
be expected to be liable for undertaking or paying for any
investigation or any
other action to respond to the release or, to the Knowledge of the
Company,
threatened release of any Hazardous Material or would reasonably be
expected to
be required to pay natural resource damages, except in any such
case as would
not have or would not reasonably be likely to have, individually or
in the
aggregate, a Material Adverse Effect on the Company; (v) no Company
Property or
any property currently or, to the Knowledge of the Company,
formerly owned,
leased or operated by the Company and its subsidiaries has been the
subject of
any treatment, storage, disposal, accumulation, generation, or
release of
Hazardous Materials in any manner which would reasonably be
expected to give
rise to liability under Environmental Laws or need to undertake any
action to
respond to such Hazardous Materials, except as would not have or
would not
reasonably be likely to have, individually or in the aggregate, a
Material
Adverse Effect on the Company; (vi) there are no wetlands at any of
the Company
Properties nor is any Company Property subject to any current or,
to the
Knowledge of the Company, threatened environmental deed
restriction, use
restriction, institutional or engineering control, except as would
not have or
would not reasonably be likely to have, individually or in the
aggregate, a
Material Adverse Effect on the Company; (vii) the Company and its
subsidiaries
have made available to Parent all environmental audits, reports,
memorandum and
other material environmental documents in their possession or
control relating
to their current and, to the extent the Company or its subsidiaries
have
Knowledge that they are potentially liable, their formerly owned or
operated
properties, facilities or operations; (viii) no capital
expenditures are
presently required to maintain or achieve compliance with
Environmental Laws,
except as would not have or would not reasonably be likely to have,
individually
or in the aggregate, a Material Adverse Effect on the Company; and
(ix) to the
Knowledge of the Company, there are no underground storage
tanks,
polychlorinated biphenyls ("PCB") or PCB-containing equipment,
except for PCB or
PCB-containing equipment owned by utility companies, or asbestos
or
asbestos-containing materials at any Company Property, except as
would not have
or would not reasonably be likely to have, individually or in the
aggregate, a
Material Adverse Effect on the Company. No authorization,
notification,
recording, filing, consent, waiting period, investigation,
remediation, or
approval is required under any Environmental Law in order to
consummate the
transaction contemplated hereby. The Company has made available to
Parent a
correct and complete copy of a draft settlement and indemnity
agreement by and
between Honeywell International Inc. and a subsidiary of the
Company with
respect to environmental litigation regarding the Operating
Property commonly
referred to as 440 Commons, Site No. 117 or the Ryerson Steel
Site.
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<PAGE>
As used in this Agreement:
"Environmental Claims" means any and all administrative,
regulatory,
judicial or third-party claims, demands, notices of violation or
non-compliance,
directives, proceedings, investigations, Orders or other
allegations of
noncompliance with or liability or potential liability relating in
any way to
any Environmental Law or any Company Environmental Permit, as the
case may be.
"Environmental Laws" means all applicable federal, state, and
local
Laws, rules and regulations, Orders and other legal requirements
including,
without limitation, common law relating to pollution or the
regulation and
protection of human health, safety, the environment or natural
resources, in
effect on this date, including, but not limited to, the
Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended (42
U.S.C. Sec. 9601 et seq.); the Hazardous Materials Transportation
Act, as
amended (49 U.S.C. Sec. 5101 et seq.); the Federal Insecticide,
Fungicide, and
Rodenticide Act, as amended (7 U.S.C. Sec. 136 et seq.); the
Resource
Conservation and Recovery Act, as amended (42 U.S.C. Sec. 6901 et
seq.); the
Toxic Substances Control Act, as amended (15 U.S.C. Sec. 2601 et
seq.); the
Clean Air Act, as amended (42 U.S.C. Sec. 7401 et seq.); the
Federal Water
Pollution Control Act, as amended (33 U.S.C. Sec. 1251 et seq.);
the
Occupational Safety and Health Act, as amended (29 U.S.C. Sec. 651
et seq.); the
Safe Drinking Water Act, as amended (42 U.S.C. Sec. 300f et seq.);
and their
state and local counterparts or equivalents and any transfer of
ownership
notification or approval statute.
"Hazardous Material" means all substances, pollutants,
chemicals,
compounds, and wastes, including, without limitation, petroleum and
any fraction
thereof or substances otherwise potentially injurious to human
health and the
environment, including without limitation bacteria, mold, fungi or
other toxic
growth.
Section
3.14 TAX MATTERS.
(a) All federal and all other material Tax Returns required to
be
filed by or on behalf of the Company or any of its subsidiaries
have been filed
with the appropriate taxing authorities in all jurisdictions in
which such Tax
Returns are required to be filed (after giving effect to any valid
extensions of
time in which to make such filings), and all such Tax Returns were
and continue
to be accurate and complete in all material respects. Except as and
to the
extent publicly disclosed by the Company in the Company SEC Reports
filed prior
to the date of this Agreement, and, except for unpaid Taxes in
amounts that are
not material, the non-payment of which would not cause or
reasonably be likely
to have a Material Adverse Effect on the Company, (i) all Taxes
payable by or on
behalf of the Company or any of its subsidiaries (whether or not
shown on any
Tax Return) have been fully and timely paid or adequately provided
for in
accordance with GAAP, and (ii) adequate reserves or accruals for
Taxes of the
Company or any of its subsidiaries have been provided in accordance
with GAAP
with respect to any period for which Tax Returns have not yet been
filed or for
which Taxes are not yet due and owing. Except as set forth in
SECTION 3.14(a) OF
THE COMPANY DISCLOSURE SCHEDULE, neither the Company nor any of its
subsidiaries
has executed or filed with the IRS or any other taxing authority
any agreement,
waiver or other document or arrangement extending or having the
effect of
extending the period for assessment or collection of Taxes
(including, but not
limited to,
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<PAGE>
any applicable statute of limitation), and no power of attorney
with respect to
any Tax matter is currently in force.
(b) The Company, (i) held no assets, earned no income and did
not
engage in any business activity for its taxable year ending
December 31, 1998
and (ii) for all taxable years beginning with its taxable year
ended December
31, 1999, has been taxable as a real estate investment trust (a
"REIT") within
the meaning of Section 856 of the Internal Revenue Code of 1986, as
amended (the
"Code"), and has qualified as a REIT for all such years, (iii) has
operated
since December 31, 2005 to the date hereof in a manner that will
permit it to
qualify as a REIT for the taxable year that will end as of the
Effective Time,
and (iv) has not taken any action or failed to take any action
which would
reasonably be expected to result in a successful challenge by any
Governmental
Entity to its status as a REIT for any such years, and no such
challenge is
pending, or is or has been threatened in writing.
(c) Except as set forth in SECTION 3.14(c) OF THE COMPANY
DISCLOSURE
SCHEDULE, all material deficiencies asserted or assessments made as
a result of
any examinations by the IRS or any other taxing authority of the
Tax Returns of
or covering or including the Company or any of its subsidiaries
have been fully
paid or adequately provided for in accordance with GAAP, and, to
the Knowledge
of the Company, there are no other audits relating to any material
taxes by any
taxing authority in progress, nor has the Company or any of its
subsidiaries
received any written notice from any taxing authority that it
intends to conduct
such an audit.
(d) Except as set forth in SECTION 3.14(d) OF THE COMPANY
DISCLOSURE
SCHEDULE, and, except as would not have or would not reasonably be
likely to
have, individually or in the aggregate, a Material Adverse Effect
on the
Company, the Company and its subsidiaries have complied in all
material respects
with all applicable Laws, rules and regulations relating to the
payment, paying
over and withholding of Taxes (including, without limitation, under
Sections
1441, 1442, 1445, 1446, and 3402 of the Code) and have duly and
timely withheld
and paid over Taxes in connection with amounts paid or owing to any
employee,
independent contractor, creditor, stockholder or other third party
(including,
without limitation, with respect to any sales, gross receipts, and
use taxes)
and have duly paid over to the appropriate taxing authorities all
material
amounts so withheld on or prior to the due date thereof.
(e) The Company has made available to Parent correct and
complete
copies of (a) all U.S. federal and other material Tax Returns of
the Company and
its subsidiaries relating to the taxable periods since their
respective date of
formation that have been filed and (B) any audit report issued and
relating to
any material Taxes due from or with respect to the Company or any
of its
subsidiaries.
(f) Except as set forth in SECTION 3.14(f) OF THE COMPANY
DISCLOSURE
SCHEDULE, no material deficiencies for Taxes have been asserted or
assessed in
writing by a Governmental Entity against the Company or any of its
subsidiaries
which have not been paid or remain pending, including claims by a
taxing
authority in a jurisdiction where the Company or any of its
subsidiaries does
not file Tax Returns such that the Company or any such subsidiary
is or may be
subject to taxation by that jurisdiction or is otherwise required
to file Tax
Returns in such jurisdiction.
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<PAGE>
(g) Except as set forth in SECTION 3.14(g) OF THE COMPANY
DISCLOSURE
SCHEDULE, neither the Company nor any other Person on behalf of the
Company or
any of its subsidiaries has requested any extension of time within
which to file
any income Tax Return or other material Tax Return, which such Tax
Return has
since not been filed.
(h) Except as set forth in SECTION 3.10(a) OF THE COMPANY
DISCLOSURE
SCHEDULE, neither the Company nor any of its subsidiaries is a
party to any Tax
Sharing Agreement or Tax Protection Agreement, or tax indemnity
agreement (or
similar agreement or arrangement) other than any agreement or
arrangement solely
between the Company and one or more of its wholly owned
subsidiaries. The
Company and its subsidiaries have complied with all material terms
of the
agreements provided in the preceding sentence and no Person has
raised or
threatened to raise a material claim against the Company or any of
its
subsidiaries for any breach of any such agreement.
(i) Except as set forth in SECTION 3.14(i) OF THE COMPANY
DISCLOSURE
SCHEDULE, neither the Company nor any of its subsidiaries has
applied for,
received or has pending a request for a written ruling of a taxing
Governmental
Entity relating to Taxes, or has commenced negotiations or entered
into a
written and legally binding agreement with a taxing authority
relating to Taxes.
(j) Neither the Company nor any subsidiary has (i) made, agreed
to,
or is required to make, any adjustments pursuant to Section 481(a)
of the Code
or any state, local, or foreign analogue, or has any application
pending with
any Governmental Entity requesting permission for any changes in
accounting
methods, (ii) executed or entered into, or has pending a closing
agreement
pursuant to Section 7121 of the Code or any state, local, or
foreign analogue,
or any similar agreement, or (iii) received a ruling from any
Governmental
Entity in respect of Taxes, any of the foregoing of which would
have continuing
effect after the Merger.
(k) There are no Liens for Taxes upon the assets of the Company
or
any of its subsidiaries, other than Permitted Liens.
(l) Since the date of the most recent audited consolidated
financial
statements included in the Company SEC Reports, the Company has
incurred no
liability for any Taxes under Sections 857(b), 857(f), 860(c) or
4981 of the
Code or IRS Notice 88-19 or Treasury Regulation Sections
1.337(d)-5T, 1.337(d)-6
and 1.337(d)-7 including any Tax arising from a prohibited
transaction described
in Section 857(b)(6) of the Code, and neither the Company nor any
of its
subsidiaries has incurred any material liability for Taxes other
than in the
ordinary course of business. To the Knowledge of the Company, no
event has
occurred, and no condition or circumstance exists, which presents a
material
risk that any material Tax described in the preceding sentences
will be imposed
upon the Company or its subsidiaries.
(m) The Company does not own any assets that would cause it not
to
satisfy the asset test set forth in Section 856(c)(4) of the Code.
Each
subsidiary of the Company which files Tax Returns as a partnership
for U.S.
federal income Tax purposes has since its inception or acquisition
by the
Company been classified for U.S. federal income Tax purposes as a
partnership
and not as an association taxable as a corporation, or a "publicly
traded
partnership" within the meaning of Section 7704(b) of the Code.
Each other
subsidiary of the Company has
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<PAGE>
been and continues to be treated for U.S. federal income Tax
purposes as a
"qualified REIT subsidiary" within the meaning of Section 856(i) of
the Code, or
a "taxable REIT subsidiary" within the meaning of Section 856(l) of
the Code.
Except as set forth in SECTION 3.14(m) OF THE COMPANY DISCLOSURE
SCHEDULE, the
Company does not hold any asset the disposition of which would be
subject to
rules similar to Section 1374 of the Code as announced in IRS
Notice 88-19 or as
provided for in Treasury Regulation Section 1.337(d)-5T,
1.337(d)-6, or
1.337(d)-7.
(n) To the Company's Knowledge, the aggregate of the adjusted
basis
of the assets of the Company exceed the aggregate liabilities of
the Company.
(o) At the close of each of its taxable years beginning with
its
taxable year ending December 31, 1998, and as of the date hereof,
the Company
has not had, and does not have, as applicable, any earnings and
profits
accumulated in any non-REIT year within the meaning of Section
857(a)(2)(B) of
the Code.
(p) Except as provided in SECTION 3.14(o) OF THE COMPANY
DISCLOSURE
SCHEDULE, (i) none of the Company or any of its subsidiaries is or
has ever been
a member of a consolidated or affiliated group under any provision
of U.S.
federal, state, local, or foreign law, other than a group of which
the Company
was or is, as relevant, the common parent, and (ii) except as would
not have or
reasonably be likely to have a Material Adverse Effect on the
Company, the
Company does not have and could not have any liability for the
Taxes of any
Person other than the Company and its subsidiaries, and none of its
subsidiaries
have or could have any liability for the Taxes of any Person other
than the
Company and its 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, or (C) by contract.
(q) Neither the Company nor any of its subsidiaries made any
payments, is obligated to make any payments, or is a party to an
agreement that
could obligate it to make any payments that could reasonably be
determined to
not be deductible under Section 162(m) of the Code.
(r) Except as would not have or reasonably would be expected to
have
a Material Adverse Effect on the Company, neither the Company nor
any of its
subsidiaries is or has been a party to any understanding or
arrangement
described in Section 6662(d)(2)(C)(ii) of the Code or Treasury
Regulations
Section 1.6011-4(b), or is or has been a "material advisor" as
defined in
Section 6111(b) of the Code.
(s) Neither the Company nor any of its subsidiaries has
constituted
either a "distributing corporation" or a "controlled corporation"
(within the
meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock
qualifying for tax-free treatment under Section 355 of the Code (i)
in the two
years prior to the date of this Agreement or (ii) in a distribution
which could
otherwise constitute part of a "plan" or "series of related
transactions"
(within the meaning of Section 355(e) of the Code) in conjunction
with the
transactions contemplated by this Agreement.
(t) Other than regular monthly dividends in amounts consistent
with
dividends declared and paid during the twelve month period
immediately prior to
the date of this
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<PAGE>
Agreement, the Company will not be required to make distributions
to its
shareholders in order to maintain its REIT status or to avoid the
imposition of
corporate level Tax or excise Tax under Section 4981 of the Code
(determined
without regard to the effects of the Merger). All distributions
made by the
Company on and since January 1, 1999 have been made in accordance
with the
rights of its shareholders set forth in the Company's
organizational documents,
and the Company has not made any "preferential dividends" within
the meaning of
Section 562(c) of the Code.
(u) The Company is not a foreign person within the meaning of
Section 1445(b)(2) of the Code, and is and has been, at all times
dur
