NOW, THEREFORE , in
consideration of the premises and of the mutual covenants,
representations, warranties and agreements contained herein, and
intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I.
CERTAIN DEFINITIONS
1.01.
Certain Definitions .
The following
terms are used in this Agreement with the meanings set forth
below:
“
Acquiror ” has the
meaning set forth in the preamble to this Agreement.
“
Acquiror Bylaws ”
means the bylaws of Acquiror.
“
Acquiror Common Shares
” means common shares of beneficial interest, $.01 par value
per share, of Acquiror.
“
Acquiror Convertible Preferred
Shares ” means the 5.6% convertible Acquiror
Preferred Shares, $50.00 liquidation preference per share, of
Acquiror, with such terms as are set forth in the Articles
Supplementary.
“
Acquiror Declaration of
Trust ” means the declaration of trust of
Acquiror.
“
Acquiror Material Adverse
Effect ” means any event, circumstance, change or
effect that adversely affects the financial condition or results of
operations of Acquiror in an amount in excess of $100,000,000, that
was not reasonably foreseeable at the date of this Agreement;
provided , however , that none of the following shall
be deemed to constitute or shall be taken into account in
determining whether there has been an “Acquiror Material
Adverse Effect”: (i) any event, circumstance,
change or effect arising out of or attributable to (A) any
changes in the United States or global economy or capital,
financial or securities markets generally, including changes in
interest or exchange rates, (B) the commencement or escalation of a
war or armed hostilities or the occurrence of acts of terrorism or
sabotage, (C) any changes in general economic, legal,
regulatory or political conditions in the geographic regions in
which Acquiror operates, (D) earthquakes, hurricanes or other
natural disasters, and (E) changes in Law or GAAP or (ii) any
existing event, circumstance, change or effect with respect to
which Target has knowledge as of the date hereof.
“
Acquiror OP ” has the
meaning set forth in the preamble to this Agreement.
“
Acquiror Preferred Shares
” means preferred shares of beneficial interest, $.01 par
value per share, of Acquiror.
“
Acquiror SEC Documents
” has the meaning set forth in Section 6.04(b)
.
2
“
Acquiror Shares ”
means the Acquiror Common Shares and Acquiror Preferred Shares,
collectively.
“
Acquiror Subsidiary ”
or “ Acquiror
Subsidiaries ” means a Subsidiary or Subsidiaries of
Acquiror.
“
Acquisition Agreement
” means the Acquisition Agreement dated August 17, 2005 by
and between Honeygo Run Reclamation Center, Inc. and
Target.
“
Acquisition Proposal
” has the meaning set forth in Section 7.04(a)
.
“
Action ” means any
claim, action, suit, proceeding, arbitration, mediation or other
investigation as to which written notice has been provided to the
applicable party.
“
Additional Escrow Shares
” has the meaning set forth in Section 4.05(b)
.
“
Additional Share Escrow
Agreement ” means the escrow agreement among the
Share Escrow Agent, Acquiror, Acquiror OP, Merger Subsidiary and
Stockholders’ Agent with respect to the Additional Escrow
Shares.
“
Affiliate ” means,
with respect to any Person, any other Person which directly or
indirectly controls, is controlled by or is under common control
with such Person. For purposes of the immediately preceding
sentence, the term “ control ” (including, with
correlative meanings, the terms “ controlling ,” “
controlled by ” and
“ under common control
with ”), as used with respect to any Person, means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person,
whether through ownership of voting securities, by contract or
otherwise.
“
Aggregate Closing
Adjustments ” has the meaning set forth in Section
4.01(a) .
“
Agreement ” means
this Agreement, as amended or modified from time to time in
accordance with Section 11.04 .
“
Applicable Date ” has
the meaning set forth in Section 6.04(b) .
“
Applicable Permits ”
has the meaning set forth in Section 6.02(e)
.
“
Articles of Merger ”
has the meaning set forth in Section 3.02(b)
.
“
Articles Supplementary
” means the Articles Supplementary to the Acquiror
Declaration of Trust setting forth the terms of the Acquiror
Convertible Preferred Shares, in the form attached hereto as
Exhibit A .
“
Assumed Loans ” means
the loans listed in Schedule 5 hereto.
“
Assumption Fees ” has
the meaning set forth in Section 7.11(b) .
“
Blue Sky Laws ” means
the state securities laws of the several States.
3
“
Business Day ” means
Monday through Friday of each week, except a legal holiday
recognized as such by the U.S. Government or any day on which
banking institutions in the State of Maryland are authorized or
obligated to close.
“ Calculation Price ” means the
average closing price on the NYSE of the Acquiror Common Shares
over a period of twenty (20) trading days, ending on the tenth
(10 th ) trading
day prior to the Closing Date; provided, however , that such
price shall equal a minimum of $43.00 per share and a maximum of
$49.00 per share.
“
Cash Escrow Agent ”
means Anchor Title Company.
“
Cash Escrow Agreement
” means the escrow agreement among the Cash Escrow Agent,
Acquiror, Acquiror OP, Merger Subsidiary and Target with respect to
investment and payment of the Deposit.
“
Certificate ” or
“ Certificates
” has the meaning set forth in Section 4.02(a)
.
“
Change in Recommendation
” has the meaning set forth in Section 7.04(f)
.
“
Claims Notice ” has
the meaning set forth in Section 7.07(d) .
“
Closing ” and “
Closing Date ” have
the meanings set forth in Section 3.02(a) .
“
Closing Adjustments ”
has the meaning set forth in Section 8.04 .
“
Closing Adjustment Amount
” has the meaning set forth in Section 8.04
.
“
Closing Adjustment Time
” has the meaning set forth in Section 8.04
.
“
COBRA ” means the
Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
“
Code ” means the
Internal Revenue Code of 1986, as amended.
“
Common Share Consideration
” means the Common Share Consideration Amount divided by the
Calculation Price ( i.e. , the amount of Acquiror Common
Shares issued at Closing).
“
Common Share Consideration
Amount ” means the Merger Consideration Amount minus
the Preferred Share Consideration Amount.
“
Confidentiality Agreement
” has the meaning set forth in Section 7.03(b)
.
“
Damages ” has the
meaning set forth in Section 7.07(b)(i) .
“
Debt Balance ” means
the balance due under all indebtedness of Target, Target
Subsidiaries and Retail Entities at the Effective Time, including
but not limited to accrued but unpaid interest, and incurred but
unpaid prepayment premiums. The Debt
4
Balance does not
include the Exchange Properties Indebtedness, as this shall be an
obligation of NPI at the Effective Time.
“
Deposit ” has the
meaning set forth in Section 4.04 .
“
Dollenberg Retirement
Obligations ” means any outstanding obligations to
make payments to P. Douglas Dollenberg pursuant to Sections 3(iii),
4 and 8(i) of the Retirement Agreement dated January 1, 2005
by and among P. Douglas Dollenberg, Target and NPI, as
amended.
“
Effective Date ”
means the day of the Effective Time.
“
Effective Time ” has
the meaning set forth in Section 3.02(b) .
“
Environment ” has the
meaning set forth in Section 6.04(f) .
“
Environmental Laws ”
means any United Stated federal, state or local Laws in existence
on the date hereof relating to the presence or release of Hazardous
Substances or protection of the environment, including the Federal
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (“ CERCLA ”).
“
ERISA ” means the
Employee Retirement Income Security Act of 1974, as
amended.
“
ERISA Affiliate ”
means any Person who, together with Target or the Surviving Entity,
as appropriate in the context, is or has been treated as a single
employer under Section 414 of the Code, and the regulations
thereunder.
“
Escrow Fund ” has the
meaning set forth in Section 7.07(a) .
“
Escrow Period ” has
the meaning set forth in Section 7.07(c) .
“
Escrow Shares ” has
the meaning set forth in Section 4.05(a) .
“
Exchange ” has the
meaning set forth in the preamble to this Agreement.
“
Exchange Act ” means
the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.
“
Exchange Agreement ”
means the exchange agreement to be entered into by and between NPI
and Surviving Entity on the day after the Closing pursuant to which
the ownership interests in the Retail Entities will be exchanged
for the ownership interests in the NPI Exchange
Entities.
“
Exchange Properties
Indebtedness ” has the meaning set forth in the
Exchange Agreement.
5
“
Existing Indebtedness
” means the Existing Office Indebtedness and the Existing
Retail Indebtedness.
“
Existing Office
Indebtedness ” means the loans incurred by the
entities set forth in Section 8.02 of the Target Disclosure
Letter, secured by deeds of trust on the properties owned by such
entities, having an aggregate balance as of December 1, 2006 of
approximately Fifty-Seven Million Five Hundred Sixty-Four Thousand
One Hundred Thirty-One Dollars ($57,564,131). Target shall
use a portion of the proceeds of the Short Term Loan to prepay the
Existing Office Indebtedness prior to Closing.
“
Existing Retail
Indebtedness ” means the loans secured by deeds of
trust on the properties owned by White Marsh Plaza Business Trust
and The Avenue at White Marsh Business Trust, having an aggregate
balance as of December 1, 2006 of approximately Twenty-Nine Million
One Hundred Forty-Six Thousand Three Hundred Ninety-Eight Dollars
($29,146,398). Acquiror shall not be directly or indirectly
liable for the Existing Retail Indebtedness upon or after the
closing of the Exchange, except to the extent set forth in
Section 6.02(k) of the Target Disclosure Letter.
“
Former Superior Proposal
” has the meaning set forth in Section 7.04(e)
.
“
GAAP ” means
accounting principles generally accepted in the United States of
America.
“
Governmental Authority
” means any federal, state or local court, administrative
agency or commission or other governmental authority or
instrumentality or agency.
“ Gross Value
” means the sum of $303,422,124 (which is equal to
$362,500,000 less the gross purchase price of $59,077,876 payable
for the ownership interests in the NPI Entities).
“
Hazardous Materials ”
means (i) those substances defined in or regulated under the
following federal statutes and their state counterparts, as each
may be amended from time to time, and all regulations
thereunder: the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability
Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic
Energy Act and the Clean Air Act; (ii) petroleum and petroleum
products, including crude oil and any fractions thereof;
(iii) polychlorinated biphenyls, friable asbestos and radon;
and (iv) any chemicals, materials, substances or wastes which
are defined as or included in the definition of “hazardous
substances,” “restricted hazardous wastes,”
“toxic substances,” “toxic pollutants” or
words of similar import, under any applicable Environmental Law;
and (v) any substance, material, or waste regulated by any
Governmental Authority pursuant to any Environmental
Law.
“
Indemnified Person ”
or “ Indemnified
Persons ” have the meaning set forth in Section
7.07(b)(i) .
“
Indemnity Threshold ”
has the meaning set forth in Section 7.07(b)(iii)
.
6
“
Inspection Period ”
has the meaning set forth in Section 8.01(b) .
“
Intellectual Property
” means all intellectual property owned or used by Target and
the Target Subsidiaries, including patents (including any
continuations, divisionals, continuations-in-part, renewals and
reissues), trademarks, trade names, service marks, logos, domain
names and other indicators of source or origin, database rights,
copyrights, mask works, technology, know-how, trade secrets,
inventory, ideas, algorithms, processes, computer software programs
or applications (in both source code and object code form),
tangible or intangible proprietary information or material and all
other intellectual property or proprietary rights, together with
all goodwill symbolized by any of the foregoing, registrations and
applications for the foregoing, and rights to sue for past
infringement thereof.
“
IRS ” means the
Internal Revenue Service.
“
knowledge of Acquiror
” or “ to
Acquiror’s knowledge ” means the actual
knowledge of Randall M. Griffin or Roger A. Waesche, Jr.
“
knowledge of Target ”
or “ to Target’s
knowledge ” means the actual knowledge of J. Joseph
Credit, Steven Endres or Peter Teeling.
“
Law ” has the meaning
set forth in Section 6.02(d)(i) .
“
Leasing Commissions ”
means any commissions due and payable on the Target Properties
Leases to third parties and not to Affiliates of Target.
“
Lender’s Approval
” has the meaning set forth in Section 7.11(b)
.
“
License Agreement ”
has the meaning set forth in Section 8.06 .
“
Liens ” means any
charge, mortgage, pledge, security interest, restriction, Claim,
lien or encumbrance.
“
Liquidating Trust ”
means NVI Liquidating Trust, a Maryland business trust.
“
Liquidation Preference
” means $50.00 per Acquiror Convertible Preferred
Share.
“
Loan Escrows ” has
the meaning set forth in Section 4.01(a) .
“
Loan Documents ” has
the meaning set forth in Section 7.11(a) .
“
Loans ” means any
loan, loan agreement, note, borrowing arrangement or extension of
credit, including, without limitation, letters of credit, leases,
credit enhancements, guarantees and similar interest-bearing
assets, as well as commitments to extend any of the
same.
“
Merger ” has the
meaning set forth in Section 3.01(a) .
7
“
Merger Closing Properties
” means the Merger Properties and the Retail
Properties.
“
Merger Closing Properties
Leases ” means the leases applicable to the Merger
Closing Properties.
“
Merger Consideration
” has the meaning set forth in Section 4.01(a)
.
“
Merger Consideration Amount
” has the meaning set forth in Section 4.01(a)
.
“
Merger Properties ”
has the meaning set forth in the preamble to this
Agreement.
“
Merger Properties Leases
” means the leases in effect as of the date hereof with
tenants of the Merger Properties and all written amendments,
modifications and supplements thereto.
“
Merger Subsidiary ”
has the meaning set forth in the preamble to this
Agreement.
“
Merger Subsidiary Common
Shares ” means the common shares of beneficial
interest, $0.01 par value per share, of Merger
Subsidiary.
“
MGCL ” means the
Maryland General Corporation Law.
“
Non-Target Properties Letters of
Credit ” has the meaning set forth in Section
6.02(g)(xix) .
“
NPI ” has the meaning
set forth in the preamble to this Agreement.
“
NPI Entities ” means,
collectively, one hundred percent (100%) of the ownership interests
in 37 Allegheny Business Trust, Philadelphia Road Operating
Company, LLC, 9020 Mendenhall, LLC, Woods Investors, LLC, Rivers
Center III Investors LLC and White Marsh Hi-Tech 2 Business Trust,
fifty percent (50%) of the ownership interests in Campbell
Corporate Center I Limited Partnership, forty-three and
seven-tenths percent (43.7%) in Nottingham Associates Limited
Partnership and sixty percent (60%) in Sandpiper Limited
Partnership.
“
NPI Exchange Entities
” has the meaning set forth in the preamble to this
Agreement.
“
NPI Exchange Properties
” has the meaning set forth in the preamble to this
Agreement.
“
NPI Exchange Properties
Leases ” means all leases in effect as of the date
hereof with tenants of the NPI Exchange Properties and all written
amendments, modifications and supplements thereto.
“
NYSE ” means the New
York Stock Exchange, Inc.
8
“
Office Assumed Loan
Documents ” means the documents evidencing and
relating to the Office Assumed Loans.
“
Office Assumed Loans
” means the Assumed Loans, the loans to be assumed by
Acquiror OP under the PSA (Woods and Rivers Center III) and the
loan made to Tyler Ridge I.
“
Outside Date ” has
the meaning set forth in Section 10.01(b)(ii) .
“
Payment Fund ” has
the meaning set forth in Section 4.02(a) .
“
Permitted Liens ”
means (i) Liens for Taxes not yet delinquent and Liens for
Taxes being contested in good faith; (ii) inchoate
mechanics’ and materialmen’s Liens for construction in
progress; (iii) inchoate workmen’s, repairmen’s,
warehousemen’s and carriers’ Liens arising in the
ordinary course of business of Target or any of the Target
Subsidiaries; (iv) zoning restrictions, survey exceptions,
utility easements, rights of way and similar Liens that are imposed
by any Governmental Authority having jurisdiction thereon; (v) with
respect to real property, any title exception disclosed in title
insurance policy with respect to any Target Property (whether
material or immaterial), Liens and obligations arising under the
Material Contracts (including but not limited to any Lien securing
mortgage debt disclosed in the Target Disclosure Letter) and any
other Lien that does not interfere materially with the current use
of such property (assuming its continued use in the manner in which
it is currently used) or materially adversely affect the value or
marketability of such property; (vi) reciprocal easement
agreements; (vii) matters that would be disclosed on current title
reports or surveys and/or (viii) Liens or restrictions arising
pursuant to the Target Properties Leases.
“
Person ” means any
individual, bank, corporation, partnership, association,
joint-stock company, business trust, limited liability company or
unincorporated organization.
“
Potential Acquiror ”
has the meaning set forth in Section 7.04(d) .
“
Preferred Share
Consideration ” means the number of Acquiror
Convertible Preferred Shares designated by Target to Acquiror at
least five (5) Business Days prior to the Closing; provided,
however , the number of Acquiror Convertible Preferred Shares
shall not exceed the sum of (i) 2,830,000 plus (ii) seventy percent
(70%) of the Aggregate Closing Adjustments divided by the
Liquidation Preference.
“
Preferred Share Consideration
Amount ” means the Preferred Share Consideration
multiplied by the Liquidation Preference.
“
Pre-LOI Leases ” the
Target Properties Leases signed on or prior to September 6,
2006.
“
Pre-LOI Leasing Commissions
” means any commissions due and payable on Pre-LOI Leases but
excluding commissions due with respect to future renewals or
extensions of Pre-LOI Leases.
9
“
Pre-LOI TI Work ” has
the meaning set forth in Section 7.14 .
“
Proxy Statement ”
means the proxy statement to be provided to the Target Stockholders
in connection with the Target Stockholders Meeting.
“
Purchase and Sale ”
has the meaning set forth in Section 2.01 .
“
Purchase Price ” has
the meaning set forth in Section 2.02 .
“
Purchase Properties ”
has the meaning set forth in the preamble to this
Agreement.
“
Purchase Properties Leases
” means all leases in effect as of the date hereof with
tenants of the Purchase Properties and all written amendments,
modifications and supplements thereto.
“
Rating Agencies ” has
the meaning set forth in Section 7.11(b) .
“
Reciprocal Release ”
has the meaning set forth in Section 9.04(k)
.
“
REIT ” means a real
estate investment trust within the meaning of Section 856- 860 of
the Code.
“
Registration Rights
Agreement ” means the registration rights agreement
between Acquiror and the Target Stockholders relating to the filing
of the Registration Statement, in substantially the form attached
hereto as Exhibit B .
“
Registration Statement
” means the Acquiror Registration Statement on Form S-3 or
other available form registering the resale of the Common Share
Consideration and the Acquiror Common Shares issuable upon
conversion of the Acquiror Convertible Preferred Shares and any
amendments or supplements thereto.
“
Release ” has the
meaning set forth in Section 6.04(f) .
“
Representative ” has
the meaning set forth in Section 7.04(b) .
“
Retail Entities ” has
the meaning set forth in the preamble to this Agreement.
“
Retail Loan Guarantees
” has the meaning set forth in Section 7.07(b)
.
“
Retail Properties ”
has the meaning set forth in the preamble to this
Agreement.
“
Retail Transaction ”
means the acquisition of NPI by, or the merger of NPI with, an
entity that engages or proposes to engage in retail property
acquisitions or ownership.
“
Rights ” means, with
respect to any Person, warrants, options, rights, convertible
securities and other arrangements or commitments which obligate the
Person to issue or dispose of any of its stock or other ownership
interests.
10
“
Scheduled Contracts ”
means those service and other contracts which have been entered
into by Target or Target Subsidiaries or that will be assigned to
Target or Target Subsidiaries prior to Closing, all as set forth in
Section 6.02(k) of the Target Disclosure Letter.
“
SDAT ” has the
meaning set forth in Section 3.02(b) .
“
SEC ” means the
Securities and Exchange Commission.
“
Securities Act ”
means the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
“
Share Escrow Agent ”
means U.S. Bank National Association.
“
Share Escrow Agreement
” means the escrow agreement among the Share Escrow Agent,
Acquiror, Acquiror OP, Merger Subsidiary and Stockholders’
Agent with respect to the Escrow Shares.
“
Shares ” means shares
of Target Common Stock.
“
Short Term Loan ”
means the loan to be made to Target by Wachovia Bank, N.A. with an
outstanding balance not to exceed $83,018,978 as of the Closing,
which may be fully prepaid at any time by Acquiror after Closing
without any prepayment penalty thereto. The documents
evidencing or securing the Short Term Loan are referred to herein
as the “ Short Term Loan
Documents .” Of the total proceeds of the Short
Term Loan, up to $57,564,131 shall be applied by Target to prepay
Existing Office Indebtedness prior to Closing.
“
Stockholder Approval
” has the meaning set forth in Section 6.02(c)(ii)
.
“
Stockholders’ Agent
” shall mean the Liquidating Trust.
“
Subsidiary ” and
“ Significant
Subsidiary ” have the meanings ascribed to those
terms in Rule l-02 of Regulation S-X promulgated by the
SEC.
“
Superior Proposal ”
means a bona fide written proposal (and its most recently amended
or modified terms, if amended or modified) made by a Person other
than Target or its Affiliates: (A) to consummate an
Acquisition Proposal; (B) on terms which the Target Board in
good faith concludes (following advice of its financial advisors
that such proposal is more favorable to the Target Stockholders,
from a financial point of view, and advice of outside counsel),
taking into account, among other things, all legal, financial,
regulatory, timing and other aspects of the proposal and the
identity and nature of the Person making the proposal, would,
if consummated, result in a transaction that is more favorable to
Target or to the Target Stockholders (in their capacities as
stockholders), as the case may be, from a financial point of view,
than the transactions contemplated by this Agreement (as the same
may be proposed to be amended by Acquiror pursuant to
11
Section 7.04(e) ); and (C) that does
not contain any contingency to obtain financing or other
funding.
“
Superior Proposal Notice
” has the meaning set forth in Section 7.04(d)
.
“
Surviving Entity ”
has the meaning set forth in Section 3.01(a)
.
“
Target ” has the
meaning set forth in the preamble to this Agreement.
“
Target Board ” means
the Board of Directors of Target.
“
Target Bylaws ” means
the Amended and Restated Bylaws of Target as in effect on the date
hereof.
“
Target Charter ”
means the Articles of Incorporation of Target as in effect on the
date hereof.
“
Target Class A Common Stock
” means the Class A Common Stock, $10.00 par value per share,
of Target.
“
Target Class B Common Stock
” means the Class B Common Stock, $1.00 par value per share,
of Target.
“
Target Common Stock ”
means the Target Class A Common Stock together with the Target
Class B Common Stock.
“
Target Disclosure Letter
” has the meaning set forth in Section 6.01
.
“
Target Group ” means,
collectively, Target, Target Subsidiaries, NPI and the NPI
Entities.
“
Target Joint Ventures
” meanings the Target Properties in which Target or a Target
Subsidiary owns less than a 100% equity interest.
“
Target Material Adverse
Effect ” means any event, circumstance, change or
effect that adversely affects the financial condition or results of
operations of Target and the Target Subsidiaries in an amount in
excess of $18,000,000, taken as a whole, that was not reasonably
foreseeable at the date hereof; provided , however ,
that none of the following shall be deemed to constitute or shall
be taken into account in determining whether there has been an
“Target Material Adverse Effect”: (i) any
event, circumstance, change or effect arising out of or
attributable to (A) any changes in the United States or global
economy or capital, financial or securities markets generally,
including changes in interest or exchange rates, (B) the
commencement or escalation of a war or armed hostilities or the
occurrence of acts of terrorism or sabotage, (C) any changes
in general economic, legal, regulatory or political conditions in
the geographic regions in which Target and the Target Subsidiaries
operate, (D) earthquakes, hurricanes or other natural
12
disasters and (E)
changes in Law or GAAP or (ii) any existing event, circumstance,
change or effect with respect to which Acquiror has knowledge as of
the date hereof.
“
Target Material Contracts
” means the Target Properties Leases, the Office Assumed Loan
Documents, the Short Term Loan Documents, the Scheduled Contracts
and the documents evidencing or securing the Existing Indebtedness
(it being recognized that the documents evidencing or securing the
Existing Office Indebtedness shall be terminated in conjunction
with the repayment thereof with the proceeds of the Short Term
Loan).
“
Target Property ” or
“ Target Properties
” means, collectively, the Merger Properties, NPI Exchange
Properties and Purchase Properties.
“
Target Properties Escrow
LCs ” has the meaning set forth in Section
6.02(g)(xix) .
“
Target Properties Leases
” means the Purchase Properties Leases collectively with the
Merger Properties Leases and the NPI Exchange Properties
Leases.
“
Target Properties LCs
” has the meaning set forth in Section 6.02(g)(xix)
.
“
Target Stockholders ”
means the holders of the Target Common Stock.
“
Target Stockholders Meeting
” means a special meeting of the Target Stockholders to
consider and vote upon the approval of the Merger, this Agreement
and any other matter required to be approved by Target’s
stockholders for consummation of the Transaction (including any
adjournment or postponement).
“
Target Subsidiary ”
or “ Target
Subsidiaries ” has the meaning set forth in
Section 6.02(a)(ii) .
“
Tax ” or “
Taxes ” shall mean
any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, stock,
franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or
not.
“
Tax Returns ” means
any return, declaration, report, claim for refund, transfer pricing
report or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any
amendment thereof.
“
Termination Date ”
has the meaning set forth in Section 10.01 .
“
Termination Fee ” has
the meaning set forth in Section 10.03(b) .
13
“
Transaction ” shall
mean the Merger and the Purchase and Sale, collectively, along with
any other transaction contemplated by this Agreement.
“
Transfer Taxes ”
shall mean any real property transfer, sales, use, recordation,
recording costs, registration and other fees and any similar Taxes
together with any related interest, penalties or additions to
Tax.
ARTICLE II.
PURCHASE AND SALE OF OWNERSHIP INTERESTS IN NPI
ENTITIES
2.01.
Purchase and Sale of the Ownership Interests .
On the Closing
Date, Acquiror OP shall purchase from NPI the percentage of
ownership interests in the NPI Entities as more particularly set
forth on Schedule 1 hereto pursuant to the terms and
conditions set forth herein (the “ Purchase and Sale ”) and pursuant
to a purchase and sale agreement by and between NPI and Acquiror OP
(the “ PSA
”).
2.02.
Purchase Price.
The purchase price
for the ownership interests in the NPI Entities which Acquiror OP
agrees to deliver to NPI, subject to the terms and conditions set
forth herein and in the PSA, shall be cash in an amount equal to
(a) $59,077,876 (subject to adjustment) reduced by (b) the
reductions and adjustments set forth in the PSA (the difference
between (a) and (b) being herein referred to as the “
Purchase Price
”).
ARTICLE III.
THE MERGER
3.01.
The Merger .
(a)
The Merger . Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time,
Target will merge into Merger Subsidiary (the “
Merger ”), the
separate corporate existence of Target shall cease and Merger
Subsidiary shall survive and continue to exist as a Maryland
business trust and as a wholly owned subsidiary of Acquiror (Merger
Subsidiary, as the surviving entity in the Merger, is sometimes
referred to herein as the “ Surviving Entity ”) with all its
rights, privileges, immunities, powers and franchises continuing
unaffected by the Merger.
(b)
Name . The name of the Surviving Entity shall be
“W&M Business Trust”.
(c)
Certificate of Trust and Declaration of Trust . The
certificate of trust and declaration of trust of the Merger
Subsidiary in effect immediately prior to the Effective Time shall
be the certificate of trust and declaration of trust of the
Surviving Entity, unless and until duly amended in accordance with
applicable Law.
14
(d)
Trustees and Officers of the Surviving Entity . The
parties hereto shall take all actions necessary so that the
trustees of the Surviving Entity immediately after the Merger shall
be the trustees of the Merger Subsidiary immediately prior to the
Merger. The parties hereto shall take all actions necessary
so that the officers of the Surviving Entity immediately after the
Merger shall be the officers of the Merger Subsidiary immediately
prior to the Merger.
(e)
Effect of the Merger . At the Effective Time, the
effect of the Merger shall be as provided in the MGCL.
Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Target shall vest in the
Surviving Entity, and the Assumed Loans directly or indirectly
shall become the debts of the Surviving Entity.
(f)
Additional Actions . If, at any time after the
Effective Time, the Surviving Entity shall consider that any
further assignments or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect or confirm, of
record or otherwise, in the Surviving Entity its right, title or
interest in, to or under any of the rights, properties or assets of
Target acquired or to be acquired by the Surviving Entity as a
result of, or in connection with, the Merger, or
(ii) otherwise carry out the purposes of this Agreement,
Target, and its proper officers and directors, shall be deemed to
have granted to the Surviving Entity an irrevocable power of
attorney to execute and deliver all such proper deeds, assignments
and assurances in law and to do all acts necessary or proper to
vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Entity and otherwise to carry
out the purposes of this Agreement, and the proper officers and
trustees of the Surviving Entity are fully authorized in the name
of the Surviving Entity or otherwise to take any and all such
action.
3.02.
Effective Date and Effective Time; Closing .
(a)
The closing of the Transaction (the “ Closing ”) shall take place
immediately prior to the Effective Time at 10:00 a.m., Eastern
Time, at the offices of DLA Piper US LLP at 6225 Smith Avenue,
Baltimore, Maryland 21209, or at such other place, at such other
time, or on such other date as the parties may mutually agree upon
(such date, the “ Closing
Date ”). At the Closing, there shall be
delivered to Acquiror and Target the certificates and other
documents required to be delivered under Article IX
hereof. It is the parties’ goal that the Closing Date
shall occur no later than December 31, 2006.
(b)
As soon as practicable upon satisfaction or waiver of the
conditions set forth in Article IX (other than those
conditions that by their nature are to be satisfied at the
consummation of the Merger, but subject to the fulfillment or
waiver of those conditions), at the closing, the parties shall
cause Articles of Merger in the form of Exhibit C
hereto (the “ Articles of
Merger ”) to be filed with the State Department of
Assessments and Taxation of Maryland (the “ SDAT ”) pursuant to the
MGCL. The Merger provided for herein shall become effective
at such time as the Articles of Merger have been accepted for
record by the SDAT, or such later time (not to exceed 30
days
15
from the date of filing) designated by the
parties in the Articles of Merger in accordance with the MGCL;
provided , however , that such time shall not be on a
date later than the Outside Date (the “ Effective Time ”).
ARTICLE IV.
MERGER CONSIDERATION; EXCHANGE PROCEDURES
4.01.
Conversion of Shares .
At the Effective
Time, by virtue of the Merger and without any action on the part of
a holder of shares of Target Common Stock:
(a)
The aggregate merger consideration payable to holders of Target
Common Stock issued and outstanding immediately prior to the
Effective Time (expressed as a number of shares) is referred to as
the “ Merger
Consideration ”. The Merger Consideration shall
be comprised of the Preferred Share Consideration and the Common
Share Consideration. For example, assume that the Debt
Balance were $129,648,266 (comprised of the Existing Retail
Indebtedness of $29,146,398, the Short Term Loan of $83,018,978 and
the Assumed Loans of $17,482,890), the Closing Adjustment Amount
due by Target to Acquiror were $2,000,000 and the Loan Escrows were
$1,000,000. The Merger Consideration Amount would be as
follows:
|
|
$
|
303,422,124
|
|
|
Debt
Balance
|
|
$
|
–129,648,266
|
|
|
Closing Adjustment
Amount
|
|
$
|
–2,000,000
|
|
|
Loan
Escrows
|
|
$
|
+1,000,000
|
|
|
Merger
Consideration Amount
|
|
$
|
172,773,858
|
|
Further, assume that
the Preferred Share Consideration were designated by Target to be
2,830,000 Acquiror Convertible Preferred Shares. The
Preferred Share Consideration Amount would therefore be 2,830,000 x
$50 = $141,500,000. The Common Share Consideration Amount
would therefore be:
|
Merger Consideration Amount
|
|
$
|
172,773,858
|
|
|
Preferred Share Consideration
Amount
|
|
$
|
–141,500,000
|
|
|
Common
Share Consideration Amount
|
|
$
|
31,273,858
|
|
If the Calculation
Price were $45 per share, the Common Share Consideration would be
$31,273,858 ÷ $45 = 694,974.62 Acquiror Common
Shares.
“
Merger Consideration Amount
” means (i) the excess of the Gross Value over the Debt
Balance, (ii) increased by any Closing Adjustment Amount owed by
Acquiror to Target pursuant to Section 8.04 , if applicable,
or decreased by any Closing Adjustment Amount owed by Target to
Acquiror pursuant to Section 8.04 , if applicable, as the
case may be, plus (iii) the amount of any loan escrows held by
Target’s lenders in connection with the Assumed Loans at the
Effective Time, to the extent not taken into account in
16
computing the Debt
Balance (the “ Loan
Escrows ”). The sum of (ii) and (iii) is
referred to as the “ Aggregate Closing Adjustments
”.
(b)
At the Effective Time, except as set forth in subsections
(c) and (d) below, each share of Target Common Stock
issued and outstanding immediately prior to the Effective Time
shall be converted into, and shall be canceled in exchange for, the
right to receive a pro rata share of the Merger
Consideration.
(c)
Each share of Merger Subsidiary Common Shares issued and
outstanding immediately prior to the Effective Time that is owned
by Acquiror or by any Subsidiary of Acquiror, shall be converted
into and become one share of common stock of the Surviving
Entity.
(d)
Each share of Target Common Stock that is owned by Target or any of
the Target Subsidiaries, or by Acquiror, Merger Subsidiary or any
other direct or indirect Subsidiary of Acquiror or Merger
Subsidiary, shall be cancelled and retired and shall cease to exist
and no cash, stock or any other consideration shall be delivered by
Acquiror or Merger Subsidiary in exchange therefor.
4.02.
Exchange Procedures .
(a)
Custody of Certificates and Payment Fund . At or prior
to the Effective Time, (i) Target shall acquire and hold for the
Target Stockholders pursuant to a Power of Attorney between the
Liquidating Trust and the Target Stockholders the certificate or
certificates or affidavits of loss in accordance with Section
4.02(e) hereof (collectively, the “ Certificates ”), which
immediately prior to the Effective Time represented shares of
Target Common Stock and (ii) Acquiror shall deposit or cause to be
deposited with the Liquidating Trust, for the benefit of the Target
Stockholders for exchange in accordance with this Article IV
, full certificates representing Acquiror Common Shares and
Acquiror Convertible Preferred Shares in an amount sufficient to
satisfy the aggregate Merger Consideration (such aggregate
certificates being deposited hereinafter referred to as the “
Payment Fund
”). The Liquidating Trust shall, pursuant to
irrevocable instructions, make payments out of the Payment Fund as
provided for in this Article IV , and the Payment Fund shall
not be used for any other purpose.
(b)
Exchange Procedures for Target Common Stock . After
surrender to the Liquidating Trust of a Certificate for
cancellation, together with such Power of Attorney duly executed,
and such other customary documents as may reasonably be required by
the Liquidating Trust, upon the Effective Time, the holder of such
Certificate shall be entitled to receive the Merger Consideration
in exchange therefor for each share of Target Common Stock formerly
represented by such Certificate. Such payment of the Merger
Consideration shall be sent to such holder by the Liquidating Trust
promptly after receipt by the Liquidating Trust of the Payment
Fund, and the Power of Attorney duly executed, and such other
customary documents as may reasonably be required by the
Liquidating Trust, and the shares of Target Common Stock formerly
represented by such
17
Certificate so
surrendered shall forthwith be canceled. No interest will be
paid or will accrue on any cash payable upon the surrender of a
Certificate.
(c)
No Further Ownership Rights in Stock . Until
surrendered as contemplated by this Article IV , each
Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger
Consideration in respect of the shares of Target Common Stock
formerly represented by such Certificate as contemplated by this
Section 4.02 . All shares paid upon the surrender for
exchange of Certificates in accordance with the terms of this
Article IV shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Target
Common Stock represented by such Certificates. After the
Effective Time, there shall be no further registration of transfers
of shares of Target Common Stock outstanding immediately prior to
the Effective Time on the records of Target, and if Certificates
are presented to the Surviving Entity, they shall be canceled and
exchanged as provided for, and in accordance with the procedures
set forth, in this Article IV .
(d)
Unregistered Transfer of Stock . If payment of the
Merger Consideration is to be made to a Person other than the
Person in whose name the surrendered Certificate is registered, it
shall be a condition of such payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the Person requesting such
payment shall have paid any transfer and any other Taxes required
by reason of the payment to a Person other than the registered
holder of the Certificate surrendered or shall have established to
the satisfaction of the Surviving Entity that such Tax either has
been paid or is not applicable.
(e)
Lost Certificates . In the event that any Certificate
shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Surviving
Entity, an indemnity against any claim that may be made against it
with respect to such Certificate, the Liquidating Trust will issue,
in exchange for such lost, stolen or destroyed Certificate, the
Merger Consideration payable pursuant to this Article IV
.
(f)
Termination of Payment Fund . Any portion of the
Payment Fund remaining unclaimed by holders of Shares immediately
prior to such time as such amounts would otherwise escheat to or
become property of any Governmental Authority shall, to the extent
permitted by applicable Law, become the property of the Liquidating
Trust free and clear of all claims or interest of any Persons
previously entitled thereto.
(g)
No Liability . None of Acquiror, Merger Subsidiary,
Target or the Liquidating Trust, or any employee, officer,
director, agent or Affiliate thereof, shall be liable to any Person
in respect of any cash from the Payment Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or
similar Law.
4.03.
Adjustments .
Notwithstanding
anything in this Agreement to the contrary, if, between the date of
this Agreement and the Effective Time, the outstanding shares of
Target Common
18
Stock shall be changed
into a different number, class or series of shares by reason of any
stock dividend, subdivision, reclassification, recapitalization,
stock split, combination or exchange of shares, then the Merger
Consideration payable with respect thereto and any other amounts
payable pursuant to this Agreement shall be appropriately adjusted
in order to provide holders of Target Common Stock the same
economic effect as contemplated by this Agreement.
4.04.
Deposit .
Within one (1)
Business Day after the execution of this Agreement, Acquiror shall
deposit with the Cash Escrow Agent in cash Two Million Dollars
($2,000,000) which sum, together with any interest earned thereon
prior to the Closing Date, is referred to as the “
Deposit ”, pursuant
to the Cash Escrow Agreement for the benefit of the Target
Stockholders. The Deposit shall be held in an interest
bearing escrow account, pending disposition of the Deposit in
accordance with Section 8.01(b) . At Closing of the
Merger, the Cash Escrow Agent shall remit the Deposit to
Acquiror.
4.05.
Deposit of Escrow Shares and Additional Escrow Shares
.
(a)
As soon as practicable after the Effective Time, and subject to,
and in accordance with, the provisions of Section 7.07 ,
Acquiror shall cause to be deposited with the Share Escrow Agent a
certificate or certificates representing a number of Acquiror
Common Shares (the “ Escrow
Shares ”) equal to Three Million Five Hundred
Thousand Dollars ($3,500,000) of the Merger Consideration Amount,
which shall be registered in the name of the Share Escrow Agent as
nominee for the holders of Certificates cancelled pursuant to
Section 4.02(b) . The Escrow Shares shall be
beneficially owned by such holders so that such holders shall be
entitled to any dividends or distributions (other than securities)
and have the right to vote the shares and shall be available to
compensate Acquiror for certain damages as provided in Section
7.07 . The Escrow Shares shall be released in accordance
with and subject to the provisions of Section 7.07 and the
Share Escrow Agreement. At the Effective Time, the Escrow
Shares will not have been registered under the Securities
Act. In accordance with the Registration Rights Agreement,
Acquiror will register the Escrow Shares with the SEC after Closing
pursuant to the Registration Statement.
(b)
As soon as practicable after the Effective Time, and subject to,
and in accordance with, the Additional Share Escrow Agreement,
Acquiror shall cause to be deposited with the Share Escrow Agent a
certificate or certificates representing a number of shares of
Acquiror Common Shares (the “ Additional Escrow Shares ”) equal
to Four Million Five Hundred Thousand ($4,500,000) of the Merger
Consideration Amount, which shall be registered in the name of the
Share Escrow Agent as nominee for the holders of Certificates
cancelled pursuant to Section 4.02(b) . The Additional
Escrow Shares shall be beneficially owned by such holders so that
such holders shall be entitled to any dividends or distributions
(other than securities) and have the right to vote the shares and
shall be available to Acquiror as provided in the Additional Share
Escrow Agreement. The Additional Escrow Shares shall be
released in accordance with and
19
subject to the
provisions of the Additional Share Escrow Agreement. At the
Effective Time, the Additional Escrow Shares will not have been
registered under the Securities Act. In accordance with the
Registration Rights Agreement, Acquiror will register the
Additional Escrow Shares with the SEC after Closing pursuant to the
Registration Statement.
ARTICLE V.
CONDUCT OF THE PARTIES PENDING CLOSING
5.01.
Conduct of Business by Target .
From the date
hereof until the earlier of the Effective Time and the termination
of this Agreement pursuant to and in accordance with Article
X , except as expressly contemplated or permitted by this
Agreement or as disclosed in the Target Disclosure Letter as noted
specifically herein, without the prior written consent of Acquiror,
not to be unreasonably withheld, Target will not, and will cause
each of the Target Subsidiaries not to:
(a)
Ordinary Course . Conduct its business other than in
the ordinary and usual course consistent with past practice or fail
to use commercially reasonable efforts to preserve its business
organization and in no event enter into any commitment that would
impose any obligation on Acquiror, Target, Target Subsidiaries or
the Surviving Entity after the Closing, other than tenant
improvements with respect to Target Properties Leases signed after
September 6, 2006 and other than as set forth in the Target
Disclosure Letter.
(b)
Acquisitions . Except as set forth in Section
5.01(b) of the Target Disclosure Letter, acquire all or any
portion of the assets, business or properties of any other
entity.
(c)
Governing Documents . Amend the Target Charter or the
Target Bylaws or the articles of incorporation or bylaws (or
equivalent documents) of Target or any Target
Subsidiary.
(d)
Contracts . Except in the ordinary course of business
consistent with past practice or as otherwise permitted under this
Section 5.01 and except as disclosed in the Target
Disclosure Letter, enter into or terminate any Target Material
Contract or amend or modify in any material respect any of its
existing Target Material Contracts.
(e)
Insurance . Allow any insurance policy in effect as of
the date hereof to be modified, lapse or expire prior to Closing or
fail to file any claim, notice or report that Target would normally
file in the ordinary course of business or as reasonably requested
by Acquiror.
20
(f)
Future Obligations . Grant any severance or
termination pay to any director, officer or consultant, pay any
special bonus or any remuneration to any director, officer or
consultant, the terms of which would require any payments to be
made post-Closing.
(g)
Employees . Hire any employees.
(h)
Litigation . Commence a lawsuit other than for the
routine collection of bills, to protect a material right, or for a
breach of this Agreement.
(i)
Dispositions . Sell, license or otherwise dispose of
any Target Properties.
(j)
Liens . Encumber or permit any liens on any Target
Properties.
(k)
Notices . Deliver a default notice to any tenant
without simultaneously delivering a copy of such notice to
Acquiror.
(l)
Indebtedness . Incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt
securities or guarantee any debt securities of others, other than
draw-downs under credit arrangements or loan facilities existing on
the date of this Agreement, and other than the Short Term
Loans.
(m)
Taxes . Except as provided in Section
6.02(i)(xix) , make any Tax election, change any Tax election,
adopt any Tax accounting method, change any Tax accounting method,
file any Tax return (other than any estimated Tax returns, payroll
Tax returns or sales Tax returns) or any amendment to a Tax return,
enter into any closing agreement, settle any Tax claim or
assessment, or consent to any Tax claim or assessment.
(n)
Target Properties Leases . (i) Enter into any new
leases in excess of 5,000 square feet with respect to a Target
Property, (ii) modify or change in any material respect any
existing Target Property Lease in excess of 5,000 square feet or
(iii) terminate any Target Property Lease in excess of 5,000 square
feet. For purposes of this Section 5.01(n) , consent
of Acquiror may be assumed in the event Target has not received a
response from Acquiror within two (2) Business Days of
Target’s request for consent.
(o)
Other Actions . Authorize or enter into any agreement
or otherwise agree or commit to do any of the foregoing.
5.02.
Conduct of Acquiror .
From the date
hereof until the Effective Time, except as expressly contemplated
or permitted by this Agreement, without the prior written consent
of Target, not to be unreasonably withheld, Acquiror will not, and
will cause each of the Acquiror Subsidiaries not to:
21
(a)
Interference or Delay . Take, or cause to be taken,
any action that would interfere with the consummation of the
Transaction and other transactions contemplated by this Agreement,
or delay the consummation of such transactions.
(b)
Adverse Actions . Take any action that is intended or
is reasonably likely to result in (x) any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to
the Effective Time or (y) any of the conditions to the
Transaction set forth in Article IX not being
satisfied.
(c)
Other Actions . Authorize or enter into any agreement
or otherwise agree or commit to do any of the foregoing.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
6.01.
Target Disclosure Letter .
Concurrently with
the execution and delivery of this Agreement, Target is delivering
to Acquiror a disclosure letter with numbered sections
corresponding to the relevant sections in this Agreement (the
“ Target Disclosure
Letter ”). Any exception, qualification,
limitation, document or other item described in any provision,
subprovision, section or subsection of any Section of the Target
Disclosure Letter with respect to a particular representation or
warranty contained in Section 6.02 herein shall be deemed to
be an exception or qualification with respect to all other
representations or warranties contained in Section 6.02
herein to which the relevance of such item is reasonably
apparent. Nothing in the Target Disclosure Letter is intended
to broaden the scope of any representation or warranty contained in
Section 6.02 herein.
6.02.
Representations and Warranties of Target .
Subject to the
exceptions and qualifications set forth in the Target Disclosure
Letter, Target hereby represents and warrants to Acquiror, Acquiror
OP and Merger Subsidiary that:
(a)
Existence; Good Standing; Authority; Compliance with Law
.
(i)
Target is a corporation duly incorporated, validly existing under
the laws of the State of Maryland and in good standing with the
SDAT. Target is duly qualified or licensed to do business as
a foreign entity and is in good standing under the laws of any
other jurisdiction in which the character of the properties owned,
leased or operated by it therein or in which the transaction of its
business makes such qualification or licensing necessary.
Target has all requisite corporate power and authority to own,
operate, lease and encumber the Target Properties and carry on its
business as now conducted.
22
(ii)
Section 6.02(a)(ii) of the Target Disclosure Letter sets
forth as of the Closing Date: (i) each Subsidiary of Target (each,
a “ Target Subsidiary
, ” and collectively, the “ Target Subsidiaries ”); (ii) the
legal form of each Target Subsidiary, including the state of
formation; and (iii) the identity and ownership interest of each of
the Target Subsidiaries that is held by Target or a Target
Subsidiary.
(iii)
Each of the Target Subsidiaries is duly organized, validly existing
and is in good standing under the laws of the State of
Maryland. Each of the Target Subsidiaries is duly qualified
or licensed to do business and in good standing under the laws of
each jurisdiction in which the character of the properties owned,
leased or operated by it therein or in which the transaction of its
business makes such qualification or licensing
necessary.
(iv)
Except as set forth in Section 6.02(a)(iv) of the Target
Disclosure Letter, as of the Closing Date all of the outstanding
voting securities or other interests of each of the Target
Subsidiaries have been validly issued and are (i) fully paid and
nonassessable and (ii) owned, directly or indirectly, 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),
and all voting interests in each of the Subsidiaries that is a
partnership, joint venture, limited liability company or trust
which are owned by Target, by one of the Target Subsidiaries or by
Target and one of the Target 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).
(v)
Target has previously made available to Acquiror true and complete
copies of the (i) Target Charter and the Target Bylaws, each as
amended through the date hereof, (ii) minute books of meetings of
the Target’s Board and (iii) organizational documents of
the Target Subsidiaries, each as amended through the date
hereof.
(vi)
Section 6.02(a)(vi) of the Target Disclosure Letter sets
forth as of the date hereof each Subsidiary of Target; the legal
form of such Subsidiary, including the state of formation, and the
identity and ownership interest of each of the Subsidiaries held
directly or indirectly by Target.
(b)
Capitalization .
(i)
The authorized shares of capital stock of Target consist of 100,000
shares of Target Class A Common Stock, of which, as of September
30, 2006, 15,000 were issued and outstanding, 300,000 shares of
Target Class B Common Stock, of which, as of September 30, 2006,
75,000 were issued and outstanding and 600 shares of Target Class C
Common Stock, of which, as of September 30, 2006, none are issued
and outstanding. As of the date of this Agreement, there were
no shares of Target Common Stock reserved for issuance or required
to be reserved for issuance. Section 6.02(b)(i) of the
Target Disclosure Letter sets forth a list of the Target
Stockholders and the shares of
23
Target Common Stock owned by each. There
are no other classes of stock of Target other than Target Common
Stock.
(ii)
Section 6.02(b)(ii) of the Target Disclosure Letter sets
forth a list of all secured and unsecured debt instruments
outstanding as of the date hereof of Target and/or relating to the
Target Properties and their outstanding principal amounts as of
December 1, 2006. Target has no outstanding bonds,
debentures, notes or other similar obligations the holders of which
have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the
Target Stockholders on any matter.
(iii)
As of the Effective Time, there will not be outstanding any share
appreciation rights, dividend equivalent rights, performance
awards, restricted stock unit awards or “phantom”
shares applicable to Target or Target Subsidiaries.
(iv)
Except as set forth in Section 6.02(b)(iv) of the Target
Disclosure Letter, there are no agreements or understandings to
which Target is a party with respect to shares of Target Common
Stock, nor does Target have knowledge, as of the date of this
Agreement, of any third party agreements or understandings with
respect to the voting of any such shares.
(v)
Immediately prior to the Closing, each Target Subsidiary shall be
wholly-owned by Target except as otherwise shown on Schedule
2. Neither Target nor any Target Subsidiary has any agreement
or commitment to sell or transfer any of its stock, partnership or
ownership interests, as the case may be.
(c)
Authority Relative to this Agreement .
(i)
Target has all necessary corporate power and authority to execute
and deliver this Agreement and to consummate the Transaction.
No other corporate proceedings on the part of Target is necessary
to authorize this Agreement or to consummate the Transaction (other
than, with respect to the Merger and this Agreement, to the extent
required by Law, the Stockholder Approval). This Agreement
has been duly and validly executed and delivered by Target and,
assuming due authorization, execution and delivery hereof by each
of Acquiror, Acquiror OP and Merger Subsidiary, constitutes a
valid, legal and binding agreement of Target, enforceable against
Target in accordance with and subject to its terms and conditions,
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and
similar Laws of general applicability relating to or affecting
creditors’ rights or by general equitable
principles.
(ii)
The Target Board has duly and validly authorized the execution and
delivery of this Agreement, declared the Transaction advisable and
approved, subject to the approval of the Target Stockholders, the
Transaction, and no other actions are required to be taken by the
Target Board for the consummation of the Transaction. The
Target Board has directed that this Agreement be submitted to the
Target Stockholders for their approval to the extent required by
Law and the Target
24
Charter and Target Bylaws. The Merger
requires the affirmative vote of a two-thirds majority of all votes
entitled to be cast by the holders of all outstanding Target Common
Stock as of the record date for the Target Stockholder Meeting (the
“ Stockholder
Approval ”). The Stockholder Approval is the
only vote of the holders of any class or series of stock of Target
necessary to approve the Transaction.
(d)
No Conflict; Required Filings and Consents .
(i)
Except as set forth in Section 6.02(d)(i) of the Target
Disclosure Letter, the execution and delivery by Target of this
Agreement does not, and the performance of its obligations
hereunder will not, (A) conflict with or violate the
organizational documents of Target or Target Subsidiaries,
(B) assuming that all consents, approvals, authorizations and
other actions described in subsection (ii) have been obtained
and all filings and obligations described in subsection (ii)
have been made, conflict with or violate any domestic statute, law,
ordinance, regulation, rule, code, executive order, injunction,
judgment, decree or other order (“ Law ”) applicable to Target and
Target Subsidiaries or by which any Target Property or other
property or asset of Target or any of the Target Subsidiaries is
bound or affected, or (C) result in any breach of or
constitute a default (or an event which, with notice or lapse of
time or both, would become a default) under, or give to others any
right of termination, amendment, acceleration or cancellation of,
or result in the creation of a Lien or other encumbrance on any
Target Property or other property or asset of Target or any of the
Target Subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation, except, with respect to clauses
(B) and (C), for any such conflicts, violations, breaches, defaults
or other occurrences that would not (x) prevent or delay
consummation of the Transaction or otherwise prevent it from
performing its obligations under this Agreement or (y) have a
Target Material Adverse Effect.
(ii)
Except as set forth in Section 6.02(d)(ii) of the Target
Disclosure Letter, the execution and delivery by Target of this
Agreement does not, and the performance of its obligations
hereunder will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental
Authority except (A) for the filing of the Articles of Merger
with, and the acceptance for record of the Articles of Merger by,
the SDAT and (B) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not (x) prevent or delay consummation of the
Transaction or otherwise prevent it from performing its obligations
under this Agreement or (y) have a Target Material Adverse
Effect.
(e)
Permits; Compliance . Except as set forth in
Section 6.02(e) of the Target Disclosure Letter, to the
knowledge of Target, each of Target and the Target Subsidiaries is
in possession of all franchises, grants, authorizations, licenses,
permits, consents, certificates, approvals and orders of any
Governmental Authority necessary for each of Target or the Target
Subsidiaries to own, lease and operate the Target Properties or to
carry on its business as it is now being conducted (the “
Applicable Permits
”),
25
except where the failure to have, or the
suspension or cancellation of, any of the Applicable Permits could
not reasonably be expected to have a Target Material Adverse
Effect. As of the date hereof, no suspension or cancellation
of any of the Applicable Permits is pending or, to the knowledge of
Target, threatened, except where the failure to have, or the
suspension or cancellation of, any of the Applicable Permits could
not reasonably be expected to have a Target Material Adverse
Effect. Neither Target nor any of the Target Subsidiaries is
in conflict with, or in default, breach or violation of,
(i) any Law applicable to Target or any of the Target
Subsidiaries or by which any of the Target Properties or assets is
bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, Applicable Permit,
franchise or other instrument or obligation to which Target or any
of the Target Subsidiaries is a party or by which Target or any of
the Target Subsidiaries or any of their properties or assets is
bound, except for any such conflicts, defaults, breaches or
violations that could not reasonably be expected to have a Target
Material Adverse Effect.
(f)
Litigation . Except (i) as listed in Section
6.02(f) of the Target Disclosure Letter, or (ii) for suits,
claims, Actions, proceedings or investigations arising in the
ordinary course of business of Target and the Target Subsidiaries
which are adequately covered by insurance (it being understood that
litigation (A) arising from or related in any way to Hazardous
Materials or (B) related to any landlord/tenant rent collection
proceeding or regarding Target Properties Leases in excess of 5,000
square feet shall not be considered in the ordinary course of
business), there is no suit, Action pending or, to Target’s
knowledge, threatened against Target or any of the Target
Subsidiaries or any of the Target Properties that could reasonably
have a Target Material Adverse Effect or that question the validity
of this Agreement or any action to be taken by Target in connection
with the consummation of the Transaction. None of Target or
the Target Subsidiaries is subject to any order, judgment, writ,
injunction or decree by any Governmental Authority, except as could
not reasonably be expected to have a Target Material Adverse
Effect.
(g)
Target Properties and Target Properties Leases .
(i)
Prior to the Closing Date, the Target Properties shall be owned by
the entities shown on Schedules 1, 2 and 4 hereof and no
other person will have any ownership interest in or right to share
in the profits of any Target Property.
(ii)
Target has provided Acquiror all policies of title insurance or
updates or endorsements that are in the possession of Target with
respect to the Target Properties, and no claim has been made
against any such policy that has not been resolved and, to
Target’s knowledge, there are no facts or circumstances which
would constitute the basis for such a claim. Except as set
forth in Section 6.02(g)(ii) of the Target Disclosure
Letter, to Target’s knowledge and subject to matters of
record, there are no material exceptions not shown on such title
insurance policies.
(iii)
All buildings currently under construction by the Target Group on
the Target Properties, all construction projects and building
maintenance and
26
improvements currently ongoing, all tenant
improvements required to be performed under the Target Properties
Leases prior to the commencement of the initial term of a Target
Properties Lease or an existing expansion or renewal thereof that
have not been so completed as of the date of this Agreement (and
have been designated as Pre-LOI TI Work and other work), and all
properties currently under contract for acquisition as of the date
of this Agreement by the Target or Target Subsidiaries are listed
as such in Section 6.02(g)(iii) of the Target Disclosure
Letter, other than routine building maintenance in the ordinary
course of business not exceeding $2,500.
(iv)
Except as provided in Section 6.02(g)(iv) of the Target
Disclosure Letter, none of the Target Group (A) has received
written notice of any violation of any Law issued by any
Governmental Authority, (B) has received written notice of any
structural defects relating to any Target Property which would
reasonably be expected to have a Target Material Adverse Effect, or
(C) has received written notice of any physical damage to any
Target Property which would, individually or in the aggregate,
reasonably be expected to have a Target Material Adverse Effect for
which there is not insurance in effect covering the cost of the
restoration and the loss of revenue.
(v)
Except as set forth in Section 6.02(g)(v) of the Target
Disclosure Letter, no tenant or third party has any option to
purchase any of the Target Properties, rights of first refusal or
other agreements to purchase or sell any Target Properties, other
than as set forth in the Target Properties Leases.
(vi)
Except (A) as set forth in Section 6.02(g)(vi) of the Target
Disclosure Letter, (B) for the Target Properties Leases and (C) for
secured loan documents entered into in the ordinary course of
business, there are no written agreements which restrict the Target
Group from transferring any of the Target Properties, and none of
the Target Properties is subject to any restriction on the sale or
other disposition thereof or on the financing or release of
financing thereon.
(vii)
To the knowledge of Target, (i) no certificate, permit or license
from any Governmental Authority having jurisdiction over any of the
Target Properties or any agreement, easement or other right which
is necessary to permit the lawful use and operation of the
buildings and improvements on any of the Target Properties or which
is necessary to permit the lawful use and operation of all
driveways, roads, parking areas, out lots, and other means of
egress and ingress to and from any of the Target Properties has not
been obtained and is not in full force and effect, and there is no
pending threat of modification or cancellation of any of the same;
and (ii) no written notice of any violation of any federal, state
or municipal law, ordinance, order, regulation or requirement
affecting any portion of any of the Target Properties has been
received by any of the Target Group with respect to the Target
Properties from any Governmental Authority and none of the Target
Properties has received notice that any of the Target Properties
are in violation of any such federal, state or municipal law,
order, ordinance, regulation or requirement, including, without
limitation, the Americans with Disabilities Act, except for such
violations that would not have a Target Material Adverse Effect on
the value of any of the Target Properties, individually or in the
aggregate.
27
(viii)
Except as set forth in Section 6.02(g)(viii) of the Target
Disclosure Letter, there are no condemnation proceedings pending,
or to Target’s Knowledge, threatened, against any of the
Target Properties.
(ix)
None of the Target Group has received any notice to the effect that
(A) any betterment assessments have been levied against, or
rezoning proceedings are pending or threatened with respect to, any
of the Target Properties or (B) any zoning, building or similar
law, code, ordinance, order or regulation is or will be violated by
the continued maintenance, operation or use of any buildings or
other improvements on any of the Target Properties or by the
continued maintenance, operation or use of the parking
areas.
(x)
Section 6.02(g)(x) of the Target Disclosure Letter sets
forth a true, accurate and complete rent roll for each of the
Target Properties (the “ Rent
Roll ”) as of the date specified in the Target
Disclosure Letter. On the Closing Date, Section
6.02(g)(x) of the Target Disclosure Letter will be updated by
Target to reflect the Rent Roll as of two (2) Business Days prior
to the Closing Date. Section 6.02(g)(x) of the Target
Disclosure Letter sets forth a report listing all tenant
delinquencies (the “ Delinquency Report ”) as of the
date specified in the Target Disclosure Letter. On the
Closing Date, Section 6.02(g)(x) of the Target Disclosure
Letter will be updated by Target to reflect the Delinquency Report
as of two (2) Business Days prior to the Closing Date. Except
as noted in Section 6.02(g)(x) of the Target Disclosure
Letter, to Target’s knowledge, there is no violation of any
co-tenancy, exclusive or restriction listed in such Section
6.02(g)(x) of the Target Disclosure Letter.
(xi)
Except as set forth in the Target Disclosure Letter, Target has
previously delivered or made available to Acquiror a true, complete
and correct copy of all Target Properties Leases, tenancies or
other agreements for all or any portion of the Target Properties
listed on the Rent Roll, all amendments, modifications,
assignments, subleases to which any member of the Target Group has
consented and supplements thereto and all guarantees with respect
thereto.
(xii)
Each of the Target Properties Leases is valid and subsisting and in
full force and effect and has not been amended, modified or
supplemented. Except as noted in Section 6.02(g)(xii)
of the Target Disclosure Letter, to the knowledge of Target, other
than as set forth in the Target Properties Leases, no tenant under
a Lease has the right to terminate such lease prior to the
scheduled expiration thereof. Except as set forth in
Section 6.02(g)(xii) of the Target Disclosure Letter, none
of the Target Group has received any written notice from any tenant
under a Target Property Lease of more than 5,000 square feet of any
intention to vacate.
(xiii)
Except as set forth in Section 6.02(g)(xiii) of the Target
Disclosure Letter, no member of the Target Group has received
written notice from any tenant under a Lease of any offset, defense
or claim against rent payable by it or other performance of
obligations due from it under its lease.
28
(xiv)
Except as set forth in Section 6.02(g)(xiv) of the Target
Disclosure Letter, to Target’s knowledge and without
independent investigation, no tenant under a Lease is currently in
default under any monetary provision of its lease nor is any tenant
under a Lease currently in material default under any non-monetary
provision of its lease, and no such tenant is in arrears in the
performance of any monetary obligation required of it under its
lease. Except as set forth in Section 6.02(g)(xiv) of
the Target Disclosure Letter, Target, to Target’s knowledge
and without independent investigation, is not aware of any facts or
circumstances which with the passage of time and/or notice would
constitute a default by any tenant under a Lease.
(xv)
Except as set forth in Section 6.02(g)(xv) of the Target
Disclosure Letter, Target has received no written notice stating
that any tenant leasing in excess of 5,000 square feet under a
Lease is insolvent or that any such tenant is unable to perform any
or all of its material obligations under its lease.
(xvi)
Except as set forth in Section 6.02(g)(xvi) of the Target
Disclosure Letter, no tenant under any of the Target Properties
Leases, or any guarantor, has asserted any claim of which the
Target Group has received written notice which would materially
affect the collection of rent from such tenant and the Target Group
has not received written notice of any material default or breach
on the part of the Target Group under any of the Target Properties
Leases which has not been cured within the applicable cure
period.
(xvii)
Section 6.02(g)(xvii) of the Target Disclosure Letter sets
forth a list of all written commitments made by the Target Group to
enter into leases of 5,000 square feet or more of any of the Target
Properties or any portion thereof which has not yet been reduced to
a written lease, including a description of the right of any third
party broker to any outstanding brokerage or other commission
incidental thereto and all other financial terms, all in reasonable
detail. Section 6.02(g)(xvii) of the Target Disclosure
Letter also sets forth a complete list of all brokerage or other
commissions owed in whole or part as of the date hereof by the
Target Group relating to the Target Properties. Target has
provided true and correct copies of all such written commitments to
Acquiror.
(xviii) Except as
set forth in Section 6.02(g)(xviii) of the Target Disclosure
Letter and to the knowledge of Target, all Target Properties Leases
are valid and effective in accordance with their respective terms,
and there is not, under any of such Target Properties Leases, any
material existing default or any event which with notice or lapse
of time or both would constitute such a default, nor do any of such
Target Properties Leases contain any provision which would preclude
the Surviving Entity, a Target Subsidiary or a NPI Entity from
occupying and using the leased premises for the same purposes and
upon substantially the same rental and other terms as are
applicable to the occupation and current use by the Target
Group.
(xix)
Section 6.02(g)(xix) of the Target Disclosure Letter sets
forth a list of all of the letters of credit with respect to which
Target has any liability,
29
classified as (A) those letters of credit for
which Acquiror will substitute letters of credit and if such
letters of credit are drawn upon, Target shall reimburse Acquiror
the amount of such draw (the “ Target Properties Escrow LCs ”),
(B) those letters of credit for which Acquiror will substitute
letters of credit and assume all obligations thereunder (the
“ Target Properties
LCs ”) and (C) letters of credit relating to
properties other than Target Properties (the “ Non-Target Properties Letters of Credit
”).
(xx)
Except as set forth in Section 6.02(g)(xx) of the Target
Disclosure Letter, Target Group has not received any notices of
threatened claims regarding the Target Properties.
(xxi)
A true and correct copy of the Acquisition Agreement has been
supplied to Target and there have been no amendments thereof.
Miles & Stockbridge P.C. is the escrow agent under such
Acquisition Agreement and is holding the $800,000 Sewer System
Credit (as such term is defined therein) pursuant to Section 6.3 of
such Acquisition Agreement and none of the Sewer System Credit has
been spent. Work in connection with the Sewer System (as such
term is defined in the Acquisition Agreement) has been performed by
Target or Target Subsidiaries and the cost of such work incurred
since September 6, 2006 shall be determined prior to
Closing.
(h)
Intellectual Property . Except as would not have a
Target Material Adverse Effect, (i) the conduct of business of
the Target Group as currently conducted with respect to the Target
Properties does not, to Target’s knowledge, infringe the
Intellectual Property rights of any third parties and
(ii) with respect to Intellectual Property owned by or
licensed to the Target Group and material to the Target Properties,
the Target Group has not received any notice that it does not have
the right to use such Intellectual Property in the continued
operation of its business as currently conducted.
(i)
Taxes .
(i)
There are no Liens for Taxes upon any assets of the Target Group,
except for Permitted Liens.
(ii)
Each of the Target Group has timely filed with the appropriate
taxing authority all Tax Returns required to be filed by it prior
to the date hereof. Each such Tax Return is complete and
accurate in all material respects. All Taxes have been
properly reflected in the statements of operations of the Target
Group, and have been paid prior to the imposition of any
penalty. None of the Target Group has executed or filed with
the IRS or any other taxing authority any agreement now in effect
extending the period for assessment or collection of any Tax.
Except as set forth in Section 6.02(i)(ii) of the Target
Disclosure Letter, none of the Target Group is a party to any
pending action or proceedings by any taxing authority for
assessment or collection of any Tax, and no claim for assessment or
collection of any Tax has been asserted against it. Except as
set forth in the Target Disclosure Letter, true and complete copies
of all federal, state and local income or franchise Tax Returns
filed by each member of the Target Group with respect to taxable
years commencing on or after January 1, 2003 have
30
been delivered to Acquiror. No claim has
been made in writing by a Governmental Authority in a jurisdiction
where the Target Group does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction. There is no dispute or
claim concerning any Tax liability of the Target Group, (A) claimed
or raised by any taxing authority in writing or (B) as to which the
Target Group has knowledge. No issues have been raised in
writing in any examination by any taxing authority with respect to
the Target Group which, by application of similar principles,
reasonably could be expected to result in a material deficiency or
increase in Tax for any other period not so examined. Section
6.02(i)(ii) of the Target Disclosure Letter lists all federal
and state income Tax Returns filed with respect to the Target Group
for taxable periods commencing on or after January 1, 2003 that
have been audited, and indicates those Tax Returns, if any, that
currently are the subject of audit.
(iii)
Target and the Stockholders of Target as of April 1, 1998 made a
valid election for Target to be treated as an “S
corporation”, as that term is defined in Section 1361(a) of
the Code, and such election will be in effect at the Closing
Date. There are no grounds for the revocation of any such
election and no such election will be revoked retroactively or
otherwise. Target has been an S corporation from
April 1, 1998 through the date hereof. Neither Target
nor any of the stockholders of Target has taken any action that
would cause, or would result in, the termination of the S
corporation status of the Target.
(iv)
Section 6.02(i)(iv) of the Target Disclosure Letter contains
a copy of the Target’s election to be treated as an S
corporation, which was timely filed with the IRS and has not been
superseded by any subsequent filing. The IRS has not sent any
correspondence to Target questioning the Target’s status as
an S corporation.
(v)
Target (A) shall be taxed as an S corporation through the Closing
Date and has complied (and will comply) with all applicable
provisions of the Code relating to an S corporation through the
Closing Date, (B) has operated, and intends to continue to operate,
in such a manner as to qualify as an S corporation from 1998 and
through Closing, and (C) has not taken or omitted to take any
action which would reasonably be expected to result in a challenge
to its status as an S corporation during such time period, and, to
the knowledge of Target, no such challenge is pending or
threatened.
(vi)
Target, for all taxable years commencing as of April 1, 1998, was
eligible to and did validly elect to be taxed as an S corporation
for federal income tax purposes and at all times thereafter
continued such election and continued to be so eligible to be taxed
as an S corporation for federal income tax purposes. The
“built-in gain”, as of December 31, 2005, of the assets
owned indirectly by Target as listed on Section 6.02(i)(vi)
of the Target Disclosure Letter is true, accurate and
complete.
(vii)
Target shall not revoke its election to be taxed as an S
corporation within the meaning of Sections 1361 and 1362 of the
Code. Target shall not
31
