UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 3, 2005
BRANDYWINE
REALTY TRUST
(Exact name of issuer as specified in charter)
| MARYLAND (State or Other Jurisdiction of Incorporation or Organization) |
1-9106 (Commission file number) |
23-2413352 (I.R.S. Employer Identification Number) |
401 Plymouth Road, Suite 500
Plymouth Meeting, Pennsylvania 19462
(Address of principal executive offices)
(610) 325-5600
(Registrant’s
telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On October 3, 2005, we, together with our operating subsidiary, Brandywine Operating Partnership, L.P (“Brandywine OP”), entered into an agreement and plan of merger (the “Merger Agreement”) that provides for our acquisition of Prentiss Properties Trust (“Prentiss”) and its operating subsidiary, Prentiss Properties Acquisition Partners, L.P. (“Prentiss OP”). In the merger, each Prentiss common share (a “Prentiss Common Share”) will be converted into the right to receive 0.69 of a Brandywine common share (a “Brandywine Common Share”) and $21.50 in cash, subject to adjustment if a pre-closing cash dividend is paid as described below (the “Per Share Merger Consideration”). Cash will be paid instead of fractional shares. The exchange ratio is not subject to change and there is no “collar” or minimum trading price for the shares of Prentiss or Brandywine. In the merger, each unit of a limited partnership interest in Prentiss OP (“Prentiss OP Units”) will, at the option of the holder, be converted into Prentiss Common Shares with the right to receive the Per Share Merger Consideration or 1.3799 Class A Units of Brandywine OP (“Brandywine Class A Units”), subject to adjustment if the pre-closing cash dividend described below is paid. In addition, each series D preferred share of Prentiss outstanding at closing of the merger will be converted into one newly created Brandywine series E preferred share.
The total consideration payable in the merger (including the proceeds from the sale of the Prudential Properties described below and excluding transaction and severance expenses that will be incurred in connection with the merger) will be approximately $3.2 billion, consisting of $2.1 billion in cash and assumption of Prentiss debt and approximately 35.5 million Brandywine Common Shares. As of October 3, 2005, (i) 46,328,782 Prentiss common shares were outstanding; (ii) 2,823,583 Prentiss common shares were reserved for issuance upon conversion of the Prentiss series D preferred shares; and (iii) 1,797,479 Prentiss common shares were reserved for issuance upon exchange of Prentiss OP Units held by persons other than Prentiss.
As part of our merger transaction, we and Prentiss have entered into agreements with The Prudential Insurance Company of America (“Prudential”) that provide for the acquisition by Prudential (either on the day prior to, or the day of, the closing of the merger) of Prentiss properties that contain approximately 4.32 million net rentable square feet (“Prudential Properties”) for total consideration of approximately $747.7 million. If the Prudential Properties are sold on the day prior to the closing of the merger, then the Prentiss Board would declare a cash dividend that would be payable to holders of Prentiss Common Shares of record on such date and the cash portion of the Per Share Merger Consideration would be reduced by the per share amount of such dividend.
The table below identifies the Prudential Properties.
Washington, D.C.
| Prudential Property | Location | Net Rentable Square Feet |
| AMS BUILDING | 12601 Fair Lakes Circle Fairfax, VA |
263,990 |
| WILLOW OAKS I-III | 8260 & 8280 Willow Oaks Corp Drive Fairfax, VA |
570,076 |
| Total | 834,066 |
-2-
Southern California
| Prudential Property | Location | Net Rentable Square Feet |
| PLAZA I | Palomar Oaks Way Carlsbad, CA |
43,389 |
| PLAZA II | Palomar Oaks Way Carlsbad, CA |
45,645 |
| LA INDUSTRIAL | Torrance, CA | 1,252,708 |
| DEL MAR GATEWAY | 11988 El Camino Real San Diego, CA |
163,969 |
| EXECUTIVE CENTER DEL MAR | El Camino Real San Diego, CA |
113,102 |
| HIGH BLUFF RIDGE AT DEL MAR | High Bluff Drive Del Mar, CA |
157,859 |
| CARLSBAD PACIFICA | 5050 Avinida Encinas Carlsbad, CA |
49,080 |
| CARLSBAD I | 701 & 703 Palomar Airport Road Carlsbad, CA |
48,850 |
| CARLSBAD II | 701 & 703 Palomar Airport Road Carlsbad, CA |
41,285 |
| CARLSBAD III | 701 & 703 Palomar Airport Road Carlsbad, CA |
39,862 |
| CAMPUS OFFICE | La Place Court Carlsbad, CA |
45,173 |
| CAMPUS INDUSTRIAL | La Place Court Carlsbad, CA |
112,713 |
| DEL CAMPO | 16868 Via del Campo Court Rancho Bernardo, CA |
86,952 |
| PACIFIC CORPORATE CENTER | 5993 Avenida Encinas Carlsbad, CA |
68,177 |
| Total | 2,268,762 |
Northern California
| Prudential Property | Location | Net Rentable Square Feet |
| LAKE MERRIT TOWER | Lake Merritt Tower I Oakland, CA |
204,277 |
| 5500 GREAT AMERICA PARKWAY | 5500 Great America Parkway Santa Clara, CA |
219,721 |
| 5480 GREAT AMERICA PARKWAY | 5480 Great America Parkway Santa Clara, CA |
87,329 |
| Total | 511,327 |
-3-
Denver
| Prudential Property | Location | Net Rentable Square Feet |
| HIGHLAND COURT | 9000 East Nichols Engelwood, CO |
92,866 |
| PACIFICARE | 6455 South Yosemite St. Engelwood, CO |
198,365 |
| CARRARA PL | 6200 South Syracuse Way Engelwood, CO |
234,222 |
| ORCHARD I&II | Greenwood Plaza Blvd Engelwood, CO |
105,779 |
| PANORAMA | 9200 East Mineral Avenue Engelwood, CO |
79,175 |
| Total | 710,407 |
Land
| Prudential Property | Location | Buildable Square Feet |
| GATEWAY AT TORREY HILLS | Adjacent to 5500 Great America Parkway San Diego, CA |
200,000 |
| GREAT AMERICAN PARKWAY | Located in Del Mar Heights Santa Clara, CA |
230,000 |
| Total | 430,000 |
Total Square Feet
| Total | 4,754,562 |
Our agreement with Prudential includes a limited right of Prudential to change the composition of the of the portfolio of Prentiss properties that it will purchase at the closing.
The exchange of Prentiss Common Shares in the merger will be a taxable transaction for U.S. federal income tax purposes.
Upon completion of the merger, Michael V. Prentiss, Chairman of the Board of Prentiss, and Thomas F. August, President, Chief Executive Officer and a trustee of Prentiss, will become trustees of Brandywine. We anticipate that each of Messrs. Prentiss and August, together with Anthony A. Nichols, Sr., a trustee of Brandywine and our former executive Chairman, will provide transitional and consulting services to us following the merger. Upon our entry into an agreement with any one or more of these individuals, we will file a copy of the agreement with the Securities and Exchange Commission.
Messrs. Prentiss and August who collectively own approximately 4.5% of the outstanding Prentiss Common Shares have entered into voting agreements with us pursuant to which they have agreed to vote their Prentiss Common Shares in favor of the merger.
-4-
Completion of the merger is subject to customary closing conditions, including, but not limited to, the approval by the shareholders of Brandywine and Prentiss. The Merger Agreement contains customary termination rights for both Brandywine and Prentiss and provides that upon termination of the agreement in certain circumstances, Prentiss or Brandywine would be required to pay liquidated damages.
The description of the Merger Agreement and related transactions does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement and the other agreements that we have attached to this Form 8-K as exhibits. Except for their status as contractual documents that establish and govern the legal relations among the parties with respect to the transactions described above, the Merger Agreement is not intended to be a source of factual, business or operational information about the parties. Representations and warranties may be used as a tool to allocate risks between the respective parties to the Merger Agreement, including where the parties do not have complete knowledge of all facts, instead of establishing these matters as facts. Furthermore, they may be subject to standards of materiality applicable to the contracting parties, which may differ from those applicable to investors. The assertions embodied in such representations and warranties are qualified by information contained in disclosure schedules that the parties exchanged in connection with signing the Merger Agreement and such other agreements. Accordingly, investors and security holders should not rely on such representations and warranties as characterizations of the actual state of facts or circumstances, since they were only made as of the date of the Merger Agreement and are modified in important part by the underlying disclosure schedules in the Merger Agreement and such other agreements. Moreover, information concerning the subject matter of such representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in Brandywine’s public disclosures.
Additional Information about the Merger and Where to Find It
Brandywine and Prentiss will file with the Securities and Exchange Commission a registration statement on Form S-4 that will contain a joint proxy statement/prospectus and other documents regarding the mergers provided for in the Merger Agreement. Investors and security holders are urged to read the proxy statement/prospectus when it becomes available, because it will contain important information about Brandywine and Prentiss and the proposed mergers. A definitive joint proxy statement/prospectus will be sent to holders of Brandywine Common Shares and Prentiss Common Shares seeking their approval of the transaction. Investors and security holders may obtain a free copy of the definitive joint proxy statement/prospectus (when available) and other documents filed by Brandywine and Prentiss with the Securities and Exchange Commission at the Securities and Exchange Commission’s web site at www.sec.gov. The definitive proxy statement/prospectus and other relevant documents may also be obtained free of charge by directing a request to Brandywine Realty Trust, 401 Plymouth Road, Suite 500, Plymouth Meeting, PA 19462, Attention Investor Relations, (telephone 610-325-5600) or Prentiss Properties Trust, 3890 W. Northwest Highway, Suite 400, Dallas, Texas 75220, Attention: Investor Relations (telephone 214-654-0886).
Brandywine and Prentiss and their respective trustees and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Brandywine and Prentiss in connection with the merger. Information about Brandywine and its trustees and executive officers, and their ownership of Brandywine securities, is set forth in the proxy statement for Brandywine’s 2005 Annual Meeting of Shareholders, which was filed with the SEC on April 1, 2005. Information about Prentiss and its trustees and executive officers, and their ownership of Prentiss securities, is set forth in the proxy statement for the 2005 Annual Meeting of Shareholders of Prentiss, which was filed with the SEC on April 5, 2005. Additional information regarding the interests of those persons may be obtained by reading the proxy statement/prospectus when it becomes available.
-5-
This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Item 3.02 Unregistered Sales of Equity Securities.
As indicated in Item 1.01, Brandywine OP may issue Brandywine Class A Units to holders of Prentiss OP Units in the merger. Brandywine Class A Units are subject to redemption at the option of the holder for a cash payment equal to the then market price of a Brandywine Common Share. We may elect to satisfy the redemption price of a Brandywine Class A Unit by issuing one Brandywine Common Share in lieu of the cash otherwise payable. Any Brandywine Class A Units would be issued in a transaction exempt from the registration requirements of the Securities Act of 1933 (the “Act”) by virtue of the exemption provided for in Section 4(2) of the Act.
Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.
(i) The Merger Agreement provides for Michael V. Prentiss and Thomas F. August to become members of our board of trustees upon consummation of the merger. In the Merger Agreement we have agreed to nominate each of Messrs. Prentiss and August for election to our board at each of our annual shareholders meetings in 2006 and 2007. Each of Messrs. Prentiss and August is currently a member of the board of trustees and an executive officer of Prentiss.
(ii) As part of our combination of the management teams of Brandywine and Prentiss, we expect to implement the following changes within our management ranks: (i) Robert K. Wiberg (age 49), currently an Executive Vice President with Prentiss, will become Executive Vice President of Operations of Brandywine; (ii) Gregory S. Imhoff (age 48), currently Senior Vice President and Chief Administrative Officer of Prentiss, will become Senior Vice President and Chief Administrative Officer of Brandywine; (iii) Timothy M. Martin (age 34), currently Brandywine’s Vice President and Chief Accounting Officer, will become Vice President, Finance and Treasurer; and (iv) Scott W. Fordham (age 37), currently Senior Vice President and Chief Accounting Officer of Prentiss, will become Vice President and Chief Accounting Officer of Brandywine. We anticipate that the these management changes will become effective upon closing of the merger. As of the date of this Form 8-K, we have not entered into any employment agreements with any of these executives. Additional information regarding Mr. Martin may be found in our proxy statement for our 2005 annual shareholders meeting filed with the Securities and Exchange Commission on April 1, 2005. Additional information regarding Messrs. Wiberg, Imhoff and Fordham may be found in the Prentiss proxy statement for its 2005 annual shareholders meeting filed with the Securities and Exchange Commission on April 5, 2005.
-6-
Item 5.03. Amendment to Articles of Incorporation or Bylaws; Change in Fiscal Year.
(i) As indicated in Item 1.01, upon closing of the merger, we will amend or supplement the partnership agreement of Brandywine OP to provide for the issuance of Brandywine Class A in exchange for any Prentiss OP Units that are not converted into the Per Share Merger Consideration. In addition, as indicated in Item 1.01, if upon closing of the merger, any Prentiss series D preferred shares remain outstanding, they will convert into an equal number of newly-created Brandywine series E preferred shares.
(ii) On October 3, 2005, pursuant to authorization from our board of trustees, we filed Articles of Amendment (the “Amendment”) to our Amended and Restated Declaration of Trust with the State Department of Assessments and Taxation of Maryland. The Amendment authorizes an increase in our shares of beneficial interest from 110,000,000 to 220,000,000 shares, including an increase in the number of Brandywine Common Shares from 100,000,000 to 200,000,000 and an increase in the number of Brandywine preferred shares of beneficial interest from 10,000,000 to 20,000,000. We attach as Exhibit 3.1 to this Form 8-K, and incorporate herein by reference, a copy of the Amendment. Under our Amended and Restated Declaration of Trust, our board has the authority, without any action by our shareholders, to increase our authorized shares of beneficial interest.
Item 8.01 Other Events.
We have received a commitment from affiliates of J.P. Morgan Securities Inc. for (i) a 364-day term loan in the amount of $750 million, (ii) an interim term loan in the amount of $240 million, and (iii) a backstop revolving credit facility in the amount of $600 million.
We expect to use the net proceeds from borrowings under the 364-day term loan to fund a portion of the cash component of the merger consideration. The 364-day term loan will be subject to mandatory prepayment in the event that we complete equity or debt financings. We expect that the 364-day term loan will be guaranteed by the same subsidiaries that are guarantors under our revolving credit facility. We anticipate that the 364-day term loan will bear interest, at our option, at (A) a “base rate” equal to the higher of (1) the prime lending rate or (2) the federal funds effective rate from time to time plus 0.50%, plus a margin of 0.25%, or (B) the London interbank offered rate for terms of one, two or three months, as selected by us, plus a margin that varies between 1.00% and 1.40% per annum depending on our credit ratings.
The interim term loan will only be drawn if (i) certain properties located in the Mid-west anticipated to be sold by Prentiss are not sold prior to the merger, or (ii) if a portion of the Prudential Properties are not sold to Prudential. The interim term loan will be subject to mandatory pre-payment out of the proceeds of any sale of the Mid-west properties. The interim term loan will have a term of 60 days. We expect that the interim term loan will be guaranteed by the same subsidiaries that are guarantors under our revolving credit facility. We anticipate that the interim term loan will bear interest, at our option, at (A) a “base rate” equal to the higher of (1) the prime lending rate or (2) the federal funds effective rate from time to time plus 0.50%, plus a margin of 0.25%, or (B) the London interbank offered rate for a term of one month, plus a margin that varies between 1.00% and 1.40% per annum depending on our credit ratings.
The back-stop revolving credit facility will only be put into place if we are not successful in completing, prior to the closing of the merger with Prentiss, an amendment and restatement of our existing revolving credit facility on terms which allow for the consummation of the merger with Prentiss and are otherwise satisfactory to us. The back-stop revolving credit facility will have a term of 60 days from the closing of the merger. We expect that Brandywine OP and most of our subsidiaries will provide guarantees of our payment obligations under the facilities. We anticipate that the back-stop revolving credit facility will bear interest, at our option, at (A) a “base rate” equal to the higher of (1) the prime lending rate or (2) the federal funds effective rate from time to time plus 0.50%, plus a margin of 0.25%, or (B) the London interbank offered rate for a term of one month, plus a margin that varies between 1.00% and 1.40% per annum depending on our credit ratings.
-7-
The commitment is subject to conditions, including consummation of the merger with Prentiss and the completion of definitive loan documentation, which is anticipated to contain substantially similar financial covenants, other covenants, representations and warranties, events of default and conditions to closing as those contained in our existing revolving credit facility, except for the modifications to the financial covenants provided in the commitment.
We have attached a copy of the commitment to this Form 8-K as Exhibit 99.1.
J.P. Morgan Securities Inc. delivered to our board an opinion that the consideration to be paid by us pursuant to the Merger Agreement is, as of the date of such opinion, fair, from a financial point of view, to Brandywine, subject to the assumptions and limitations set forth in such opinion.
Item 9.01. Financial Statements and Exhibits.
| Exhibits | ||
| 2.1 | Agreement and Plan of Merger dated as of October 3, 2005, by and among Brandywine, Brandywine Operating Partnership, Merger Sub I, L.P. Merger Sub, Prentiss and Prentiss Acquisition Partners. | |
| 3.1 | Articles of Amendment to Declaration of Trust of Brandywine. | |
| 10.2 | Voting Agreement dated as of October 3, 2005 among Brandywine Realty Trust, Brandywine Operating Partnership and Michael V. Prentiss. | |
| 10.3 | Voting Agreement dated as of October 3, 2005 among Brandywine Realty Trust, Brandywine Operating Partnership and Thomas F. August. | |
| 10.4 | Master Agreement dated as of October 3, 2005 by and between Brandywine Operating Partnership, L.P. and The Prudential Insurance Company of America. | |
| 10.5 | Asset Purchase Agreement dated as of October 3, 2005 between Prentiss and The Prudential Insurance Company of America. | |
| 10.6 | Registration Rights Agreement. | |
| 99.1 | Financing Commitment Letter from JP Morgan Chase bank, N.A. and J.P. Morgan Securities Inc. | |
| 99.2 | Joint Press release of Brandywine Realty Trust of Prentiss Properties Trust dated October 3, 2005. | |
* Pursuant to Item 601(b)(2) of Regulation S-K, the Exhibits and Schedules to the Merger Agreement have been omitted. Such Exhibits and Schedules will be submitted to the Securities and Exchange Commission upon request.
-8-
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| BRANDYWINE REALTY TRUST | ||
| Date: October 4, 2005 | By: | /s/ Gerard H. Sweeney |
| Gerard H. Sweeney | ||
| President and Chief Executive Officer | ||
-9-
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 3, 2005,
by and among
BRANDYWINE REALTY TRUST,
BRANDYWINE OPERATING PARTNERSHIP, L.P.
BRANDYWINE COGNAC I, LLC
BRANDYWINE COGNAC II, LLC
PRENTISS PROPERTIES TRUST
and
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.
TABLE OF CONTENTS
PAGE |
||||
| ARTICLE I THE MERGERS | 2 |
|||
| Section 1.01. | The Mergers | 2 |
||
| Section 1.02. | Closings | 2 |
||
| Section 1.03. | Effective Times | 3 |
||
| Section 1.04. | Legal Effects of Mergers | 3 |
||
| Section 1.05. | Effect of the REIT Merger on the Organizational Documents and Management of the Surviving Company | 4 |
||
| Section 1.06. | Effect of the OP Merger on the Company L.P. Partnership Agreement | 4 |
||
| Section 1.07. | Effect of REIT Merger on Company Shares | 4 |
||
| Section 1.08. | Company Options | 6 |
||
| Section 1.09. | Effect of OP Merger on Interests of Constituent Entities | 7 |
||
| Section 1.10. | Structure | 8 |
||
| Section 1.11. | Election by Limited Partners in Company L.P. to Exercise the Exchange Right; The OP Merger | 8 |
||
| ARTICLE II EXCHANGE OF SECURITIES | 9 |
|||
| Section 2.01. | Exchange Fund | 9 |
||
| Section 2.02. | Exchange Procedures | 10 |
||
| Section 2.03. | Distributions with Respect to Unexchanged Securities | 11 |
||
| Section 2.04. | No Further Ownership Rights in Company Common Shares, Company Series D Preferred Shares and Company Common Units | 11 |
||
| Section 2.05. | No Fractional Shares | 12 |
||
| Section 2.06. | Termination of Exchange Fund | 12 |
||
| Section 2.07. | No Liability | 12 |
||
| Section 2.08. | Investment of the Exchange Fund | 13 |
||
| Section 2.09. | Lost Certificates | 13 |
||
| Section 2.10. | Withholding Rights | 13 |
||
| Section 2.11. | Further Assurances | 13 |
||
| Section 2.12. | Share Transfer Books. | 14 |
||
| ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND COMPANY L.P. | 14 |
|||
| Section 3.01. | Organization, Standing and Power of the Company | 15 |
||
| Section 3.02. | Company Subsidiaries | 15 |
||
| Section 3.03. | Authority; No Violations; Consents and Approval | 16 |
||
| Section 3.04. | Capital Structure | 18 |
||
| Section 3.05. | Vote Required | 21 |
||
| Section 3.06. | SEC Documents | 21 |
||
| Section 3.07. | Absence of Certain Changes or Events | 22 |
||
| Section 3.08. | Environmental Matters | 23 |
||
| Section 3.09. | Properties | 24 |
||
| Section 3.10. | No Undisclosed Material Liabilities | 28 |
||
| Section 3.11. | No Default | 28 |
||
-i-
PAGE
|
||||
| Section 3.12. | Compliance with Applicable Laws | 28
|
||
| Section 3.13. | Litigation | 29
|
||
| Section 3.14. | Taxes | 29
|
||
| Section 3.15. | Pension and Benefit Plans; ERISA | 32
|
||
| Section 3.16. | Labor and Employment Matters | 34
|
||
| Section 3.17. | Contracts | 35
|
||
| Section 3.18. | Intellectual Property | 37
|
||
| Section 3.19. | Insurance | 37
|
||
| Section 3.20. | Brokers | 38
|
||
| Section 3.21. | Related Party Transactions | 38
|
||
| Section 3.22. | Opinion of Financial Advisor | 38
|
||
| Section 3.23. | Investment Company Act of 1940 | 38
|
||
| Section 3.24. | Board Recommendation | 38
|
||
| Section 3.25. | Inapplicability of Takeover Statutes, Rights Agreement and Certain Charter and Bylaw Provisions | 38
|
||
| Section 3.26. | Information Supplied by the Company | 39
|
||
| Section 3.27. | Hart-Scott-Rodino Antitrust Improvements Act | 39
|
||
| Section 3.28. | Limitation | 40
|
||
| ARTICLE IV REPRESENTATIONS
AND WARRANTIES OF PARENT, PARENT L.P., MERGER SUB AND L.P. MERGER SUB |
40
|
|||
| Section 4.01. | Organization, Standing and Power of Parent | 40
|
||
| Section 4.02. | Parent Subsidiaries | 40
|
||
| Section 4.03. | Authority; No Violations; Consents and Approval. | 41
|
||
| Section 4.04. | Capital Structure | 43
|
||
| Section 4.05. | Vote Required | 46
|
||
| Section 4.06. | SEC Documents | 46
|
||
| Section 4.07. | Absence of Certain Changes or Events | 46
|
||
| Section 4.08. | Environmental Matters | 48
|
||
| Section 4.09. | Properties | 49
|
||
| Section 4.10. | No Undisclosed Material Liabilities | 52
|
||
| Section 4.11. | No Default | 53
|
||
| Section 4.12. | Compliance with Applicable Laws | 53
|
||
| Section 4.13. | Litigation | 53
|
||
| Section 4.14. | Taxes | 54
|
||
| Section 4.15. | Pension and Benefit Plans; ERISA | 56
|
||
| Section 4.16. | Labor and Employment Matters | 59
|
||
| Section 4.17. | Contracts | 59
|
||
| Section 4.18. | Intellectual Property | 61
|
||
| Section 4.19. | Insurance | 61
|
||
| Section 4.20. | Brokers | 62
|
||
| Section 4.21. | Related Party Transactions | 62
|
||
| Section 4.22. | Opinion of Financial Advisor | 62
|
||
| Section 4.23. | Investment Company Act of 1940 | 62
|
||
| Section 4.24. | Board Recommendation | 62
|
||
| Section 4.25. | Inapplicability of Takeover Statutes, Rights Agreement and Certain Charter and By-law Provisions | 62
|
||
-ii-
PAGE
|
||||
| Section 4.26. | Information Supplied by Parent | 63
|
||
| Section 4.27. | Merger Sub | 63
|
||
| Section 4.28. | Hart-Scott-Rodino Antitrust Improvements Act | 63
|
||
| ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS | 64
|
|||
| Section 5.01. | Conduct of Business by the Company | 64
|
||
| Section 5.02. | Conduct of Business by Parent | 69
|
||
| Section 5.03. | Control of Other Party’s Business | 71
|
||
| ARTICLE VI ADDITIONAL AGREEMENTS | 71
|
|||
| Section 6.01. | Preparation of the Joint Proxy Statement/Prospectus; Shareholder Meetings | 71
|
||
| Section 6.02. | Access to Information | 74
|
||
| Section 6.03. | Reasonable Best Efforts; Notification | 75
|
||
| Section 6.04. | No Solicitation | 76
|
||
| Section 6.05. | Employees and Benefit Plans | 78
|
||
| Section 6.06. | Indemnification | 80
|
||
| Section 6.07. | Public Announcements | 81
|
||
| Section 6.08. | Transfer Taxes | 81
|
||
| Section 6.09. | Listing of Shares | 81
|
||
| Section 6.10. | Affiliate Letter | 82
|
||
| Section 6.11. | Coordination of Dividends | 82
|
||
| Section 6.12. | Section 16(b) | 82
|
||
| Section 6.13. | Redemption of Company Series D Preferred Shares | 83
|
||
| Section 6.14. | Conversion of Company G.P. | 83
|
||
| Section 6.15. | Repayment of PPREFI Portfolio Collateralized Loan | 83
|
||
| Section 6.16. | Registration Rights | 83
|
||
| Section 6.17. | Assumption of Existing Tax Protection Arrangements | 84
|
||
| Section 6.18. | Director Nominees | 84
|
||
| Section 6.19. | Tenants Estoppels and SNDA’s | 84
|
||
| Section 6.20. | Suspension of Dividend Reinvestment Plan; Amended and Restated Share Purchase Plan | 85
|
||
| Section 6.21. | Third Party Consents | 85
|
||
| Section 6.22. | Private Letter Ruling | 85
|
||
| ARTICLE VII CONDITIONS PRECEDENT | 85
|
|||
| Section 7.01. | Conditions to Each Party’s Obligation to Effect the REIT Merger | 85
|
||
| Section 7.02. | Conditions to Obligations of Parent and Merger Sub | 86
|
||
| Section 7.03. | Conditions to Obligation of the Company | 87
|
||
| ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER | 88
|
|||
| Section 8.01 | Termination | 88
|
||
| Section 8.02 | Effect of Termination | 89
|
||
| Section 8.03 | Fees and Expenses | 89
|
||
| Section 8.02. | Amendment | 92
|
||
| Section 8.03. | Extension; Waiver | 92
|
||
-iii-
PAGE
|
||||
| ARTICLE IX GENERAL PROVISIONS | 92
|
|||
| Section 9.01. | Nonsurvival of Representations and Warranties | 92
|
||
| Section 9.02. | Notices | 92
|
||
| Section 9.03. | Definitions | 94
|
||
| Section 9.04. | Interpretation | 107
|
||
| Section 9.05. | Severability | 108
|
||
| Section 9.06. | Counterparts | 108
|
||
| Section 9.07. | Entire Agreement; No Third-Party Beneficiaries | 108
|
||
| Section 9.08. | Governing Law | 108
|
||
| Section 9.09. | Assignment | 108
|
||
| Section 9.10. | Enforcement | 108
|
||
| Section 9.11. | Disclosure Letters | 109
|
||
| ARTICLE X SALE OF SPECIFIED ASSETS | 109
|
|||
| Section 10.01. | Final Condition Notice | 109
|
||
| Section 10.02. | Entry into Prudential Asset Purchase Agreement | 109
|
||
| Section 10.03. | Declaration of Distribution and Special Dividend | 110
|
||
| Section 10.04. | Payment of Special Dividend | 110
|
||
| Section 10.05. | Effects of the Execution of the Prudential Asset Purchase Agreement and the Payment of the Special Dividend | 110
|
||
| Schedules and Exhibits | |
| Schedule I – Principal Company Limited Partners | |
| Exhibit A | Form of Voting Agreement |
| Exhibit B | Form of Registration Rights Agreement |
| Exhibit C | Rule 145 Affiliate Letter |
| Exhibit D | Prudential Asset Purchase Agreement |
-iv-
AGREEMENT AND PLAN OF MERGER, dated as of October 3, 2005 (this “Agreement”), among Brandywine Realty Trust, a Maryland real estate investment trust (“Parent”), Brandywine Operating Partnership, L.P., a Delaware limited partnership (“Parent L.P.”), Brandywine Cognac I, LLC, a Maryland limited liability company (“Merger Sub”), Brandywine Cognac II, LLC, a Delaware limited liability company (“L.P. Merger Sub”), Prentiss Properties Trust, a Maryland real estate investment trust (the “Company”), and Prentiss Properties Acquisition Partners, L.P., a Delaware limited partnership (“Company L.P.”).
RECITALS:
WHEREAS, the board of trustees of the Company (the “Company Board”) has approved and declared the merger (the “REIT Merger”) of the Company with and into Merger Sub, with Merger Sub to be the surviving entity (except as provided in Article X), on the terms and subject to the conditions set forth in this Agreement, whereby each issued and outstanding common share of beneficial interest, par value $.01 per share, of the Company (“Company Common Shares”) (except for shares owned or held by Parent, Parent L.P., the Company or any of their respective direct or indirect wholly owned Subsidiaries) shall be converted into the right to receive the REIT Merger Consideration in accordance with this Agreement, advisable and fair to, and in the best interests of, the Company and its shareholders and desires to provide herein, in accordance with Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland, as amended (“Maryland REIT Law”) and the Maryland Limited Liability Company Act (the “MLLCA”);
WHEREAS, the Company, as sole general partner (through a wholly-owned direct Subsidiary) of Company L.P., has approved and declared this Agreement advisable and fair to, and in the best interests of, Company L.P. and its partners and desires to provide herein, in accordance with the Delaware Revised Uniform Limited Partnership Act (“DRULPA”) and the Delaware Limited Liability Company Act (“DLLCA”), for the merger (the “OP Merger”) of L.P. Merger Sub with and into Company L.P. immediately following the REIT Merger, with Company L.P. to be the surviving entity, on the terms and subject to the conditions set forth in this Agreement, whereby each Company Common Unit owned by the limited partners of Company L.P. (except for Company Common Units owned or held by Parent, Parent L.P., Merger Sub, L.P. Merger Sub, Company G.P., Company L.P. or any of their respective direct or indirect wholly owned Subsidiaries) shall be converted automatically into the right to receive the OP Merger Consideration;
WHEREAS, as an alternative to receiving the OP Merger Consideration in connection with the OP Merger, each holder of Company L.P. Units (other than the Company) shall have the right to elect, effective immediately prior to the OP Merger, to exercise their exchange right under the Company L.P. Partnership Agreement, regardless of whether or not they would otherwise be entitled to exercise that exchange right under the Company L.P. Partnership Agreement, and the Company shall issue Company Common Shares in satisfaction of that right, thereby allowing former limited partners in Company L.P. (other than the Company) to participate in the REIT Merger as holders of the Company Common Shares;
WHEREAS, simultaneously with the execution and delivery of this Agreement, Parent, Parent L.P. and certain limited partners of Company L.P. set forth in Schedule I hereto (the “Principal Company Limited Partners”) have entered into voting agreements in the form of Exhibit A attached hereto (the “Voting Agreements”) pursuant to which the Principal Company Limited Partners have agreed to take specified actions in furtherance of the REIT Merger; and
-1-
WHEREAS Parent, Parent L.P., Merger Sub, L.P. Merger Sub, the Company and Company L.P. desire to make certain representations, warranties, covenants and agreements in connection with the REIT Merger and the OP Merger and also to prescribe various conditions to the REIT Merger and the OP Merger.
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
The Mergers
Section 1.01. The Mergers.
(a) REIT Merger. Except as provided in Section 10.5, on the terms and subject to the conditions set forth in this Agreement, at the REIT Effective Time, the Company shall be merged with and into Merger Sub. Except as provided in Section 10.5, at the REIT Effective Time, the separate existence of the Company shall cease and Merger Sub shall continue as the surviving company (the “Surviving Company”).
(b) OP Merger. On the terms and subject to the conditions set forth in this Agreement, immediately following the REIT Merger, L.P. Merger Sub shall be merged with and into Company L.P. At such time, the separate existence of L.P. Merger Sub shall cease and Company L.P. shall continue as the surviving partnership (the “Surviving L.P.”).
Section 1.02. Closings.
(a) Unless this Agreement has been earlier terminated in accordance with its terms or the REIT Merger has been abandoned pursuant to Section 10.05(a), the closing (the “REIT Closing”) of the REIT Merger shall take place at the offices of Pepper Hamilton LLP, Philadelphia, Pennsylvania at 10:00 a.m. on the second business day following the satisfaction (or, to the extent permitted by Law, waiver by the party or parties entitled to the benefits thereof) of the conditions set forth in Article VII if Parent shall have received the Private Letter Ruling that confirms the matters referred to in Section 6.22 prior to the Final Condition Notice Date, or such other place, time and date as shall be agreed in writing between Parent and the Company.
(b) Unless this Agreement has been earlier terminated in accordance with its terms or the REIT Merger has been consummated pursuant to Section 1.02(a), the REIT Closing of the Reverse REIT Merger shall take place at the offices of Pepper Hamilton LLP, Philadelphia, Pennsylvania at 10:00 a.m. on the first business day following the Final Condition Satisfaction Date if Parent shall not have received the Private Letter Ruling that confirms the matters referred to in Section 6.22 before the Final Condition Satisfaction Date, or such other place, time and date as shall be agreed in writing between Parent and the Company.
-2-
(c) The closing of the OP Merger (the “OP Closing” and, together with the REIT Closing, the “Closing”) shall take place immediately after the effectiveness of the REIT Merger at the offices identified above. The date on which the Closing occurs is referred to in this Agreement as the “Closing Date.” If the REIT Closing and the OP Closing occur on different dates, then the term “Closing Date” shall mean, with respect to the REIT Merger, the date on which the REIT Closing occurs and, with respect to the OP Merger, the date on which the OP Closing occurs.
Section 1.03. Effective Times.
(a) Prior to the REIT Closing, Parent L.P., Merger Sub and the Company shall prepare, and, on the Closing Date, the Company shall file with the State Department of Assessments and Taxation of Maryland articles of merger and/or such other appropriate documents (the “Articles of Merger”) executed in accordance with the applicable provisions of the Maryland REIT Law and the MLLCA and shall make all other filings or recordings required under the Maryland REIT Law and the MLLCA to effect the REIT Merger. The REIT Merger shall become effective at such time as the Articles of Merger are accepted for record by the State Department of Assessments and Taxation of Maryland, or at such later time as Parent L.P. and the Company shall agree and specify in the Articles of Merger; provided, however, that if Parent shall not have received the Private Letter Ruling that confirms the matters referred to in Section 6.22 before the Final Condition Satisfaction Date, the Company shall file the Articles of Merger with the State Department of Assessment and Taxation of Maryland on the Final Condition Satisfaction Date to be effective on the following business day at 10:00 a.m. Eastern Time (the time at which the REIT Merger becomes effective being the “REIT Effective Time”).
(b) Prior to the OP Closing, Parent L.P., L.P. Merger Sub and Company L.P. shall prepare, and, immediately after the REIT Effective Time or as soon thereafter as reasonably practicable, Company L.P. shall file with the Secretary of State of the State of Delaware a certificate of merger and/or such other appropriate documents (the “OP Merger Certificate”) executed in accordance with the applicable provisions of the DRULPA and the DLLCA and shall make all other filings or recordings required under the DRULPA and the DLLCA to effect the OP Merger. The OP Merger shall become effective at such time as the OP Merger Certificate is duly filed with the office of the Secretary of State of the State of Delaware, or at such later time as Parent L.P. and Company L.P. shall agree and specify in the OP Merger Certificate; provided, however, that if Parent shall not have received the Private Letter Ruling that confirms the matters referred to in Section 6.22 before the Final Condition Satisfaction Date, Company L.P. shall file the OP Merger Certificate with the of Secretary of State of the State of Delaware on the Final Condition Satisfaction Date to be effective on the following business day at 10:00 a.m. Eastern Time (the time at which the OP Merger becomes effective being the “OP Effective Time” and, together with the REIT Effective Time, the “Effective Time”).
Section 1.04. Legal Effects of Mergers The REIT Merger shall have the effects set forth in Section 8-501.1 of the Maryland REIT Law and Section 4A-709 of the MLLCA. The OP Merger shall have the effects set forth in Section 17-211 of the DRULPA and Section 18-209 of the DLLCA.
-3-
Section 1.05. Effect of the REIT Merger on the Organizational Documents and Management of the Surviving Company.
(a) Organizational Documents. Except as provided in Section 10.5, from and after the REIT Effective Time, the operating agreement of Merger Sub shall be the operating agreement of the Surviving Company until thereafter changed or amended as provided therein or by applicable Law.
(b) Management. The officers of Merger Sub as of the REIT Effective Time shall be the officers of the Surviving Company until the earlier of their resignation or removal or otherwise ceasing to be an officer or until their respective successors are duly elected and qualified, as the case may be.
Section 1.06. Effect of the OP Merger on the Company L.P. Partnership Agreement. The Company L.P. Partnership Agreement shall be amended and restated as of the OP Effective Time in accordance with the instructions of Parent and, as so amended, shall be the Agreement of Limited Partnership of the Surviving L.P. until thereafter changed or amended as provided therein or by applicable Law.
Section 1.07. Effect of REIT Merger on Company Shares.
(a) Each Company Common Share issued and outstanding immediately prior to the REIT Effective Time (other than Company Common Shares owned or held by Parent, Parent L.P., the Company or any of their respective direct or indirect wholly owned Subsidiaries, all of which shall be canceled as provided in Section 1.07(d)) shall be converted into the right to receive (i) $21.50 in cash minus the Cash Adjustment Amount (as the same may be adjusted pursuant to Section 10.5 the “Cash Consideration”) and (ii) a fraction of a fully paid and nonassessable Parent Common Share equal to the Common Exchange Ratio (which Common Exchange Ratio is subject to adjustment as set forth below), subject to Section 2.05 with respect to fractional shares (collectively, the “REIT Merger Consideration”). For purposes of this Agreement, the “Common Exchange Ratio” means 0.69, appropriately adjusted for any share splits, reverse share splits, share dividends, recapitalizations or other similar transactions.
(b) Each Company Series D Preferred Share issued and outstanding on the date hereof shall be redeemed, if subject to redemption, by the Company as provided in Section 6.13 unless earlier converted by the holder into a Company Common Share prior to such time; provided, however, that any Company Series D Preferred Share, which is not subject to redemption on or prior to the Closing Date, issued and outstanding immediately prior to the REIT Effective Time (other than Company Series D Preferred Shares owned or held by Parent, Parent L.P., the Company or any of their respective direct or indirect wholly owned Subsidiaries, all of which shall be canceled as provided in Section 1.07(d)), shall be converted into the right to receive one fully paid and nonassessable Parent Series E Cumulative Convertible Redeemable Preferred Share (the “Parent Series E Preferred Shares”). As a result of the REIT Merger and without any action on the part of the holders thereof, at the REIT Effective Time, all Company Series D Preferred Shares shall cease to be outstanding and shall be canceled and retired and shall cease to exist, and each holder of a certificate which immediately prior to the REIT Effective Time evidenced any such Company Series D Preferred Share (a “Series D Certificate”) shall thereafter cease to have any rights with respect to such Company Series D Preferred Shares, except (i) the right to receive Parent Series E Preferred Shares, and (ii) any dividends or other distributions to which holders of Company Series D Preferred Shares become entitled, all in accordance with Article II upon the surrender of such Series D Certificate. If the Closing Date occurs prior to the date that the Company Series D Preferred Shares may be redeemed and any such shares remain issued and outstanding, prior to the REIT Effective Time, the Declaration of Trust of Parent shall be amended in accordance with Maryland law in order to create the Parent Series E Preferred Shares, which will have the same preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms or conditions of redemption thereof identical to that of a Company Series D Preferred Share (except for changes that do not materially and adversely affect the holders of the Company Series D Preferred Shares).
-4-
(c) As a result of the REIT Merger and without any action on the part of the holders thereof, at the REIT Effective Time, all Company Common Shares and Company Series D Preferred Shares, including those Company Common Shares held by the Company in trust, or otherwise designated, for the participants in and beneficiaries of the Company Deferred Compensation Plans (other than shares referred to in Section 1.07(d)) shall cease to be outstanding and shall be canceled and retired and shall cease to exist, and each holder of a certificate which immediately prior to the REIT Effective Time evidenced any such shares (a “Certificate”) shall thereafter cease to have any rights with respect to such Company Common Shares or Company Series D Preferred Shares except (i) the right to receive the REIT Merger Consideration or Parent Series E Preferred Shares, as the case may be, (ii) any cash in lieu of fractional Parent Common Shares to be issued or paid in consideration for Company Common Shares and (iii) any dividends or other distributions to which holders become entitled, all in accordance with Article II upon the surrender of such Certificate.
(d) Each Company Common Share and Company Series D Preferred Share owned or held by Parent, Parent L.P., the Company or any of their respective direct or indirect wholly owned Subsidiaries at the REIT Effective Time (other than those Company Common Shares held by the Company in trust, or otherwise designated, for the participants in and beneficiaries of the Company Deferred Compensation Plans) shall, by virtue of the REIT Merger, cease to be outstanding and shall be canceled and retired and shall cease to exist and no REIT Merger Consideration or other consideration shall be delivered in exchange therefor.
(e) Each Company Common Share held by the Company in trust, or otherwise designated, for participants in and beneficiaries of the Company Deferred Compensation Plans shall be converted into a number of fully paid and non-assessable Parent Common Shares equal to the Option Exchange Ratio.
(f) Except as provided in Section 10.5, the membership interests of Merger Sub issued and outstanding immediately prior to the REIT Effective Time shall remain issued and outstanding and unchanged by the REIT Merger.
(g) If prior to the REIT Effective Time, Parent or the Company, as the case may be, should split, combine or otherwise reclassify the Parent Common Shares or the Company Common Shares, or make a distribution in Parent Common Shares or Company Common Shares, as applicable, or otherwise change the Parent Common Shares or Company Common Shares into any other securities, or make any other such share dividend or distribution in shares of beneficial interest of Parent or the Company in respect of the Parent Common Shares or the Company Common Shares, respectively, then any number or amount contained herein which is based upon the price of the Parent Common Shares or the number of Company Common Shares or Parent Common Shares, as the case may be (including but not limited to the Cash Consideration and the Common Exchange Ratio), will be appropriately adjusted to reflect such split, combination, dividend or other distribution or change.
-5-
Section 1.08. Company Options.
(a) Except as otherwise set forth in Section 1.08(c), the Company shall take all actions necessary and appropriate to provide that at the REIT Effective Time each outstanding and unexercised option to purchase Company Common Shares granted under any of the Company Incentive Plans (each, a “Company Option”), whether or not exercisable or vested, shall be converted into an option to purchase Parent Common Shares (each, a “New Parent Option”), on the same terms and conditions as were applicable under the Company Option (but taking into account any changes thereto, including the acceleration thereof, provided for in the Company Incentive Plans or other agreement set forth on the Company Disclosure Letter). Each New Parent Option shall be exercisable for a number of Parent Common Shares equal to (i) the number of Company Common Shares subject to the Company Option to which such New Parent Option relates multiplied by (ii) the Option Exchange Ratio, rounded to the nearest share. The per share exercise price of each New Parent Option shall equal (A) the per share exercise price of the Company Option to which such New Parent Option relates divided by (B) the Option Exchange Ratio, rounded to the nearest one-hundredth of a cent. For this purpose, the “Option Exchange Ratio” shall be equal to a fraction, the numerator of which is the per share dollar value of the REIT Merger Consideration on the Closing Date (with the portion of the REIT Merger Consideration that consists of Parent Common Shares valued at the Closing Date Market Price) and the denominator of which is the Closing Date Market Price; provided, however, that if a Special Dividend is declared pursuant to Section 10.3, the Option Exchange Ratio shall be an amount equal to the foregoing plus an amount equal to the quotient that results from dividing the Special Dividend Amount by the Closing Date Market Price.
(b) Subject to Section 1.08(c) and the terms of the Company Incentive Plans and applicable Laws, the Company and Parent shall take any actions necessary and appropriate to cause the Company Incentive Plans to be assumed by Parent at the REIT Effective Time, and from and after the REIT Effective Time, except as otherwise set forth herein, the terms of each Company Option and the Company Incentive Plan under which such Company Option was initially granted, in each case, as in effect immediately prior to the REIT Effective Time, shall continue to apply to the corresponding New Parent Option.
(c) Prior to the REIT Effective Time and subject to the terms of the Company Incentive Plans, the Company may, in its sole discretion, take all actions necessary and appropriate to allow each holder of a Company Option (whether or not exercisable or vested) to elect, in lieu of the treatment provided in Section 1.08(a), to convert each Company Option so held into the right to receive an amount of cash at the REIT Effective Time equal to the product of (i) the excess, if any, of the sum of the per share dollar value of the REIT Merger Consideration on the Closing Date (with the portion of the REIT Merger Consideration that consists of Parent Common Shares valued at the Closing Date Market Price) and the Special Dividend Amount, if any, over the per share exercise price of such Company Option and (ii) the number of Company Common Shares subject to such Company Option (such payment to be net of all applicable withholding taxes). The Company shall notify Parent not later than five days prior to the REIT Effective Time of the number of Company Options for which the treatment provided in this Section 1.08(c) has been elected and the total amount of cash payable pursuant to such elections.
-6-
(d) Prior to the REIT Effective Time, the Company shall take all necessary action for the adjustment of the Company Options under this Section 1.08. Parent shall reserve for issuance a number of Parent Common Shares at least equal to the number of Parent Common Shares that will be subject to the Company Options that are to be converted into New Parent Options pursuant to this Section 1.08. As soon as reasonably practicable following the REIT Effective Time, Parent shall file an amendment to the Form S-4 on Form S-8 or shall file a registration statement on Form S-8 (or any successor, or if Form S-8 is not available, other appropriate forms) with respect to the Parent Common Shares issuable upon exercise of the New Parent Options and shall maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such options remain outstanding.
Section 1.09. Effect of OP Merger on Interests of Constituent Entities.
(a) As of the OP Effective Time, without any further action on the part of any holder of Company L.P. Units or any other party hereto:
(i) The Company GP Units issued and outstanding immediately prior to the OP Effective Time shall remain issued and outstanding and unchanged by the OP Merger.
(ii) Each Company Common Unit (other than any Company Common Units owned or held by Parent, Parent L.P., Merger Sub, L.P. Merger Sub, Company G.P., Company L.P. or any of their respective direct or indirect wholly owned Subsidiaries which shall remain issued and outstanding and unchanged by the OP Merger) owned or held by the limited partners of Company L.P. immediately prior to the effectiveness of the OP Merger shall be converted into the right to receive a number of Parent Class A Units equal to the Common Interest Exchange Ratio (the “OP Merger Consideration”). For purposes of this Agreement, the “Common Interest Exchange Ratio” means the sum of (x) the Common Exchange Ratio plus (y) the quotient that results from dividing the Cash Consideration (giving effect to any decrease thereto as provided in Section 1.07(a)) by $31.1594. As a result of the OP Merger and without any action on the part of the holders thereof, at the OP Effective Time, all Company Common Units converted as provided in the preceding sentence shall cease to be outstanding and shall be canceled and retired and shall cease to exist, and each holder of such Company Common Units shall thereafter cease to have any rights with respect to such Company Common Units, except the right to receive the OP Merger Consideration and any dividends or other distributions to which such holder becomes entitled, all in accordance with Article II upon the exchange of such Company Common Unit; and
-7-
(iii) The limited liability company interests in L.P. Merger Sub outstanding immediately prior to the effectiveness of the OP Merger shall be converted into a limited partnership interest in the Surviving L.P. representing 3% of the partnership interests therein, entitling the holder thereof to such rights, duties and obligations as are more fully set forth in the Agreement of Limited Partnership of the Surviving L.P. All limited liability company interests in L.P. Merger Sub so converted shall cease to be outstanding and shall be canceled and retired and shall cease to exist.
(b) If prior to the OP Effective Time, Parent L.P. or Company L.P., as the case may be, should split, combine or otherwise reclassify the Parent Class A Units or the Company L.P. Units, or pay a non-cash dividend or other non-cash distribution in Parent Class A Units, Parent Preferred Units or Company L.P. Units, as applicable, or make any other such non-cash dividend or non-cash distribution in interests of Parent L.P. or Company L.P. in respect of the Parent Class A Units or the Company L.P. Units, respectively, then any number or amount contained herein which is based upon the number of Parent Class A Units or Company L.P. Units, as the case may be, will be appropriately adjusted to reflect such split, combination, dividend or other distribution or change.
Section 1.10. Structure. The Company shall cooperate with Parent and agree to any reasonable changes requested by Parent regarding the structure of the transactions contemplated herein (such cooperation shall include entering into appropriate amendments to this Agreement) in order to enable Parent, Parent L.P. or Merger Sub to obtain a “step up” in the tax basis of the assets of the Company or any Company Subsidiary; provided that any such changes do not have an adverse effect on either the holders of the Company Common Shares or Company Common Units or jeopardize the intended qualifications of the REIT Merger as a taxable sale by the Company of all of the Company’s assets to Merger Sub in exchange for the REIT Merger Consideration to be received by the shareholders of the Company and the assumption of all of the Company’s liabilities, and the treatment of this Agreement as a “plan of liquidation” of the Company for federal income tax purposes pursuant to Section 331 of the Code. If the Closing occurs pursuant to Section 1.02(a), the execution of this Agreement shall constitute the adoption of a plan of liquidation of the Company pursuant to Section 331 of the Code.
Section 1.11. Election by Limited Partners in Company L.P. to Exercise the Exchange Right; The OP Merger. Notwithstanding any limitation or restriction contained in the Company L.P. Partnership Agreement with respect to the right of a Limited Partner (as defined in the Company L.P. Partnership Agreement) to exercise the Exchange Right (as defined in the Company L.P. Partnership Agreement) (including, without limitation, any limitation or restriction contained in Section 8.05 of the Company L.P. Partnership Agreement), every Limited Partner shall have the right to exercise the Exchange Right by submitting to Company L.P. (with a copy to the Company) during the period between the mailing date of the Joint Proxy Statement/Prospectus for the Company Shareholders Meeting and 5:00 p.m., Eastern time, on the second business day prior to the date of the Company Shareholders Meeting a Notice of Exchange (as defined in the Company L.P. Partnership Agreement) specifying the number of Company Common Units which such Limited Partner desires to have exchanged pursuant to Section 8.05 of the Company L.P. Partnership Agreement (as modified by this Section 1.11), which Notice of Exchange shall be conditioned upon the closing of the OP Merger and which Notice of Exchange may be conditioned on whether the REIT Merger occurs as contemplated by Section 1.01(a) or occurs as contemplated by Section 10.5; provided, that,
-8-
| (a) with respect to each Notice of Exchange (a copy of the form of which shall accompany or form a part of the form of election) properly submitted by a Limited Partner in accordance with this Section 1.11 (an “Exercise”), the Company shall elect in accordance with Section 8.05(b) of the Company L.P. Partnership Agreement to purchase the Company Common Units relating to such Exercise by paying the REIT Shares Amount (as defined in the Company L.P. Partnership Agreement) and not the Cash Amount (as defined in the Company L.P. Partnership Agreement); |
(b) Notwithstanding the provisions of Section 8.05(b) of the Company L.P. Partnership Agreement, the Company shall not be required to notify the Exchanging Partner (as defined in the Company L.P. Partnership Agreement) of the Company’s election to purchase the Company Common Units as described in the foregoing clause (a);
(c) The Specified Exchange Date (as defined in the Company L.P. Partnership Agreement) shall be the Closing Date (as defined herein) at a time prior to the consummation of the OP Merger; and
(d) Each Exchanging Partner shall be treated as an owner of the Company Common Shares issued pursuant to this Agreement at the REIT Effective Time.
ARTICLE II
Exchange of Securities
Section 2.01. Exchange Fund. On or prior to the Closing Date, Parent shall deposit with Computershare Limited or such other bank or trust company as Parent shall determine and which shall be reasonably satisfactory to the Company (the “Exchange Agent”), (i) in trust for the benefit of holders of Company Common Shares, for exchange in accordance with Section 1.07(a), all the cash and certificates evidencing Parent Common Shares to be paid or issued pursuant to this Agreement in exchange for outstanding Company Common Shares and cash sufficient to pay cash in lieu of fractional shares pursuant to Section 2.05, (ii) in trust for the benefit of holders of Company Series D Preferred Shares, for exchange in accordance with Section 1.07(e) all the certificates representing Parent Series E Preferred Shares, if any, to be issued pursuant to this Agreement in exchange for outstanding Company Series D Preferred Shares. Parent agrees to make available to the Exchange Agent from time to time as needed, cash sufficient to pay any dividends and other distributions pursuant to Section 2.03. Any cash and certificates of Parent Common Shares or Parent Series E Preferred Shares deposited with the Exchange Agent shall hereinafter be referred to as the “Exchange Fund”.
-9-
| Section 2.02. Exchange Procedures. |
As promptly as practicable after the REIT Effective Time, the Exchange Agent will send to each record holder of Certificates other than Certificates to be canceled pursuant to Section 1.07(d): (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in a form and have such other provisions as Parent may reasonably specify, subject to the Company’s approval not to be unreasonably withheld) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the REIT Merger Consideration or the Parent Series E Preferred Shares, as the case may be. As soon as reasonably practicable after the REIT Effective Time: (i) each holder of a Certificate evidencing Company Common Shares, upon surrender of a Certificate to the Exchange Agent together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Exchange Agent, shall be entitled to receive in exchange therefor a certificate or certificates evidencing the number of full Parent Common Shares into which the aggregate number of Company Common Shares previously represented by such Certificate shall have been converted pursuant to this Agreement and the amount of cash that such holder is entitled to hereunder (including amounts to be paid pursuant to Section 1.07(a), in lieu of fractional Parent Common Shares pursuant to Section 2.05 and in respect of any dividends or other distributions to which holders are entitled pursuant to Section 2.03), and (ii) each holder of a Certificate evidencing Company Series D Preferred Shares, upon surrender of a Certificate to the Exchange Agent together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Exchange Agent, shall be entitled to receive in exchange therefor a certificate or certificates evidencing the number of full Parent Series E Preferred Shares into which the aggregate number of Company Series D Common Shares previously represented by such Certificate shall have been converted pursuant to this Agreement. The Exchange Agent shall accept such Certificates upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. No interest will be paid or will accrue on any cash payable pursuant to Section 1.07, Section 2.03 or Section 2.05. In the event of a transfer of ownership of Company Common Shares which is not registered in the transfer records of the Company, one or more certificates of Parent Common Shares evidencing, in the aggregate, the proper number of Parent Common Shares, a check in the proper amount of cash pursuant to Section 1.07(a) and cash in lieu of any fractional Parent Common Shares pursuant to Section 2.05 and any dividends or other distributions to which such holder is entitled pursuant to Section 2.03, may be issued with respect to such Company Common Shares to such a transferee if the Certificate representing such Company Common Shares is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. In the event of a transfer of ownership of Company Series D Preferred Shares which is not registered in the transfer records of the Company, one or more certificates of Parent Series E Preferred Shares evidencing, in the aggregate, the proper number of Parent Series E Preferred Shares and any dividends or other distributions to which such holder is entitled pursuant to Section 2.03 may be issued with respect to such Company Series D Preferred Share to such a transferee if the Certificate representing such Company Series D Preferred Shares is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. Provision shall be made for holders of Certificates to procure in person immediately after the Effective Time a letter of transmittal and instructions and to deliver in person immediately after the Effective Time such letter of transmittal and Company Common Shares or Company Series D Preferred Shares, as the case may be, in exchange for the REIT Merger Consideration or the Parent Series E Preferred Shares, as applicable, and cash in lieu of fractional Parent Common Shares and dividends and distributions, if any, pursuant to Section 2.03.
-10-
Section 2.03. Distributions with Respect to Unexchanged Securities.
(a) No dividends or other distributions declared or made with respect to Parent Common Shares or Parent Series E Preferred Shares with a record date after the REIT Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the Parent Common Shares or Parent Series E Preferred 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 2.05 until such holder shall surrender such Certificate in accordance with Section 2.02.
(b) Subject to the effect of applicable Laws, following surrender of any such Certificate, there shall be paid to such holder of Parent Common Shares or Parent Series E Preferred 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 2.05 and the amount of dividends or other distributions with a record date after the REIT Effective Time theretofore paid with respect to such whole Parent Common Shares or Parent Series E Preferred Shares, and (b) at the appropriate payment date, the amount of dividends or other distributions with a record date after the REIT Effective Time but prior to such surrender and a payment date subsequent to such surrender payable with respect to such Parent Common Shares or Parent Series E Preferred Shares.
(c) Subject to the effect of applicable Laws, following the automatic conversion of Company Common Units in the OP Merger as provided in Section 1.09, there shall be paid to such holder of Parent Class A Units issuable in exchange therefor, without interest, (a) promptly after the time of such exchange, the amount of distributions with a record date after the OP Effective Time theretofore paid with respect to such Parent Class A Units, and (b) at the appropriate payment date, the amount of distributions with a record date after the OP Effective Time but prior to such exchange and a payment date subsequent to such exchange payable with respect to such Parent Class A Units.
Section 2.04. No Further Ownership Rights in Company Common Shares, Company Series D Preferred Shares and Company Common Units.
(a) All Parent Common Shares issued and cash paid upon conversion of Company Common Shares in accordance with the terms of Article I and this Article II (including any cash paid pursuant to Section 1.07(a), 2.03 or 2.05) shall be deemed to have been issued or paid in full satisfaction of all rights pertaining to the Company Common Shares.
-11-
(b) All Parent Series E Preferred Shares issued upon conversion of Company Series D Preferred Shares in accordance with the terms of Article I and this Article II (including any cash paid pursuant to Section 2.03) shall be deemed to have been issued or paid in full satisfaction of all rights pertaining to the Company Series D Preferred Shares.
(c) The OP Merger Consideration issued upon conversion of Company Common Units in accordance with the terms of Article I shall be deemed to have been issued in full satisfaction of all rights pertaining to such Company Common Units.
Section 2.05. No Fractional Shares.
(a) No fractional Parent Common Shares or certificates or scrip or Parent Common Shares evidencing fractional Parent Common Shares shall be issued upon the surrender for exchange of Certificates.
(b) Notwithstanding any other provision of this Agreement, each holder of Company Common Shares exchanged pursuant to the REIT Merger who would otherwise have been entitled to receive a fraction of a Parent Common Share (after taking into account all Certificates delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to the product of (i) such fractional part of a Parent Common Share multiplied by (ii) the Closing Date Market Price. As promptly as practicable after the determination of the amount of cash, if any, to be paid to holders of fractional interests, the Exchange Agent shall so notify Parent, and Parent shall cause the Exchange Agent to forward payments to such holders of fractional interests subject to and in accordance with the terms hereof.
Section 2.06. Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to the holders of Certificates for one year after the REIT Effective Time shall be delivered to the Surviving Company or otherwise on the instruction of the Surviving Company, and any holders of Certificates who have not theretofore complied with this Article II shall thereafter look only to the Surviving Company and Parent (subject to abandoned property, escheat or other similar laws) for (i) the REIT Merger Consideration with respect to Company Common Shares formerly represented thereby or the Parent Series E Preferred Shares with respect to the Company Series D Preferred Shares formerly represented thereby (as the case may be), in either case which such holders are entitled pursuant to Section 1.07, (ii) any cash in lieu of fractional Parent Common Shares to which such holders are entitled pursuant to Section 2.05 and (iii) any dividends or distributions with respect to Parent Common Shares to which such holders are entitled pursuant to Section 2.03.
Section 2.07. No Liability. None of Parent, Parent L.P., Merger Sub, L.P. Merger Sub, the Company, Company L.P. or the Exchange Agent shall be liable to any Person in respect of (i) any REIT Merger Consideration or Parent Series E Preferred Shares from the Exchange Fund or OP Merger Consideration, (ii) cash in lieu of fractional Parent Common Shares pursuant to Section 2.05 or (iii) any dividends or distributions with respect to Parent Common Shares, Parent Class A Units or Parent Series E Preferred Shares pursuant to Section 2.03 delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.
-12-
Section 2.08. Investment of the Exchange Fund. Any funds included in the Exchange Fund may be invested by the Exchange Agent, as directed by Parent; provided that such investments shall be in obligations of or guaranteed by the United States of America or backed by the full faith and credit of the United States of America;provided, further, that no such investment or loss thereon shall affect the amounts payable or the timing of the amounts payable to the Company shareholders pursuant to the other provisions of this Article II. Any interest and other income resulting from such investments shall promptly be paid to or at the discretion of Parent.
Section 2.09. Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Company, the posting by such Person of a bond in such reasonable amount as the Surviving Company may direct as indemnity against any claim that may be made against it with respect to such Certificate or other documentation (including an indemnity in customary form) reasonably requested by Parent, the Exchange Agent will deliver in exchange for such lost, stolen or destroyed Certificate the applicable REIT Merger Consideration or Parent Series E Preferred Shares with respect to the Company Common Shares or Company Series D Preferred Shares formerly evidenced thereby, any cash in lieu of fractional Parent Common Shares, and unpaid dividends and distributions on Parent Common Shares or Parent Series D Preferred Shares deliverable in respect thereof, all pursuant to this Agreement.
Section 2.10. Withholding Rights. Each of the Surviving Company, the Surviving L.P., Parent and Parent L.P. shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Common Shares, any holder of Company Common Units and any holder of Company Options such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code and the rules and regulations promulgated thereunder, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by the Surviving Company, the Surviving L.P., Parent or Parent L.P., as the case may be, and paid to the appropriate taxing authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Company Common Shares, Company Common Units or Company Options, as the case may be, in respect of which such deduction and withholding was made by the Surviving Company, the Surviving L.P., Parent or Parent L.P., as the case may be.
Section 2.11. Further Assurances.
(a) At and after the REIT Effective Time, the officers of the Surviving Company will be authorized to execute and deliver, in the name and on behalf of the Company or Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Merger Sub, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Company any and all right, title and interest in, to and under any of the rights, properties or assets acquired or to be acquired by the Surviving Company as a result of, or in connection with, the REIT Merger.
-13-
(b) At and after the OP Effective Time, Company G.P., as the general partner of Company L.P., and the officers of Company L.P. will be authorized to execute and deliver, in the name and on behalf of Company L.P. or L.P. Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of Company L.P. or L.P. Merger Sub, any other actions and things to vest, perfect or confirm of record or otherwise in Company L.P. any and all right, title and interest in, to and under any of the rights, properties or assets acquired or to be acquired by Company L.P. as a result of, or in connection with, the OP Merger.
Section 2.12. Share Transfer Books.
(a) At the close of business, New York time, on the day the REIT Effective Time occurs, the share transfer books of the Company shall be closed and there shall be no further registration of transfers of Company Common Shares or Company Series D Preferred Shares on the records of the Company. From and after the REIT Effective Time, the holders of Certificates shall cease to have any rights with respect to such Company Common Shares or Company Series D Preferred Shares, except as otherwise provided herein or by Law. On or after the REIT Effective Time, any Certificates presented to the Exchange Agent, the Surviving Company or Parent for any reason shall be exchanged for the REIT Merger Consideration or Parent Series E Preferred Shares into which such Company Common Shares or Company Series D Preferred Shares have been converted, any cash in lieu of fractional Parent Common Shares to which the holders thereof are entitled pursuant to Section 2.05 and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 2.03.
(b) At the close of business, New York time, on the day the OP Effective Time occurs, the transfer books of Company L.P. shall be closed and there shall be no further registration of transfers of Company L.P. Units thereafter on the records of Company L.P. (except as approved by Parent or Parent L.P.). From and after the OP Effective Time, the holders of Company L.P. Units shall cease to have any rights with respect to such Company L.P. Units, except as otherwise provided herein or by Law. On or after the OP Effective Time, any Company Common Units presented to Company L.P. or Parent L.P. for any reason shall be converted into the OP Merger Consideration. This Section shall not apply to Company L.P. Units owned or held by Parent, Parent L.P., Merger Sub, Company G.P., Company L.P. or any of their respective direct or indirect wholly owned Subsidiaries immediately after the OP Effective Time.
ARTICLE III
Representations and Warranties of the Company and Company L.P.
As an inducement to Parent, Parent L.P., Merger Sub and L.P. Merger Sub to enter into this Agreement, except as disclosed in a section of the Company Disclosure Letter corresponding to the section of this Article III to which such disclosure applies, each of the Company and Company L.P. hereby jointly and severally represents and warrants to Parent, Parent L.P., Merger Sub and L.P. Merger Sub as follows:
-14-
Section 3.01. Organization, Standing and Power of the Company. The Company is a real estate investment trust duly formed, validly existing and in good standing under the laws of the State of Maryland and has the requisite real estate investment trust power, authority and all necessary government approvals or licenses to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to have such real estate investment trust power, authority, government approvals or licenses would not, individually or in the aggregate, have a Company Material Adverse Effect. The Company is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of the business it is conducting, or the ownership, operation or leasing of its properties or the management of properties for others makes such qualification or licensing necessary, except where the failure to be so qualified or licensed or in good standing would not, individually or in the aggregate, have a Company Material Adverse Effect. The Company has heretofore made available to Parent complete and correct copies of the Charter and bylaws in each case, as currently in effect (the “Company Organizational Documents”). The Company Organizational Documents are in full force and effect as of the date hereof.
| Section 3.02. Company Subsidiaries. |
(a) Each Company Subsidiary that is a corporation is duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation and has the requisite corporate power, authority and all necessary government approvals and licenses to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to have such corporate power, authority, government approvals or licenses would not, individually or in the aggregate, have a Company Material Adverse Effect. All outstanding shares of stock of each Company Subsidiary that is a corporation have been duly authorized, are validly issued, fully paid and nonassessable, and are not subject to any rights of first offer, rights of first refusal, tag-along rights or any other preemptive rights and are, except as disclosed in Section 3.02(a) of the Company Disclosure Letter, (i) 100% owned by the Company and/or another Company Subsidiary and (ii) owned free and clear of all Encumbrances, preemptive rights, call rights, assessments or other adverse interests of any kind or nature whatsoever.
(b) Each Company Subsidiary that is a partnership, limited liability company, trust or other entity (including, without limitation, Company L.P.) is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization and has the requisite power, authority and all necessary government approvals and licenses to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to have such power, authority, government approvals or licenses would not, individually or in the aggregate, have a Company Material Adverse Effect. The Company has heretofore made available to Parent complete and correct copies of the Company L.P.’s limited partnership agreement, as currently in effect which limited partnership agreement is in full force and effect as of the date hereof.
(c) Each Company Subsidiary is duly qualified or licensed to do business and is, where applicable, in good standing in each jurisdiction in which the nature of its business or the ownership, operation or leasing of its properties or the management of properties for others makes such qualification or licensing necessary, except where the failure to be so qualified or licensed or in good standing would not, individually or in the aggregate, have a Company Material Adverse Effect.
-15-
(d) Except as set forth in Section 3.02(d) of the Company Disclosure Letter, there are no outstanding options, warrants or other rights to acquire ownership interests from or with respect to any Company Subsidiary. The Company has heretofore made available to Parent complete and correct copies of the charter, by-laws, partnership agreements, operating agreements or other organizational documents of each of the Company Subsidiaries, each as amended to date, and each such instrument or agreement is in full force and effect as of the date hereof. Section 3.02(d) of the Company Disclosure Letter sets forth (i) all Company Subsidiaries and their respective jurisdictions of incorporation or organization, and (ii) each owner and the respective amount of such owner’s equity interest in each Company Subsidiary. Except as set forth in Section 3.02(d) of the Company Disclosure Letter, the Company does not directly or indirectly own any equity or similar interests in any other Person, or any interest convertible into or exchangeable or exercisable for any equity or similar interests in any other Person.
Section 3.03. Authority; No Violations; Consents and Approval.
(a) The Company and Company L.P. each has all requisite real estate investment trust or partnership power and authority to enter into this Agreement and each of the other Transaction Documents and to consummate the transactions contemplated hereby and thereby, subject, with respect to the consummation of the REIT Merger and the Prudential Asset Sale, to receipt of the affirmative vote of the holders of at least a majority of all votes entitled to be cast on the REIT Merger and the Prudential Asset Sale (the “Required Company Vote”) and the acceptance for record of the Articles of Merger by the State Department of Assessments and Taxation of Maryland, and the acceptance for filing of the OP Merger Certificate by the Secretary of State of the State of Delaware. Each Company Subsidiary that is a party to any Transaction Document has all requisite power and authority to enter into such Transaction Document and to consummate the transactions contemplated thereby. The execution and delivery of the Transaction Documents and the consummation of the transactions contemplated hereby or thereby have been duly authorized by all necessary action on the part of the Company and each applicable Company Subsidiary, subject, with respect to the consummation of the REIT Merger and the Prudential Asset Sale, to receipt of the Required Company Vote. The Transaction Documents have been duly executed and delivered by the Company and each applicable Company Subsidiary and constitute legal, valid and binding obligations of the Company and each applicable Company Subsidiary, and assuming they are binding obligations of Parent, Parent L.P., Merger Sub and L.P. Merger Sub in accordance with their terms, are enforceable against the Company and each Company Subsidiary in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other Laws of general applicability relating to or affecting creditors’ rights and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at Law).
(b) Except as set forth in Section 3.03(b) of the Company Disclosure Letter, the execution and delivery of the Transaction Documents by the Company and each applicable Company Subsidiary do not, and, after obtaining the Required Company Vote, the consummation of the transactions contemplated hereby or thereby, and compliance with the provisions hereof or thereof, will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation, or the material loss of a benefit under, or give rise to a right of purchase, first offer or forced sale, under, or result in the creation of any Encumbrance upon any of the properties or assets of the Company or any of the Company Subsidiaries under any provision of:
-16-
(i) the Company Organizational Documents or the comparable charter or organizational documents (including any operating agreement or limited partnership agreement) of any Company Subsidiary;
(ii) any Contract applicable to the Company or any Company Subsidiary, or their respective properties or assets or any guarantee by the Company or any Company Subsidiary of any of the foregoing, it being understood that no representation is being given as to whether the Surviving Company, the Surviving L.P. and their Subsidiaries will be in compliance with any financial covenants contained therein following the Mergers; or
(iii) assuming the consents, approvals, authorizations, permits and filings or notifications referred to in Section 3.03(d) are duly and timely obtained or made and the Required Company Vote and Required Parent Vote each have been obtained, any judgment, order, decree, statute, Law, ordinance, rule or regulation applicable to the Company or any Company Subsidiary, or any of their respective properties or assets;
except as to clauses (ii) and (iii) as would not, individually or in the aggregate, cause a Company Material Adverse Effect.
(c) Except as set forth on Section 3.03(c) of the Company Disclosure Letter, without limiting the generality of Section 3.03(b), the transactions contemplated herein do not violate any provision regarding direct or indirect transfers of interests in any Company Subsidiary that are set forth in any agreement relating to the operation of, or the ownership of interests in, any Company Subsidiary, even if such transactions result in a termination under Section 708 of the Code of any Company Subsidiary.
(d) Except as set forth in Section 3.03(d) of the Company Disclosure Letter, no consent, approval, order or authorization of, or registration, declaration or filing with, or permit from, any Governmental Entity, is required by or on behalf of the Company or any of the Company Subsidiaries in connection with the execution and delivery of the Transaction Documents by the Company and each of the applicable Company Subsidiaries or the consummation by the Company or the applicable Company Subsidiaries of the transactions contemplated hereby or thereby, except for:
(i) as to the REIT Merger, the filing of the Articles of Merger with the Department of Assessment and Taxation of the State of Maryland, and as to the OP Merger, the filing of the OP Merger Certificate with the Secretary of State of the State of Delaware;
-17-
(ii) a proxy statement relating to the Required Company Vote (as amended or supplemented from time to time, the “Company Proxy Statement”) and the Registration Statement (as defined below);
(iii) rules and regulations of the NYSE;
(iv) such reports under Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as may be required in connection with this Agreement and the transactions contemplated by this Agreement;
(v) such filings and approvals as are required to be made or obtained under the securities or “Blue Sky” laws of various states in connection with the issuance of Parent Common Shares and Parent Class A Units pursuant to this Agreement; and
(vi) such other consents, approvals, orders, authorizations, registrations, declarations, filings or permits that (1) may be required in connection with the payment of any transfer and gains taxes or under federal, state or local environmental laws or (2) the failure to obtain or make, individually or in the aggregate, would not have a Company Material Adverse Effect.
Section 3.04. Capital Structure.
(a) The Company is authorized to issue 120,000,000 shares of beneficial interest, consisting of 100,000,000 Company Common Shares and 20,000,000 preferred shares of beneficial interest, par value of $.01 per share (the “Company Preferred Shares”), of which 1,000,000 have been designated Junior Participating Cumulative Preferred Shares of Beneficial Interest and 3,773,585 shares have been designated as Series D Cumulative Convertible Redeemable Preferred Shares of Beneficial Interest (“Company Series D Preferred Shares”). As of the date hereof, (i) 46,328,782 Company Common Shares (excluding shares held by the Company but including Common Shares held by the Company in trust or otherwise designated for the participants in and beneficiaries of the Company Deferred Compensation Plans) were issued and outstanding, (ii) 2,823,583 Company Series D Preferred Shares were issued and outstanding; (iii) 2,823,583 Company Common Shares were reserved for issuance upon conversion of the Company Series D Preferred Shares, (iv) 3,233,553 Company Common Shares were held by the Company, (v) 5,455,186 Company Common Shares were reserved for issuance upon exercise of Company Options issued and outstanding pursuant to Company Incentive Plans, (vi) 1,594,814 Company Common Shares were reserved for issuance upon exercise of Company Options available for future grant pursuant to Company Incentive Plans (but, for the sake of clarity, no such Options will be awarded without Parent’s consent) and (vii) 1,797,479 Company Common Shares were reserved for issuance upon exchange of Company Common Units. The conversion price per share of the Company Series D Preferred Shares is $26.50 and the quarterly dividend rate per share of the Company Series D Preferred Shares is $0.56.
-18-
(b) To the Knowledge of the Company, the issuance and sale of the issued and outstanding shares of beneficial interest described in this Section 3.04 have been made in compliance in all material respects with United States federal and state securities Laws. Section 3.04(b) of the Company Disclosure Letter accurately sets forth as of the date hereof the names of all holders of options or rights to purchase the Company’s shares of beneficial interest (including but not limited to Company Options) and the number and type of shares issuable upon exercise of such options, the exercise price and vesting schedule with respect thereto. Except as set forth in Section 3.04(b) of the Company Disclosure Letter, neither the Company nor any Company Subsidiary has agreed to register any securities under the Securities Act or under any state securities Law or granted registration rights to any Person, and complete and correct copies of any such agreements have previously been made available to Parent. Except as set forth in Section 3.04(b) of the Company Disclosure Letter, as of the date hereof, there are no outstanding share or stock-appreciation rights, security-based performance units, “phantom” stock or other security rights or other agreements, arrangements or commitments of any character (contingent or otherwise) pursuant to which any Person is or may be entitled to receive any payment or other value based on the revenues, earnings or financial performance, share or stock price performance or other attribute of the Company or any of its Subsidiaries or assets or calculated in accordance therewith.
(c) (i) As of the date hereof, the issued and outstanding partnership interests of Company L.P. consist of (A) 47,152 units of general partner interest (the “Company GP Units”), all of which are owned by Prentiss Properties I, Inc., a Delaware corporation (“Company G.P.”), a wholly owned Subsidiary of the Company and (B) 48,079,109 common units of limited partner interest (“Company Common Units”) of which 46,281,630 Common Units are owned by the Company and Company G.P.
(ii) Company G.P. is a wholly owned Subsidiary of the Company and is the sole general partner of Company L.P. and as of the date hereof holds Company GP Units representing 100% of the outstanding Company GP Units. Section 3.04(c) of the Company Disclosure Letter sets forth the name of each partner and the number of Company Common Units held by such partner in Company L.P.
(iii) Each Company Common Unit may, under certain circumstances and subject to certain conditions set forth in the Company L.P. Partnership Agreement, be exchanged into Company Common Shares on a one-for-one basis. To the Knowledge of the Company, as of the date hereof, no notice has been received by the Company or Company L.P. of the exercise of any of the rights set forth in this Section 3.04(c)(iii), which are not reflected in this Section. Notwithstanding anything to the contrary contained herein, except as otherwise restricted pursuant to the Voting Agreements for certain holders, the holders of Company Common Units may at any time and from time to time prior to the REIT Effective Time convert such interests into Company Common Shares.
(d) Except as set forth in Sections 3.04(a) or (c) hereof or in Section 3.04(b) or 3.04(d) of the Company Disclosure Letter, as of the date hereof there are issued and outstanding or reserved for issuance: (i) no Company Common Shares or other shares of beneficial interest, Voting Debt or other voting securities of the Company; (ii) no restricted Company Common Shares or other shares of beneficial interest, capital stock or equity interests of the Company or any Company Subsidiary, performance share awards or dividend equivalent rights relating to the equity interests of the Company or any Company Subsidiary, (iii) no securities of the Company or any Company Subsidiary or securities or assets of any other entity convertible into or exchangeable for Company Common Shares, other shares of beneficial interest, Voting Debt or other voting securities of the Company or any Company Subsidiary; and (iv) no subscriptions, options, warrants, conversion rights, share appreciation rights, calls, claims, rights of first refusal, rights (including preemptive rights), commitments, arrangements or agreements to which the Company or any Company Subsidiary is a party or by which it is bound in any case obligating the Company or any Company Subsidiary to issue, deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed or acquired, additional Company Common Shares, other shares of beneficial interest or stock, Voting Debt or other voting securities of the Company or of any Company Subsidiary, or obligating the Company or any Company Subsidiary to grant, extend or enter into any such subscription, option, warrant, conversion right, share appreciation right, call, right, commitment, arrangement or agreement. All outstanding shares of beneficial interest or capital stock of the Company and each Company Subsidiary (including Company L.P.) are, and all shares reserved for issuance will be, upon issuance in accordance with the terms specified in the instruments or agreements pursuant to which they are issuable, duly authorized, validly issued, fully paid and, with respect to Company Subsidiaries that are corporations, nonassessable and not subject to or issued in violation of, any preemptive right, purchase option, call option, right of first refusal, subscription or any other similar right or Encumbrance and with respect to each Company Subsidiary, 100% owned by the Company and/or another Company Subsidiary except as disclosed in Section 3.04(d) of the Company Disclosure Letter.
-19-
(e) Except as disclosed in the Company SEC Documents, all dividends or distributions on securities of the Company or any Company Subsidiary that have been declared or authorized prior to the date of this Agreement have been paid in full (except to the extent such dividends have been publicly announced and are not yet due and payable).
(f) Except for the Transaction Documents, except as set forth in Section 3.04(f) of the Company Disclosure Letter and except as disclosed in the Company SEC Documents, to the Knowledge of the Company, there are not any (i) shareholder agreements, voting trusts, proxies or other agreements or understandings relating to the voting of any shares of beneficial interest or stock of the Company or any Company Subsidiary or (ii) agreements or understandings relating to the sale or transfer (including agreements imposing transfer restrictions) of any Company Common Shares or Company Preferred Shares or any ownership interests in any Company Subsidiary, to which the Company or any Company Subsidiary is a party or by which it is bound. Except as set forth in Section 3.04(f) of the Company Disclosure Letter, there are no restrictions on the Company’s ability to vote the equity interests of any of the Company Subsidiaries.
(g) Except as set forth in Section 3.04(g) of the Company Disclosure Letter, there are no Company Subsidiaries (other than Company L.P.) in which any officer, trustee or director of the Company or any Company Subsidiary owns any shares of beneficial interest, stock or other securities. To the Knowledge of the Company, as of the date hereof, there are no agreements or understandings between the Company or any Company Subsidiary and any Person that could cause such Person to be treated as holding any shares of beneficial interest, stock or security in the Company or any Company Subsidiary as an agent for, or nominee of, the Company or any Company Subsidiary.
-20-
Section 3.05. Vote Required. The Required Company Vote is the only vote of the holders of any class or series of the Company’s or the Company Subsidiaries shares of beneficial interest or capital stock necessary to approve this Agreement, the REIT Merger, the Prudential Asset Sale and the OP Merger.
| Section 3.06. SEC Documents. |
(a) The Company has filed with the SEC, and has heretofore made available to Parent (by public filing with the SEC or otherwise) true and complete copies of, all reports, schedules, forms, statements and other documents required to be filed with the SEC by the Company since December 31, 2001 (collectively, the “Company SEC Documents”). The Company does not have any outstanding and unresolved comments from the SEC with respect to any of the Company SEC Documents. None of the Company SEC Documents is the subject of any confidential treatment request by the Company.
(b) As of its respective date, each Company SEC Document complied in all material respects with the requirements of the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), as the case may be, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), as and to the extent applicable thereto, and the rules and regulations of the SEC promulgated thereunder applicable to such Company SEC Document. Except to the extent that information contained in any Company SEC Document filed and publicly available prior to the date of this Agreement has been revised or superseded by a later filed Company SEC Document, which later filed Company SEC Document was filed prior to the date of this Agreement, none of the Company SEC Documents at the time of filing contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the Company SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except, in the case of unaudited statements, and to the extent as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as and to the extent may be indicated in the notes thereto) and fairly present the financial position of the Company and the Company Subsidiaries as of the dates thereof and the results of its operations and cash flows for the periods shown (subject, in the case of unaudited statements, to normal year-end audit adjustments).
(c) The management of the Company has (i) implemented disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the management of the Company by others within those entities, and (ii) has disclosed, based on its most recent evaluation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act), to the Company’s outside auditors and the audit committee of the Company Board (A) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
-21-
Section 3.07. Absence of Certain Changes or Events. Except as and to the extent disclosed in the Company SEC Documents filed prior to the date of this Agreement or as disclosed in Section 3.07 of the Company Disclosure Letter or as otherwise permitted pursuant to this Agreement to occur after the date hereof, since December 31, 2004, the Company and the Company Subsidiaries have conducted their business only in the ordinary course and there has not been:
| (a) other than (x) as permitted pursuant to Section 6.11 or for dividends from a wholly owned Subsidiary to its parent entity or (y) for distributions pursuant to the joint venture agreements or other documents identified on Section 3.17(e) of the Company Disclosure Letter, any declaration, setting aside or payment of any dividends on, or any other distributions in respect of, any of their shares of beneficial interest or capital stock or other ownership interests, including, without limitation, Company L.P. Units; |
(b) any amendment of any term of any material outstanding debt or equity security of the Company or any Company Subsidiary other than in the ordinary course of business;
(c) any split, combination or reclassification of any Company Common Shares or the stock of any Company Subsidiary (other than the stock of Subsidiaries wholly-owned, directly or indirectly, by the Company), or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for, or giving the right to acquire by exchange or exercise, shares of stock or any ownership interest in, the Company or any Company Subsidiary other than in connection with (1) the conversion, redemption or exchange of the Company Series D Preferred Shares or Company L.P. Units in accordance with their terms, (2) the exercise of Company Options in accordance with their terms or (3) any dividend reinvestment or share purchase program;
(d) any material change in accounting methods, principles or practices of the Company or Company Subsidiaries, except as may be required by a change in industry practice, Law, GAAP or by a Governmental Entity;
(e) to the Knowledge of the Company, any amendment of any employment, consulting, severance, incentive stock, stock option, deferred compensation, bonus, retirement, retention or any other agreement, or the adoption of any new such agreement, between (i) the Company or any Company Subsidiary, on the one hand and (ii) any officer, trustee or director of the Company or any Company Subsidiary, on the other hand, earning more than $150,000 per year; other than as required by any contract, agreement or Company Employee Benefit Plan;
(f) any change in the lines of business in which the Company or any of the Company Subsidiaries participates or is engaged;
(g) any direct or indirect acquisition (whether through merger or consolidation with, the purchase of a substantial equity interest in, the purchase of a substantial portion of the assets of, or otherwise) any business or any corporation, partnership, association or other business organization or a division thereof or any significant assets other than in the ordinary course of business in an amount not involving more than $1,000,000 individually or $5,000,000 in the aggregate or as otherwise specified in the Company Corporate Budget;
-22-
(h) any incurrence of indebtedness for borrowed money or guarantee for such indebtedness, in each case by the Company or any Company Subsidiary, other than to meet (i) the current cash needs of the Company and Company Subsidiaries not exceeding the amount contemplated by the Company Corporate Budget for such period, a copy of which has been previously provided to Parent, (ii) for projects currently under construction in amounts disclosed in the Company Corporate Budget and (iii) as needed for the conversion, redemption or exchange of Company Series D Preferred Shares or Company L.P. Units in accordance with their terms;
(i) any change, event, effect, damage, destruction or loss relating to the business or operations of the Company or any Company Subsidiary that has had a Company Material Adverse Effect; or
(j) any Contract, commitment or arrangement to do or engage in any action the consummation of which would effect any of the events listed in this Section 3.07.
Section 3.08. Environmental Matters. Except as disclosed in Section 3.08 of the Company Disclosure Letter, the Company SEC Documents filed prior to the date of this Agreement or which, individually or in the aggregate, would not have a Company Material Adverse Effect:
| (a) The Company has not received written notice that any judicial, administrative or compliance order has been issued, any unresolved complaint has been filed, any unpaid penalty has been assessed, or that any investigation or review is pending or, to the Knowledge of the Company, threatened by any Governmental Entity with respect to any alleged failure by the Company or any Company Subsidiary to comply with any Environmental Law; |
(b) To the Knowledge of the Company, neither the Company nor any Company Subsidiary nor, any previous owner or lessee of any property currently owned, operated or leased by the Company or any Company Subsidiary, has used, generated, stored, treated or handled any Hazardous Material in a manner that would reasonably be expected to result in liability under Environmental Laws. In addition, to the Company’s Knowledge: (i) there are no asbestos-containing materials or Microbial Matter present on, in or under any property owned, leased or operated by the Company or any Company Subsidiary not in compliance with applicable Law, (ii) there are no PCBs present on, in or under any property owned, leased or operated by the Company or any Company Subsidiary not in compliance with applicable Law, (iii) there are no environmental conditions, including without limitation any wetlands or endangered species, that will impede use of the Company Properties as currently used, and (iv) there are currently no leaking underground storage tanks, active or abandoned, used for the storage of Hazardous Materials on, in or under any property owned, leased or operated by the Company or any Company Subsidiary;
-23-
(c) The Company and the Company Subsidiaries have not received notice of any unresolved claim, investigation, litigation, proceeding, notice of violation, complaint, or request for information, to the effect that it is or may be liable to a Third Party, including a Governmental Entity, as a result of a violation of any Environmental Law or a Release or threatened Release of a Hazardous Material at any property currently or formerly owned, leased or operated by the Company or a Company Subsidiary;
(d) To the Knowledge of the Company, the Company and the Company Subsidiaries have not transported or arranged for the transportation of any Hazardous Material to any location which is the subject of any action, suit or proceeding that would be reasonably expected to result in claims against the Company or any Company Subsidiary related to such Hazardous Material;
(e) There are no Encumbrances threatened or attached to any Company Property arising under or pursuant to any applicable Environmental Law, and no action of any Governmental Entity has been taken or, to the Knowledge of the Company, is in process which could subject any of such properties to such Encumbrances;
(f) Neither the Company nor any Company Subsidiary has in its possession or control or knows of the existence of any environmental assessment or investigation reports or environmental testing results relating to Microbial Matter prepared within the last four years that have not been made available to Parent prior to the execution of this Agreement;
(g) To the Knowledge of the Company, each of the Company Properties and operations conducted thereon is in compliance in all material respects with all Environmental Laws and the Company and all Company Subsidiaries are in compliance in all material respects with all Environmental Laws applicable to any of their owned or leased properties;
(h) To the Knowledge of the Company, there has been no Release or threatened Release of Hazardous Material in violation of any Environmental Law or which would reasonably be expected to result in liability on any property owned, leased or operated by the Company or any Company Subsidiary; and
(i) There are no claims pending relating to alleged personal injury attributable to air quality or Microbial Matter at the Company Properties. To the Knowledge of the Company, there have been no indications of improper design or construction of any structure at the Company Properties or any system contained therein that has led or would reasonably be expected to lead to the growth of Microbial Matter. The Company is not subject to any material capital expenditures or material obligations (contractual or otherwise) arising under or relating to Environmental Laws.
-24-
Section 3.09. Properties.
(a) Except as described in Section 3.09(a) of the Company Disclosure Letter, the Company or a Company Property Owner owns fee simple title to each of the real properties (or the applicable portion thereof) listed on Section 3.09(a) of the Company Disclosure Letter as being owned in fee (collectively, the “Company Owned Properties”). Except as described in Section 3.09(a) of the Company Disclosure Letter, the Company or a Company Property Owner has a valid leasehold interest in each of the real properties (or the applicable portion thereof) listed on Section 3.09(a) of the Company Disclosure Letter as being ground leased or subleased (together with the Company Owned Properties, collectively, the “Company Properties”) pursuant to those certain ground leases or subleases (together with any amendments thereto, collectively, the “Company Ground Leases”) described on Section 3.09(a) of the Company Disclosure Letter. The Company Properties are all of the real properties owned or leased by Company and the Company Property Owners. To the Knowledge of the Company, the interests of the Company and the Company Property Owners in the Company Properties are good and insurable and the same are owned free and clear of Encumbrances except for (i) indebtedness for money borrowed and other matters specifically identified in Section 3.09(a) of the Company Disclosure Letter with reference to the particular property affected thereby, (ii) inchoate Encumbrances imposed for construction work in progress, including mechanics liens, workers or repairmen’s liens, or otherwise incurred in the ordinary course of business that do not adversely affect in any material respects the use or operation of the applicable Company Property, (iii) easement agreements disclosed and all other matters disclosed on the existing title policies which were previously provided (or made available) to Parent (a list of all of which title policies is included in Section 3.09(a) of the Company Disclosure Letter) (“Existing Company Title Policies”), (iv) matters as would be disclosed on current title reports or surveys that arise in the ordinary course and do not materially and adversely affect the value, use or operation of the applicable Company Property (restrictive covenants in forms generally created for office parks of the types or which Company Properties are located shall be deemed Permitted Company Encumbrances), (v) matters disclosed in Section 3.09(a) of the Company Disclosure Letter with reference to the particular property affected thereby, (vi) real estate Taxes and special assessments not yet delinquent (except as is being contested in good faith by appropriate proceedings and for which a reserve in accordance with GAAP has been set forth on the books of the Company or a Company Property Owner, as applicable), (vii) Space Leases and (viii) in the case of a Company Property Owner identified in Section 3.17(e) as a joint venture in which a Company Subsidiary holds an ownership interest, the interest of the other member or partner in such Company Property Owner, as and to the extent such interest is disclosed in Section 3.17(e) of the Company Disclosure Letter (the matters in clauses (i) through (viii), inclusive, the “Permitted Company Encumbrances”) and (ix) Encumbrances being contested in good faith in the ordinary course of business.
(b) Except as listed in Section 3.09(b) of the Company Disclosure Letter or Existing Company Title Policies or which would not have a Company Material Adverse Effect, the Company Properties are not subject to any rights of way, restrictive covenants, written agreements, Laws, ordinances and regulations affecting building use, parking or occupancy, or reservations of an interest in title (including, without limitation, reciprocal easement and operating easement agreements) (collectively, “Company Property Restrictions”), except for (i) Company Property Restrictions imposed or promulgated by Law with respect to real property, including zoning regulations and (ii) Permitted Company Encumbrances. Except as listed in Section 3.09(b) of the Company Disclosure Letter or which would not have a Company Material Adverse Effect, to the Knowledge of the Company, (i) each Company Property complies with the Company Property Restrictions, (ii) neither the Company nor any Company Property Owner, nor, to the Knowledge of the Company, any other party, is currently in default or violation of any Company Property Restriction and (iii) no event has occurred which, with due notice or lapse of time or both, would constitute a default thereunder.
-25-
(c) Except as set forth in Section 3.09(c) of the Company Disclosure Letter, (i) valid policies of title insurance or marked up title commitments have been issued insuring the Company’s or a Company Property Owner’s fee simple title or leasehold estate to each of the Company Properties in amounts at least equal to the purchase price paid for the applicable Company Property and, to the Knowledge of the Company, such policies are in full force and effect and (ii) no material claim has been made against any such policies.
(d) Except as listed in Section 3.09(d) of the Company Disclosure Letter or which, individually or in the aggregate, would not have a Company Material Adverse Effect, to the Knowledge of the Company, there is no certificate, permit or license from any Governmental Entity having jurisdiction over any of the Company Properties or any agreement, easement or any other right which is necessary to permit the current use and operation of the buildings and improvements on any of the Company Properties or which is necessary to permit the current use and operation of all driveways, roads and other means of egress and ingress to and from any of the Company Properties or which govern the use and operation of the Company Properties (collectively, the “Company Property Agreements”) that has not been obtained and is not in full force and effect, or any pending threat of modification or cancellation of any of same. Except as listed in Section 3.09(d) of the Company Disclosure Letter or which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, (i) neither the Company nor any Company Property Owner, nor to the Knowledge of the Company, any other party, is currently in default or violation of any Company Property Agreement and (ii) to the Knowledge of the Company, no event has occurred which, with due notice or lapse of time or both, would constitute a default or violation thereunder.
(e) Except as listed in Section 3.09(e) of the Company Disclosure Letter or which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, neither the Company nor any Company Property Owner has received written notice of any violation of any federal, state or municipal Law, ordinance, order, regulation or requirement affecting any portion of any of the Company Properties issued by any Governmental Entity that has not been heretofore remedied.
(f) Except as listed in Sections 3.09(f) and 3.13 of the Company Disclosure Letter or which, individually or in the aggregate, would not have a Company Material Adverse Effect, the Company has not received notice of any, (i) condemnation or rezoning or proceedings that are pending or, to the Knowledge of the Company, threatened with respect to any portion of any of the Company Properties; or (ii) to the Knowledge of the Company, violation of zoning, building, land-use, fire, safety and signage or other applicable Laws (including, without limitation, to the Knowledge of the Company, the Americans With Disabilities Act) or orders that are presently being violated or will be violated by the continued maintenance, operation or use of any buildings or other improvements on any of the Company Properties or by the continued maintenance, operation or use of the parking areas.
-26-
(g) Except as listed in Section 3.09(g) of the Company Disclosure Letter, neither the Company nor any Company Property Owner is currently obligated under any option, right of first refusal or other contractual right to sell, dispose of any of the Company Properties or any material portion thereof or material interest therein to any Person other than Merger Sub.
(h) Each Company Ground Lease is valid, binding and enforceable against the Company (or any Company Property Owner, as applicable) and, to the Knowledge of the Company, the other parties thereto in accordance with its terms, and is in full force and effect. Except as listed in Section 3.09(h) of the Company Disclosure Letter or which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, (i) the Company has performed in all material respects all material obligations required to be performed by it to date under each of the Company Ground Leases and (ii) neither the Company nor any Company Property Owner, nor to the Knowledge of the Company, any other party, is in default under any Company Ground Lease (and no event has occurred which, with due notice or lapse of time or both, would constitute such a default). The Company has delivered (or made available) to Parent a true, correct and complete copy of each Company Ground Lease and all amendments thereto. No option has been exercised under any of such Company Ground Leases, except options whose exercise has been evidenced by a written document as described in Section 3.09(h) of the Company Disclosure Letter, a true, complete and accurate copy of which has been delivered to Parent with the corresponding Company Ground Lease.
(i) The rent rolls for each of the Company Properties as of September 30, 2005, copies of which dated September 30, 2005 were delivered to Parent (collectively, the “Rent Roll”) have been provided or made available to Parent. Except as disclosed in Section 3.09(i) of the Company Disclosure Letter and for discrepancies that, either individually or in the aggregate, would not have a Company Material Adverse Effect, to the Knowledge of the Company, the information set forth in the Rent Roll is true, correct and complete as of the date thereof. Except as disclosed in Section 3.09(i) of the Company Disclosure Letter (i) to the Knowledge of the Company, neither the Company nor any Company Property Owner is in any monetary default under any Space Lease which default or defaults, individually or in the aggregate, would result in a Company Material Adverse Effect and (ii) neither a Company Property Owner nor the Company has received written notice or a copy of a notice from any tenant under any Space Lease claiming that the Company or the applicable Company Property Owner is currently in default under its obligations as landlord under any such lease which monetary default or defaults would result in a Company Material Adverse Effect.
(j) To the Knowledge of the Company, the Company and each of the Company Property Owners have good and sufficient title to, or are permitted to use under valid and existing leases, personal and non-real properties and assets sufficient for the conduct and operation of their respective businesses and properties.
-27-
(k) Section 3.09(k) of the Company Disclosure Letter identifies the Company Properties that consist of or include undeveloped land and any Company Properties that are in the process of being developed, expanded or rehabilitated or that are being held for future development (each such Company Property, a “Company Development Property”) and a brief description of the development, expansion or rehabilitation being carried out by or on behalf of the Company or a Company Property Owner or intended by the Company or a Company Property Owner to be carried out or completed thereon (collectively, the “Projects”), including the budget and development, expansion or rehabilitation schedule therefor prepared as of respective dates thereof by or for the Company or Company Property Owner (collectively, the “Development Budget and Schedule”). In the case of each Project, the implementation of which has been commenced as of the date hereof, the costs or expenses incurred in connection with such Project and the progress thereof are consistent in all material respects with the Development Budget and Schedule applicable thereto, as modified from time to time.
Section 3.10. No Undisclosed Material Liabilities. Except as set forth in Section 3.10 of the Company Disclosure Letter, there are no liabilities or obligations of the Company or any Subsidiary thereof of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances that would be reasonably expected to result in such a liability or obligation, other than (i) liabilities or obligations disclosed and provided for in the consolidated balance sheet of the Company as of June 30, 2005 included in the Company SEC Documents filed prior to the date of this Agreement or referred to in the notes thereto; (ii) liabilities or obligations incurred in the ordinary course of business consistent with past practice since June 30, 2005; and (iii) liabilities or obligations which, in case of (i), (ii) and (iii), would not, individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.11. No Default. Except as set forth in Section 3.11 of the Company Disclosure Letter, neither the Company nor any of the Company Subsidiaries is in default or violation (and to the Knowledge of the Company no event has occurred which, with notice or the lapse of time or both, would constitute a default or violation) of any term, condition or provision of:
| (a) the Company Organizational Documents or the comparable charter or organizational documents (including any operating agreement or limited partnership agreement) of any of the Company Subsidiaries, or |
(b) any Contract applicable to the Company or any Company Subsidiary or their respective properties or assets or any guarantee by the Company or any Company Subsidiary of any of the foregoing;
except, in the case of clause (b), for defaults and violations which, individually or in the aggregate, have not constituted and would not reasonably be expected to constitute a Company Material Adverse Effect.
Section 3.12. Compliance with Applicable Laws. The Company and the Company Subsidiaries hold, and are in compliance with, all permits, licenses, certificates, registrations, variances, exemptions, orders, franchises and approvals of all Governmental Entities necessary for the lawful conduct of their respective businesses (the “Company Permits”), except where the failure so to hold or be in compliance, individually or in the aggregate, would not have a Company Material Adverse Effect. All applications required to have been filed for the renewal of the Company Permits have been duly filed on a timely basis with the appropriate Governmental Entities, and all other filings required to have been made with respect to such Company Permits have been duly made on a timely basis with the appropriate Governmental Entities, except for failures to file which, individually or in the aggregate, have not constituted and would not reasonably be expected to constitute a Company Material Adverse Effect. Except as disclosed in the Company SEC Documents filed prior to the date of this Agreement and as, individually or in the aggregate, would not reasonably be expected to constitute a Company Material Adverse Effect, the businesses of the Company and the Company Subsidiaries are not being conducted in violation of any Law.
-28-
Section 3.13. Litigation. Except as set forth in Section 3.13 of the Company Disclosure Letter or the Company SEC Documents filed prior to the date of this Agreement, and other than bodily injury and other tort litigation arising from the ordinary course of operations of Company and the Company Subsidiaries (a) which are substantially covered by insurance or (b) for which all material costs and liabilities arising therefrom are reimbursable pursuant to common area maintenance or similar agreements, there is no action, order, writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, arbitration, investigation or inquiry by or before any court, governmental or other regulatory or administrative agency or commission or any other Person instituted, pending or, to the Knowledge of the Company, threatened, in each case against the Company or any Company Subsidiaries or any of their respective properties or assets that would cause a Company Material Adverse Effect, nor is there any outstanding judgment, decree or injunction, in each case against the Company or any Company Subsidiaries, or any order of any Governmental Entity applicable to the Company or any Company Subsidiary that would cause a Company Material Adverse Effect. To the Knowledge of the Company, there are no SEC inquiries or investigations, other governmental inquiries or investigations or internal investigations pending or threatened, in each case regarding any accounting practices of the Company or any of its Subsidiaries or any malfeasance by any executive officer of the Company or any of the Company Subsidiaries.
Section 3.14. Taxes. Except as set forth in Section 3.14 of the Company Disclosure Letter:
| (a) The Company and each Company Subsidiary has (i) timely and duly filed with the appropriate Governmental Entities all material Tax Returns required to be filed by them (after giving effect to validly obtained extensions of time in which to make such filings) and each such Tax Return is accurate and complete in all material respects and (ii) timely paid all material Taxes due and, with respect to any period for which Tax Returns have not yet been filed or for which Taxes are not yet due or owing, have made adequate accruals for the projected amount of such Taxes in their books and records and in the balance sheet dated December 31, 2004 contained in the Company SEC Documents filed prior to the date of this Agreement. |
(b) The Company and the Company Subsidiaries have complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes (including Taxes required to have been withheld in connection with amounts paid or owing to an employee, independent contractor, creditor or stockholder), have duly and timely withheld and paid over to the appropriate Governmental Entity all amounts so withheld and paid under all applicable Laws, and have duly and timely filed all material Tax Returns with respect to such withheld Taxes.
-29-
(c) The Company has always been, and will be through the Closing Date, (i) a real estate investment trust within the meaning of Section 856 of the Code (a “REIT”), and (ii) to its Knowledge, a “domestically-controlled REIT” within the meaning of Section 897(h)(4)(B) of the Code. To its Knowledge, the Company has neither taken nor omitted to take any action that could result in a successful challenge to its status as a REIT and no such challenge is pending or threatened in writing.
(d) Section 3.14(d) of the Company Disclosure Letter sets forth each Company Subsidiary (for purposes of this Section 3.14(d), the definition of “Subsidiary” contained in Section 9.03 shall be applied by substituting “9.9%” for “50%” in clause (i) of such definition) and designates which Company Subsidiaries are “taxable REIT subsidiaries” within the meaning of Section 856(1) of the Code. Each Company Subsidiary that is a partnership, joint venture, or limited liability company (i) has always been, and will be through the Closing Date, a partnership or disregarded entity for federal income tax purposes, as the case may be, and not a corporation or an association taxable as a corporation and (ii) is controlled or managed by the Company. Each Company Subsidiary that is a corporation has always been, and will be through the Closing Date, 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(1) of the Code.
(e) Since January 1, 2002, the Company has incurred no liability for Taxes under Sections 856(c)(7)(B), 856(g)(5)(C), 857(b), 860(c) or 4981 of the Code, including without limitation any Tax arising from a prohibited transaction described in Section 857(b)(6) of the Code or any Tax arising from “redetermined rents, redetermined deductions and excess interest” described in Section 857(b)(7) of the Code, and neither the Company nor any Company Subsidiary has incurred any material liability for Taxes other than in the usual, regular and ordinary course of business. To the Company’s Knowledge, no event has occurred and no condition or circumstance exists which presents a material risk that any material Tax described in the preceding sentence will be imposed upon the Company or any Company Subsidiary.
(f) Neither the Company nor any Company Subsidiary holds any asset (i) the disposition of which would be subject to rules similar to Section 1374 of the Code as a result of (A) an election under IRS Notice 88-19 or Treasury Regulation § 1.337(d)-5 or § 1.337(d)-6 or (B) the application of Treasury Regulation § 1.337(d)-7 or (ii) that would cause the Company to fail to satisfy the requirements of Section 856(c)(4) of the Code.
(g) Since January 1, 2002, the Company and the Company Subsidiaries have not taken or omitted to take any action which would reasonably be expected to result in any amounts treated by the Company and/or the Company Subsidiaries as rents paid by tenants of the Company Properties to be excluded from the definition of “rents from real property” within the meaning of Section 856(d) of the Code and Treasury Regulations thereunder.
-30-
(h) All material deficiencies for Taxes asserted against the Company or any Company Subsidiary (i) have been paid or (ii) are being contested in good faith and are disclosed on Section 3.14(h) of the Company Disclosure Letter. Since January 1, 2002, neither the Company nor any Company Subsidiary has been the subject of any audit, suit, proceeding, claim, examination, or assessment by any Governmental Entity regarding Taxes, and no such audit, suit, proceeding, claim, examination, or assessment is currently pending or, to the Knowledge of the Company, threatened or proposed. No claim has been made in writing by a Governmental Entity in a jurisdiction where the Company or any Company Subsidiary does not file Tax Returns such that the Company or any Company Subsidiary is or may be subject to taxation by that jurisdiction.
(i) Neither the Company nor any of the Company Subsidiaries (i) has any liability for the Taxes of any Person, other than the Company or the Company Subsidiaries, under Treasury Regulation § 1.1502-6 (or any similar provision of state, local or foreign Law) or as a transferee or successor or (ii) has entered into or is subject, directly or indirectly, to any Tax Protection Arrangement, Tax sharing agreement, Tax indemnification agreement or similar contract or arrangement; and Section 3.14 of the Company Disclosure Letter identifies the maximum amounts that could become payable under any such agreements.
(j) Neither the Company nor any Company Subsidiary 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 (2) 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.
(k) The Company and each Company Subsidiary has disclosed to the IRS on the appropriate Tax Returns any Reportable Transaction, as defined in Treasury Regulation §1.6011-4(b), in which it has participated. The Company and each Company Subsidiary has retained all documents and other records pertaining to any Reportable Transaction in which it has participated, in accordance with Treasury Regulation § 1.6011-4(g).
(l) The Company and each Company Subsidiary has disclosed on their federal income Tax Returns all positions taken therein which could give rise to a substantial understatement of income Tax under Section 6662 of the Code.
(m) There are no Encumbrances for Taxes upon the assets of the Company or the Company Subsidiaries except for Taxes not yet due and payable.
(n) Neither the Company nor any other Person on its behalf has (i) agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of Law or has any Knowledge that any Governmental Entity has proposed any such adjustment, or has any application pending with any Governmental Entity requesting permission for any changes in accounting methods that relate to the Company or any Company Subsidiary, (ii) executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of Law with respect to the Company or any Company Subsidiary, (iii) requested any extension of time within which to file any Tax Return, which Tax Return has since not been filed, (iv) granted any extension of the statute of limitations for the assessment or collection of Taxes, or otherwise entered into or filed any agreements, arrangements, waivers or objections extending the statutory period or providing for an extension of time with respect to the assessment or reassessment of Taxes or the filing of any Tax Return, or any payment of Taxes, (v) granted to any Person any power of attorney that is currently in force with respect to any Tax matter, or (vi) received a ruling from any Governmental Entity in respect of Taxes or signed an agreement in respect of Taxes with any Governmental Entity.
-31-
Section 3.15. Pension and Benefit Plans; ERISA.
(a) Section 3.15(a) of the Company Disclosure Letter sets forth (i) all “employee benefit plans,” as defined in Section 3(3) of ERISA, and all material employee compensation and benefit plans, policies, arrangements or payroll practices, including, without limitation, severance pay, severance agreements, employment agreements, sick leave, vacation pay, salary continuation for disability, consulting or other compensation agreements, retirement, deferred compensation, bonus (including, without limitation, any retention bonus plan), long-term incentive, stock option, stock purchase, hospitalization, medical insurance, life insurance and scholarship programs maintained by the Company or any of the Company Subsidiaries or with respect to which the Company or any of the Company Subsidiaries has any liability; and (ii) all “employee pension benefit plans,” as defined in Section 3(2) of ERISA, maintained or contributed to by the Company or any trade or business (whether or not incorporated) which is under common control, or which is treated as a single employer, with the Company under Section 4.14(b), (c), (m) or (o) of the Code (a “Company ERISA Affiliate”) or to which the Company or any of the Company Subsidiaries or any Company ERISA Affiliate contributed or is obligated to contribute thereunder within six years prior to the Closing (the “Company Pension Plans”) (all such plans listed in clauses (i) and (ii) being hereinafter referred to as the “Company Employee Benefit Plans”).
(b) Except as set forth on Section 3.15(b) of the Company Disclosure Letter, true and complete copies of each Company Employee Benefit Plan, related trust (or other funding or financing arrangement) and all amendments thereto have been made available to Parent, as have the most recent summary plan descriptions, administrative service agreements, investment management or advisory agreements, audit reports, fidelity bonds, and fiduciary liability policies for such Company Employee Benefit Plans, as well as (i) Form 5500s for each Company Employee Benefit Plan for each of the past three (3) years, (ii) all material correspondence with any Governmental Entity relating to any Company Employee Benefit Plan, and (iii) with respect to any Company Employee Benefit Plan intended to be qualified pursuant to Section 401(a) of the Code, a current IRS determination letter.
(c) All individual employment, consulting, termination, severance, change in control, retention, bonus, post employment and other compensation agreements, arrangements and plans existing prior to the execution of this Agreement or which will exist prior to the Closing, which are between the Company or a Company Subsidiary and any current or former trustee, director, officer or employee thereof, including the name of such current or former trustee, director, officer or employee, the type of agreement and the amount of any estimated severance payment (including estimated gross-up, if applicable) owed thereunder due to the transactions contemplated by this Agreement and any subsequent termination of employment, are listed in Section 3.15(c) of the Company Disclosure Letter (collectively, the “Company Employment Agreements”).
-32-
(d) The Company Pension Plans intended to qualify under Section 401 of the Code have received a favorable determination letter from the IRS and such determination has not been modified, revoked or limited, and, to the Knowledge of the Company, as of the Closing Date, nothing has occurred with respect to the operation of the Company Pension Plans that could reasonably be expected to cause the loss of such qualification or the imposition of any material liability, penalty or Tax under ERISA or the Code.
(e) Except as would not, individually or in the aggregate, have a Company Material Adverse Effect or except as disclosed in Section 3.15(e) of the Company Disclosure Letter:
(i) All Company Employee Benefit Plans have been maintained in accordance with the terms of such plan and with all provisions of ERISA and the Code (including rules and regulations thereunder) and other applicable Law.
(ii) None of the Company Pension Plans is a “multiemployer plan”, as defined in Section 3(37) of ERISA (“Company Multiemployer Plan”), and neither the Company nor any Company ERISA Affiliate has at any time in the past sponsored, contributed to any such Company Multiemployer Plan, or has any liabilities with respect to any such Company Multiemployer Plan.
(iii) Neither the Company nor any Company ERISA Affiliate has ever maintained, sponsored, contributed to or otherwise incurred any present or contingent liability with respect to any “single-employer plan”, as defined in Section 4001(a)(15) of ERISA, and neither the Company nor any Company ERISA Affiliate has any present or contingent liability that is subject to Title IV of ERISA to the Pension Benefit Guaranty Corporation or to a trustee appointed under Section 4042 of ERISA, and no events have occurred and no circumstances exist that could reasonably be expected to result in any such liability to the Company or any Company ERISA Affiliate.
(iv) There is no liability for breaches of fiduciary duty in connection with Company Employee Benefit Plans, and neither the Company nor any of the Company Subsidiaries or any “party in interest” or “disqualified person” with respect to Company Employee Benefit Plans has engaged in a non-exempt “prohibited transaction” within the meaning of Section 4975 of the Code or Section 406 of ERISA.
(v) There are no actions, disputes, suits, claims, arbitration or legal, administrative or other proceeding or governmental investigation pending (other than routine claims for benefits) or, to the Knowledge of the Company, threatened, alleging any breach of the terms of any Company Employee Benefit Plan or of any fiduciary duties thereunder or violation of any applicable Law with respect to any such Company Employee Benefit Plan.
-33-
(vi) All contributions, premiums and other payments required by Law or any Company Employee Benefit Plan or applicable collective bargaining agreement have been made under any such plan to any fund, trust or account established thereunder or in connection therewith by the due date thereof, and no amounts are or will be due to the Pension Benefit Guaranty Corporation as of the Closing Date (except for premiums in the ordinary course of business, which will be payable by the Company); and any and all contributions, premiums and other payments with respect to compensation or service before and through the Closing Date, or otherwise with respect to periods before and through the Closing Date, due from any of the Company or its Company ERISA Affiliates to, under or on account of each Company Employee Benefit Plan shall have been paid prior to the Closing Date or shall have been fully reserved and provided for or accrued on the Company financial statements.
(vii) The Company and Company ERISA Affiliates have complied with the requirements of Section 4980B of the Code and Parts 6 and 7 of Subtitle B of Title I of ERISA regarding health care coverage under Company Employee Benefit Plans.
(viii) No amount has been paid by the Company or any Company Subsidiaries, and no amount is expected to be paid by the Company or any Company Subsidiaries, which would be subject to the provisions of Section 162(m) of the Code such that all or a part of such payments would not be deductible by the payor.
(ix) Each Company Employee Benefit Plan may be unilaterally amended or terminated in its entirety by the Company except as to benefits accrued thereunder prior to amendment or termination and except for the rights of third-party administrators under the Company’s Contracts with such administrators, which Contracts have been previously provided to Parent.
(f) Except as set forth in Section 3.15(f) of the Company Disclosure Letter, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, whether alone, or in connection with any other event, will (i) result in any payment (including, but not limited to, any retention bonuses, parachute payments or noncompetition payments) becoming due to any employee or former employee or group of employees or former employees of the Company or any of the Company Subsidiaries; (ii) increase any benefits otherwise payable under any Company Employee Benefit Plan or any Company Employment Agreement; (iii) result in the acceleration of the time of payment or vesting of any Company Options or any other rights or benefits; or (iv) result in the payment of any “excess parachute payment” within the meaning of Section 280G of the Code with respect to a current or former employee of the Company or any of the Company Subsidiaries.
Section 3.16. Labor and Employment Matters. Except as to clauses (b), (c), (e) and (f) of this Section 3.16, which, individually or in the aggregate, would not have a Company Material Adverse Effect and except as disclosed in Section 3.16 of the Company Disclosure Letter:
-34-
| (a) Neither the Company nor any of the Company Subsidiaries is a party to any collective bargaining agreement or other current labor agreement with any labor union or organization, and there is no question involving current union representation of employees of the Company or any of the Company Subsidiaries, nor does the Company or any of the Company Subsidiaries have any Knowledge of any activity or proceeding of any labor organization (or representative thereof) or employee group (or representative thereof) to organize any such employees. |
(b) There is no unfair labor practice charge or grievance arising out of a collective bargaining agreement or other grievance procedure pending, or, to the Knowledge of the Company, threatened against the Company or any of the Company Subsidiaries.
(c) There is no complaint, lawsuit or proceeding in any forum by or on behalf of any present or former employee, any applicant for employment or any classes of the foregoing, or any written threat to initiate any of the foregoing, alleging breach of any express or implied contract of employment, any Law or regulation governing employment or the termination thereof or other discriminatory, wrongful or tortious conduct in connection with the employment relationship pending, or, to the Knowledge of the Company, threatened against the Company or any of the Company Subsidiaries.
(d) There is no strike, slowdown, work stoppage or lockout pending, or, to the Knowledge of the Company, threatened, against or involving the Company, any of the Company Subsidiaries, or any Company Development Property.
(e) The Company and each of the Company Subsidiaries are in compliance with all applicable Laws in respect of employment and employment practices, terms and conditions of employment, wages, hours of work and occupational safety and health.
(f) As of the date of this Agreement, there is no proceeding, claim, suit, action or governmental investigation pending or, to the Knowledge of the Company, threatened, with respect to which any current or former trustee, director, officer, employee or agent of the Company or any of the Company Subsidiaries is claiming indemnification from the Company or any of the Company Subsidiaries.
Section 3.17. Contracts.
(a) As of the date hereof, Section 3.17(a) of the Company Disclosure Letter lists all Material Contracts of the Company and all Company Subsidiaries, other than those Material Contracts filed as exhibits to the Company SEC Documents filed prior to the date of this Agreement. Except as set forth in Section 3.17(a) of the Company Disclosure Letter or as set forth in the Company SEC Documents filed prior to the date of this Agreement, each Material Contract of the Company or a Company Subsidiary is valid, binding and enforceable and in full force and effect and there are no defaults or violations thereunder by the Company or the Company Subsidiaries party thereto or, to the Company’s Knowledge, any other party thereto, nor does there exist any condition which upon the passage of time or the giving of notice or both would cause such a violation of or a default thereunder, except those defaults or violations that have not and would not, individually or in the aggregate, have a Company Material Adverse Effect.
-35-
(b) All mortgages, deeds of trust, loan agreements or other similar documents encumbering any of the Assets, or to which the Company or a Company Subsidiary is a party, are listed in Section 3.17(b) of the Company Disclosure Letter; and Section 3.17(b) of the Company Disclosure Letter also identifies each interest rate cap, interest rate collar, interest rate swap, currency hedging transaction and any other agreement relating to a similar transaction to which the Company or a Company Subsidiary is a party. The transactions contemplated hereby and by the Transaction Documents will not trigger any due-on-sale provision on any of such mortgages, deeds of trust, loan agreements or other documents or agreements, except as set forth in Section 3.17(b) of the Company Disclosure Letter, and will not require the consent of any lender or other Person, except as set forth in Section 3.17(b) of the Company Disclosure Letter.
(c) Except as set forth in Section 3.17(c) of the Company Disclosure Letter, there is no confidentiality agreement, non-competition agreement or other contract or agreement that contains covenants that materially restrict the Company’s or any of the Company Subsidiaries’ ability to conduct its business in any location.
(d) Except as set forth in Section 3.17(d) of the Company Disclosure Letter, there are no indemnification agreements entered into by and between the Company or any of the Company Subsidiaries and any trustee, director or officer of the Company or any of the Company Subsidiaries.
(e) All joint venture agreements applicable to the Company or any of the Company Subsidiaries are listed in Section 3.17(e) of the Company Disclosure Letter or are filed as exhibits to the Company SEC Documents. The transactions contemplated by this Agreement and the Transaction Documents will not trigger any termination, buy-sell, transfer, option, right of first refusal, right of first offer, tag-along or any similar right by any party under any of such joint venture agreements, except as set forth in Section 3.17(e) of the Company Disclosure Letter, and will not require the consent of any joint venture partner, except as set forth in Section 3.17 of the Company Disclosure Letter. Section 3.17(e) of the Company Disclosure Letter discloses the ownership interests in each joint venture; the capital accounts of each partner or member of each joint venture; any outstanding loans by a partner or member to a joint venture; and any capital calls made by a partner or member in a joint venture, but not fully funded as of the date of this Agreement.
(f) Except as set forth in Section 3.17(f) of the Company Disclosure Letter, none of the Company or any of the Company Subsidiaries is a party to any agreement which would restrict any of them from prepaying any of their indebtedness without penalty or premium at any time or which requires any of them to maintain any amount of indebtedness with respect to any of the Company Properties.
(g) Except as set forth in Section 3.17(g) of the Company Disclosure Letter or except as disclosed in the Company SEC Documents, none of the Company or any of the Company Subsidiaries is a party to any agreement relating to the management of any Company Property by any Person other than the Company or a Company Subsidiary.
-36-
(h) None of the Company or any of the Company Subsidiaries is a party to any agreement pursuant to which the Company or any of the Company Subsidiaries manages or provides services with respect to any real properties other than Company Properties, except for the agreements listed in Section 3.17(h) of the Company Disclosure Letter or filed as exhibits to the Company SEC Documents filed prior to the date of this Agreement. No party to any such agreement has given written notice of its intention to terminate or cancel any such agreements.
(i) Section 3.17(i) of the Company Disclosure Letter lists all Material Contracts entered into by the Company or any of the Company Subsidiaries providing for the sale of, or option to sell, any Company Properties or the purchase of, or option to purchase, by the Company or any of the Company Subsidiaries, on the one hand, or the other party thereto, on the other hand, any real estate not yet consummated as of the date hereof except where such termination or cancellation would not have a Company Material Adverse Effect.
(j) Section 3.17(j) of the Company Disclosure Letter lists all agreements entered into by the Company or any of the Company Subsidiaries with any investment bankers or financial advisors that are currently in effect.
Section 3.18. Intellectual Property. All Company Intellectual Property is owned or licensed by the Company or the Company Subsidiaries free and clear of any and all Encumbrances, except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, and neither the Company nor any such Company Subsidiary has forfeited or otherwise relinquished any Company Intellectual Property, except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Section 3.19. Insurance. Section 3.19 of the Company Disclosure Letter sets forth a true, correct and complete schedule of the insurance policies (including the type, amount of coverage and premiums and expiration dates of such policies) held by, or for the benefit of, the Company, the Company Subsidiaries and any Company Property Owner. The Company or the applicable Company Subsidiary has paid, or caused to be paid, all premiums due under such policies and is not in default with respect to any obligations under such policies in any respect except to the extent that such failure to pay would not have a Company Material Adverse Effect. Section 3.19 of the Company Disclosure Letter also includes a list of five years of loss runs for losses in excess of $10,000 for every line of insurance, including large-loss descriptions on any such policies. None of the Company or any of the Company Subsidiaries has received any insurance company notice of any material defects or deficiencies affecting the insurability of the Company or any of the Company Subsidiaries or any of their respective assets thereunder. Except as set forth in Section 3.19 of the Company Disclosure Letter, (i) neither the Company nor any of the Company Subsidiaries has received any written notice of cancellation or termination with respect to any existing insurance policy held by or for the benefit of the Company, any of the Company Subsidiaries or any Company Property Owner, and (ii) there are no outstanding or to the Company’s Knowledge, threatened, requirements for any repairs or alterations to be made to any Company Property by any (x) insurance company that has issued an insurance policy covering any Company Property, or (y) board of fire underwriters or other body exercising similar functions. The Company and Company Subsidiaries maintain insurance in form and amount and with carriers that meet requirements for insurance included in loan agreements and other Material Contracts.
-37-
Section 3.20. Brokers. Except for the fees and expenses payable to the Company Financial Advisor (which engagement letter with respect to the Company Financial Advisor has been made available to Parent), no broker, investment banker or other Person is entitled to any broker’s, finder’s or other similar fee or commission in connection with the transactions contemplated by the Transaction Documents based upon arrangements made by or on behalf of the Company or any Company Subsidiary.
Section 3.21. Related Party Transactions. Except as disclosed in the Company SEC Documents filed prior to the date of this Agreement or as set forth in Section 3.21 of the Company Disclosure Letter, there are no material arrangements, agreements or contracts entered into by the Company or any of the Company Subsidiaries, on the one hand, and any Person who is an officer, trustee, director or Affiliate of the Company or any Company Subsidiary, any relative of the foregoing or an entity of which any of the foregoing is an Affiliate or an Associate, on the other hand. Copies of all such documents listed on Section 3.21 of the Company Disclosure Letter have been made available to Parent.
Section 3.22. Opinion of Financial Advisor. The Company Board has received the written opinion of the Company Financial Advisor to the effect that, based on, and subject to the various assumptions and qualifications set forth in such opinion, as of the date of such opinion, the REIT Merger Consideration to be received by the Company’s shareholders (or, if the Reverse REIT Merger is to be consummated pursuant to Article X of this Agreement, the Special Dividend, together with the REIT Merger Consideration) is fair from a financial point of view to the Company’s public holders of Company Common Shares. A copy of the written opinion of the Company Financial Advisor has been delivered to Parent.
Section 3.23. Investment Company Act of 1940. Neither the Company nor any of the Company Subsidiaries is, or on the Closing Date will be, required to be registered as an investment company under the Investment Company Act of 1940, as amended.
Section 3.24. Board Recommendation. The Company Board, at a meeting duly called and held, has, by unanimous vote of all its members, (i) determined that this Agreement and the transactions contemplated by this Agreement are advisable, fair to and in the best interests of the Company and the shareholders of the Company, and (ii) resolved to recommend that the holders of Company Common Shares approve and adopt this Agreement and the transactions contemplated thereby, including the REIT Merger.
Section 3.25. Inapplicability of Takeover Statutes, Rights Agreement and Certain Charter and Bylaw Provisions.
(a) The Company has taken all action required to be taken by it in order to exempt this Agreement and the REIT Merger from, and this Agreement and the REIT Merger are exempt from, the requirements of any “moratorium”, “control share”, “fair price”, “affiliate transaction”, “business combination” or other takeover Laws and regulations of any state (collectively, “Takeover Statutes”), including the Maryland Business Combination Act and Maryland Control Share Acquisition Act and any takeover provision in the Company Organizational Documents.
-38-
(b) The Company and the Company Board have taken all appropriate and necessary actions to render any and all limitations on ownership of (i) Company Common Shares and Company Preferred Shares as set forth in the Charter and (2) Company L.P. Units as set forth in the Company L.P. Partnership Agreement, including the Ownership Limit (as defined in the Charter), inapplicable to the REIT Merger, the OP Merger, the Transaction Documents and the other transactions contemplated thereby.
(c) The Company Board has amended the Company Rights Agreement prior to the execution of this Agreement so as to provide that (i) (A) none of Parent, Parent L.P. or any of their Affiliates or associates will become an “Acquiring Person” (as defined in the Company Rights Agreement) and (B) no “Share Acquisition Date” or “Distribution Date” or “Section 11(a)(ii) Event” or “Section 13 Event” (each as defined in the Company Rights Agreement) will occur or be deemed to have occurred, in each case, as a result of the approval, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and (ii) the Company Rights Agreement will terminate immediately prior to the REIT Effective Time.
Section 3.26. Information Supplied by the Company.
(a) The information supplied or to be supplied by the Company for inclusion or incorporation in the Joint Proxy Statement/Prospectus and the Partner Exchange Materials, and any other documents filed with the SEC in connection herewith, will not, at the time the Registration Statement is declared effective by the SEC, on the date the Joint Proxy Statement/Prospectus is first mailed to shareholders of the Company and first mailed to shareholders of Parent, or at the time of either of the Company Shareholders Meeting or Parent Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company Proxy Statement included in the Joint Proxy Statement/Prospectus will, at the time of the Company Shareholders Meeting, comply as to form in all material respects with the requirements of the Exchange Act.
(b) Notwithstanding the foregoing, the Company makes no representations or warranties with respect to information that has been or will be supplied by Parent or Merger Sub, or their auditors, attorneys, financial advisers, other consultants or advisers, specifically for use in the Joint Proxy Statement/Prospectus.
Section 3.27. Hart-Scott-Rodino Antitrust Improvements Act. The transactions contemplated hereby are exempt from any requirement to make any filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the implementing regulations thereto, 16 C.F.R. parts 801-803, because (a) the Company is a REIT; and (b) the Company has determined that the aggregate fair market value of the non-exempt assets of the Company and the entities controlled by the Company is less than $53.1 million.
-39-
Section 3.28. Limitation. The representations and warranties set forth in this Agreement were made in contemplation of the REIT Merger and the Reverse REIT Merger and Company and Company L.P. are not responsible for any breach of a representation or warranty that results from the consummation of the Prudential Purchase Agreement.
ARTICLE IV
Representations and Warranties of Parent, Parent L.P., Merger Sub and L.P. Merger Sub
As an inducement to the Company and Company L.P. to enter into this Agreement, except as disclosed in a section of the Parent Disclosure Letter corresponding to the section of this Article IV to which such disclosure applies, each of Parent, Parent L.P., Merger Sub and L.P. Merger Sub hereby jointly and severally represents and warrants to the Company and Company L.P. as follows:
Section 4.01. Organization, Standing and Power of Parent. Parent is a real estate investment trust duly formed, validly existing and in good standing under the laws of the State of Maryland and has the requisite real estate investment trust power, authority and all necessary government approvals or licenses to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to have such real estate investment trust power, authority, government approvals or licenses would not, individually or in the aggregate, have a Parent Material Adverse Effect. Parent is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of the business it is conducting, or the ownership, operation or leasing of its properties or the management of properties for others makes such qualification or licensing necessary, except where the failure to be so qualified or licensed or in good standing would not, individually or in the aggregate, have a Parent Material Adverse Effect. Parent has heretofore made available to the Company complete and correct copies of Parent’s Declaration of Trust and bylaws in each case, as currently in effect (the “Parent Organizational Documents”) and Parent Organizational Documents Organizational Documents are in full force and effect as of the date hereof.
Section 4.02. Parent Subsidiaries.
(a) Each Parent Subsidiary that is a corporation is duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation and has the requisite corporate power, authority and all necessary government approvals and licenses to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to have such corporate power, authority, government approvals or licenses would not, individually or in the aggregate, have a Parent Material Adverse Effect. All outstanding shares of stock of each of the Parent Subsidiaries that is a corporation have been duly authorized, are validly issued, fully paid and nonassessable, and are not subject to any rights of first offer, rights of first refusal, tag-along rights or any other preemptive rights and are, except as disclosed in 4.02(a) of the Parent Disclosure Letter, (i) 100% owned by Parent and/or another Parent Subsidiary and (ii) owned free and clear of all Encumbrances, preemptive rights, call rights, assessments or other adverse interests of any kind or nature whatsoever.
-40-
(b) Each Parent Subsidiary that is a partnership, limited liability company, trust or other entity (including, without limitation, Parent, L.P., Merger Sub, and Merger L.P.) is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization and has the requisite power, authority and all necessary government approvals and licenses to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to have such power, authority, government approvals or licenses would not, individually or in the aggregate, have a Parent Material Adverse Effect. Parent has heretofore made available to the Company complete and correct copies of (i) the Parent L.P. Partnership Agreement, (ii) Merger Sub’s certificate of formation and operating agreement as currently in effect (the “Merger Sub Organizational Documents”) and (iii) L.P. Merger Sub’s certificate of formation and operating agreement as currently in effect (the “L.P. Merger Sub Organizational Documents”). The Parent L.P. Partnership Agreement, the Merger Sub Organizational Documents and the L.P. Merger Sub Organizational Documents are in full force and effect as of the date hereof.
(c) Each Parent Subsidiary is duly qualified or licensed to do business and is, where applicable, in good standing in each jurisdiction in which the nature of its business or the ownership, operation or leasing of its properties or the management of properties for others makes such qualification or licensing necessary, except where the failure to be so qualified or licensed or in good standing would not, individually or in the aggregate, have a Parent Material Adverse Effect.
(d) Except as set forth in Section 4.02(d) of the Parent Disclosure Letter and except for any interest in Merger Sub or Merger L.P. that Prudential or an Affiliate of Prudential may acquire, there are no outstanding options, warrants or other rights to acquire ownership interests from or with respect to any Parent Subsidiary. Parent has heretofore made available to the Company complete and correct copies of the charter, by-laws, partnership agreements, operating agreements or other organizational documents of each of the Parent Subsidiaries, each as amended to date, and each such instrument or agreement is in full force and effect as of the date hereof. Section 4.02(d) of the Parent Disclosure Letter sets forth (i) all Parent Subsidiaries and their respective jurisdictions of incorporation or organization, and (ii) each owner and the respective amount of such owner’s equity interest in each Parent Subsidiary. Except as set forth in Section 4.02(d) of the Parent Disclosure Letter, Parent does not directly or indirectly own any equity or similar interests in any other Person, or any interest convertible into or exchangeable or exercisable for any equity or similar interests in any other Person.
Section 4.03. Authority; No Violations; Consents and Approval.
(a) Each of Parent and any Parent Subsidiary party hereto or thereto has all requisite real estate investment trust, limited partnership or limited liability company power and authority to enter into this Agreement and each of the other Transaction Documents and to consummate the transactions contemplated hereby and thereby, subject with respect to the consummation of the REIT Merger, to receipt of the approval by a majority of the votes cast by the holders of outstanding Parent Common Shares entitled to vote on the REIT Merger (provided that the total vote cast on the proposal represents over 50% in interest of all securities entitled to vote on the REIT Merger) (the “Required Parent Vote”) and the acceptance for recording of the Articles of Merger by the State of Maryland Department of Assessments and Taxation. The execution and delivery of the Transaction Documents and the consummation of the transactions contemplated hereby or thereby have been duly authorized by all necessary action on the part of Parent and each applicable Parent Subsidiary, subject with respect to the consummation of the REIT Merger, to receipt of the Required Parent Vote. The Transaction Documents have been duly executed and delivered by Parent and each applicable Parent Subsidiary and constitute legal, valid and binding obligations of Parent and each applicable Parent Subsidiary, and assuming they are binding obligations of the Company and Company L.P. in accordance with their terms, are enforceable against Parent and each applicable Parent Subsidiary in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other Laws of general applicability relating to or affecting creditors’ rights and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at Law).
-41-
(b) Except as set forth in Section 4.03(b) of the Parent Disclosure Letter, the execution and delivery of the Transaction Documents by each of Parent, Parent L.P., Merger Sub, L.P. Merger Sub and each other Parent Subsidiary party thereto do not, and the consummation of the transactions contemplated hereby or thereby, and compliance with the provisions hereof or thereof, will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation, or the material loss of a benefit under, or give rise to a right of purchase, first offer or forced sale, under, or result in the creation of any Encumbrance upon any of the properties or assets of Parent or any of the Parent Subsidiaries under, any provision of:
(i) the Parent Organizational Documents or the comparable charter or organizational documents (including any operating agreement or limited partnership agreement) of any Parent Subsidiary;
(ii) any Contract applicable to Parent or any Parent Subsidiary, or their respective properties or assets or any guarantee by Parent or any Parent Subsidiary of any of the foregoing; or
(iii) assuming the consents, approvals, authorizations, permits and filings or notifications referred to in Section 4.02(c) are duly and timely obtained or made and the Required Company Vote and Required Parent Vote each have been obtained, any judgment, order, decree, statute, Law, ordinance, rule or regulation applicable to Parent or any Parent Subsidiary, or any of their respective properties or assets;
except as to clauses (ii) and (iii) as would not individually or in the aggregate, cause a Parent Material Adverse Effect.
(c) Without limiting the generality of Section 4.03(b), the transactions contemplated herein do not violate any provision regarding direct or indirect transfers of interests in any Parent Subsidiary that are set forth in any agreement relating to the operation of, ownership of interests in, any Parent Subsidiary, even if such transactions result in a termination under Section 708 of the Code of any Parent Subsidiary.
-42-
(d) Except as set forth in Section 4.03(d) of the Parent Disclosure Letter, no consent, approval, order or authorization of, or registration, declaration or filing with, or permit from any Governmental Entity is required by or with respect to Parent, Parent L.P., Merger Sub L.P., Merger Sub and each other Parent Subsidiary in connection with the execution and delivery by such entity of the Transaction Documents to which such entity is a party or the consummation by such entity of the transactions contemplated hereby or thereby, except for:
(i) as to the REIT Merger, the filing of the Articles of Merger with the Department of Assessment and Taxation of the State of Maryland, and as to the OP Merger, the filing of the OP Merger Certificate with the Secretary of State of the State of Delaware;
(ii) a proxy statement relating to the Required Parent Vote (as amended or supplemented from time to time, the “Parent Proxy Statement”) and the Registration Statement;
(iii) rules and regulations of the NYSE;
(iv) such reports under Section 13(a) of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated by this Agreement;
(v) such filings and approvals as are required to be made or obtained under the securities or “Blue Sky” laws of various states in connection with the issuance of Parent Common Shares and Parent Class A Units pursuant to this Agreement; and
(vi) such other consents, approvals, orders, authorizations, registrations, declarations, filings or permits that (1) may be required in connection with the payment of any transfer and gains taxes or under federal, state or local environmental laws or (2) the failure to obtain or make, individually or in the aggregate, would not have a Parent Material Adverse Effect.
Section 4.04. Capital Structure.
(a) Parent is authorized to issue 110,000,000 shares of beneficial interest, consisting of 100,000,000 common shares of beneficial interest, par value $.01 per share (“Parent Common Shares”) and 10,000,000 preferred shares of beneficial interest, par value $.01 per share of which 2,000,000 shares have been designated as 7.50% Series C Cumulative Redeemable Preferred Shares and 2,300,000 shares have been designated as 7.375% Series D Cumulative Redeemable Preferred Shares. As contemplated by this Agreement, Parent intends to designate a class of Parent Series E Preferred Shares. As of the date hereof, (i) 56,495,269 Parent Common Shares (excluding shares held by Parent) were issued and outstanding, (ii) 2,000,000 7.50% Series C Cumulative Redeemable Preferred Shares were issued and outstanding, (iii) 2,300,000 7.375% Series D Cumulative Redeemable Preferred Shares were issued and outstanding, (iv) no Parent Common Shares were held by Parent, (v) 1,276,722 Parent Common Shares were reserved for issuance upon exercise of outstanding options to purchase Parent Common Shares (each, a “Parent Option”), (vi) 2,743,521 Parent Common Shares were available for future grant pursuant to Parent’s Amended and Restated 1997 Long-Term Incentive Plan and (vii) 3,749,717 Parent Common Shares were reserved for issuance upon exchange of Parent Class A Units.
-43-
(b) To the Knowledge of Parent, the issuance and sale of the issued and outstanding shares of beneficial interest described in this Section 4.04 have been made in compliance in all material respects with United States federal and state securities Laws. Section 4.04(b) of the Parent Disclosure Letter accurately sets forth as of the date hereof the names of all holders of options or rights to purchase the Parent’s shares of beneficial interest (including but not limited to Parent Options) and the number and type of shares issuable upon exercise of such options, the exercise price and vesting schedule with respect thereto. Except as set forth in Section 4.04(b) of the Parent Disclosure Letter, neither the Parent nor any Parent Subsidiary has agreed to register any securities under the Securities Act or under any state securities Law or granted registration rights to any Person, and complete and correct copies of any such agreements have previously been made available to Company. Except as set forth in the Parent SEC Documents or Section 4.04(b) of the Parent Disclosure Letter, as of the date hereof, there are no outstanding share or stock-appreciation rights, security-based performance units, “phantom” stock or other security rights or other agreements, arrangements or commitments of any character (contingent or otherwise) pursuant to which any Person is or may be entitled to receive any payment or other value based on the revenues, earnings or financial performance, share or stock price performance or other attribute of Parent or any of its Subsidiaries or assets or calculated in accordance therewith.
(c) (i) As of the date hereof, the issued and outstanding partnership interests of Parent L.P. consist of (A) 54,690,817 units of general partner interests in Parent L.P., all of which are owned by Parent, (B) 3,749,717 Class A units of limited partner interests in Parent L.P. (“Parent Class A Units”), 1,804,452 of which are owned by Parent and 1,945,265 of which are owned by Persons who are not Subsidiaries of Parent, (C) 2,000,000 Series D Preferred Mirror Units, all of which are owned by Parent, and (D) 2,300,000 Series E Preferred Mirror Units (together with the Series D Preferred Mirror Units, the “Parent Preferred Units”), all of which are owned by Parent.
(ii) Parent is the sole general partner of Parent L.P.
(iii) The holders of Parent Class A Units have the right, under certain circumstances, to exchange such units for Parent Common Shares on a one-for-one basis pursuant to the terms of the Parent L.P. Partnership Agreement. To the Knowledge of Parent, as of the date hereof, no notice has been received by Parent or Parent L.P. of the exercise of any of the rights set forth in this Section 4.04(c)(iii), which are not reflected in this Section.
(d) Except as set forth in Sections 4.04(a) or (c) hereof or in Sections 4.04(b) or 4.04(d) of the Parent Disclosure Letter, as of the date hereof there are issued and outstanding or reserved for issuance: (i) no Parent Common Shares or other shares of beneficial interest, Voting Debt or other voting securities of Parent; (ii) no restricted Parent Common Shares or other shares of beneficial interest, capital stock or equity interests of Parent or any Parent Subsidiary, performance share awards or dividend equivalent rights relating to the equity interests of Parent or any Parent Subsidiary, (iii) no securities of Parent or any Parent Subsidiary or securities or assets of any other entity convertible into or exchangeable for Parent Common Shares, shares of stock, Voting Debt or other voting securities of Parent or any Parent Subsidiary; and (iv) no subscriptions, options, warrants, conversion rights, shares appreciation rights, calls, claims, rights of first refusal, rights (including preemptive rights), commitments, arrangements or agreements to which Parent or any Parent Subsidiary is a party or by which it is bound in any case obligating Parent or any Parent Subsidiary to issue, deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed or acquired, additional Parent Common Shares, other shares of beneficial interest or stock, Voting Debt or other voting securities of Parent or of any Parent Subsidiary, or obligating Parent or any Parent Subsidiary to grant, extend or enter into any such subscription, option, warrant, conversion right, share appreciation right, call, right, commitment, arrangement or agreement. All outstanding shares of beneficial interest or capital stock of Parent and each Parent Subsidiary (including Parent L.P.) are, and all shares reserved for issuance will be, upon issuance in accordance with the terms specified in the instruments or agreements pursuant to which they are issuable, duly authorized, validly issued, fully paid and, with respect to Parent Subsidiaries that are corporations, nonassessable and not subject to or issued in violation of, any preemptive right, purchase option, call option, right of first refusal, subscription or any other similar right or Encumbrance and with respect to each Parent Subsidiary, 100% owned by the Parent and/or another Parent Subsidiary except as disclosed in Section 4.04(d) of the Parent Disclosure Letter.
-44-
(e) Except as set forth in the Parent SEC Documents, all dividends or distributions on securities of Parent or any Parent Subsidiary that have been declared or authorized prior to the date of this Agreement have been paid in full (except to the extent such dividends have been publicly announced and are not yet due and payable).
(f) Except for the Transaction Documents and except as set forth in Section 4.04(f) of the Parent Disclosure Letter, to the Knowledge of Parent, as of the date hereof there are not any (i) shareholder agreements, voting trusts, proxies or other agreements or understandings relating to the voting of any shares of beneficial interest of Parent or any Parent Subsidiary or (ii) agreements or understandings relating to the sale or transfer (including agreements imposing transfer restrictions) of any Parent Common Shares or any preferred shares of Parent or any ownership interests in any Parent Subsidiary, to which Parent or any Parent Subsidiary is a party or by which it is bound. Except as set forth in Section 4.04(f) of the Parent Disclosure Letter, as of the date hereof there are no restrictions on Parent’s ability to vote the equity interests of any Parent Subsidiary.
(g) Except as set forth in the Parent SEC Documents or in Section 4.04(g) of the Parent Disclosure Letter, as of the date hereof there are no material Parent Subsidiaries (other than Parent L.P.) in which any officer, trustee or director of Parent or any Parent Subsidiary owns any shares of beneficial interest, stock or other securities. To the Knowledge of Parent, as of the date hereof, there are no agreements or understandings between Parent or any material Parent Subsidiary and any Person that could cause such Person to be treated as holding any stock or security in Parent or any material Parent Subsidiary as an agent for, or nominee of, Parent or any material Parent Subsidiary.
Section 4.05. Vote Required. The Required Parent Vote is the only vote of the holders of any class or series of Parent’s shares of beneficial interest or the Parent Subsidiaries capital stock necessary to approve this Agreement, the REIT Merger and the OP Merger.
-45-
Section 4.06. SEC Documents.
(a) Parent has filed with the SEC, and has heretofore made available to the Company (by public filing with the SEC or otherwise) true and complete copies of, all reports, schedules, forms, statements and other documents required to be filed with the SEC by Parent since December 31, 2001 (collectively, the “Parent SEC Documents”). Parent does not have any outstanding and unresolved comments from the SEC with respect to any of the Parent SEC Documents. None of the Parent SEC Documents is the subject of any confidential treatment request by Parent.
(b) As of its respective date, each Parent SEC Document complied in all material respects with the requirements of the Exchange Act or the Securities Act, as the case may be, the Sarbanes-Oxley Act, as and to the extent applicable thereto, and the rules and regulations of the SEC promulgated thereunder applicable to such Parent SEC Document. Except to the extent that information contained in any Parent SEC Document filed and publicly available prior to the date of this Agreement has been revised or superseded by a later filed Parent SEC Document, none of the Parent SEC Documents at the time of filing contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of Parent included in the Parent SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP (except, in the case of unaudited statements, and to the extent as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as and to the extent may be indicated in the notes thereto) and fairly present the financial position of Parent and the Parent Subsidiaries as of the dates thereof and the results of its operations and cash flows for the periods shown (subject, in the case of unaudited statements, to normal year-end audit adjustments).
(c) The management of Parent has (i) implemented disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to Parent, including its consolidated subsidiaries, is made known to the management of Parent by others within those entities, and (ii) has disclosed, based on its most recent evaluation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act), to Parent’s outside auditors and the audit committee of the board of trustees of Parent (the “Parent Board”) (A) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Parent’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Parent’s internal control over financial reporting.
Section 4.07. Absence of Certain Changes or Events. Except as and to the extent disclosed in the Parent SEC Documents filed prior to the date of this Agreement or as disclosed in Section 4.07 of the Parent Disclosure Letter or as otherwise permitted pursuant to this Agreement to occur after the date hereof, since December 31, 2004, Parent and the Parent Subsidiaries have conducted their business only in the ordinary course and there has not been:
-46-
| (a) other than (x) as permitted pursuant to Section 6.11 or for dividends from a wholly owned Subsidiary to its parent entity or (y) for distributions pursuant to the joint venture agreements or other documents identified on Section 4.17(e) of the Parent Disclosure Letter, any declaration, setting aside or payment of any dividends on, or any other distributions in respect of, any of their shares of beneficial interest or capital stock or other ownership interests, including, without limitation, Parent L.P. Units; |
(b) any amendment of any term of any material outstanding debt or equity security of Parent or any Parent Subsidiary other than in the ordinary course of business;
(c) any split, combination or reclassification of any Parent Common Shares or the stock of any Parent Subsidiary (other than the stock of Subsidiaries wholly-owned, directly or indirectly, by Parent), or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for, or giving the right to acquire by exchange or exercise, shares of stock or any ownership interest in, Parent or any Parent Subsidiary other than in connection with (1) the conversion, redemption or exchange of Parent L.P. Units in accordance with their terms, (2) the exercise of Parent Options in accordance with their terms or (3) any dividend reinvestment or share purchase program;
(d) any material change in accounting methods, principles or practices of Parent or Parent Subsidiaries, except as may be required by a change in industry practice, Law, GAAP or by a Governmental Entity;
(e) to the Knowledge of Parent, any amendment of any employment, consulting, severance, incentive stock, stock option, deferred compensation, bonus, retirement, retention or any other agreement between (i) Parent or any Parent Subsidiary, on the one hand and (ii) any officer, trustee or director of Parent or any Parent Subsidiary, earning more than $150,000 per year other than as required by any contract, agreement or Parent Employee Benefit Plan;
(f) any change in the lines of business in which Parent or any the Parent Subsidiaries participates or is engaged;
(g) any direct or indirect acquisition (whether through merger or consolidation with, the purchase of a substantial equity interest in, the purchase of a substantial portion of the assets of, or otherwise) of any business or any corporation, partnership, association or other business organization or a division thereof or any significant assets other than in the ordinary course of business in an amount not involving more than $1,000,000 individually or $5,000,000 in the aggregate or as otherwise specified in the Parent Corporate Budget;
(h) any incurrence of indebtedness for borrowed money or guarantee for such indebtedness, in each case by Parent or any Parent Subsidiary, other than to meet (i) the current cash needs of Parent and Parent Subsidiaries not exceeding the amount contemplated by the Parent Corporate Budget for such period, a copy of which has been previously provided to the Company, (ii) for projects currently under construction in amounts disclosed in the Parent Corporate Budget and (iii) as needed for the conversion, redemption or exchange of Parent L.P. Units in accordance with their terms;
-47-
(i) any change, event, effect, damage, destruction or loss relating to the business or operations of Parent or any Parent Subsidiary that has had a Parent Material Adverse Effect; or
(j) any Contract, commitment or arrangement to do or engage in any action the consummation of which would effect any of the events listed in this Section 4.07.
Section 4.08. Environmental Matters. Except as disclosed in Section 4.08 of the Parent Disclosure Letter, the Parent SEC Documents filed prior to the date of this Agreement or which, individually or in the aggregate, would not have a Parent Material Adverse Effect:
| (a) Parent has not received written notice that any judicial, administrative or compliance order has been issued, any unresolved complaint has been filed, any unpaid penalty has been assessed, or that any investigation or review is pending or, to the Knowledge of Parent, threatened by any Governmental Entity with respect to any alleged failure by Parent or any Parent Subsidiary to comply with any Environmental Law; |
(b) To the Knowledge of Parent, neither Parent nor any Parent Subsidiary nor any previous owner or lessee of any property currently owned, operated or leased by Parent or any Parent Subsidiary, has used, generated, stored, treated or handled any Hazardous Material in a manner that would reasonably be expected to result in liability under Environmental Laws. In addition, to Parent’s Knowledge: (i) there are no asbestos-containing materials or Microbial Matters present on, in or under any property owned, leased or operated by Parent or any Parent Subsidiary not in compliance with applicable Law, (ii) there are no PCBs present on, in or under any property owned, leased or operated by Parent or any Parent Subsidiary not in compliance with applicable Law, and (iii) there are currently no leaking underground storage tanks, active or abandoned, used for the storage of Hazardous Materials on, in or under any property owned, leased or operated by Parent or any Parent Subsidiary;
(c) Parent and the Parent Subsidiaries have not received notice of any unresolved claim, investigation, litigation, proceeding, notice of violation, complaint, or request for information, to the effect that it is or may be liable to a Third Party, including a Governmental Entity, as a result of a violation of any Environmental Law or a Release or threatened Release of a Hazardous Material at any property currently or formerly owned, leased or operated by Parent or a Parent Subsidiary;
(d) To the Knowledge of Parent, Parent and the Parent Subsidiaries have not transported or arranged for the transportation of any Hazardous Material to any location which is the subject of any action, suit or proceeding that would be reasonably expected to result in claims against Parent or any Parent Subsidiary related to such Hazardous Material;
-48-
(e) There are no Encumbrances threatened or attached to any Parent Property arising under or pursuant to any applicable Environmental Law, and no action of any Governmental Entity has been taken or, to the Knowledge of Parent, is in process which could subject any of such properties to such Encumbrances;
(f) Neither Parent nor any Parent Subsidiary has in its possession or control or knows of the existence of any environmental assessment or investigation reports or environmental testing results relating to Microbial Matter prepared within the last four years that have not been provided to the Company prior to the execution of this Agreement;
(g) To the Knowledge of Parent, each of the Parent Properties and operations conducted thereon is in compliance in all material respects with all Environmental Laws and Parent and all Parent Subsidiaries are in compliance in all material respects with all Environmental Laws applicable to any of their owned or leased properties; and
(h) To the Knowledge of Parent, there has been no Release or threatened Release of Hazardous Material in violation of any Environmental Law or which would reasonably be expected to result in liability on any property owned, leased or operated by Parent or any Parent Subsidiary.
(i) There have been no complaints relating to air quality or Microbial Matter at the Parent Properties and there have been no significant incidents of water damage at the Parent Properties or visual evidence of Microbial Matter in any structure or system at the Parent Properties. To the Knowledge of the Parent, there have been no indications of improper design or construction of any structure at the Parent Properties or any system contained therein that has led or would reasonably be expected to lead to the growth of Microbial Matter. Parent is not subject to any material capital expenditures or material obligations (contractual or otherwise) arising under or relating to Environmental Laws.
Section 4.09. Properties.
(a) Except as described in Section 4.09(a) of the Parent Disclosure Letter, Parent or a Parent Property Owner owns fee simple title to each of the real properties (or the applicable portion thereof) listed on Section 4.09(a) of the Parent Disclosure Letter as being owned in fee (collectively, the “Parent Owned Properties”). Except as described in Section 4.09(a) of the Parent Disclosure Letter, Parent or a Parent Property Owner has a valid leasehold interest in each of the real properties (or the applicable portion thereof) listed on Section 4.09(a) of the Parent Disclosure Letter as being ground leased or subleased (together with the Parent Owned Properties, collectively, the “Parent Properties”) pursuant to those certain ground leases or subleases (together with any amendments thereto, collectively, the “Parent Ground Leases”) described on Section 4.09(a) of the Parent Disclosure Letter. The Parent Properties are all of the real properties owned or leased by Parent and the Parent Property Owners. To the Knowledge of Parent, the interests of Parent and the Parent Property Owners in the Parent Properties are good and insurable and the same are owned free and clear of Encumbrances except for (i) indebtedness for money borrowed and other matters specifically identified in Section 4.09(a) of the Parent Disclosure Letter with reference to the particular property affected thereby, (ii) inchoate Encumbrances imposed for construction work in progress, including mechanics liens, workers or repairmen’s liens, or otherwise incurred in the ordinary course of business that do not adversely affect in any material respects the use or operation of the applicable Parent Property, (iii) easement agreements disclosed and all other matters disclosed on the existing title policies (“Existing Parent Title Policies”), (iv) matters as would be disclosed on current title reports or surveys that arise in the ordinary course and do not materially and adversely affect the value, use or operation of the applicable Parent Property (restrictive covenants in forms generally created for office parks of the types of which Parent Properties are located shall be deemed Permitted Parent Encumbrances), (v) matters disclosed in Section 4.09(a) of the Parent Disclosure Letter with reference to the particular property affected thereby, (vi) real estate Taxes and special assessments not yet delinquent (except as is being contested in good faith by appropriate proceedings and for which a reserve in accordance with GAAP has been set forth on the books of Parent or a Parent Property Owner, as applicable), (vii) Space Leases and (viii) in the case of a Parent Property Owner identified in Section 4.17(e) as a joint venture in which a Parent Subsidiary holds an ownership interest, the interest of the other member or partner in such Parent Property Owner, as and to the extent such interest is disclosed in Section 4.17(e) of the Parent Disclosure Letter (the matters in clauses (i) through (viii), inclusive, the “Permitted Parent Encumbrances”) and (ix) Encumbrances being contested in good faith in the ordinary course of business.
-49-
(b) Except as listed in Section 4.09(b) of the Parent Disclosure Letter or Existing Parent Title Policies or which would not have a Parent Material Adverse Effect, Parent Properties are not subject to any rights of way, restrictive covenants, written agreements, Laws, ordinances and regulations affecting building use, parking or occupancy, or reservations of an interest in title (including, without limitation, reciprocal easement and operating easement agreements) (collectively, “Parent Property Restrictions”), except for (i) Parent Property Restrictions imposed or promulgated by Law with respect to real property, including zoning regulations and (ii) Permitted Parent Encumbrances. Except as listed in Section 4.09(b) of the Parent Disclosure Letter or which would not have a Parent Material Adverse Effect, to the Knowledge of Parent, (i) each Parent Property complies with the Parent Property Restrictions, (ii) neither Parent nor any Parent Property Owner, nor, to the Knowledge of Parent, any other party, is currently in default or violation of any Parent Property Restriction and (iii) no event has occurred which, with due notice or lapse of time or both, would constitute a default thereunder.
(c) Except as set forth in Section 4.09(c) of the Parent Disclosure Letter, (i) valid policies of title insurance or marked up title commitments have been issued insuring Parent’s or a Parent Property Owner’s fee simple title or leasehold estate to each of the Parent Properties in amounts at least equal to the purchase price paid for the applicable Parent Property and, to the Knowledge of Parent, such policies are in full force and effect and (ii) no material claim has been made against any such policies.
(d) Except as listed in Section 4.09(d) of the Parent Disclosure Letter or which, individually or in the aggregate, would not have a Parent Material Adverse Effect, to the Knowledge of Parent, there is no certificate, permit or license from any Governmental Entity having jurisdiction over any of the Parent Properties or any agreement, easement or any other right which is necessary to permit the current use and operation of the buildings and improvements on any of the Parent Properties or which is necessary to permit the current use and operation of all driveways, roads and other means of egress and ingress to and from any of the Parent Properties or which govern the use and operation of the Parent Properties (collectively, the “Parent Property Agreements”) that has not been obtained and is not in full force and effect, or any pending threat of modification or cancellation of any of same. Except as listed in Section 4.09(d) of the Parent Disclosure Letter or which, individually or in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect, (i) neither Parent nor any Parent Property Owner, nor to the Knowledge of Parent, any other party, is currently in default or violation of any Parent Property Agreement and (ii) to the Knowledge of Parent no event has occurred which, with due notice or lapse of time or both, would constitute a default or violation thereunder.
(e) Except as listed in Section 4.09(e) of the Parent Disclosure Letter or which, individually or in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect, neither Parent nor any Parent Property Owner has received written notice of any violation of any federal, state or municipal Law, ordinance, order, regulation or requirement affecting any portion of any of the Parent Properties issued by any Governmental Entity that has not been heretofore remedied.
(f) Except as listed in Sections 4.09(f) and 4.13 of the Parent Disclosure Letter or which, individually or in the aggregate, would not have a Parent Material Adverse Effect, Parent has not received notice of any: (i) condemnation or rezoning or proceedings that are pending or, to the Knowledge of Parent, threatened with respect to any portion of any of the Parent Properties; or (ii) to the Knowledge of Parent, violation of zoning, building, land-use, fire, safety and signage or other applicable Laws (including, without limitation, to the Knowledge of Parent the Americans With Disabilities Act) or orders that are presently being violated or will be violated by the continued maintenance, operation or use of any buildings or other improvements on any of the Parent Properties or by the continued maintenance, operation or use of the parking areas.
-50-
(g) Except as listed in Section 4.09(g) of the Parent Disclosure Letter, neither Parent nor any Parent Property Owner is currently obligated under any option, right of first refusal or other contractual right to sell, dispose of any of the Parent Properties or any material portion thereof or material interest therein to any Person other than Merger Sub.
(h) Each Parent Ground Lease is valid, binding and enforceable against Parent (or any Parent Property Owner, as applicable) and, to the Knowledge of Parent, the other parties thereto in accordance with its terms, and is in full force and effect. Except as listed in Section 4.09(h) of the Parent Disclosure Letter or which, individually or in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect, (i) Parent has performed in all material respects all material obligations required to be performed by it to date under each of the Parent Ground Leases and (ii) neither Parent nor any Parent Property Owner, nor to the Knowledge of Parent, any other party, is in default under any Parent Ground Lease (and no event has occurred which, with due notice or lapse of time or both, would constitute such a default). Parent has delivered (or made available) to the Company a true, correct and complete copy of each Parent Ground Lease and all amendments thereto. No option has been exercised under any of such Parent Ground Leases, except options whose exercise has been evidenced by a written document as described in Section 4.09(h) of the Parent Disclosure Letter, a true, complete and accurate copy of which has been delivered to Parent with the corresponding Parent Ground Lease.
(i) The rent rolls for each of the Parent Properties as of September 23, 2005, copies of which dated September 23, 2005 were delivered to the Company (collectively, the “Parent Rent Roll”) have been provided or made available to the Company. Except as disclosed in Section 4.09(i) of the Parent Disclosure Letter and for discrepancies that, either individually or in the aggregate, would not have a Parent Material Adverse Effect, to the Knowledge of Parent, the information set forth in the Parent Rent Roll is true, correct and complete as of the date thereof. Except as disclosed in Section 4.09(i) of the Parent Disclosure Letter (i) to the Knowledge Parent, neither Parent nor any Parent Property Owner is in any monetary default under any Space Lease which default or defaults, individually or in the aggregate, would result in a Parent Material Adverse Effect and (ii) neither a Parent Property Owner nor Parent has received written notice or a copy of a notice from any tenant under any Space Lease claiming that Parent or the applicable Parent Property Owner is currently in default under its obligations as landlord under any such lease which monetary default or defaults would result in a Parent Material Adverse Effect.
-51-
(j) To the Knowledge of Parent, Parent and each of the Parent Property Owners have good and sufficient title to, or are permitted to use under valid and existing leases, personal and non-real properties and assets sufficient for the conduct and operation of their respective businesses and properties.
(k) Section 4.09(k) of the Parent Disclosure Letter identifies the Parent Properties that consist of or include undeveloped land and any Parent Properties that are in the process of being developed, expanded or rehabilitated or that are being held for future development) (each such Parent Property, a “Parent Development Property”) and a brief description of the development, expansion or rehabilitation being carried out by or on behalf of Parent or a Parent Property Owner or intended by Parent or a Parent Property Owner to be carried out or completed thereon, including the status thereof.
Section 4.10. No Undisclosed Material Liabilities. Except as set forth in Section 4.10 of the Parent Disclosure Letter, there are no liabilities or obligations of Parent or any Subsidiary thereof of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances that would be reasonably expected to result in such a liability or obligation, other than (i) liabilities or obligations disclosed and provided for in the consolidated balance sheet of Parent as of June 30, 2005 included in the Parent SEC Documents filed prior to the date of this Agreement or referred to in the notes thereto; (ii) liabilities or obligations incurred in the ordinary course of business consistent with past practice since June 30, 2005; and (iii) liabilities or obligations which, in case of (i), (ii) and (iii), would not, individually or in the aggregate, have a Parent Material Adverse Effect.
-52-
Section 4.11. No Default. Except as set forth in Section 4.11 of the Parent Disclosure Letter, neither Parent nor any of the Parent Subsidiaries is in default or violation (and to the Knowledge of Parent no event has occurred which, with notice or the lapse of time or both, would constitute a default or violation) of any term, condition or provision of:
(a) the Parent Organizational Documents or the comparable charter or organizational documents (including any operating agreement or limited partnership agreement) of any of the Parent Subsidiaries, or
(b) any Contract applicable to Parent or any Parent Subsidiary or their respective properties or assets or any guarantee by Parent or any Parent Subsidiary of any of the foregoing;
except, in the case of clause (b), for defaults and violations which, individually or in the aggregate, have not constituted and would not reasonably be expected to constitute a Parent Material Adverse Effect.
Section 4.12. Compliance with Applicable Laws. Parent and the Parent Subsidiaries hold, and are in compliance with, all permits, licenses, certificates, registrations, variances, exemptions, orders, franchises and approvals of all Governmental Entities necessary for the lawful conduct of their respective businesses (the “Parent Permits”), except where the failure so to hold or be in compliance, individually or in the aggregate, would not have a Parent Material Adverse Effect. All applications required to have been filed for the renewal of the Parent Permits have been duly filed on a timely basis with the appropriate Governmental Entities, and all other filings required to have been made with respect to such Parent Permits have been duly made on a timely basis with the appropriate Governmental Entities, except for failures to file which, individually or in the aggregate, have not constituted and would not reasonably be expected to constitute a Parent Material Adverse Effect. Except as disclosed in the Parent SEC Documents filed prior to the date of this Agreement and as, individually or in the aggregate, would not reasonably be expected to constitute a Parent Material Adverse Effect, the businesses of Parent and the Parent Subsidiaries are not being conducted in violation of any Law.
Section 4.13. Litigation. Except as set forth in Section 4.13 of the Parent Disclosure Letter or the Parent SEC Documents filed prior to the date of this Agreement, and other than bodily injury and other tort litigation arising from the ordinary course of operations of Company and the Company Subsidiaries (a) which are substantially covered by insurance or (b) for which all material costs and liabilities arising therefrom are reimbursable pursuant to common area maintenance or similar agreements, there is no action, order, writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, arbitration, investigation or inquiry by or before any court, governmental or other regulatory or administrative agency or commission or any other Person instituted, pending or, to the Knowledge of Parent, threatened, in each case against Parent or any Parent Subsidiaries or any of their respective properties or assets that would cause a Parent Material Adverse Effect, nor is there any outstanding judgment, decree or injunction, in each case against Parent or any Parent Subsidiaries, or any order of any Governmental Entity applicable to Parent or any Parent Subsidiary that would cause a Parent Material Adverse Effect. To the Knowledge of Parent, there are no SEC inquiries or investigations, other governmental inquiries or investigations or internal investigations pending or threatened, in each case regarding any accounting practices of Parent or any of its Subsidiaries or any malfeasance by any executive officer of Parent or any of the Parent Subsidiaries.
-53-
Section 4.14. Taxes. Except as set forth in Section 4.14 of the Parent Disclosure Letter:
| (a) Parent and each Parent Subsidiary has (i) timely and duly filed with the appropriate Governmental Entities all material Tax Returns required to be filed by them (after giving effect to validly obtained extensions of time in which to make such filings) and each such Tax Return is accurate and complete in all material respects and (ii) timely paid all material Taxes due and, with respect to any period for which Tax Returns have not yet been filed or for which Taxes are not yet due or owing, have made adequate accruals for the projected amount of such Taxes in their books and records and in the balance sheet dated December 31, 2004 contained in the Parent SEC Documents filed prior to the date of this Agreement. |
(b) Parent and the Parent Subsidiaries have complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes (including Taxes required to have been withheld in connection with amounts paid or owing to an employee, independent contractor, creditor or stockholder), have duly and timely withheld and paid over to the appropriate Governmental Entity all amounts so withheld and paid under all applicable Laws, and have duly and timely filed all material Tax Returns with respect to such withheld Taxes.
(c) Parent has always been, and will be through the Closing Date, (i) a REIT, and (ii) to its Knowledge, a “domestically-controlled REIT” within the meaning of Section 897(h)(4)(B) of the Code. To its Knowledge, Parent has neither taken nor omitted to take any action that could result in a successful challenge to its status as a REIT and no such challenge is pending or threatened in writing.
(d) Section 4.14(d) of the Parent Disclosure Letter sets forth each Parent Subsidiary (for purposes of this Section 4.14(d), the definition of “Subsidiary” contained in Section 9.03 shall be applied by substituting “9.9%” for “50%” in clause (i) of such definition) and designates which Parent Subsidiaries are “taxable REIT subsidiaries” within the meaning of Section 856(1) of the Code. Each Parent Subsidiary that is a partnership, joint venture, or limited liability company (i) has always been, and will be through the Closing Date, a partnership or disregarded entity for federal income tax purposes, as the case may be, and not a corporation or an association taxable as a corporation and (ii) is controlled or managed by Parent. Each Parent Subsidiary that is a corporation has always been, and will be through the Closing Date, 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(1) of the Code.
(e) Since January 1, 2002, Parent has incurred no liability for Taxes under Sections 856(c)(7)(B), 856(g)(5)(C), 857(b), 860(c) or 4981 of the Code, including without limitation any Tax arising from a prohibited transaction described in Section 857(b)(6) of the Code or any Tax arising from “redetermined rents, redetermined deductions and excess interest” described in Section 857(b)(7) of the Code, and neither Parent nor any Parent Subsidiary has incurred any material liability for Taxes other than in the usual, regular and ordinary course of business. To Parent’s Knowledge, no event has occurred and no condition or circumstance exists which presents a material risk that any material Tax described in the preceding sentence will be imposed upon Parent or any Parent Subsidiary.
-54-
(f) Neither Parent nor any Parent Subsidiary holds any asset (i) the disposition of which would be subject to rules similar to Section 1374 of the Code as a result of (A) an election under IRS Notice 88-19 or Treasury Regulation § 1.337(d)-5 or § 1.337(d)-6 or (B) the application of Treasury Regulation § 1.337(d)-7 or (ii) that would cause Parent to fail to satisfy the requirements of Section 856(c)(4) of the Code.
(g) Since January 1, 2002, Parent and the Parent Subsidiaries have not taken or omitted to take any action which would reasonably be expected to result in any amounts treated by Parent and/or the Parent Subsidiaries as rents paid by tenants of the Parent Properties to be excluded from the definition of “rents from real property” within the meaning of Section 856(d) of the Code and Treasury Regulations thereunder.
(h) All material deficiencies for Taxes asserted against Parent or any Parent Subsidiary (i) have been paid or (ii) are being contested in good faith and are disclosed on Section 4.14(h) of the Parent Disclosure Letter. Since January 1, 2002, neither Parent nor any Parent Subsidiary has been the subject of any audit, suit, proceeding, claim, examination, or assessment by any Governmental Entity regarding Taxes, and no such audit, suit, proceeding, claim, examination, or assessment is currently pending or, to the Knowledge of Parent, threatened or proposed. No claim has been made in writing by a Governmental Entity in a jurisdiction where Parent or any Parent Subsidiary does not file Tax Returns such that Parent or any Parent Subsidiary is or may be subject to taxation by that jurisdiction.
(i) Neither Parent nor any of the Parent Subsidiaries (i) has any liability for the Taxes of any Person, other than Parent or the Parent Subsidiaries, under Treasury Regulation § 1.1502-6 (or any similar provision of state, local or foreign Law) or as a transferee or successor or (ii) has entered into or is subject, directly or indirectly, to any Tax Protection Arrangement, Tax sharing agreement, Tax indemnification agreement or similar contract or arrangement except as set forth on Section 4.14(i) of the Parent Disclosure Letter.
(j) Neither Parent nor any Parent Subsidiary 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 (2) 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.
(k) Parent and each Parent Subsidiary has disclosed to the IRS on the appropriate Tax Returns any Reportable Transaction, as defined in Treasury Regulation §1.6011-4(b), in which it has participated. Parent and each Parent Subsidiary has retained all documents and other records pertaining to any Reportable Transaction in which it has participated, in accordance with Treasury Regulation § 1.6011-4(g).
-55-
(l) Parent and each Parent Subsidiary has disclosed on their federal income Tax Returns all positions taken therein which could give rise to a substantial understatement of income Tax under Section 6662 of the Code.
(m) There are no Encumbrances for Taxes upon the assets of Parent or the Parent Subsidiaries except for Taxes not yet due and payable.
(n) Neither Parent nor any other Person on its behalf has (i) agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of Law or has any Knowledge that any Governmental Entity has proposed any such adjustment, or has any application pending with any Governmental Entity requesting permission for any changes in accounting methods that relate to Parent or any Parent Subsidiary, (ii) executed or entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of Law with respect to Parent or any Parent Subsidiary, (iii) requested any extension of time within which to file any Tax Return, which Tax Return has since not been filed, (iv) granted any extension of the statute of limitations for the assessment or collection of Taxes, or otherwise entered into or filed any agreements, arrangements, waivers or objections extending the statutory period or providing for an extension of time with respect to the assessment or reassessment of Taxes or the filing of any Tax Return, or any payment of Taxes, (v) granted to any Person any power of attorney that is currently in force with respect to any Tax matter, or (vi) received a ruling from any Governmental Entity in respect of Taxes or signed an agreement in respect of Taxes with any Governmental Entity.
Section 4.15. Pension and Benefit Plans; ERISA.
(a) Section 4.15(a) of the Parent Disclosure Letter sets forth (i) all “employee benefit plans,” as defined in Section 3(3) of ERISA, and all material employee compensation and benefit plans, policies, arrangements or payroll practices, including, without limitation, severance pay, severance agreements, employment agreements, sick leave, vacation pay, salary continuation for disability, consulting or other compensation agreements, retirement, deferred compensation, bonus (including, without limitation, any retention bonus plan), long-term incentive, stock option, stock purchase, hospitalization, medical insurance, life insurance and scholarship programs maintained by Parent or any of the Parent Subsidiaries or with respect to which Parent or any of the Parent Subsidiaries has any liability; and (ii) all “employee pension benefit plans,” as defined in Section 3(2) of ERISA, maintained or contributed to by Parent or any trade or business (whether or not incorporated) which is under common control, or which is treated as a single employer, with Parent under Section 4.14(b), (c), (m) or (o) of the Code (a “Parent ERISA Affiliate”) or to which Parent or any of the Parent Subsidiaries or any Parent ERISA Affiliate contributed or is obligated to contribute thereunder within six years prior to the Closing (the “Parent Pension Plans”) (all such plans listed in clauses (i) and (ii) being hereinafter referred to as the “Parent Employee Benefit Plans”).
(b) True and complete copies of each Parent Employee Benefit Plan, related trust (or other funding or financing arrangement) and all amendments thereto have been made available to Parent, as have the most recent summary plan descriptions, administrative service agreements, investment management or advisory agreements, audit reports, fidelity bonds, and fiduciary liability policies for such Parent Employee Benefit Plans, as well as (i) Form 5500s for each Parent Employee Benefit Plan for each of the past three (3) years, (ii) all material correspondence with any Governmental Entity relating to any Parent Employee Benefit Plan, and (iii) with respect to any Parent Employee Benefit Plan intended to be qualified pursuant to Section 401(a) of the Code, a current IRS determination letter.
-56-
(c) All individual employment, consulting, termination, severance, change in control, retention, bonus, post employment and other compensation agreements, arrangements and plans existing prior to the execution of this Agreement or which will exist prior to the Closing, which are between Parent or a Parent Subsidiary and any current or former trustee, director, officer or employee thereof, including the name of such current or former trustee, director, officer or employee, the type of agreement and the amount of any estimated severance payment (including estimated gross-up, if applicable) owed thereunder due to the transactions contemplated by this Agreement and any subsequent termination of employment, are listed in Section 4.15(c) of the Parent Disclosure Letter (collectively, the “Parent Employment Agreements”).
(d) Parent Pension Plans intended to qualify under Section 401 of the Code have received a favorable determination letter from the IRS and such determination has not been modified, revoked or limited, and, to the Knowledge of Parent as of the Closing Date, nothing has occurred with respect to the operation of the Parent Pension Plans that could reasonably be expected to cause the loss of such qualification or the imposition of any material liability, penalty or Tax under ERISA or the Code.
(e) Except as would not, individually or in the aggregate, have a Parent Material Adverse Effect or except as disclosed in Section 4.15(e) of the Parent Disclosure Letter:
(i) All Parent Employee Benefit Plans have been maintained in accordance with their express terms and with all provisions of ERISA and the Code (including rules and regulations thereunder) and other applicable Law.
(ii) None of the Parent Pension Plans is a “multiemployer plan”, as defined in Section 3(37) of ERISA (“Parent Multiemployer Plan”), and neither Parent nor any Parent ERISA Affiliate has at any time in the past sponsored, contributed to any such Parent Multiemployer Plan, or has any liabilities with respect to any such Parent Multiemployer Plan.
(iii) Neither Parent nor any Parent ERISA Affiliate has ever maintained, sponsored, contributed to or otherwise incurred any present or contingent liability with respect to any “single-employer plan”, as defined in Section 4001(a)(15) of ERISA, and neither Parent nor any Parent ERISA Affiliate has any present or contingent liability under Title IV of ERISA to the Pension Benefit Guaranty Corporation or to a trustee appointed under Section 4042 of ERISA, and no events have occurred and no circumstances exist that could reasonably be expected to result in any such liability to Parent or any Parent ERISA Affiliate.
(iv) There is no liability for breaches of fiduciary duty in connection with Parent Employee Benefit Plans, and neither Parent nor any of the Parent Subsidiaries or any “party in interest” or “disqualified person” with respect to Parent Employee Benefit Plans has engaged in a non-exempt “prohibited transaction” within the meaning of Section 4975 of the Code or Section 406 of ERISA.
-57-
(v) There are no actions, disputes, suits, claims, arbitration or legal, administrative or other proceeding or governmental investigation pending (other than routine claims for benefits) or, to the Knowledge of Parent, threatened, alleging any breach of the terms of any Parent Employee Benefit Plan or of any fiduciary duties thereunder or violation of any applicable Law with respect to any such Parent Employee Benefit Plan.
(vi) All contributions, premiums and other payments required by Law or any Parent Employee Benefit Plan or applicable collective bargaining agreement have been made under any such plan to any fund, trust or account established thereunder or in connection therewith by the due date thereof, and no amounts are or will be due to the Pension Benefit Guaranty Corporation as of the Closing Date (except for premiums in the ordinary course of business, which will be payable by Parent); and any and all contributions, premiums and other payments with respect to compensation or service before and through the Closing Date, or otherwise with respect to periods before and through the Closing Date, due from any of Parent or its Parent ERISA Affiliates to, under or on account of each Parent Employee Benefit Plan shall have been paid prior to the Closing Date or shall have been fully reserved and provided for or accrued on Parent financial statements.
(vii) Parent and Parent ERISA Affiliates have complied with the requirements of Section 4980B of the Code and Parts 6 and 7 of Subtitle B of Title I of ERISA regarding health care coverage under Parent Employee Benefit Plans.
(viii) No amount has been paid by Parent or any Parent Subsidiaries, and no amount is expected to be paid by Parent or any Parent Subsidiaries, which would be subject to the provisions of Section 162(m) of the Code such that all or a part of such payments would not be deductible by the payor.
(ix) Each Parent Employee Benefit Plan may be unilaterally amended or terminated in its entirety by Parent except as to benefits accrued thereunder prior to amendment or termination and except for the rights of third-party administrators under Parent’s Contracts with such administrators, which Contracts have been previously provided to the Company.
(f) Except as set forth in Section 4.15(f) of the Parent Disclosure Letter, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, whether alone, or in connection with any other event, will (i) result in any payment (including, but not limited to, any retention bonuses, parachute payments or noncompetition payments) becoming due to any employee or former employee or group of employees or former employees of Parent or any of the Parent Subsidiaries; (ii) increase any benefits otherwise payable under any Parent Employee Benefit Plan or any Parent Employment Agreement; (iii) result in the acceleration of the time of payment or vesting of any Parent Options or any other rights or benefits; or (iv) result in the payment of any “excess parachute payment” within the meaning of Section 280G of the Code with respect to a current or former employee of Parent or any of the Parent Subsidiaries.
-58-
Section 4.16. Labor and Employment Matters. Except as to clauses (b), (c), (e) and (f) of this Section 4.16, which, individually or in the aggregate, would not have a Parent Material Adverse Effect:
| (a) Neither Parent nor any of the Parent Subsidiaries is a party to any collective bargaining agreement or other current labor agreement with any labor union or organization, and there is no question involving current union representation of employees of Parent or any of the Parent Subsidiaries, nor does Parent or any of the Parent Subsidiaries have any Knowledge of any activity or proceeding of any labor organization (or representative thereof) or employee group (or representative thereof) to organize any such employees. |
(b) There is no unfair labor practice charge or grievance arising out of a collective bargaining agreement or other grievance procedure pending, or, to the Knowledge of Parent, threatened against Parent or any of the Parent Subsidiaries.
(c) There is no complaint, lawsuit or proceeding in any forum by or on behalf of any present or former employee, any applicant for employment or any classes of the foregoing, or any written threat to initiate any of the foregoing, alleging breach of any express or implied contract of employment, any Law or regulation governing employment or the termination thereof or other discriminatory, wrongful or tortious conduct in connection with the employment relationship pending, or, to the Knowledge of Parent, threatened against Parent or any of the Parent Subsidiaries.
(d) There is no strike, slowdown, work stoppage or lockout pending, or, to the Knowledge of Parent, threatened, against or involving Parent, any of the Parent Subsidiaries, or any Parent Development Property.
(e) Parent and each of the Parent Subsidiaries are in compliance with all applicable Laws in respect of employment and employment practices, terms and conditions of employment, wages, hours of work and occupational safety and health.
(f) As of the date of this Agreement, there is no proceeding, claim, suit, action or governmental investigation pending or, to the Knowledge of Parent, threatened, with respect to which any current or former trustee, director, officer, employee or agent of Parent or any of the Parent Subsidiaries is claiming indemnification from Parent or any of the Parent Subsidiaries.
Section 4.17. Contracts.
(a) As of the date hereof, Section 4.17(a) of the Parent Disclosure Letter lists all Material Contracts of Parent and all Parent Subsidiaries, other than those Material Contracts filed as exhibits to the Parent SEC Documents filed prior to the date of this Agreement. Except as set forth in Section 4.17(a) of the Parent Disclosure Letter or as set forth in the Parent SEC Documents filed prior to the date of this Agreement, each Material Contract of Parent or a Parent Subsidiary is valid, binding and enforceable and in full force and effect and there are no defaults or violations thereunder by Parent or the Parent Subsidiaries party thereto or, to Parent’s Knowledge, any other party thereto, nor does there exist any condition which upon the passage of time or the giving of notice or both would cause such a violation of or a default thereunder, except those defaults or violations that have not and would not, individually or in the aggregate, have a Parent Material Adverse Effect. Parent has made available, or caused to be made available, to the Company true and complete copies of each Material Contract and all ancillary documents pertaining thereto.
-59-
(b) All mortgages, deeds of trust, loan agreements or other similar documents encumbering any of the assets, or to which Parent or a Parent Subsidiary is a party, are listed in Section 4.17(b) of the Parent Disclosure Letter; and Section 4.17(b) of the Parent Disclosure Letter also identifies each interest rate cap, interest rate collar, interest rate swap, currency hedging transaction and any other agreement relating to a similar transaction to which Parent or a Parent Subsidiary is a party. The transactions contemplated hereby and by the Transaction Documents will not trigger any due-on-sale provision on any of such mortgages, deeds of trust, loan agreements or other documents or agreements, except as set forth in Section 4.17(b) of the Parent Disclosure Letter, and will not require the consent of any lender or other Person, except as set forth in Section 4.17(b) of the Parent Disclosure Letter.
(c) Except as set forth in Section 4.17(c) of the Parent Disclosure Letter, there is no confidentiality agreement, non-competition agreement or other contract or agreement that contains covenants that materially restrict Parent’s or any of the Parent Subsidiaries’ ability to conduct its business in any location.
(d) Except as set forth in Section 4.17(d) of the Parent Disclosure Letter, there are no indemnification agreements entered into by and between Parent or any of the Parent Subsidiaries and any trustee, director or officer of Parent or any of the Parent Subsidiaries.
(e) All joint venture agreements applicable to Parent or any of the Parent Subsidiaries are listed in Section 4.17(e) of the Parent Disclosure Letter or are filed as exhibits to the Parent SEC Documents. The transactions contemplated by this Agreement and the Transaction Documents will not trigger any termination, buy-sell, transfer, option, right of first refusal, right of first offer, tag-along or any similar right by any party under any of such joint venture agreements, except as set forth in Section 4.17(e) of the Parent Disclosure Letter, and will not require the consent of any joint venture partner, except as set forth in Section 4.17(e) of the Parent Disclosure Letter. Section 4.17(e) of the Parent Disclosure Letter discloses the ownership interests in each joint venture; the capital accounts of each partner or member of each joint venture; any outstanding loans by a partner or member to a joint venture; and any capital calls made by a partner or member in a joint venture, but not fully funded as of the date of this Agreement.
(f) Except as set forth in Section 4.17(f) of the Parent Disclosure Letter or except as disclosed in the Parent SEC Documents, none of Parent or any of the Parent Subsidiaries is a party to any agreement relating to the management of any Parent Property by any Person other than Parent or a Parent Subsidiary.
-60-
(g) None of Parent or any of the Parent Subsidiaries is a party to any agreement pursuant to which Parent or any of the Parent Subsidiaries manages or provides services with respect to any real properties other than Parent Properties, except for the agreements listed in Section 4.17(g) of the Parent Disclosure Letter or filed as exhibits to the Parent SEC Documents filed prior to the date of this Agreement. No party to any such agreement has given written notice of its intention to terminate or cancel any such agreements except where such termination or cancellation would not have a Parent Material Adverse Effect.
(h) Section 4.17(h) of the Parent Disclosure Letter lists all agreements entered into by Parent or any of the Parent Subsidiaries providing for the sale of, or option to sell, any Parent Properties or the purchase of, or option to purchase, by Parent or any of the Parent Subsidiaries, on the one hand, or the other party thereto, on the other hand, any real estate not yet consummated as of the date hereof except where such termination or cancellation would not have a Parent Material Adverse Effect.
(i) Section 4.17(i) of the Parent Disclosure Letter lists all agreements entered into by Parent or any of the Parent Subsidiaries with any investment bankers or financial advisors that are currently in effect.
Section 4.18. Intellectual Property. All Parent Intellectual Property is owned or licensed by Parent or the Parent Subsidiaries free and clear of any and all Encumbrances, except as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, and neither Parent nor any such Parent Subsidiary has forfeited or otherwise relinquished any Parent Intellectual Property, except as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
Section 4.19. .Insurance. Section 4.19 of the Parent Disclosure Letter sets forth a true, correct and complete schedule of the insurance policies (including the type, amount of coverage and premiums and expiration dates of such policies) held by, or for the benefit of, Parent, the Parent Subsidiaries and any Parent Property Owner. Parent or the applicable Parent Subsidiary has paid, or caused to be paid, all premiums due under such policies and is not in default with respect to any obligations under such policies in any material respect. Section 4.19 of the Parent Disclosure Letter also includes a list of five years of loss runs for every line of insurance, including large-loss descriptions on any such policies. None of Parent or any of the Parent Subsidiaries has received any insurance company notice of any material defects or deficiencies affecting the insurability of Parent or any of the Parent Subsidiaries or any of their respective assets thereunder. Except as set forth in Section 4.19 of the Parent Disclosure Letter, (i) neither Parent nor any of the Parent Subsidiaries has received any written notice of cancellation or termination with respect to any existing insurance policy held by or for the benefit of Parent, any of the Parent Subsidiaries or any Parent Property Owner, and (ii) there are no outstanding or to Parent’s Knowledge, threatened, requirements for any repairs or alterations to be made to any Parent Property by any (x) insurance company that has issued an insurance policy covering any Parent Property, or (y) board of fire underwriters or other body exercising similar functions. Parent and Parent Subsidiaries maintain insurance in form and amount and with carriers that meet requirements for insurance included in loan agreements and other Material Contracts.
-61-
Section 4.20. Brokers. Except for the fees and expenses payable to the Parent Financial Advisor (which engagement letter with respect to the Parent Financial Advisor has been made available to the Company), no broker, investment banker or other Person is entitled to any broker’s, finder’s or other similar fee or commission in connection with the transactions contemplated by the Transaction Documents based upon arrangements made by or on behalf of Parent, for which fee or commission Parent or any Parent Subsidiary may be liable.
Section 4.21. Related Party Transactions. Except as disclosed in the Parent SEC Documents filed prior to the date of this Agreement or as set forth in Section 4.21 of the Parent Disclosure Letter, there are no arrangements, agreements or contracts entered into by Parent or any of the Parent Subsidiaries, on the one hand, and any Person who is an officer, trustee, director or Affiliate of Parent or any Parent Subsidiary, any relative of the foregoing or an entity of which any of the foregoing is an Affiliate or an Associate, on the other hand. Copies of all such documents listed on Section 4.21 of the Parent Disclosure Letter have been made available to the Company.
Section 4.22. Opinion of Financial Advisor. The Parent Board has received the written opinion of the Parent Financial Advisor to the effect that, based on, and subject to the various assumptions, limitations and qualifications set forth in such opinion, as of the date of such opinion, the Parent and Parent L.P. consideration to be paid for the “pro forma Company” in the transactions contemplated by this Agreement (and certain related agreements with Prudential) is fair from a financial point of view to Parent. A copy of the written opinion of the Parent Financial Advisor will be delivered to Company.
Section 4.23. Investment Company Act of 1940. Neither Parent nor any of the Parent Subsidiaries is, or on the Closing Date will be, required to be registered as an investment company under the Investment Company Act of 1940, as amended.
Section 4.24. Board Recommendation. The Parent Board, at a meeting duly called and held, has, by unanimous vote of all its members, (i) determined that this Agreement and the transactions contemplated by this Agreement are advisable, fair to and in the best interests of Parent and the shareholders of Parent, and (ii) resolved to recommend that the holders of Parent Common Shares approve and adopt this Agreement and the transactions contemplated thereby, including the REIT Merger.
Section 4.25. Inapplicability of Takeover Statutes, Rights Agreement and Certain Charter and By-law Provisions.
(a) Parent has taken all action required to be taken by it in order to exempt this Agreement and the REIT Merger from, and this Agreement and the REIT Merger are exempt from Takeover Statutes, including the Maryland Business Combination Act and Maryland Control Share Acquisition Act and any takeover provision in the Parent Organizational Documents.
(b) Parent and the Parent Board have taken all appropriate and necessary actions to render any and all limitations on ownership of (i) Parent Common Shares and Parent’s preferred shares as set forth in Parent’s Declaration of Trust and (2) partnership interests in Parent L.P. as set forth in the Parent L.P. Partnership Agreement, including the Ownership Limit (as defined in Parent’s Declaration of Trust), inapplicable to the REIT Merger, the OP Merger, the Transaction Documents and the other transactions contemplated thereby.
-62-
Section 4.26. Information Supplied by Parent.
(a) The information supplied or to be supplied by Parent for inclusion or incorporation in the Joint Proxy Statement/Prospectus and any other documents filed with the SEC in connection herewith, will not, at the time the Registration Statement is declared effective by the SEC, on the date the Joint Proxy Statement/Prospectus is first mailed to shareholders of Parent and first mailed to shareholders of Parent, or at the time of either of the Company Shareholders Meeting or Parent Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Parent Proxy Statement included in the Joint Proxy Statement/Prospectus will, at the time of the Parent Shareholders Meeting, comply as to form in all material respects with the requirements of the Exchange Act.
(b) The information supplied or to be supplied by Parent for inclusion or incorporation in the Partner Exchange Materials will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
(c) Notwithstanding the foregoing, Parent makes no representations or warranties with respect to information that has been or will be supplied by the Company, or their auditors, attorneys, financial advisers, other consultants or advisers, specifically for use in the Joint Proxy Statement/Prospectus.
Section 4.27. Merger Sub. Neither Merger Sub nor L.P. Merger Sub has incurred nor will it incur any liabilities or obligations, except those incurred in connection with its organization and with the negotiation of this Agreement and the performance hereof, and the consummation of the transactions contemplated hereby, including the REIT Merger and the OP Merger. Except as contemplated by this Agreement, including by Article X, neither Merger Sub nor L.P. Merger Sub has engaged in any business activities of any type or kind whatsoever, or entered into any agreements or arrangements with any person or entity, or become subject to or bound by any obligation or undertaking. As of the date hereof, and except as set forth in Section 4.27 of the Parent Disclosure Letter, all of the issued and outstanding equity interests of Merger Sub are owned beneficially and of record by Parent L.P., free and clear of all Encumbrances (other than those created by this Agreement and the transactions contemplated hereby). As of the date hereof, and except as set forth in Section 4.27 of the Parent Disclosure Letter, all of the issued and outstanding equity interests of L.P. Merger Sub are owned beneficially and of record by Parent L.P., free and clear of all Encumbrances (other than those created by this Agreement and the transactions contemplated hereby).
Section 4.28. Hart-Scott-Rodino Antitrust Improvements Act. The transactions contemplated hereby are exempt from any requirement to make any filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the implementing regulations thereto, 16 C.F.R. parts 801-803, because (a) the Parent is a REIT; and (b) the Parent has determined that the aggregate fair market value of the non-exempt assets of the Parent and entities controlled by Parent, is less than $53.1 million.
-63-
ARTICLE V
Covenants Relating to Conduct of Business
Section 5.01. Conduct of Business by the Company.
(a) Conduct of Business by the Company and the Company Subsidiaries. Except with respect to the sale of the Subject Properties at a price for each Subject Property no less than the price set forth next to the name of such Subject Property on Section 5.01(a) of the Company Disclosure Letter or for matters set forth in Section 5.01(a) of the Company Disclosure Letter or as contemplated by the Company SEC Documents or otherwise expressly permitted by this Agreement, from the date of this Agreement to the Effective Time, the Company and the Company Subsidiaries shall conduct their business in the usual, regular and ordinary course in substantially the same manner as previously conducted (except as otherwise contemplated by the corporate budget included in Section 5.01 of the Company Disclosure Letter (the “Company Corporate Budget”)), and use their commercially reasonable efforts to preserve their current business organization, assets and technology, keep available the services of their current officers and employees and maintain their relationships with tenants, customers, joint venture partners, collaborators, suppliers, licensors, licensees, distributors and others having business dealings with them. In addition, and without limiting the generality of the foregoing, except in connection with the sale of the Subject Properties at a price for each Subject Property no less than the price set forth next to the name of such Subject Property on Section 5.01(a) of the Company Disclosure Letter or for matters set forth in Section 5.01(a) of the Company Disclosure Letter or as contemplated by the Company SEC Documents or otherwise expressly permitted by this Agreement, from the date of this Agreement to the Effective Time, the Company and the Company Subsidiaries shall not authorize, commit or agree to do any of the following without the prior written consent of Parent, which consent shall not be unreasonably withheld, delayed or conditioned:
(i) (A) other than (x) as permitted pursuant to Section 6.11 or pursuant to Section 10.03 or for dividends from a wholly owned Subsidiary to its parent entity or (y) for distributions pursuant to the joint venture agreements identified on Section 3.17(e) of the Company Disclosure Letter, declare, set aside or pay any dividends on, or make any other distributions in respect of, any of their shares of beneficial interest (including Company Common Shares) or capital stock or other ownership interests, including, without limitation, Company L.P. Units, (B) split, combine or reclassify any of their shares of beneficial interest or capital stock or other ownership interests, including, without limitation, Company L.P. Units, (C) purchase, redeem or otherwise acquire (other than in connection with (1) the conversion or redemption of the Company Series D Preferred Shares in accordance with their terms or the conversion or redemption of Company L.P. Units outstanding on the date hereof in accordance with their terms (and solely for the REIT Shares Amount (as defined in the Company L.P. Partnership Agreement)), (2) the redemption of Company Common Shares under the Charter in order to preserve the status of the Company as a REIT under the Code, (3) the exercise of Company Options outstanding on the date hereof in accordance with their terms or (4) the use of Company Common Shares to pay the exercise price or tax withholding in connection with equity-based employee benefit plans by the participants therein) any shares of beneficial interest or capital stock or other ownership interests, including, without limitation, Company L.P. Units, of the Company and the Company Subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities, (D) take any action the result of which is that the Company acquires, forms or creates a Subsidiary of the Company or (E) except as permitted in Section 5.01(a)(iv), take any action the result of which is that the Company or a Company Subsidiary acquires or otherwise owns any equity interest in any other Person other than the Company Subsidiaries identified in Section 3.02(d) of the Company Disclosure Letter;
-64-
(ii) Other than issuances of Company Common Shares in connection with (1) the conversion of the Company Series D Preferred Shares in accordance with their terms or the redemption or conversion of Company L.P. Units outstanding on the date hereof in accordance with their terms (and solely for the REIT Shares Amount (as defined in the Company L.P. Partnership Agreement)), (2) the exercise of Company Options outstanding on the date hereof in accordance with their terms or (3) the Company Dividend Reinvestment and Share Purchase Plan or the Amended and Restated Share Purchase Plan (provided that all such issuances shall be subject to Section 6.21 below), issue, deliver, sell, pledge, grant or otherwise encumber (A) any Company Common Shares or any other shares of beneficial interest or capital stock or other ownership interests, (B) any Voting Debt or other voting securities, (C) any securities convertible into or exchangeable for, or any options, warrants, calls or rights to acquire, any such shares or capital stock, Voting Debt, voting securities or convertible or exchangeable securities or (D) any phantom stock, phantom stock rights, stock appreciation rights, stock-based performance units, or other rights or interests based on or linked to the value of Company Common Shares;
(iii) except to the extent required to comply with applicable Law and except for changes or amendments to reflect the conversion or redemption of the Company Series D Preferred Shares in accordance with their terms or the redemption or exchange of Company L.P. Units in accordance with their terms or as provided in Section 1.11, amend the Company Organizational Documents or any organizational documents of any Company Subsidiary including, without limitation, Company L.P.;
(iv) except as provided in Section 5.01(a)(x), directly or indirectly acquire or agree to acquire (A) by merging or consolidating with, or by purchasing all or a portion of the assets of, or equity interests in, or by any other manner, any business or any corporation, partnership, trust, joint venture, association or other business organization or division thereof or (B) any assets, in each case other than purchases in the ordinary course of business consistent with past practice in an amount not involving more than $1,000,000 individually or $5,000,000 in the aggregate or as otherwise specifically provided for in the Company Corporate Budget;
(v) except as required by applicable Law or written contractual commitments existing on the date hereof and that are disclosed on Section 5.01(a)(v) of the Company Disclosure Letter or as otherwise disclosed on Section 5.01(a)(v) of the Company Disclosure Letter, (A) increase the compensation or benefits payable or to become payable to the trustees, directors, officers or employees of the Company, any Company Subsidiary or any Affiliate thereof; provided that, without the Parent’s consent, between the date of this Agreement and the Closing Date, the Company shall be permitted to increase the compensation payable to employees of the Company, any Company Subsidiary or any Affiliate thereof by up to, in the aggregate for all employees, $100,000, (B) establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, employment, termination, severance, stock incentive or other plan, agreement, trust, fund, policy or arrangement for the benefit of any trustee, director, officer or employee, except as provided in this Agreement or to the extent required by Law, (C) increase the benefits payable under any existing severance or termination pay policies or employment or other agreements (except that the Company Board or Compensation Committee thereof may provide for vesting of the Company Options outstanding on the Closing Date by reason of this Agreement and the transactions contemplated hereby), (D) make any material determinations not in the ordinary course of business consistent with past practice under any collective bargaining agreement or Company Employee Benefit Plan, (E) amend or modify any Company Incentive Plan, other than pursuant to the provisions of Sections 1.08 or 6.05 hereof, (F) grant or promise any tax offset payment award under any Company Incentive Plan, (G) except in the ordinary course of business, make any loan or cash advance to, or engage in any transaction with, any current or former trustee, director, officer or employee or (H) make any loan or cash advance to any current or former consultant or independent contractor;
-65-
(vi) (A) enter into any employment, consulting or severance agreement with or grant any severance or termination pay to any officer, trustee or director of the Company or any Company Subsidiary or enter into any material employment, consulting or severance agreement with or grant any material severance or termination pay to any employee who is not an officer of the Company or any Company Subsidiary, (B) hire or agree to hire any new or additional employees or officers other than employees hired in the ordinary course of business, consistent with past practice who are not hired as officers of the Company or any Company Subsidiary, provided, however, that if any non-officer employee of the Company or any Company Subsidiary who is not a party to an employment agreement or other similar agreement resigns after the date hereof but prior to Closing, such entity may hire a person to replace such employee on substantially similar terms consistent with past practice, provided that the Company or any Company Subsidiary does not enter into any employment, consulting or severance agreement with such new hire, or (C) otherwise enter into, amend or modify any material agreement or arrangement with any person that is an Affiliate of the Company (other than agreements with Company Subsidiaries) or, as of the date of this Agreement, is an employee, officer, trustee or director of the Company or any Company Subsidiary;
(vii) make any material change in accounting methods, principles or practices of the Company or Company Subsidiaries, except as may be required by a change in industry practice, Law, GAAP or by a Governmental Entity;
(viii) directly or indirectly transfer, sell, lease (as lessor) (other than as provided in Section 5.01(a)(x)(D)), license, sell and leaseback, mortgage or otherwise dispose of or encumber or subject to any Encumbrance any properties or assets or any interest therein, except sales in the ordinary course of business consistent with past practice in an amount not involving more than $3,000,000 in one transaction or series of related transactions or as otherwise specifically provided for in the Company Corporate Budget, or enter into or amend, modify or terminate any Material Contract or waive, release or assign any material rights or claims thereunder.
-66-
(ix) (A) except with respect to arrangements made with respect to the defeasance of the PPREFI Portfolio Loan, the loan secured by the Company Property known as “Corporetum” and prepayment of debt related to loans secured by the Subject Properties (in each case including any prepayment penalties, legal costs or defeasance costs) in accordance with the applicable loan documents in effect as of the date of this Agreement and except to meet the current cash needs of the Company and Company Subsidiaries not exceeding the amount provided for in the Company Corporate Budget for the period specified therein, incur any indebtedness (including the $135,000,000 proposed loan to be secured by the Barton Skyway I-IV property (the “Proposed Barton Skyway Loan”)) or guarantee any indebtedness of another Person, issue or sell any debt securities or warrants or other rights to acquire any debt securities, guarantee any debt securities of another Person, enter into any “keep well” or other agreement to maintain any financial statement condition of another Person or enter into any arrangement having the economic effect of any of the foregoing except as needed for the conversion, redemption or exchange of the Company Series D Preferred Shares or Company L.P. Units in accordance with their terms or (B) except as disclosed in the Development Budget and Schedule or in Section 5.01(a)(ix) of the Company Disclosure Letter, make any loans, advances or capital contributions to, or investments in, any other Person, except loans or investments by the Company or a wholly owned Company Subsidiary to or in the Company or any wholly owned Company Subsidiary;
(x) except as disclosed in the Development Budget and Schedule or in Section 5.01(a)(x) of the Company Disclosure Letter, (A) enter into any commitments obligating the Company or any Company Subsidiary to make capital expenditures in excess of $500,000 individually or $2,000,000 in the aggregate, not including tenant allowances under new or existing leases, (B) acquire, enter into any option to acquire, or exercise an option or other right or election or enter into any other commitment or contractual obligation (each, a “Commitment”) for, the acquisition of any real property or other transaction in excess of $1,000,000 individually or $3,500,000 in the aggregate (provided that with respect to the projects identified in Section 5.01(a)(x) of the Company Disclosure Letter, the Company shall be authorized to incur predevelopment expenditures not in excess of $750,000 per individual project and $2,500,000 in the aggregate), (C) commence construction of, or enter into any Commitment to develop or construct, other real estate projects involving in excess of $3,500,000, or (D) enter into or amend or waive rights of the Company or any Company Subsidiary under any lease in excess of 25,000 square feet or incur or commit to incur any tenant allowances or landlord funded construction expenditures related thereto; provided that, if Parent fails to respond to any request made in writing by the Company to approve any of the lease transactions described in this Section 5.01(a)(x)(D) within two business days from such request, such request will be deemed to have been agreed to by Parent.
(xi) (A) settle or compromise any material Tax liability or waive or extend the statute of limitations with respect to any Taxes of the Company or any Company Subsidiary, (B) take or omit to take any action that could cause the termination or revocation of the Company’s REIT status or the status of any Company Subsidiary as a partnership for U.S. federal income tax purposes where such Company Subsidiary presently files Tax Returns as a partnership or the status of any Company Subsidiary as a REIT where such Company Subsidiary has elected to be taxed as a REIT, (C) make or rescind any material election relating to Taxes of the Company or any Company Subsidiary, except as provided in the preceding clause (B) or (D) enter into, or permit any Company Subsidiary to enter into, any Tax Protection Arrangement;
-67-
(xii) (A) settle or compromise any claim, litigation or other legal proceeding, other than those wholly-covered by insurance or in the ordinary course of business consistent with past practice in an amount not involving more than $200,000 individually or $1,000,000 in the aggregate (and other than settlement of tenant receivables disclosed in Section 5.01(a)(xii) of the Company Disclosure Letter), (B) pay, discharge, settle or satisfy any claims (including claims of shareholders), liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business consistent with past practice or as required by their terms in effect on the date of this Agreement of claims, liabilities or obligations reflected or reserved against in the most recent audited consolidated financial statements (or the notes thereto) of the Company included in the Company SEC Documents filed prior to the date of this Agreement (for amounts not in excess of such reserves) or incurred since the date of such audited financial statements in the ordinary course of business consistent with past practice, (C) cancel any indebtedness or waive, release, grant or transfer any claims or rights of material value or (D) waive any benefit of, or agree to modify in any adverse respect, or fail to enforce, or consent to any matter with respect to which its consent is required under, any confidentiality, standstill or similar agreement to which the Company is a party unless Company simultaneously and similarly waives any such similar provisions applicable to Parent or its Affiliates;
(xiii) in connection with any Company Development Property, fail to diligently pursue the development, rehabilitation, renovation, addition or expansion of each such Company Development Property in a manner that is (i) in accordance with the Company’s past development practices and (ii) consistent in all material respects with the applicable Development Budget and Schedule;
(xiv) commence any lawsuit, arbitration or any administrative proceeding against any Third Party, excluding actions brought in the ordinary course of business; provided that with respect to the Company Properties identified in Section 5.01(a) of the Company Disclosure Letter, the Company shall not authorize, commit or agree to commence any lawsuit, arbitration or any administrative proceeding against any Third Party, excluding, for purposes of this proviso, (A) actions against tenants under Space Leases in such properties that do not involve eviction proceedings or (B) actions to enforce any contractual rights;
(xv) make any payments or incur any liability or obligation for the purpose of obtaining any consent from any person to the REIT Merger or the OP Merger;
-68-
(xvi) permit any insurance policy naming the Company or any Company Subsidiary as a beneficiary or a loss payable payee to be canceled or terminated without notice to Parent unless such entity shall have obtained, prior to or simultaneous with such cancellation or termination, an insurance policy with substantially similar terms and conditions to the canceled or terminated policy; or
(xvii) take any action that would reasonably be expected to (A) result in any condition to the REIT Merger set forth in Article VII not being satisfied in all material respects or (B) prevent, materially delay or materially impede the consummation of the REIT Merger or the OP Merger or the other transactions contemplated by this Agreement or (C) result in (i) any representation and warranty of the Company and Company L.P. set forth in this Agreement that is qualified as to materiality becoming untrue or (ii) any such representation and warranty that is not so qualified becoming untrue in any material respect.
(b) Notice of Changes; Filings. Each party shall confer with the other party on a regular and frequent basis to report on operational matters and other matters reasonably requested by such party. Parent and the Company shall promptly advise the other orally and in writing of any change or event that could reasonably be expected to have a Company Material Adverse Effect or Parent Material Adverse Effect, as applicable. The Company and Parent shall each promptly provide the other copies of all filings made by such party with any Governmental Entity in connection with this Agreement and the Transactions, other than the portions of such filings, if any, that include confidential information not directly related to the Transactions.
(c) Certain Tax Matters. During the period from the date of this Agreement to the Effective Time, the Company shall, and shall cause each Company Subsidiary to, (i) furnish all material Tax Returns required to be filed by the Company or any Company Subsidiary after the date hereof (“Post-Signing Returns”) to Parent for review and comment at least twenty (20) days before the due date for such Tax Returns and shall promptly file such Tax Returns after receiving approval from Parent, which approval shall not be unreasonably withheld, delayed or conditioned; (ii) timely pay all Taxes due and payable by the Company or any of its Subsidiaries in respect of such Post-Signing Returns that are so filed, other than those being contested in good faith for which appropriate reserves have been made; (iii) accrue a reserve in the books and records and financial statements of the Company in accordance with past practice for all projected Taxes payable by the Company for which no Post-Signing Return is due prior to the Effective Time; and (iv) promptly notify Parent of any suit, claim, action, investigation, proceeding or audit (collectively, “Actions”) pending against or with respect to the Company in respect of any Tax and not settle or compromise any such Action without Parent’s prior written consent.
Section 5.02. Conduct of Business by Parent. Except for matters expressly permitted by this Agreement or as contemplated by the Parent SEC Documents, from the date of this Agreement to the Effective Time, the Parent and the Parent Subsidiaries shall conduct their business in the usual, regular and ordinary course in substantially the same manner as previously conducted (except as otherwise contemplated by the corporate budget included in Section 5.02 of the Parent Disclosure Letter (the “Parent Corporate Budget”)) and use their commercially reasonable efforts to preserve their current business organization, assets and technology, keep available the services of their current officers and employees and maintain their relationships with tenants, customers, joint venture partners, collaborators, suppliers, licensors, licensees, distributors and others having business dealings with them. In addition, and without limiting the generality of the foregoing, except for matters expressly permitted by this Agreement or as contemplated by the Parent SEC Documents, from the date of this Agreement to the Effective Time, Parent and its Subsidiaries shall not do any of the following without the prior written consent of the Company, which consent shall not be unreasonably withheld, delayed or conditioned:
-69-
| (i) Except as set forth in Section 5.02(a)(i) of the Parent Disclosure Letter, (A) other than (x) as permitted pursuant to Section 6.11 or for dividends from a wholly owned Subsidiary to its parent entity or (y) for distributions pursuant to the joint venture agreements identified on Section 4.17(e) of the Parent Disclosure Letter, declare, set aside or pay any dividends on, or make any other distributions in respect of, any of their shares of beneficial interest or capital stock or other ownership interests, including, without limitation, Parent Class A Units, (B) split, combine or reclassify any of their shares of beneficial interest or capital stock or other ownership interests, including, without limitation, Parent Class A Units, (C) purchase, redeem or otherwise acquire (other than in connection with (1) the redemption of the Parent Series C Preferred Shares, Parent Series D Preferred Shares or Parent Class A Units in accordance with their terms, (2) the redemption of Parent Common Shares under the Parent charter in order to preserve the status of Parent as a REIT under the Code, (3) the exercise of Parent Options in accordance with their terms or (4) the use of Parent Common Shares to pay the exercise price or tax withholding in connection with equity-based employee benefit plans by the participants therein or to fund any transactions pursuant to Parent’s dividend reinvestment and share purchase plan) any shares of beneficial interest or capital stock or other ownership interests, including, without limitation, Parent Class A Units, of Parent and the Parent Subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities, (D) take any action the result of which is that Parent acquires, forms or creates a Subsidiary of Parent or (E) take any action the result of which is that Parent or a Parent Subsidiary acquires or otherwise owns any equity interest in any other Person; |
(ii) Other than in connection with (1) the exercise of Parent Options in accordance with their terms or (2) issuances and deliveries pursuant to any Parent dividend reinvestment or share purchase program or (3) the redemption or exchange of Parent Class A Units, issue, deliver, sell, pledge, grant or otherwise encumber (A) any shares of their beneficial interest or capital stock or other ownership interests, (B) any Voting Debt or other voting securities, (C) any securities convertible into or exchangeable for, or any options, warrants, calls or rights to acquire, any such shares or capital stock, Voting Debt, voting securities or convertible or exchangeable securities or (D) any phantom stock, phantom stock rights, stock appreciation rights, stock-based performance units, or other rights or interests based on or linked to the value of Parent Common Shares except as set forth in Section 5.02(a)(ii) of the Parent Disclosure Letter;
(iii) except to the extent required to comply with applicable Law, to increase the authorized shares of beneficial interest of Parent or to provide for the issuance of Parent Class A Units or the Parent Series E Preferred Shares as described in this Agreement, amend Parent’s Declaration of Trust or by-laws or amend the Parent L.P. Partnership Agreement or the organizational documents of any Parent Subsidiary including, without limitation, Parent L.P.;
-70-
(iv) Except as set forth in Section 5.02(a)(iv) of the Parent Disclosure Letter, directly or indirectly acquire or agree to acquire (A) by merging or consolidating with, or by purchasing all or a portion of the assets of, or equity interests in, or by any other manner, any business or any corporation, partnership, trust, joint venture, association or other business organization or division thereof or (B) any assets, in each case other than purchases in the ordinary course of business consistent with past practice in an amount not involving more than $1,000,000 individually or $5,000,000 in the aggregate or as otherwise provided for in the Parent Corporate Budget;
(v) make any material change in accounting methods, principles or practices of Parent or Parent Subsidiaries, except as may be required by a change in industry practice, Law, GAAP or by a Governmental Entity;
(vi) (A) settle or compromise any material Tax liability or waive or extend the statute of limitations with respect to any Taxes of Parent or any Parent Subsidiary, (B) take or omit to take any action that could cause the termination or revocation of Parent’s REIT status or the status of any Parent Subsidiary as a partnership for U.S. federal income tax purposes where such Parent Subsidiary presently files Tax Returns as a partnership or the status of any Parent Subsidiary as a REIT where such Parent Subsidiary has elected to be taxed as a REIT or (C) make or rescind any material election relating to Taxes of Parent or any Parent Subsidiary; or
(vii) take any action that would reasonably be expected to (A) result in any condition to the REIT Merger or the OP Merger set forth in Article VII not being satisfied in all material respects or (B) prevent, materially delay or materially impede the consummation of the REIT Merger or the OP Merger or the other transactions contemplated by this Agreement.
Section 5.03. Control of Other Party’s Business. Nothing contained in this Agreement shall give the Company, directly or indirectly, the right to control or direct Parent’s operations or give Parent, directly or indirectly, the right to control or direct the Company’s operations prior to the Effective Time. Prior to the Effective Time, Parent and the Company shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its respective operations.
ARTICLE VI
Additional Agreements
Section 6.01. Preparation of the Joint Proxy Statement/Prospectus; Shareholder Meetings.
(a) As promptly as practicable after the execution of this Agreement, the Company and Parent shall prepare and file with the SEC a joint proxy statement in preliminary form relating to the Company Shareholders Meeting and the Parent Shareholders Meeting and, in connection therewith, Parent shall prepare and file with the SEC a registration statement on Form S-4 (the “Registration Statement”) (together, the “Joint Proxy Statement/Prospectus”) and each of Parent and the Company shall use their reasonable best efforts to respond to comments, if any, of the SEC as promptly as practicable, and cause the Registration Statement to become effective under the Securities Act as soon after such filing as practicable and to keep the Registration Statement effective as long as necessary to consummate the REIT Merger. The Joint Proxy Statement/Prospectus shall include the recommendation of the Company Board in favor of approval and adoption of this Agreement and the REIT Merger, except to the extent the Company Board shall have withdrawn or modified its approval or recommendation of this Agreement as permitted by Section 6.04(e). The parties shall promptly provide copies, consult with each other and prepare written responses with respect to any written comments received from the SEC with respect to the Joint Proxy Statement/Prospectus and advise one another of any oral comments received from the SEC. The Joint Proxy Statement/Prospectus shall comply as to form in all material respects with the rules and regulations promulgated by the SEC under the Securities Act and the Exchange Act, respectively.
-71-
(b) Parent and the Company shall make all necessary filings with respect to the REIT Merger and the transactions contemplated thereby under the Securities Act and the Exchange Act and applicable blue sky laws and the rules and regulations thereunder. Each party will advise the other, promptly after it receives notice thereof, of the time when the Registration Statement has become effective or any supplement or amendment has been filed, the issuance of any stop order, the suspension of the qualification of the Parent Common Shares issuable in connection with the REIT Merger for offering or sale in any jurisdiction, or any request by the SEC for amendment of the Joint Proxy Statement/Prospectus or requests by the SEC for additional information. No amendment or supplement to the Joint Proxy Statement/Prospectus shall be filed without the approval of both parties hereto, which approval shall not be unreasonably withheld or delayed; provided that, with respect to documents filed by a party which are incorporated by reference in the Joint Proxy Statement/Prospectus, this right of approval by the other party shall apply only with respect to information relating to such other party and its Affiliates, their business, financial condition or results of operations or the Transactions; and provided, further, that the Company, in connection with a Subsequent Determination, may amend or supplement the Joint Proxy Statement/Prospectus (including by incorporation by reference) pursuant to a Qualifying Amendment to effect such a Subsequent Determination, and in such event, this right of approval shall apply only with respect to information relating to the Parent and its Affiliates or their business, financial condition or results of operations. “Qualifying Amendment” means an amendment or supplement to the Joint Proxy Statement/Prospectus (including by incorporation by reference) to the extent it contains (i) a Subsequent Determination, (ii) a statement of the reasons of the Company Board for making such Subsequent Determination and (iii) additional information reasonably related to the foregoing. If at any time prior to the Effective Time, any information relating to Parent or the Company, or any of their respective Affiliates, officers, trustees or directors, should be discovered by Parent or the Company that should be set forth in an amendment or supplement to the Registration Statement or the Joint Proxy Statement/Prospectus, so that such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other parties hereto and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by law, disseminated to the shareholders of the Company and Parent.
(c) The Company shall use its reasonable best efforts to cause the Joint Proxy Statement/Prospectus to be mailed to its shareholders as promptly as practicable after the Registration Statement becomes effective and shall duly call and hold a meeting of its shareholders (the “Company Shareholders Meeting”) for the purpose of obtaining the Required Company Vote as promptly as practicable after the mailing of the Joint Proxy Statement/Prospectus. In connection with the Company Shareholder Meeting, the Company will (i) subject to Section 6.04(e), use its reasonable best efforts to obtain the Required Company Vote and (ii) otherwise comply with all legal requirements applicable to such meeting.
-72-
(d) Parent shall use its reasonable best efforts to cause the Joint Proxy Statement/Prospectus to be mailed to its shareholders as promptly as practicable after the Registration Statement becomes effective and shall duly call and hold a meeting of its shareholders (the “Parent Shareholders Meeting”) for the purpose of obtaining the Required Parent Vote as promptly as practicable after the mailing of the Joint Proxy Statement/Prospectus. In connection with the Parent Shareholder Meeting, Parent will (i) use its reasonable best efforts to obtain the Required Parent Vote and (ii) otherwise comply with all legal requirements applicable to such meeting.
(e) It shall be a condition to the mailing of the Joint Proxy Statement/Prospectus that (i) Parent and Parent L.P. shall have received a “comfort” letter from PricewaterhouseCoopers LLP, independent public accountants for the Company and Company L.P., of the kind contemplated by the Statement of Auditing Standards with respect to Letters to Underwriters promulgated by the American Institute of Certified Public Accountants (the “AICPA Statement”), dated a date within two business days before the effective date of the Registration Statement, addressed to Parent and Parent L.P., in form and substance reasonably satisfactory to Parent and Parent L.P., concerning the procedures undertaken by PricewaterhouseCoopers LLP with respect to the financial statements and information of the Company, Company L.P. and the Company Subsidiaries contained in the Registration Statement and the other matters contemplated by the AICPA Statement and otherwise customary in scope and substance for letters delivered by independent public accountants in connection with transactions such as those contemplated by this Agreement and (ii) the Company shall have received a “comfort” letter from PricewaterhouseCoopers LLP, independent public accountants for Parent and Parent L.P., of the kind contemplated by the AICPA Statement, dated a date within two business days before the effective date of the Registration Statement, addressed to the Company and Company L.P., in form and substance reasonably satisfactory to the Company, concerning the procedures undertaken by PricewaterhouseCoopers LLP with respect to the financial statements and information of Parent, Parent L.P. and the Parent Subsidiaries contained in the Registration Statement and the other matters contemplated by the AICPA Statement and otherwise customary in scope and substance for letters delivered by independent public accountants in connection with transactions such as those contemplated by this Agreement.
(f) As promptly as practicable after the execution of this Agreement, the Company and Company L.P. shall prepare certain materials (the “Partner Exchange Materials”), which will be used by the Company and Company L.P. to notify each Limited Partner (as defined in the Company L.P. Partnership Agreement) of such Limited Partner’s right to exercise the Exchange Right (as defined in the Company L.P. Partnership Agreement) in the manner described in Section 1.11 of this Agreement. The Partner Exchange Materials shall be prepared by the Company and Company L.P. in compliance with applicable Law and shall include information about Parent and Parent L.P., a description of the Transactions, a general description of the federal income Tax consequences of receiving the OP Merger Consideration, and such other information as the parties reasonably determine. All Partner Exchange Materials, and all mailings to holders of Company Common Units in connection with the OP Merger, shall be subject to the prior review, comment and consent of Parent and Parent L.P. (not to be unreasonably withheld or delayed). Parent and the Company shall make all necessary filings with respect to the OP Merger and the transactions contemplated thereby under the Securities Act and the Exchange Act and applicable blue sky laws and the rules and regulations thereunder. Each party hereto shall use its reasonable best efforts, after consultation with the other parties hereto, to respond promptly to any comments made by any Governmental Entity with respect to the Partner Exchange Materials and to cause such Partner Exchange Materials to be mailed to the holders of Company Common Units at or about the same time as the Joint Proxy Statement/Prospectus is mailed to the shareholders of the Company.
-73-
(g) Parent and the Company agree to schedule the Parent Shareholders Meeting and Company Shareholders Meeting for the same date.
Section 6.02. Access to Information. Subject to applicable Law, including any applicable competition, merger control, antitrust or similar Law, or confidentiality obligations owed to third parties, upon reasonable notice each party shall afford to each other party and to Prudential and their respective Affiliates and Representatives, reasonable and prompt access during normal business hours during the period prior to the Effective Time or the termination of this Agreement to all its properties, assets, books, contracts, commitments, Representatives and records, and during such period, (x) such party and Prudential shall have the right, subject to the terms of this Section 6.02, to prepare or cause to be prepared surveys, inspections, engineering studies, environmental assessments and other tests, examinations or studies with respect to the Company Properties or the Parent Properties, as the case may be; provided that such party and Prudential may not do any destructive testing of the Company Properties or the Parent Properties, as the case may be, (y) each party shall provide a monthly review of the revenues, capital spending and performance data of it and its Subsidiaries to the other party within 20 days after the end of each such month, and (z) each party shall make available to the other party on a prompt basis (i) a copy of each report, schedule, form, statement and other document filed or received by it during such period pursuant to the requirements of domestic or foreign (whether national, federal, state, provincial, local or otherwise) Laws and (ii) all other information concerning its business, properties and personnel as such party may reasonably request. In addition, upon reasonable notice the Company and the Company Subsidiaries shall afford to each of Parent, Merger Sub and Prudential and to their respective Affiliates and Representatives, reasonable and prompt access, during normal business hours during the period prior to the Effective Time or the termination of this Agreement to tenants at Company Owned Properties. Each of the parties will hold any such information that is non-public in confidence to the extent required by, and in accordance with, the provisions of the confidentiality agreement between the Company and Parent entered into in 2005 (the “Confidentiality Agreement”). Any investigation by the parties shall not affect the representations and warranties or the conditions to the obligations of the Company or Parent, as the case may be.
-74-
| Section 6.03. Reasonable Best Efforts; Notification. |
(a) Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use reasonable best efforts to take, or cause to be taken, all actions, and do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the REIT Merger and the other Transactions, including using reasonable best efforts to obtain all necessary actions or nonactions, waivers, consents, approvals, orders and authorizations from Governmental Entities and to make all necessary registrations, declarations and filings (including filings with Governmental Entities, if any) and to take all steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity; provided, however, that Parent will not be required to agree to, or proffer to, (A) divest or hold separate, or enter into any licensing or similar arrangement with respect to, any assets (whether tangible or intangible) or any of Parent’s, the Company’s or any of their respective Affiliates’ businesses or (B) cease to conduct business or operations in any jurisdiction in which Parent, the Company or any of their respective Affiliates conducts business or operations as of the date of this Agreement. Each party shall use its reasonable best efforts (i) to obtain consents of all third parties necessary, proper or advisable for the consummation by such party or any of its Affiliates of the transactions contemplated by this Agreement (including without limitation obtaining the consents required under the agreements set forth on Section 3.03(b) of the Company Disclosure Letter or Section 4.03(b) of Parent Disclosure Letter, as the case may be); provided that, without the prior written consent of Parent, the Company shall not agree to any significant modification to any contractual arrangement to obtain such consents or certificates; (ii) to provide any material notices to third parties required to be provided by the Company or any of its Affiliates prior to the Effective Time, including under any leases or insurance policies; and (iii) to comply in all material respects with the terms of the insurance policies.
(b) In connection with and without limiting the foregoing, the Company, Company L.P. and the Company Board shall (i) take all action necessary to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to this Agreement, the Voting Agreements, the REIT Merger, the OP Merger or any of the other Transactions and (ii) if any state takeover statute or similar statute or regulation becomes applicable to this Agreement, the Voting Agreements, the REIT Merger, the OP Merger or any of the other Transactions, take all action necessary to ensure that the REIT Merger, the OP Merger and the other Transactions may be consummated as promptly as practicable on the terms contemplated by this Agreement and the Voting Agreements and otherwise to minimize the effect of such statute or regulation on the REIT Merger, the OP Merger and the other Transactions.
(c) The Company shall give notice to Parent within 48 hours of becoming aware of any representation or warranty made by it and contained in this Agreement becoming untrue or inaccurate such that the condition set forth in Section 7.02(a) would not be satisfied; provided that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement.
-75-
(d) Parent shall give notice to the Company within 48 hours of becoming aware of any representation or warranty made by it or Merger Sub contained in this Agreement becoming untrue or inaccurate such that the condition set forth in Section 7.03(a) would not be satisfied; provided that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement.
Section 6.04. No Solicitation.
(a) Neither the Company or any of its Subsidiaries shall, nor shall the Company or any of its Subsidiaries authorize or permit any of their Representatives to, directly or indirectly, (i) solicit, initiate, encourage or knowingly take any other action to facilitate (including by the furnishing of non-public information) the submission of any inquiry, proposal or offer from any Person (other than Parent, Merger Sub or their Affiliates) relating to, or that could reasonably be expected to lead to, any Takeover Proposal, (ii) agree to, approve or recommend any Takeover Proposal or enter into any agreement with respect to any Takeover Proposal or (iii) enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any Person any non-public information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Takeover Proposal. “Takeover Proposal” means any offer or proposal for any direct or indirect acquisition or purchase, in one transaction or a series of transactions, of (i) 30% or more of the assets of the Company and the Subsidiaries of the Company, taken as a whole, or (ii) 30% or more in voting power of the outstanding Company Common Shares, (iii) any tender offer or exchange offer that if consummated would result in any Person beneficially owning 30% or more in voting power of the outstanding Company Common Shares, or (iv) any merger, consolidation, business combination, recapitalization, reclassification, share exchange, liquidation, dissolution or similar transaction or series of transactions involving the Company or any Significant Subsidiary; provided, however, the sale of the Subject Properties shall not be a Takeover Proposal.
(b) In addition to the obligations of the Company set forth in paragraph (a) of this Section 6.04, the Company shall notify Parent promptly (but in any event within two business days) after receipt or occurrence of (i) any Takeover Proposal, (ii) any request for information with respect to any Takeover Proposal or (iii) any inquiry, proposal, discussions or negotiation with respect to any Takeover Proposal, and such notice shall include the material terms and conditions of any such Takeover Proposal, request for information, inquiry, proposal, discussion or negotiation and the identity of the Person making any such Takeover Proposal, request for information, inquiry or proposal or with whom discussions or negotiations are taking place. The Company shall keep Parent informed in all material respects of the status and details (including amendments or proposed amendments) of any such inquiry, request or Takeover Proposal.
(c) Nothing contained in this Section 6.04 shall prohibit the Company and the Company Board from (i) taking and disclosing to its shareholders a position contemplated by Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act or (ii) making any disclosure to the Company’s shareholders if, in the good faith judgment of the Company Board (after having obtained sufficient preliminary information upon which to make such judgment), after consultation with outside counsel, failure so to disclose would be reasonably likely to cause a breach of its duties under applicable Law. Subject to Sections 6.04(e) and 8.01(d), in no event shall the Company, the Company Board or any committee thereof withdraw (or modify in a manner adverse to Parent), or propose publicly to withdraw (or modify in a manner adverse to Parent), its position with respect to this Agreement, the Voting Agreements, the REIT Merger, the OP Merger or the other Transactions or adopt, approve or recommend, or propose to adopt, approve or recommend, a Takeover Proposal.
-76-
(d) Notwithstanding anything in this Section 6.04 to the contrary, prior to the REIT Effective Time, the Company may negotiate and participate in discussions and negotiations with such Person that has made an unsolicited bona fide written Takeover Proposal not resulting from or arising out of a breach of Section 6.04(a) (provided that the Company shall not agree to any exclusive right to negotiate with such Person) and may furnish information concerning its business, properties or assets to such Person pursuant to appropriate confidentiality agreements (on terms not less favorable to the Company than the terms (including standstill terms) of the Confidentiality Agreement, as such may be waived in accordance with Section 5.01(a)(xii)); provided that the Company Board shall be permitted to take any such action if, and only if, prior to taking such action, the Company Board (after having obtained sufficient preliminary information upon which to make such determination) has determined by the affirmative vote of a majority of all of the members of the Company Board or any committee thereof to which the power to consider such matters has been delegated that (i) such Takeover Proposal would result in, or would be reasonably likely to result in, a Superior Proposal and (ii) after consultation with outside legal counsel, the failure to provide information to such Person or access or to engage in discussions or negotiations with such Person would be reasonably likely to cause a breach of the duties of the Company Board under applicable Law. “Superior Proposal” means a Takeover Proposal (as defined in Section 6.04(a), except that the reference to “30%” in such definition shall be deemed to be a reference to “50%”) whereby the Person making such proposal has on an unsolicited basis submitted a bona fide written proposal to the Company relating to any such transaction on terms that the Company Board determines in its good faith judgment (after consultation with a nationally recognized financial advisor, taking into account all the terms and conditions of the Takeover Proposal, including any break-up fees, expense reimbursement provisions and conditions to consummation) is more favorable to the Company’s shareholders, from a financial point of view, than this Agreement and the REIT Merger, taken as a whole, and that is reasonably capable of being completed. The Company shall not provide any nonpublic information, which was not previously provided to Parent, regarding the Company to any other Person pursuant to this Section 6.04(d) unless such information is simultaneously provided to Parent.
(e) If the Company Board, after consultation with outside legal counsel, determines that failure to accept a Superior Proposal would be reasonably likely to cause a breach of the duties of the trustees of the Company to the Company and its shareholders under applicable Law, the Company Board may inform the holders of Company Common Shares that it no longer believes that the REIT Merger is advisable and no longer recommends approval (a “Subsequent Determination”), but only at a time that is prior to the Company Shareholders Meeting and after the third business day following Parent’s receipt of written notice advising Parent that the Company has received a Superior Proposal specifying the terms and conditions of such Superior Proposal (and including a copy thereof with all accompanying documentation), identifying the person making the Superior Proposal and stating that it is considering a Subsequent Determination; provided, that (i) during such three business day period Parent does not make an offer that the Company Board shall have reasonably concluded in good faith (following consultation with its nationally recognized financial advisors and outside counsel) is more favorable to the shareholders of the Company than such Superior Proposal and (ii) at the end of such three business day period such Takeover Proposal continues to be a Superior Proposal. At any time after the three business day period following notification to Parent of the Company’s consideration to do so and if the Company has otherwise complied with the terms of this Section 6.04 (but in no event following approval of the REIT Merger pursuant to this Agreement at the Company Shareholders Meeting), the Company may terminate this Agreement pursuant to Section 8.01(e) and enter into an agreement with respect to the Superior Proposal; provided that prior to such termination the Company shall have made payment to Parent of the full amounts, if any, required under Sections 8.03(c) and (d) to be paid at that time.
-77-
Section 6.05. Employees and Benefit Plans.
(a) Parent L.P. intends to interview Company employees and may in its discretion (taking into account the views of the Company) offer employment as of the Closing Date to employees of the Company (the “Company Employees”) on terms and conditions, including salary and bonus, which are no less favorable than those under which the Company Employees are currently employed, and with benefits that are no less favorable in the aggregate to those applicable to similarly situated employees of Parent L.P. as in effect from time to time. Parent L.P. shall continue such salary, benefits and bonuses of each Company Employee who accepts such offer of employment for a period of one year from the Closing Date, unless such Company Employee voluntarily resigns or is terminated for cause.
(b) Parent L.P. agrees that it shall interview Company executive employees (the “Corporate Employees”) with the goal of offering each such Corporate Employee a position with Parent L.P. or any of its Affiliates reasonably comparable to the position such Corporate Employee currently holds with the Company or any of its Affiliates. Parent L.P. shall act in good faith taking into account the staffing needs of Parent L.P. or any of its Affiliates and the qualifications of the applicable Corporate Employee. Parent L.P. shall use reasonable efforts to complete such interviews and make the offers contemplated by this Section 6.05(b) no later than ten days prior to the Closing and, at such time, shall provide a written notice to the Company identifying the Corporate Employees that have received offers of employment. Offers, if made, shall include compensation and bonus, which are no less favorable than those under which Corporate Employees are currently employed and with other benefits in line with similar positions at Parent L.P. or any of its Affiliates. Notwithstanding the foregoing, no legal obligation shall be created on Parent L.P. or any of its Affiliates to hire any such Corporate Employees.
(c) From and after the Effective Time, Parent shall, and shall cause the Surviving Company to, honor in accordance with their respective terms (as in effect on the date of this Agreement) the Company Employment Agreements and the Company’s obligations under the change of control arrangements and Company employee severance policies identified, listed or described in Section 3.15(c) of the Company Disclosure Letter.
-78-
(d) Parent will honor in accordance with their terms, all vested accrued benefit obligations to, and contractual rights of, current and former employees of the Company and its Subsidiaries which are disclosed in Section 3.15(c) of the Company Disclosure Letter. To the extent such agreements and policies were adopted or executed on or before the date of this Agreement, Parent acknowledges that a “change of control” within the meaning of the Company Incentive Plans will occur on the Effective Time and as a result, except as provided in Section 6.05(d) of the Company Disclosure Letter, all vesting of unvested options will be accelerated and all of them will vest. The Company may make any required employee matching contributions under its 401(k) Plan in a manner consistent with historical practices.
(e) With respect to any “employee benefit plan”, as defined in Section 3(3) of ERISA, maintained by Parent or any of its Subsidiaries, to the extent such plan is made available to an employee of the Company, for all purposes (other than benefit accrual), service with the Company, its Subsidiaries or their predecessors shall be treated as service with Parent or any of its Subsidiaries as applicable.
(f) Parent shall waive or cause to be waived any pre-existing condition limitation under any welfare benefit plan maintained by Parent or any of its Affiliates (other than the Company) in which employees of the Company (and their eligible dependents) will be eligible to participate from and after the Effective Time, except to the extent that such preexisting condition limitation would have been applicable under the comparable Company welfare benefit plan immediately prior to the Effective Time. Parent shall recognize, or cause to be recognized, the dollar amount of all expenses incurred by each Company employee (and his or her eligible dependents) during the calendar year in which the Effective Time occurs for purposes of satisfying such year’s deductible and co-payment limitations under the relevant welfare benefit plans in which they will be eligible to participate from and after the Effective Time.
(g) Without limiting the Company’s obligations in Section 6.21, the Company shall take all actions necessary and appropriate to ensure that (i) the Amended and Restated Share Purchase Plan is terminated prior to the REIT Effective Time, and that no Company employee shall thereafter have any rights under the Amended and Restated Share Purchase Plan and (ii) participation in the Amended and Restated Share Purchase Plan is suspended as of the end of the first “Option Period” (as defined in the Amended and Restated Share Purchase Plan) that occurs following the date of this Agreement.
(h) Subject to Section 6.05(a), nothing contained in this Section 6.05 or elsewhere in this Agreement shall be construed to prevent, from and after the Effective Time, the termination of employment of any individual employee of the Company or any change in the employee benefits available to any such individual employee or the amendment or termination of any particular Company Employee Benefit Plan or other employee benefit plan, program, policy or arrangement.
-79-
(i) Parent acknowledges that, prior to December 31, 2005, or at such later time as may be permitted under Section 409A of the Code and the regulations and guidance issued thereunder (collectively “Section 409A”), and in accordance with, and to the extent permitted under Section 409A, the participants in the Company Deferred Compensation Plans shall be permitted to amend the timing and form of payments to be made under the Company Deferred Compensation Plans, and thereafter, that the Company shall amend the Company Deferred Compensation Plans to the extent necessary to conform to Section 409A. To the extent not already vested, the parties acknowledge that all amounts currently deferred under the Company Deferred Compensation Plans shall become vested at the Effective Time except to the extent otherwise provided in Section 6.05(i) of the Company Disclosure Letter. Subject to Section 409A, Parent shall assume the Company Deferred Compensation Plans and maintain the Company Deferred Compensation Plans in accordance with their respective terms for the benefit of the participants thereunder to the extent that such participants maintain account balances after the Effective Time.
Section 6.06. Indemnification.
(a) Parent and Merger Sub agree that all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time now existing in favor of the current or former trustees or officers of the Company as provided in the Company Organizational Documents and indemnification agreements of the Company identified in Section 6.06 of the Company Disclosure Letter shall be assumed by the Surviving Company in the REIT Merger, without further action, at the REIT Effective Time and shall survive the REIT Merger and shall continue in full force and effect in accordance with their terms.
(b) The Surviving Company shall (i) for a period of six years after the REIT Effective Time cause to be maintained in effect in the Surviving Company’s (or any successor) charter and by-laws (or similar governing documents), provisions regarding elimination of liability of trustees, indemnification of officers, trustees and employees and advancement of expenses which are no less advantageous to the intended beneficiaries as those currently contained in the declaration of trust and by-laws of the Company and (ii) maintain for a period of at least six years the current policies of trustees’ and officers’ liability insurance maintained by the Company (provided that the Surviving Company may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are, in the aggregate, no less advantageous to the insured, provided that such substitution shall not result in gaps or lapses of coverage with respect to matters occurring before the REIT Effective Time) with respect to claims arising from facts or events that occurred on or before the REIT Effective Time; including, without limitation, in respect of the transactions contemplated by this Agreement; provided, however, that in no event shall the Surviving Company be required to expend in excess of 200% of the annual premiums currently paid by the Company for such insurance; and, provided, further, that if the aggregate premiums of such insurance coverage would exceed such amount, the Surviving Company shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount. The provisions of this subsection (b) shall be deemed to have been satisfied if prepaid policies have been obtained by the Surviving Company for purposes of this Section 6.06, which policies (together with the Company’s existing policy) provide such trustees and officers with the coverage described in this subsection (b) for an aggregate period of not less than six years with respect to claims arising from facts or events that occurred on or before the REIT Effective Time, including, without limitation, in respect of the transactions contemplated by this Agreement.
-80-
(c) If the Surviving Company or any of its successors or assigns (i) consolidates with or merges with or into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of the Surviving Company assume the obligations set forth in this Section 6.06. The parties acknowledge and agree that Parent guarantees the payment and performance of the Surviving Company’s obligations pursuant to this Section 6.06.
(d) The provisions of this Section 6.06 shall not be terminated or modified in such a manner as to adversely affect any indemnitee to whom this Section 6.06 applies without the consent of such affected indemnitee and are intended to be for the benefit of, and will be enforceable by, each indemnified party, his or her heirs and his or her legal representatives.
Section 6.07. Public Announcements. Each of Parent, on the one hand, and the Company, on the other hand, shall consult with each other before issuing, and provide each other a reasonable opportunity to review and comment upon, any press release or other public statements with respect to this Agreement, the OP Merger, the REIT Merger and the other Transactions and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange, in which case the party required to make the release or announcement shall use its reasonable best efforts to allow each other party reasonable time to comment on such release or announcement in advance of such issuance, it being understood that the final form and content of any such release or announcement, to the extent so required, shall be at the final discretion of the disclosing party.
Section 6.08. Transfer Taxes. Parent and the Company shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer or stamp taxes, any transfer, recording, registration and other fees and any similar taxes that become payable in connection with the transactions contemplated by this Agreement (together with any related interests, penalties or additions to Tax, “Transfer Taxes”), and shall cooperate in attempting to minimize the amount of Transfer Taxes. From and after the Effective Time, the Surviving Company shall pay or cause to be paid, without deduction or withholding from any consideration or amounts payable to holders of the Company Common Shares, Company Series D Preferred Shares, Company L.P. Units and/or Company Options, all Transfer Taxes.
Section 6.09. Listing of Shares. Parent shall use its reasonable best efforts to cause the Parent Common Shares to be issued in the REIT Merger and the Parent Common Shares to be reserved for issuance upon exercise of Company Options and upon conversion of Parent Class A Units to be approved for listing, upon official notice of issuance, on the NYSE.
-81-
Section 6.10. Affiliate Letter. On or prior to the date of the Company Shareholders Meeting, the Company will deliver to Parent a letter (the “Company Affiliate Letter”) identifying all persons who are “affiliates” of the Company for purposes of Rule 145 under the Securities Act (“Rule 145”). On or prior to the Closing Date, the Company will use all reasonable efforts to cause each person identified as an “affiliate” in the Company Affiliate Letter to deliver a written agreement, in the form attached hereto as Exhibit C, in connection with restrictions on affiliates under Rule 145.
Section 6.11. Coordination of Dividends. From and after the date of this Agreement, except as provided in Article X, the Company shall not make any dividend or distribution to its shareholders, and Company L.P. shall not make any dividend or distribution to its partners, in each case without the prior written consent of Parent in its sole discretion; provided, however, that the written consent of Parent shall not be required for the authorization and payment of (i) distributions required for the Company to maintain its status as a REIT under the Code, (ii) quarterly distributions of up to $0.56 per Company Common Share to the holders thereof for the quarter ending September 30, 2005 (the “Initial Dividend”) and for each quarter thereafter ending prior to the REIT Effective Time; provided that the record and payment dates for each distribution with respect to the Company Common Shares pursuant to this clause (ii) (other than the Initial Dividend) shall be the same date as the record and payment dates for the quarterly distributions for the Parent Common Shares, as provided by Parent to the Company by written notice not less than twenty (20) business days prior to the record date for each such quarterly Parent distribution; provided, however, that the record date for the fourth quarter dividend for 2005 shall be on or before the date which is ten days prior to the Closing Date and the record date for the first quarter dividend for 2006 (if the Closing shall not have occurred on or prior to December 31, 2005) shall be on or before the date which is ten days prior to the Closing Date, (iii) a distribution per Company Common Unit in the same amount as a dividend per Company Common Share permitted pursuant to clauses (i) or (ii) above, with the same record and payment dates as such dividends on Company Common Shares and (iv) regular quarterly dividends of $0.56 per share on the Company Series D Preferred Shares in accordance with the requirements of the Charter and corresponding dividend on the Company L.P. Series D Convertible Preferred Units in accordance with the requirements of the Company L.P. Partnership Agreement. In the event that a distribution with respect to the Company Common Shares permitted by this Section 6.11 has (x) a record date prior to the REIT Effective Time and (y) has not been paid as of the REIT Effective Time, the holders of Company Common Shares shall be entitled to receive such distribution from the Company at the time such shares are exchanged pursuant to Article II of this Agreement.
Section 6.12. Section 16(b). Assuming that the Company delivers to Parent the Company Section 16 Information (as hereinafter defined) in a timely fashion prior to the REIT Effective Time, the Parent Board, or a committee of Non-Employee Directors thereof (as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act), shall reasonably promptly thereafter and in any event prior to the Effective Time adopt a resolution providing in substance that the receipt by the Company Insiders (as hereinafter defined) of Parent Common Shares in exchange for Company Common Shares, of Parent Class A Units in exchange for Company Common Units, and of options to purchase Parent Common Shares in exchange for options to purchase Company Common Shares, in each case pursuant to the transactions contemplated hereby and to the extent such securities are listed in the Company Section 16 Information, are intended to be exempt from liability pursuant to Section 16(b) under the Exchange Act in accordance with Rule 16b-3 and interpretations of the SEC thereunder. “Company Section 16 Information” shall mean information accurate in all material respects regarding Company Insiders, the number of shares of Company Common Shares held by each such Company Insider and expected to be exchanged for Parent Common Shares in the REIT Merger, the number of Company Common Units held by each such Company Insider and expected to be exchanged for Parent Class A Units in the OP Merger, the number and description of the options to purchase shares of Company Common Shares held by each such Company Insider and expected to be converted into options to purchase Parent Common Shares in connection with the REIT Merger and any other information that may be required under applicable interpretations of the SEC under Rule 16b-3. “Company Insiders” shall mean those officers and trustees of the Company who are subject to the reporting requirements of Section 16(a) of the Exchange Act and who are listed in the Company Section 16 Information.
-82-
Section 6.13. Redemption of Company Series D Preferred Shares. After December 29, 2005 (if the REIT Merger has not occurred) and prior to the REIT Effective Time, the Company shall redeem all of the outstanding Company Series D Preferred Shares, if any, for a cash amount equal to $26.50 per share plus accrued but unpaid dividends thereon at the rate specified in Charter (except for any such shares which are converted by the holder into Company Common Shares prior to such time).
Section 6.14. Conversion of Company G.P. Prior to the REIT Effective Time, at Parent’s election exercised by written notice to Company not less than fifteen (15) days prior to the REIT Effective Time, either (i) the Company shall cause Company G.P., its wholly owned subsidiary to convert from a corporation to a Delaware limited liability company or (ii) the Company and Company GP shall make a valid election on IRS Form 8875 to treat Company GP as a taxable REIT subsidiary under Section 856(l) of the Code effective prior to the REIT Effective Time (the conversion or election under (i) or (ii) is referred to herein as the “Company GP Conversion”). In the absence of such written notice by Parent to Company, Parent shall be deemed to have elected alternative (i) above, and the Company shall cause Company G.P. to convert from a corporation to a Delaware limited liability company prior to the REIT Effective Time.
Section 6.15. Repayment of PPREFI Portfolio Collateralized Loan. Prior to the REIT Effective Time, the Company shall cause all mortgages and other liens securing the Company’s PPREFI Portfolio collateralized loan (the “PPREFI Portfolio Loan”) to be released such that they are free of any obligations relating to the PPREFI Portfolio Loan on or before Closing.
Section 6.16. Registration Rights. The Company’s registration rights agreements identified in Section 6.16 of the Company Disclosure Letter and registration rights of holders of Company L.P. Units pursuant to the terms of the Company L.P. Partnership Agreement will be assumed by Parent in accordance with their terms and the holders of registration rights under such agreements shall have substantially the same rights with respect to the registration of the securities of Parent that such holders may receive on the Closing Date as a result of the REIT Merger or the OP Merger as they currently possess under such agreements. On the date hereof, Parent shall enter into a Registration Rights Agreement with Michael V. Prentiss in the form attached hereto as Exhibit B. Parent agrees to use good faith commercially reasonable efforts to file, on or within thirty (30) days following the Closing Date, a shelf registration statement (the “Shelf Registration Statement”) pursuant to Rule 415 under the Securities Act registering the resale of the Parent Common Shares (the “Registrable Securities”) issuable by Parent upon the conversion or redemption of any Parent Class A Units received by persons who were holders of Company Common Units of Company L.P. immediately prior to the OP Merger. The Shelf Registration Statement shall be filed on Form S-3 and, if Parent is eligible, the Shelf Registration Statement shall utilize the automatic shelf registration process under Rule 415 and Rule 462 as amended by Securities Act Release No. 8591. Parent will use its best efforts to maintain its status as a “well known seasoned issuer” as defined in Rule 405 as amended by Securities Act Release No. 8591. If Parent is not a “well known seasoned issuer” or is otherwise ineligible to utilize the automatic shelf registration process, then Parent shall use its best efforts to have the Shelf Registration Statement declared effective under the Securities Act as expeditiously as practicable. Parent will maintain the effectiveness of the Shelf Registration Statement, including by filing any necessary post-effective amendments and prospectus supplements, or, alternatively, by filing new registration statements relating to the Registrable Securities as required by Rule 415 under the Securities Act to permit the disposition of all Registrable Securities pursuant hereto until the earliest date on which (i) all Registrable Securities registered pursuant to the Shelf Registration Statement or any successors thereto have been sold or (ii) all Registrable Securities may be sold pursuant to Rule 144(k) under the Securities Act. Parent acknowledges that the holders of the Company Common Units are third party beneficiaries of this Section 6.16.
-83-
Section 6.17. Assumption of Existing Tax Protection Arrangements. Parent and Parent L.P. shall assume the obligations of the Company, Company L.P. or the applicable Company Subsidiary, as the case may be, under the Company’s Tax Protection Arrangements described in Section 3.14 to the Company Disclosure Letter.
Section 6.18. Director Nominees. Parent shall use its best efforts to cause the Director Nominees to be elected as members of the Parent Board by the existing trustees of the Parent Board simultaneous with Closing, subject to applicable Law. Each Director Nominee shall serve as a trustee for a term expiring at Parent’s next annual meeting of shareholders following the Effective Time and until his successor is elected and qualified, provided that Parent shall use its best efforts to cause the Parent Board to re-nominate each Director Nominee as a trustee for election at the Parent’s annual meeting of shareholders for each of 2006 and 2007. Parent shall take such action, including amending its bylaws, as may be required to cause the number of trustees constituting the Parent Board immediately after the Effective Time to be increased by two members in furtherance of its agreements in this Section 6.18. “Director Nominees” means Michael V. Prentiss and Thomas F. August.
Section 6.19. Tenants Estoppels and SNDA’s. The Company shall use its commercially reasonable efforts to obtain prior to the Closing Date tenant estoppels from all tenants at Company Properties who have Space Leases which cover more than 25% of the square footage of any Company Property, each in form and substance reasonably satisfactory to Parent. The Company shall use its commercially reasonable efforts to obtain prior to the Closing Date, if requested by Prudential, subordination, non-disturbance and attornment agreements from all tenants at Company Properties which are to be acquired by Prudential who have Space Leases which cover more than 25% of the square footage of any Company Property, each in form and substance reasonably satisfactory to Prudential. The Company shall not be obligated to expend any funds in connection with its obligations under this Section 6.19.
-84-
Section 6.20. Suspension of Dividend Reinvestment Plan; Amended and Restated Share Purchase Plan. The Company has suspended, and shall not reinstate, the Company Dividend Reinvestment and Share Purchase Plan, and the Company will not hereafter allow any participants in the Company Dividend Reinvestment and Share Purchase Plan to elect to purchase Company Common Shares pursuant to such plan. Without limiting the foregoing, the Company shall not waive any maximum investment restrictions contained in the Company Dividend Reinvestment and Share Purchase Plan. The Company shall not waive any restrictions contained in the Company’s Amended and Restated Share Purchase Plan and shall not permit any participant in the Amended and Restated Share Purchase Plan to increase the number of Company Common Shares to be purchased by such participant under the Amended and Restated Share Purchase Plan.
Section 6.21. Third Party Consents. Company shall use its commercially reasonable efforts to obtain, prior to Closing, and each in form and substance reasonably satisfactory to Prudential: (i) the third party consents set forth in Section 6.21 of the Company Disclosure Letter, (ii) an estoppel certificate from Shell Oil Company for the benefit of Prudential and its transferees pursuant to Section 3.6 of the Release and Settlement Agreement dated September 12, 1996 among Shell Oil Company, Cadillac Fairview/California, Inc., GP Holdings, Inc. and The Prentiss/Copley Investment Group, (iii) an agreement from Collins Corporate Center, LLC that acknowledges that Prudential or its transferee shall upon Closing become the “Managing Member” under the Operating Agreement of Prentiss/Collins Del Mar Heights, LLC and confirming such other matters as Prudential may reasonably request, (iv) the Required Debt Consents (as defined in the Prudential Asset Purchase Agreement) and (v) such documents and instruments in recordable form as will remove from title any option or other right under a Space Lease that is no longer in effect and any documents securing debt that has been repaid, but shall not be obligated to expend any funds in connection therewith.
Section 6.22. Private Letter Ruling. Parent shall apply for, and use its reasonable best efforts to obtain, a private letter ruling from the IRS that confirms that the REIT Merger will (i) be treated for Federal income taxes as (x) a taxable sale of assets by the Company, immediately followed by (y) a taxable liquidation of the Company under Section 331 of the Code, or (ii) that the Transactions do not constitute a reorganization as defined in Section 368(a) of the Code. (the “Private Letter Ruling”).
ARTICLE VII
Conditions Precedent
Section 7.01. Conditions to Each Party’s Obligation to Effect the REIT Merger. The respective obligation of each party to effect the REIT Merger is subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:
| (a) Shareholder Approval. The Company shall have obtained the Required Company Vote in connection with the approval and adoption of the REIT Merger, the Prudential Asset Sale and this Agreement by the shareholders of the Company. Parent shall have obtained the Required Parent Vote in connection with the approval and adoption of this Agreement by the shareholders of Parent. |
-85-
(b) No Injunctions or Restraints. No temporary restraining order, preliminary or permanent injunction or other judgment issued by any court of competent jurisdiction or other legal restraint or prohibition that has the effect of preventing the consummation of the REIT Merger shall be in effect; and Parent and the Company shall use their reasonable efforts to have any of the foregoing vacated, dismissed or withdrawn prior to the REIT Effective Time.
(c) NYSE Listing. The Parent Common Shares to be issued in the REIT Merger and the Parent Common Shares to be reserved for issuance upon exercise of Company Options and conversion of Parent Class A Units issued in the OP Merger shall have been approved for listing on the NYSE, subject to official notice of issuance.
(d) Effectiveness of the Registration Statement. The Registration Statement shall have been declared effective by the SEC under the Securities Act. No stop order suspending the effectiveness of the Registration Statement shall have been issued by the SEC and no proceedings for that purpose shall have been initiated and not concluded or withdrawn.
Section 7.02. Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to effect the REIT Merger are further subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:
| (a) Representations and Warranties. (i) Each of the representations and warranties of the Company set forth in this Agreement that is qualified as to materiality or Material Adverse Effect shall have been true and correct as of the date hereof and at and as of the Closing Date as if made at and as of the Closing Date, and (ii) each of the representations and warranties of the Company that is not so qualified shall have been true and correct in all material respects as of the date hereof and at and as of the Closing Date as if made at and as of the Closing Date (except, in each case, for those representations and warranties which address matters only as of a particular date, in which case, they shall be true and correct, or true and correct in all material respects, as applicable, as of such date). |
(b) Performance of Obligations of the Company. The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date.
(c) Material Adverse Effect. Since the date of this Agreement, there shall not have been any state of facts, change, development, effect, event, condition or occurrence that, individually or in the aggregate, constitutes, has had or would reasonably be expected to have a Company Material Adverse Effect.
(d) Tax Opinion. Parent shall have received an opinion of Akin Gump Strauss Hauer & Feld LLP, dated as of the Closing Date, that, commencing with its taxable year ended December 31, 1996, the Company has been organized and has operated in conformity with the requirements for qualification as a REIT within the meaning of the Code (such opinion shall be in form and substance reasonably satisfactory to Parent and shall be subject to customary assumptions, qualifications and representations).
-86-
(e) Payment of PPREFI Portfolio Loan. The Company shall have defeased the PPREFI Portfolio Loan and released the collateral.
(f) LLC Conversion. The Company shall have effected the LLC Conversion and delivered evidence of the LLC Conversion to Parent.
(g) “Comfort” Letter. Parent and Parent L.P. shall have received a “comfort” letter from PricewaterhouseCoopers LLP, as described in Section 6.01(e).
Section 7.03. Conditions to Obligation of the Company. The obligation of the Company to effect the REIT Merger is further subject to the following conditions:
| (a) Representations and Warranties. (i) Each of the representations and warranties of Parent and Merger Sub set forth in this Agreement that is qualified as to Material Adverse Effect shall have been true and correct as of the date hereof and at and as of the Closing Date as if made at and as of the Closing Date, and (ii) each of the representations and warranties of each of Parent and Merger Sub that is not so qualified shall have been true and correct in all material respects as of the date hereof and at and as of the Closing Date as if made at and as of the Closing Date (except, in each case, for those representations and warranties which address matters only as of a particular date, in which case, they shall be true and correct, or true and correct in all material respects, as applicable, as of such date). |
(b) Performance of Obligations of Parent and Merger Sub. Each of Parent and Merger Sub shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date.
(c) Material Adverse Effect. Since the date of this Agreement, there shall not have been any state of facts, change, development, effect, event, condition or occurrence that, individually or in the aggregate, constitutes, has had or would reasonably be expected to have a Parent Material Adverse Effect.
(d) Tax Opinion. The Company shall have received an opinion of Pepper Hamilton LLP, dated as of the Closing Date, that, commencing with its taxable year ended December 31, 1986, Parent has been organized and has operated in conformity with the requirements for qualification as a REIT within the meaning of the Code (such opinion shall be in form and substance reasonably satisfactory to the Company and shall be subject to customary assumptions, qualifications and representations).
(e) “Comfort” Letter. Company and Company L.P. shall have received a “comfort” letter from PricewaterhouseCoopers LLP, as described in Section 6.01(e).
-87-
ARTICLE VIII
Termination, Amendment and Waiver
Section 8.01 Termination. This Agreement may be terminated at any time prior to the REIT Effective Time, whether before or after receipt of the Required Company Vote:
| (a) by the mutual written consent of Parent and the Company; |
(b) by either Parent or the Company, if any Governmental Entity of competent authority shall have issued an order, decree or ruling or taken any other action in each case permanently restraining, enjoining or otherwise prohibiting the REIT Merger or the OP Merger substantially on the terms contemplated by this Agreement and such order, decree, ruling or other action shall have become final and non-appealable;
(c) by either Parent or the Company, if the REIT Merger has not been consummated by 5:00 p.m. Eastern Standard Time on April 1, 2006 (the “Drop-Dead Date”); provided, however, that the right to terminate this Agreement under this Section 8.01(c) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the primary cause of, or resulted in, the failure of the REIT Effective Time to occur on or before such date and such action or failure to perform constitutes a breach of this Agreement;
(d) by Parent, if (i) the Company Board shall have withdrawn or materially modified its recommendation of this Agreement or the REIT Merger in a manner adverse to Parent or shall have resolved to do so; (ii) the Company shall fail to call or hold the Company Shareholders Meeting in accordance with Section 6.01; (iii) the Company shall have intentionally and materially breached its obligations under Section 6.04; or (iv) the Company shall have entered into a definitive agreement with respect to a Superior Proposal;
(e) by the Company, if prior to the approval of the REIT Merger pursuant to this Agreement at the Company Shareholders Meeting, the Company Board shall have approved, and the Company shall concurrently enter into, a definitive agreement providing for the implementation of a Superior Proposal; but only if (i) the Company is not then in breach of Section 6.04, and (ii) concurrently with such termination the Company shall have made payment to Parent of the full amounts, if any, required by Sections 8.03(c) and (d) to be paid at that time;
(f) by the Company or Parent, if either (i) the approval by the shareholders of the Company required for the consummation of the REIT Merger shall not have been obtained by reason of the failure to obtain the Required Company Vote at the Company Shareholders Meeting (or any adjournment or postponement thereof) or (ii) the approval by the shareholders of Parent required for the consummation of the REIT Merger shall not have been obtained by reason of the failure to obtain the Required Parent Vote at the Parent Shareholders Meeting (or any adjournment or postponement thereof);
(g) by the Company, if there shall have been a breach of any representation, warranty, covenant or agreement on the part of Parent or Merger Sub contained in this Agreement such that the conditions set forth in Sections 7.03(a) or (b) would not be satisfied and (A) such breach is not reasonably capable of being cured or (B) in the case of a breach of a covenant or agreement, if such breach is reasonably capable of being cured, such breach shall not have been cured prior to the earlier of (x) 20 business days following notice of such breach and (y) the Drop-Dead Date; provided that the Company shall not have the right to terminate this Agreement pursuant to this Section 8.01(g) if the Company or Company L.P. is then in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement; and
-88-
(h) by Parent, if there shall have been a breach of any representation, warranty, covenant or agreement on the part of the Company contained in this Agreement such that the conditions set forth in Sections 7.02(a) or (b) would not be satisfied and (A) such breach is not reasonably capable of being cured or (B) in the case of a breach of a covenant or agreement, if such breach is reasonably capable of being cured, such breach shall not have been cured prior to the earlier of (x) 20 business days following notice of such breach and (y) the Drop-Dead Date; provided that Parent shall not have the right to terminate this Agreement pursuant to this Section 8.01(h) if Parent or Merger Sub is then in material breach of any of its representations, warranties, covenants or agreements contained in this Agreement.
(i) by Company, if Parent shall fail to call or hold the Parent Shareholders Meeting in accordance with Section 6.01.
Section 8.02 Effect of Termination. In the event of termination of this Agreement by either the Company or Parent as provided in Section 8.01, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of any of Parent or the Company, other than the provisions of the Confidentiality Agreement, this Section 8.02, Section 8.03 and Article IX, which provisions shall survive such termination; provided that nothing herein shall relieve any party from any liability for any willful breach by a party of any of its representations, warranties or covenants set forth in this Agreement.
Section 8.03 Fees and Expenses.
(a) Except as otherwise set forth in this Section 8.03, whether or not the REIT Merger and the OP Merger is consummated, all Expenses (as hereinafter defined) incurred in connection with this Agreement and the other transactions contemplated hereby shall be paid by the party incurring such Expenses, provided that Parent and the Company shall each bear and pay one-half of the Expenses incurred in connection with the filing, printing and mailing of the Joint Proxy Statement/Prospectus and the Partner Exchange Materials; provided, further, however, that the registration fee for the Registration Statement shall be paid by Parent and the filing fee for the Company Proxy Statement shall be paid by the Company. As used in this Agreement, “Expenses” includes all documented reasonable out-of-pocket expenses (including all documented reasonable fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its Affiliates) incurred by a party or on its behalf in connection with or related to the authorization, approval, preparation, negotiation, execution and performance of this Agreement and the other transactions contemplated hereby. For the Company, Expenses shall also include any unrecoverable out-of-pocket expenses paid by the Company to terminate the Proposed Barton Skyway Loan and any lost deposits related thereto (such expenses being herein referred to as the “Barton Skyway Loan Expenses”).
-89-
(b) In the event that this Agreement is terminated by (x) the Company pursuant to Section 8.01(g) or Section 8.01(i), (y) by the Company or Parent pursuant to Section 8.01(f)(ii), or (z) by the Company or Parent pursuant to Section 8.01(c) and Parent’s failure to comply with any obligation under this Agreement has been the primary cause of, or resulted in, the failure of the REIT Effective Time to occur on or before the Drop-Dead Date, then Parent shall promptly (but in no event later than three business days after the date of such termination) pay the Company an amount equal to the Company’s Expenses (other than the Barton Skyway Loan Expenses) up to $6,000,000, by wire transfer of same day funds to an account designated by the Company. In addition, in the event this Agreement is terminated pursuant to any provision in Section 8.01 other than Section 8.01(d), Section 8.01(e) or Section 8.01(h), then Parent shall promptly (but in no event later than three business days after the date of such termination) pay the Company an amount equal to the Barton Skyway Loan Expenses by wire transfer of same day funds to an account designated by the Company which obligation to pay the Company an amount equal to the Barton Skyway Loan Expenses shall be in addition to the Company’s obligation under the immediately preceding sentence.
(c) In the event that this Agreement is terminated by (w) the Company or Parent pursuant to Section 8.01(f)(i), (x) by the Company pursuant to Section 8.01(e), (y) by Parent pursuant to Section 8.01(d) or (h) or (z) by the Company or Parent pursuant to Section 8.01(c) and Company’s failure to comply with any obligation under this Agreement has been the primary cause of, or resulted in, the failure of the REIT Effective Time to occur on or before the Drop-Dead Date, then the Company shall promptly (but in no event later than three business days after the date of such termination) pay Parent an amount equal to Parent’s Expenses up to $6,000,000 by wire transfer of same day funds to an account designated by Parent.
(d) In addition to any amounts payable to Parent pursuant to Section 8.03(c), in the event that this Agreement is terminated (i) by Parent pursuant to Section 8.01(d) or by the Company pursuant to Section 8.01(e) or (ii) by the Company or Parent pursuant to Section 8.01(f)(i) and (for purposes of this clause (ii)) a Takeover Proposal shall at the time of such termination be publicly proposed or publicly announced and not withdrawn prior to the Company Shareholder Meeting and within 9 months of the termination of this Agreement the Company consummates a Takeover Proposal or enters into any definitive agreement with respect to any Takeover Proposal that is subsequently consummated (whether or not such Takeover Proposal is the same Takeover Proposal which had been received at the time of termination of this Agreement) with any Person, then the Company shall pay Parent an amount equal to $60,000,000 (the “Termination Fee”) (in addition to the prior or concurrent payment of Parent’s Expenses pursuant to Section 8.03(c), if applicable), by wire transfer of immediately available funds to an account designated by Parent, in the case of a payment as a result of any event referred to in Section 8.03(d)(ii), within three business days after the consummation of the Takeover Proposal, and in the case of a payment as a result of any event referred to in Sections 8.03(d)(i), promptly, but in no event later than three business days after the date of such termination.
(e) In addition to any amounts payable to Parent pursuant to Section 8.03(c), in the event that this Agreement is terminated (y) by the Company or Parent pursuant to Section 8.01(f)(i) and the approval by the shareholders of Parent required for the consummation of the REIT Merger was obtained at the Parent Shareholders Meeting (or any adjournment or postponement hereof) or (z) by the Company or Parent pursuant to Section 8.01(c) and Company’s failure to comply with any obligation under this Agreement has been the primary cause of, or resulted in, the failure of the REIT Effective Time to occur on or before the Drop-Dead Date, then the Company shall pay Parent an amount equal to the Alternate Fee (as hereinafter defined) (in addition to the prior or concurrent payment of Parent’s Expenses pursuant to Section 8.03(c), if applicable), by wire transfer of immediately available funds to an account designated by Parent, promptly, but in no event later than three business days after the date of such termination. Notwithstanding any provisions contained herein to the contrary, if Parent qualifies to receive payment of both the Termination Fee and the Alternate Fee, it shall receive only the Termination Fee and shall not be entitled to the Alternate Fee. The “Alternate Fee” shall be an amount equal to $12,500,000. In addition to any amounts payable to the Company pursuant to Section 8.03(b), in the event that this Agreement is terminated (x) by the Company or Parent pursuant to Section 8.01(f)(ii) and the approval by the shareholders of the Company required for the consummation of the REIT Merger was obtained at the Company Shareholders Meeting (or any adjournment or postponement hereof), (y) by Company pursuant to Section 8.01(i) or (z) by the Company or Parent pursuant to Section 8.01(c) and Parent’s failure to comply with any obligation under this Agreement has been the primary cause of, or resulted in, the failure of the REIT Effective Time to occur on or before the Drop-Dead Date, then Parent shall pay the Company an amount equal to the Alternate Fee (in addition to the prior or concurrent payment of Company’s Expenses (other than the Barton Skyway Loan Expenses) and/or the Barton Skyway Loan Expenses, as applicable, pursuant to Section 8.03(b)), by wire transfer of immediately available funds to an account designated by Company, promptly, but in no event later than three business days after the date of such termination.
-90-
(f) The Termination Fee or the Alternate Fee, as the case may be, which is required to be paid pursuant to this Section 8.03 shall not exceed the sum of (A) the maximum amount that can be paid to a party (the “Payee”) without causing Payee to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code determined as if the payment of such amount did not constitute income described in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the Code (“Qualifying Income”), as determined by independent accountants to Payee, and (B) in the event Payee receives and, prior to the date the Termination Fee or the Alternate Fee, as the case may be, is due to be paid to Payee as described above, provides a copy to the paying party (the “Payor”) of, an opinion or a letter from outside counsel (the “Fee Tax Opinion”) indicating that Payee has received an opinion of counsel or a ruling from the IRS holding that Payee’s receipt of the Termination Fee or Alternate Fee, as the case may be, would either constitute Qualifying Income or would be excluded from gross income of Payee within the meaning of Sections 856(c)(2) and (3) of the Code (the “REIT Requirements”), the amount of the Termination Fee or Alternate Fee, as the case may be, less the amount payable under clause (A) above. In the event that Payee is not able to receive the full amount of the Termination Fee or the Alternate Fee, as the case may be, on the date such fee is due as described above, Payor shall place the amount by which such fee exceeds the amount paid under clause (A) of the preceding sentence above (the “Unpaid Fee Amount”) in escrow and shall not release any portion thereof to Payee unless and until Payee provides the Payor with either one of the following: (x) a letter from Payee’s independent accountants indicating the maximum portion of the Unpaid Fee Amount that can be paid at that time to Payee without causing Payee to fail to meet the REIT Requirements or (y) a Fee Tax Opinion, in either of which events the Payor shall pay to Payee from the escrow the lesser of the Unpaid Fee Amount and, if applicable, the maximum amount stated in the accountants’ letter referred to in clause (x) of this sentence. The Payor’s obligation to pay any portion of the Unpaid Fee Amount shall terminate three (3) years from the date of this Agreement. Amounts remaining in escrow after such obligation terminates shall be released to the Payor.
(g) The Company and Parent agree that the agreements contained in Section 8.03 above are an integral part of the transactions contemplated by this Agreement, and that the payments to be made thereunder shall be compensation for the loss suffered by the applicable party as a result of the failure of the REIT Merger to be consummated and constitute liquidated damages and not a penalty.
-91-
Section 8.02. Amendment. This Agreement may be amended by the parties hereto, by action taken or authorized by their respective boards of trustees or managers (or other similar entity, as the case may be), at any time before or after approval of the matters presented in connection with the REIT Merger by the shareholders of the Company or Parent, but, after any such approval, no amendment shall be made which by law or in accordance with the rules of the relevant stock exchange requires further approval by such shareholders, partners or members without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.
Section 8.03. Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective boards of trustees or managers (or other similar entity, as the case may be), may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights.
ARTICLE IX
General Provisions
Section 9.01. Nonsurvival of Representations and Warranties. None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except that this Section 9.01 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time.
Section 9.02. Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, (b) on the first business day following the date of dispatch if delivered by a recognized next-day courier service, or (c) on the fifth business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
-92-
| (a) | if to Parent, Parent L.P., Merger Sub or L.P. Merger Sub, to: | |
401 Plymouth Road with a copy to: Pepper Hamilton LLP |
||
| (b) | if to the Company or Company L.P., to: | |
3890 West Northwest Highway with a copy to: Akin Gump Strauss Hauer & Feld LLP |
||
| (c) | if to Prudential, to: | |
c/o Prudential Real Estate Investors with a copy to: c/o Prudential Real Estate Investors and Goodwin Procter LLP |
-93-
Section 9.03. Definitions. For purposes of this Agreement:
“Actions” shall have the meaning given thereto in Section 5.01(c).
“Affiliate” of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person.
“Agreement” shall have the meaning given thereto in the Introduction.
“AICPA Statement” shall have the meaning given thereto in Section 6.01(e).
“Alternate Fee” shall have the meaning given thereto in Section 8.03(e).
“Amended and Restated Share Purchase Plan” shall mean the Company’s Amended and Restated Share Purchase Plan dated as of July 1, 2000, as amended by Amendment No. 1 dated as of October 23, 2002, as amended prior to the date hereof.
“Articles of Merger” shall have the meaning given thereto in Section 1.03(a).
“Assets” means the material properties and assets of the Company and the Company Subsidiaries including, without limitation, the Company Properties.
“Associate” of any Person has the meaning given thereto by Rule 12b-2 under the Exchange Act.
“Barton Skyway Loan Expenses” shall have the meaning given thereto in Section 8.03(a).
-94-
“Cash Adjustment Amount” shall mean the aggregate amount of distributions, if any, payable by the Company pursuant to clause (i) of Section 6.11 unless and solely to the extent that any such distributions pursuant to clause (i) also are included within clause (ii) of Section 6.11.
“Cash Consideration” shall have the meaning given thereto in Section 1.07(a).
“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. Sections 9601 et seq., as amended.
“Certificate” shall have the meaning given thereto in Section 1.07(c).
“Charter” means the Amended and Restated Declaration of Trust of the Company, as amended and supplemented prior to the date hereof.
“Closing” shall have the meaning given thereto in Section 1.02.
“Closing Date” shall have the meaning given thereto in Section 1.02.
“Closing Date Market Price” means the average closing prices of Parent Common Shares for the ten trading day period ending on the trading date immediately prior to the Closing Date.
“Code” means the Internal Revenue Code of 1986, as amended.
“Commitment” shall have the meaning given thereto in Section 5.01(a)(x).
“Common Exchange Ratio” shall have the meaning given thereto in Section 1.07(a).
“Common Interest Exchange Ratio” shall have the meaning given thereto in Section 1.09(a)(ii).
“Company” shall have the meaning given thereto in the Introduction.
“Company Affiliate Letter” shall have the meaning given thereto in Section 6.10.
“Company Board” shall have the meaning given thereto in the Recitals.
“Company Common Shares” shall have the meaning given thereto in the Recitals.
“Company Common Units” shall have the meaning given thereto in Section 3.04(c).
“Company Corporate Budget” shall have the meaning given thereto in Section 5.01(a).
-95-
“Company Deferred Compensation Plan” shall mean the (i) Prentiss Property Executive Choice Share Deferral Plan for Trustees, effective February 12, 2003, (ii) Prentiss Properties Executive Choice Share Deferral Plan, effective February 12, 2003, (iii) Prentiss Properties Executive Choice Deferred Compensation Plan for Trustees, effective February 12, 2003, (iv) Prentiss Properties Limited Inc. Key Employee Share Option Plan, effective February 9, 2000, (v) Prentiss Properties Executive Choice Deferred Compensation Plan, effective February 12, 2003, (vi) Prentiss Properties Executive Choice Deferred Compensation Plan Trust Agreement, effective June 23, 2003, as each such plan or agreement may have been modified prior to the date hereof, and (vii) any other plan identified in Section 3.15(a) of the Company Disclosure Letter sponsored or maintained by the Company which permits directors, officers or other key employees of either the Company or Company Subsidiaries to defer compensation as defined under such plans.
“Company Development Property” shall have the meaning given thereto in Section 3.09(k).
“Company Disclosure Letter” means the disclosure letter dated as of the date of this Agreement and delivered to Parent by the Company in connection with the execution hereof.
“Company Dividend Reinvestment and Share Purchase Plan” means the Company’s Dividend Reinvestment and Share Purchase Plan as in effect on the date hereof.
“Company Employee Benefit Plans” shall have the meaning given thereto in Section 3.15(a).
“Company Employees” shall have the meaning given thereto in Section 6.05(a).
“Company Employment Agreements” shall have the meaning given thereto in Section 3.15(c).
“Company ERISA Affiliate” shall have the meaning given thereto in Section 3.15(a).
“Company Financial Advisor” means Lazard Freres & Co. LLC
“Company G.P.” shall have the meaning given thereto in Section 3.04(c).
“Company GP Conversion” shall have the meaning given thereto in Section 6.14.
“Company GP Units” shall have the meaning given thereto in Section 3.04(c).
“Company Ground Leases” shall have the meaning given thereto in Section 3.09(a).
“Company Incentive Plans” means the Company’s (i) 1996 Share Incentive Plan, as amended prior to the date hereof, (ii) 2005 Share Incentive Plan, as amended prior to the date hereof, and (iii) the Trustee Share Incentive Plan.
“Company Insiders” shall have the meaning given thereto in Section 6.12.
-96-
“Company Intellectual Property” shall mean all of the following owned or used by the Company or any Company Subsidiaries in the operation of their respective businesses: (i) trademarks, service marks, trade dress, trade names, designs and logos, all applications or registrations in any jurisdiction pertaining to the foregoing and all goodwill associated therewith; (ii) inventions, discoveries, improvements, ideas, know-how, processes, technology, computer programs and software (including source code, object code, documentation, programming tools, drawings, specifications and data) and applications and patents in any jurisdiction pertaining to the foregoing, including re-issues, continuations, divisions, continuations-in-part, renewals or extensions; (iii) trade secrets, including confidential and other non-public information, and the right in any jurisdiction to limit the use or disclosure thereof; (iv) copyrights in writings, designs, software programs and software, applications or registrations in any jurisdiction for the foregoing and moral rights related thereto; (v) databases and database rights; and (vi) Internet Web sites, domain names and applications and registrations pertaining thereto and all intellectual property used in connection with or contained in all versions of such Internet Web sites, together with all licenses and other agreements providing the Company and any Company Subsidiary with the right to use any item of the type referred to in clauses (i) through (vi).
“Company L.P.” shall have the meaning given thereto in the Introduction.
“Company L.P. Partnership Agreement” means the Third Amended and Restated Agreement of Limited Partnership of Company L.P., dated as of October 1, 2001, as amended prior to the date hereof.
“Company L.P. Units” means Company Common Units and Company GP Units.
“Company Material Adverse Effect” means a material adverse effect on the business, properties, liabilities, financial condition or results of operations of the Company and the Company Subsidiaries, taken as a whole, or which materially impairs or materially delays the ability of any such Person to consummate the transactions contemplated by this Agreement; provided, however, that a Company Material Adverse Effect shall not include any change with respect to the Company or any Company Subsidiary resulting from or attributable to (i) general national, international or regional economic conditions or securities markets in general, (ii) the announcement, execution or consummation of this Agreement and the transactions contemplated hereby, or (iii) conditions generally affecting the industry in which the Company and the Company Subsidiaries operate (except to the extent disproportionately affecting such Person, relative to other industry participants).
“Company Multiemployer Plan” shall have the meaning given thereto in Section 3.15(e)(ii).
“Company Option” shall have the meaning given thereto in Section 1.08(a).
“Company Organizational Documents” shall have the meaning given thereto in Section 3.01.
“Company Owned Properties” shall have the meaning given thereto in Section 3.09(a).
“Company Pension Plans” shall have the meaning given thereto in Section 3.15(a).
-97-
“Company Permits” shall have the meaning given thereto in Section 3.12.
“Company Preferred Shares” shall have the meaning given thereto in Section 3.04(a).
“Company Properties” shall have the meaning given thereto in Section 3.09(a).
“Company Property Agreements” shall have the meaning given thereto in Section 3.09(d).
“Company Property Owner” means the Company, each Company Subsidiary and each joint venture (whether formed as a joint venture, limited partnership, limited liability company or otherwise) identified in Section 3.17(e) of the Company Disclosure Letter, which owns or leases any Company Property.
“Company Property Restrictions” shall have the meaning given thereto in Section 3.09(b).
“Company Proxy Statement” shall have the meaning given thereto in Section 3.03(d).
“Company Rights Agreement” means the Amended and Restated Rights Agreement dated as of January 22, 2002 between the Company and Computer Share, f.k.a. EquiServe Trust Company, N.A., as amended prior to the date hereof.
“Company SEC Documents” shall have the meaning given thereto in Section 3.06(a).
“Company Section 16 Information” shall have the meaning given thereto in Section 6.12.
“Company Series D Preferred Shares” shall have the meaning given thereto in Section 3.04(a).
“Company Shareholders Meeting” shall have the meaning given thereto in Section 6.01(c).
“Company Subsidiaries” means all of the Subsidiaries of the Company.
“Confidentiality Agreement” shall have the meaning given thereto in Section 6.02.
“Contract” means any lease, license, loan or credit agreement, indenture, note, bond, agreement, guarantee, permit, concession, franchise or other contract, commitment, agreement, instrument, arrangement, understanding, obligation, undertaking, permit, license, whether oral or written (each, including all amendments thereto).
“Corporate Employees” shall have the meaning given thereto in Section 6.05(b).
-98-
“Development Budget and Schedule” shall have the meaning given thereto in Section 3.09(k).
“Director Nominees” shall have the meaning given thereto in Section 6.18.
“DLLCA” shall have the meaning given thereto in the Recitals.
“Drop-Dead Date” shall have the meaning given thereto in Section 8.01(c).
“DRULPA” shall have the meaning given thereto in the Recitals.
“Effective Time” shall have the meaning given thereto in Section 1.03(b).
“Encumbrance” means all pledges, claims, liens, charges, restrictions, controls, easements, rights of way, exceptions, reservations, licenses, grants, covenants and conditions, encumbrances and security interests of any kind or nature whatsoever.
“Environmental Law” means any Law of any Governmental Entity, with jurisdiction over the Company Subsidiaries, relating to the protection of human health, safety, natural resources or the environment.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and such regulations issued thereunder.
“Exchange Act” shall have the meaning given thereto in Section 3.03(d)(iv).
“Exchange Agent” shall have the meaning given thereto in Section 2.01.
“Exchange Fund’ shall have the meaning given thereto in Section 2.01.
“Exercise” shall have the meaning given thereto in Section 1.11(a).
“Existing Company Title Policies” shall have the meaning given thereto in Section 3.09(a).
“Existing Parent Title Policies” shall have the meaning given thereto in Section 4.09(a).
“Expenses” shall have the meaning given thereto in Section 8.03(a).
“Fee Tax Opinion” shall have the meaning given thereto in Section 8.03(f).
“Final Condition Notice” shall have the meaning given thereto in Section 10.01.
“Final Condition Notice Date” shall have the meaning given thereto in Section 10.01.
“Final Condition Satisfaction Date” shall have the meaning given thereto in Section 10.02.
-99-
“GAAP” means generally accepted accounting principles.
“Governmental Entity” means any United States federal, state or local or foreign government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.
“Hazardous Material” means (i) any petroleum or petroleum products, radioactive materials, asbestos-containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls (“PCBs”); (ii) any chemicals, materials, substances or wastes which are defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” “pollutant,” “contaminant” or words of similar import, or regulated as such, under any Environmental Law or for which a Person may be subject to liability under any Environmental Law.
“Initial Dividend’ shall have the meaning set forth in Section 6.11.
“IRS” means the United States Internal Revenue Service.
“Joint Proxy Statement/Prospectus” shall have the meaning given thereto in Section 6.01(a).
“Knowledge”, or any similar expression, means with respect to a Person, the actual knowledge of any of the individuals set forth on Section 9.03 to the Company Disclosure Letter with respect to the Company and Section 9.03 of the Parent Disclosure Letter with respect to Parent.
“Law” means any statute, law, regulation, order, interpretation, permit, license, approval, authorization, rule or ordinance of any Governmental Entity applicable to Parent, Merger Sub or the Company or any of their respective Subsidiaries.
“LLC Conversion” shall have the meaning given thereto in Section 6.14.
“L.P. Merger Sub” shall have the meaning given thereto in the Introduction.
“L.P. Merger Sub Organizational Documents” shall have the meaning given thereto in Section 4.02(b).
“Maryland REIT Law” shall have the meaning given thereto in the Recitals.
“Material Contracts” means (i) any loan agreement, indenture, note, bond, debenture, mortgage or any other document, agreement or instrument evidencing a capitalized lease obligation or other indebtedness to any Person, other than indebtedness in a principal amount less than $750,000 and (ii) each commitment, contractual obligation, capital expenditure or transaction entered into by the Company or any Company Subsidiary which may result in total payments to or by or liability of the Company or any Company Subsidiary in excess of $750,000 in any one fiscal year, other than the Company Ground Leases or Space Leases; provided, however, that any contract, agreement or other arrangement under clause (ii) above that, by its terms, is terminable within 30 days (without termination fee or penalty) of the date of this Agreement shall not be deemed to be a Material Contract.
-100-
“Merger Sub” shall have the meaning given thereto in the Introduction.
“Merger Sub Organizational Documents” shall have the meaning given thereto in Section 4.02(b).
“Microbial Matter” means fungi, bacterial or viral matter which reproduces through the release of spores or the splitting of cells or other means, including, but not limited to, mold, mildew and viruses, whether or not such Microbial Matter is living, which is likely to result in serious injury to any person or serious damage to any property.
“MLLCA” shall have the meaning given thereto in the Recitals.
“New Parent Option” shall have the meaning given thereto in Section 1.08(a).
“NYSE” shall mean the New York Stock Exchange.
“OP Closing” shall have the meaning given thereto in Section 1.02.
“OP Effective Time” shall have the meaning given thereto in Section 1.03(b).
“OP Merger” shall have the meaning given thereto in the Recitals.
“OP Merger Certificate” shall have the meaning given thereto in Section 1.03(b).
“OP Merger Consideration” shall have the meaning given thereto in Section 1.09(a)(ii).
“Option Exchange Ratio” shall have the meaning given thereto in Section 1.08(a).
“Parent” shall have the meaning given thereto in the Introduction.
“Parent Board” shall have the meaning given thereto in Section 4.06(c).
“Parent Class A Units” shall have the meaning given thereto in Section 4.04(c).
“Parent Common Shares” shall have the meaning given thereto in Section 4.04(a).
“Parent Corporate Budget” shall have the meaning given thereto in Section 5.02.
“Parent Development Property” shall have the meaning given thereto in Section 4.09(k).
“Parent Disclosure Letter” means the disclosure letter dated as of the date of this Agreement and delivered to the Company by Parent in connection with the execution hereof.
-101-
“Parent Employee Benefit Plans” shall have the meaning given thereto in Section 4.15(a).
“Parent Employment Agreements” shall have the meaning given thereto in Section 4.15(c).
“Parent ERISA Affiliate” shall have the meaning given thereto in Section 4.15(a).
“Parent Financial Advisor” means J.P. Morgan Securities Inc.
“Parent Ground Leases” shall have the meaning given thereto in Section 4.09(a).
“Parent Intellectual Property” shall mean all of the following owned or used by Parent or any Parent Subsidiary in the operation of their respective businesses: (i) trademarks, service marks, trade dress, trade names, designs and logos, all applications or registrations in any jurisdiction pertaining to the foregoing and all goodwill associated therewith; (ii) inventions, discoveries, improvements, ideas, know-how, processes, technology, computer programs and software (including source code, object code, documentation, programming tools, drawings, specifications and data) and applications and patents in any jurisdiction pertaining to the foregoing, including re-issues, continuations, divisions, continuations-in-part, renewals or extensions; (iii) trade secrets, including confidential and other non-public information, and the right in any jurisdiction to limit the use or disclosure thereof; (iv) copyrights in writings, designs, software programs and software, applications or registrations in any jurisdiction for the foregoing and moral rights related thereto; (v) databases and database rights; and (vi) Internet Web sites, domain names and applications and registrations pertaining thereto and all intellectual property used in connection with or contained in all versions of such Internet Web sites, together with all licenses and other agreements providing Parent and any Parent Subsidiary with the right to use any item of the type referred to in clauses (i) through (vi).
“Parent L.P.” shall have the meaning given thereto in the Introduction.
“Parent L.P. Partnership Agreement” means the Amended and Restated Limited Partnership Agreement of Parent, as amended and supplemented from time to time.
“Parent Material Adverse Effect” means a material adverse effect on the business, properties, liabilities, financial condition or results of operations of Parent and its Subsidiaries, taken as a whole, or which materially impairs or materially delays the ability of Parent to consummate the transactions contemplated by this Agreement; provided, however, that a Parent Material Adverse Effect shall not include any change with respect to Parent or any Parent Subsidiary resulting from or attributable to (i) general national, international or regional economic conditions or securities markets in general, (ii) the announcement, execution or consummation of this Agreement and the transactions contemplated hereby, or (iii) conditions generally affecting the industry in which Parent and Parent Subsidiaries operate (except to the extent disproportionately affecting such Person, relative to other industry participants).
“Parent Multiemployer Plan” shall have the meaning given thereto in Section 4.15(e)(ii).
-102-
“Parent Options” shall have the meaning given thereto in Section 4.04(a).
“Parent Organizational Documents” shall have the meaning given thereto in Section 4.01.
“Parent Owned Properties” shall have the meaning given thereto in Section 4.09(a).
“Parent Pension Plans” shall have the meaning given thereto in Section 4.15(a).
“Parent Permit” shall have the meaning given thereto in Section 4.12.
“Parent Preferred Units” shall have the meaning given thereto in Section 4.04(c).
“Parent Properties” shall have the meaning given thereto in Section 4.09(a).
“Parent Property Agreements” shall have the meaning given thereto in Section 4.09(d).
“Parent Property Owner” means the Parent, each Parent Subsidiary and each joint venture (whether formed as a joint venture, limited partnership, limited liability company or otherwise) identified on Section 4.9(a) of the Parent Disclosure Letter, which owns or leases any Parent Property.
“Parent Property Restrictions” shall have the meaning given thereto in Section 4.09(b).
“Parent Proxy Statement” shall have the meaning given thereto in Section 4.03(d).
“Parent Rent Roll” shall have the meaning given thereto in Section 4.09(i).
“Parent SEC Documents” shall have the meaning given thereto in Section 4.06(a).
“Parent Series E Preferred Shares” shall have the meaning given thereto in Section 1.07(d).
“Parent Shareholders Meeting” shall have the meaning given thereto in Section 6.01(d).
“Parent Subsidiaries” means all of the Subsidiaries of Parent.
“Partner Exchange Materials” shall have the meaning given thereto in Section 6.01(f).
“Payee” shall have the meaning given thereto in Section 8.03(f).
“Payor” shall have the meaning given thereto in Section 8.03(f).
-103-
“Permitted Company Encumbrances” shall have the meaning given thereto in Section 3.09(a).
“Permitted Parent Encumbrances” shall have the meaning given thereto in Section 4.09(a).
“Person” means any individual, firm, corporation, partnership, company, limited liability company, trust, joint venture, association, unincorporated organization, Governmental Entity or other entity.
“Post-Signing Returns” shall have the meaning given thereto in Section 5.01(c).
“PPREFI Portfolio Loan” shall have the meaning given thereto in Section 6.15.
“Principal Company Limited Partners” shall have the meaning given thereto in the Recitals.
“Private Letter Ruling” shall have the meaning given thereto in Section 6.22.
“Projects” shall have the meaning given thereto in Section 3.09(k).
“Proposed Barton Skyway Loan” shall have the meaning given thereto in Section 5.01(a)(ix).
“Prudential” means The Prudential Insurance Company of America, a New Jersey corporation.
“Prudential Asset Purchase Agreement” shall have the meaning given thereto in Section 10.02.
“Prudential Asset Purchase Closing Date” shall have the meaning given thereto in Section 10.02.
“Prudential Asset Sale” shall have the meaning given thereto in Section 10.02.
“Qualifying Amendment” shall have the meaning given thereto in Section 6.01(b).
“Qualifying Income” shall have the meaning given thereto in Section 8.03(f).
“Registrable Securities” shall have the meaning given thereto in Section 6.16.
“Registration Statement” shall have the meaning given thereto in Section 6.01(a).
“REIT” shall have the meaning given thereto in Section 3.14(c).
“REIT Closing” shall have the meaning given thereto in Section 1.02.
“REIT Effective Time” shall have the meaning given thereto in Section 1.03(a).
-104-
“REIT Merger” shall have the meaning given thereto in the Recitals.
“REIT Merger Consideration” shall have the meaning given thereto in Section 1.07(a).
“REIT Requirements” shall have the meaning given thereto in Section 8.03(f).
“Release” means any past or present release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, escaping, injecting, dumping or disposing into the environment (including, without limitation, ambient air, surface water, groundwater, and surface or subsurface strata) as regulated by CERCLA or any other applicable Environmental Laws.
“Rent Roll” shall have the meaning given thereto in Section 3.09(i).
“Representatives” of a Person means such Person’s officers, trustees, directors, employees, investment bankers, attorneys, accountants, auditors or other advisors or representatives.
“Required Company Vote” shall have the meaning given thereto in Section 3.03(a).
“Required Parent Vote” shall have the meaning given thereto in Section 4.03(a).
“Reverse REIT Merger” shall have the meaning given thereto in Section 10.05(a).
“Rule 145” shall have the meaning given thereto in Section 6.10.
“Sarbanes-Oxley Act” shall have the meaning given thereto in Section 3.06(b).
“SEC” shall mean the United States Securities and Exchange Commission.
“Section 409A” shall have the meaning given thereto in Section 6.05(i).
“Securities Act” shall have the meaning given thereto in Section 3.06(b).
“Shelf Registration Statement” shall have the meaning given thereto in Section 6.16.
“Significant Subsidiary” means any Subsidiary of the Company whose assets constitute 10% or more of the assets of the Company and its Subsidiaries taken as a whole.
“Space Lease” means any lease or other occupancy agreement affecting a Company Property.
“Special Company L.P. Distribution” shall have the meaning given thereto in Section 10.03.
“Special Dividend” shall have the meaning given thereto in Section 10.03.
-105-
“Special Dividend Amount” shall have the meaning given thereto in Section 10.03.
“Subject Properties” means the Company Properties identified under the caption “Subject Properties” in Section 5.01(a)(viii) of the Company Disclosure Letter.
“Subsequent Determination” shall have the meaning given thereto in Section 6.04(e).
“Subsidiary” of any Person shall mean any corporation, partnership, limited liability company, real estate investment trust, joint venture or other legal entity of which such Person (either directly or through or together with another Subsidiary of such Person) (i) owns at least 50% of the voting stock or value of such corporation, partnership, limited liability company, joint venture or other legal entity, or (ii) otherwise has the ability to elect a majority of the directors, trustees or managing members thereof.
“Superior Proposal” shall have the meaning given thereto in Section 6.04(d).
“Surviving Company” shall have the meaning given thereto in Section 1.01(a), subject to Section 10.5.
“Surviving L.P.” shall have the meaning given thereto in Section 1.01(b).
“Takeover Proposal” shall have the meaning given thereto in Section 6.04(a).
“Takeover Statutes” shall have the meaning given thereto in Section 3.25(a).
“Tax” or “Taxes” means (i) any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind whatsoever imposed by any Governmental Entity (including, without limitation, taxes or other charges on or with respect to income, alternative minimum tax, franchises, windfall or other profits, gross receipts, excise, excess distributions, impositions, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation, or net worth; withholding, ad valorem, stamp, transfer, mortgage recording, value added, or gains taxes; license, registration and documentation fees; and customs’ duties, tariffs, and similar charges), (ii) any interest or penalties, additions to tax or additional amounts imposed by any Governmental Entity in connection with (A) any item described in clause (i) or (B) the failure to comply with any requirement imposed with respect to any Tax Return, and (iii) any obligation with respect to Taxes described in clause (i) and/or (ii) above payable by reason of contract, assumption, transferee liability, operation of Law, Treasury Regulation § 1.1502-6 (or any predecessor or successor thereof or any analogous or similar provision under Law) or otherwise.
“Tax Protection Arrangement” means an agreement or arrangement, oral or written, (A) that has as one of its purposes to permit a Person or entity to take the position that such Person or entity could defer federal taxable income that otherwise might have been recognized upon a transfer of property to the Company or any Company Subsidiary that is treated as a partnership for U.S. federal income tax purposes, and (B) that (i) prohibits or restricts in any manner the disposition of any assets of the Company or any Company Subsidiary, (including, without limitation, requiring the Company or any Company Subsidiary to indemnify any Person for any Tax liabilities resulting from any such disposition), (ii) requires that the Company or any Company Subsidiary maintain, or put in place, or replace, indebtedness, whether or not secured by one or more of the Company Properties, or (iii) requires that the Company or any Company Subsidiary offer to any Person or entity at any time the opportunity to guarantee or otherwise assume, directly or indirectly, the risk of loss for U.S. federal income tax purposes for indebtedness or other liabilities of the Company or any Company Subsidiary.
-106-
“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof
“Termination Fee” shall have the meaning given thereto in Section 8.03(d).
“Third Party” means any Person other than Merger Sub and its respective Affiliates.
“Transaction Documents” shall mean, collectively, this Agreement, the Voting Agreements and, if it is executed pursuant to Article X, the Prudential Asset Purchase Agreement.
“Transactions” shall mean the REIT Merger, the OP Merger and the other transactions contemplated by the Transaction Documents.
“Transfer Taxes” shall have the meaning given thereto in Section 6.08.
“Unpaid Fee Amount” shall have the meaning given thereto in Section 8.03(f).
“Voting Agreements” shall have the meaning given thereto in the Recitals.
“Voting Debt” shall, with respect to any Person, mean bonds, debentures, notes or other indebtedness having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of equity interests in such Person may vote.
“$” means U.S. dollars or other legal currency of the United States of America.
Section 9.04. Interpretation. When a reference is made in this Agreement to an Article, Section or Schedule such reference shall be to an Article or Section of, or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The words “hereof’, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The term “or” is not exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms. Any agreement or instrument defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement or instrument as from time to time amended, modified or supplemented (other than the Company SEC Documents or Parent SEC Documents). References to a person are also to its permitted successors and assigns.
-107-
Section 9.05. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the Transactions are fulfilled to the fullest extent possible.
Section 9.06. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.
Section 9.07. Entire Agreement; No Third-Party Beneficiaries. The Transaction Documents (including the exhibits and schedules thereto), taken together with the Company Disclosure Letter and the Confidentiality Agreement, (a) constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the Transactions. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, other than Sections 6.05, 6.06, 6.16, 6.17 and 6.18 (which is intended to be for the benefit of the Persons covered thereby and may be enforced by such Persons).
Section 9.08. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland, regardless of the laws that might otherwise govern under applicable conflict or choice of law rules.
Section 9.09. Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties, except that (i) Merger Sub may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to Parent or to any direct or indirect Subsidiary of Parent and (ii) L.P. Merger Sub may assign, in its sole discretion, any of or all its rights, interests and obligations under this Agreement to Parent L.P. or to any direct or indirect Subsidiary of Parent L.P., but no such assignment shall relieve Parent, Parent L.P., Merger Sub or L.P. Merger Sub of any of its obligations under this Agreement. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
Section 9.10. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement.
-108-
Section 9.11. Disclosure Letters. The disclosures made on any disclosure schedule, including the Company Disclosure Letter and the Parent Disclosure Letter, with respect to any representation or warranty shall be deemed to be made with respect to any other representation or warranty requiring the same or similar disclosure to the extent that the relevance of such disclosure to other representations and warranties is reasonably evident from the face of the disclosure schedule. The inclusion of any matter on any disclosure schedule will not be deemed an admission by any party that such listed matter is material or that such listed matter has or would have a Company Material Adverse Effect or a Parent Material Adverse Effect, as applicable.
ARTICLE X
Sale of Specified Assets
Section 10.01. Final Condition Notice. Notwithstanding any provision in this Agreement to the contrary, if Parent shall not have received the Private Letter Ruling that confirms the matters referred to in Section 6.22 by the business day which is ten business days prior to the Company Shareholders Meeting and Parent Shareholders Meeting (such business day, the “Final Condition Notice Date”), then Parent shall notify the Company, Company L.P. and Prudential of such fact by sending a written notice to the Company, Company L.P. and Prudential indicating that the Private Letter Ruling has not yet been obtained (the “Final Condition Notice”).
Section 10.02. Entry into Prudential Asset Purchase Agreement. Concurrently with the execution of this Agreement, Company L.P., Prentiss Properties Real Estate Fund I, L.P. and Prudential have entered into the asset purchase agreement attached hereto as Exhibit D (the “Prudential Asset Purchase Agreement”) which agreement will become effective as provided therein. Parent acknowledges that if it delivers the Final Condition Notice as contemplated by Section 10.01, then on the first business day following the Company Shareholders Meeting and Parent Shareholders Meeting and the satisfaction (or, to the extent permitted by Law, waiver by the party or parties entitled to the benefits thereof) of the conditions set forth in Article VII of this Agreement (such first business day, the “Final Condition Satisfaction Date;” provided that if the day following such first business date is not also a business date, the Final Condition Satisfaction Date shall be delayed until the next business day that is also immediately followed by a business day), the Prudential Asset Purchase Agreement will become effective and Prudential and/or one or more transferees of Prudential and Company L.P. will consummate the transactions contemplated by the Prudential Asset Purchase Agreement. The obligation of Company L.P. and Prentiss Properties Real Estate Fund I, L.P. to consummate the transactions provided for in the Prudential Asset Purchase Agreement (the “Prudential Asset Sale”) is subject to the receipt by the Company, Company L.P. and Prudential of the Final Condition Notice on the Final Condition Notice Date and a written letter, in form and substance reasonably satisfactory to the Company, from Parent and Parent L.P. on the Final Condition Satisfaction Date that confirms that the conditions to the obligations of Parent and Parent L.P. to effect the REIT Merger and OP Merger have been irrevocably satisfied or waived; and the obligation of Parent to consummate the transactions provided for in Section 10.5 is subject to the receipt by Parent, Parent, L.P. and Prudential of a written letter, in form and substance reasonably satisfactory to Parent, from the Company and Company L.P. on the Final Condition Satisfaction Date that confirms that the conditions to the obligations of the Company and Company L.P. to effect the REIT Merger and OP Merger have been irrevocably satisfied or waived.
-109-
Section 10.03. Declaration of Distribution and Special Dividend. Immediately following, and subject to, the consummation of the transactions provided for in the Prudential Asset Purchase Agreement, and on the Final Condition Satisfaction Date: (a) the Company shall cause Company G.P. to authorize a distribution (the “Special Company L.P. Distribution”) by Company L.P. payable to the holders of record of Company GP Units and Company Common Units at the close of business on the Final Condition Satisfaction Date and (b) the Company Board shall authorize the Company to declare a special dividend (the “Special Dividend”) payable to the holders of record of Company Common Shares at the close of business on the Final Condition Satisfaction Date. The amount of the Special Dividend per Company Common Share shall be equal to the amount of the Special Company L.P. Distribution per Company L.P. Unit. The amount of the Special Company L.P. Distribution per Company L.P. Unit shall be equal to the quotient that results from dividing 95% of the cash consideration paid by Prudential to the Company at the closing of the Prudential Asset Sale by the aggregate number of Company GP Units and Company Common Units outstanding at the close of business on the Final Condition Satisfaction Date (the “Special Dividend Amount”).
Section 10.04. Payment of Special Dividend. The Special Company L.P. Distribution and Special Dividend shall be payable on the first business day following the Final Condition Satisfaction Date. The Company shall effect the declaration and payment of the Special Dividend pursuant to Section 10.3 and this Section 10.4 in such a manner as to comply with the rules and regulations of the NYSE.
Section 10.05. Effects of the Execution of the Prudential Asset Purchase Agreement and the Payment of the Special Dividend. Upon and subject to the execution and delivery of the Prudential Asset Purchase Agreement, the consummation of the transactions provided for therein and the declaration of the Special Company L.P. Distribution and Special Dividend, the following provisions of this Agreement shall be automatically modified as follows:
| (a) Notwithstanding the provisions of Section 1.01, at the REIT Effective Time, the REIT Merger shall be abandoned and Merger Sub shall be merged with and into the Company (the “Reverse REIT Merger”). At the REIT Effective Time, the separate existence of Merger Sub shall cease and the Company shall continue as the surviving company and all references in this Agreement to the “Surviving Company” shall be deemed to be references to the Company after the REIT Effective Time and all references to the REIT Merger other than set forth in Section 1.02(a) shall be deemed to be references to the Reverse REIT Merger. |
(b) As provided in Section 1.02, if Parent shall not have received the Private Letter Ruling that confirms the matters referred to in Section 6.22 before Final Condition Satisfaction Date, the REIT Closing shall take place at 10:00 a.m. Eastern Time on the first business day following the Final Condition Satisfaction Date.
-110-
(c) Notwithstanding the provisions of Section 1.05(a), from and after the REIT Effective Time, the Company Organizational Documents shall be the declaration of trust and bylaws of the Surviving Company until thereafter changed or amended as provided therein or by applicable Law.
(d) As referenced in Section 1.07(a), the Cash Consideration that forms part of the REIT Merger Consideration shall be reduced by an amount equal to the Special Dividend Amount.
(e) Notwithstanding the provisions of Section 1.07(f), the membership interests of Merger Sub issued and outstanding immediately prior to the REIT Effective Time shall be converted into Company Common Shares. All membership interests of Merger Sub so converted shall cease to be outstanding and shall be canceled and retired and shall cease to exist.
(f) The Option Exchange Ratio shall be adjusted in the manner set forth in Section 1.08(a).
(g) The Common Interest Exchange Ratio shall be adjusted in the manner set forth in Section 1.09(a)(ii).
[Signature Page Follows]
-111-
IN WITNESS WHEREOF, Parent, Parent L.P., Merger Sub, L.P. Merger Sub, the Company and Company L.P. have duly executed this Agreement, all as of the date first written above.
| BRANDYWINE REALTY TRUST | ||
| By: | /s/ Gerard H. Sweeney | |
| Name: Gerard H. Sweeney Title: President and Chief Executive Officer |
||
| BRANDYWINE OPERATING PARTNERSHIP, L.P. | ||
| By: | BRANDYWINE REALTY TRUST, its General Partner |
|
| By: | /s/ Gerard H. Sweeney Name: Gerard H. Sweeney Title: President and Chief Executive Officer |
|
| BRANDYWINE COGNAC I. LLC | ||
| By: | BRANDYWINE OPERATING PARTNERSHIP,
L.P. its Member |
|
| By: | /s/ Gerard H. Sweeney Name: Gerard H. Sweeney Title: President and Chief Executive Officer |
|
| BRANDYWINE COGNAC II, LLC | ||
| By: | BRANDYWINE OPERATING PARTNERSHIP,
L.P. its Member |
|
| By: | /s/ Gerard H. Sweeney Name: Gerard H. Sweeney Title: President and Chief Executive Officer |
|
| PRENTISS PROPERTIES TRUST | ||
| By: | /s/ Thomas F. August Name: Thomas F. August Title: President and Chief Executive Officer |
|
| PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P. | ||
| By: | Prentiss Properties I, Inc. its General Partner |
|
| By: | /s/ Thomas F. August Name: Thomas F. August Title: President and Chief Executive Officer |
|
SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER DATED OCTOBER 3, 2005
SCHEDULE I
Principal Company Limited Partners
| 1. | Michael V. Prentiss; and |
| 2. | Thomas F. August. |
BRANDYWINE REALTY TRUST
ARTICLES OF AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST: Section 6.1 of the Declaration of Trust of Brandywine Realty Trust, a Maryland real estate investment trust (the “Trust”), is hereby amended by increasing from 110,000,000 to 220,000,000 the total number of shares of beneficial interest which the Trust is authorized to issue; by increasing from 100,000,000 to 200,000,000 the total number of Common Chares which the Trust is authorized to issue; and by increasing from 10,000,000 to 20,000,000 the total number of Preferred Shares which the Trust is authorized to issue.
SECOND: Pursuant to Section 8-203(a)(7) of the Corporations and Associations Article of the Annotated Code of Maryland, the amendment to the Declaration of Trust of the Trust as hereinabove set forth has been duly approved by the Board of Trustees of the Trust.
THIRD: The total number of shares of beneficial interest which the Trust had authority to issue immediately prior to this amendment was 110,000,000 shares of beneficial interest, consisting of 100,000,000 common shares of beneficial interest, $.0l par value per share, and 10,000,000 preferred shares of beneficial interest, $.0l par value per share. The aggregate par value of all shares of beneficial interest having par value was $1,100,000.
The total number of shares of beneficial interest which the Trust has authority to issue pursuant to the amendment described herein is 220,000,000 shares of beneficial interest, consisting of 200,000,000 common shares of beneficial interest, $.0l par value per share, and 20,000,000 preferred shares of beneficial interest, $.0l par value per share. The aggregate par value of all shares of beneficial interest having par value is $2,200,000.
FOURTH: The undersigned President acknowledges these Articles of Amendment to be the trust act of the Trust and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Trust has caused these Articles of Amendment to be signed in its name and on its behalf by its President and attested to by its Secretary on this 3rd day of October, 2005.
| ATTEST: | BRANDYWINE REALTY TRUST |
| /s/ Brad A. Molotsky | By: /s/ Gerard H. Sweeney (SEAL) |
| Brad A. Molotsky | Gerard H. Sweeney |
| Secretary | President and |
| Chief Executive Officer |
EXHIBIT A
VOTING AGREEMENT
VOTING AGREEMENT
VOTING AGREEMENT, dated as of October 3, 2005 (this “Agreement”), among Brandywine Realty Trust, a Maryland real estate investment trust (“Parent”), Brandywine Operating Partnership, L.P., a Delaware limited partnership (“Parent L.P.”and, together with Parent, the “Parent Entities”),and the undersigned holder (the “Holder”)of common shares of beneficial interest, par value $.01 per share (“Company Common Shares”),of Prentiss Properties Trust, a Maryland real estate investment trust (the “Company”).
WHEREAS, as of the date hereof, Holder beneficially owns the number of Company Common Shares and the number of Company Common Units set forth on the Holder signature page hereto (all other Company Common Shares so owned and all Company Common Shares that may hereafter be acquired by Holder prior to the Expiration Date (as defined in Section 3.4 hereof), whether upon exercise of options, purchase, dividend, distribution or otherwise, being referred to herein as such Holder’s “Company Shares” and all other Company Common Units so owned and all other Company Common Units that may hereafter be acquired by Holder prior to the Expiration Date, whether upon exercise of options, purchase, dividend, distribution or otherwise, being referred to herein as such Holder’s “Company Units”);
WHEREAS, Parent, Parent L.P., Brandywine Cognac I, LLC, a Maryland limited liability company and subsidiary of Parent L.P. (“Merger Sub”), Brandywine Cognac II, LLC, a Delaware limited liability company and subsidiary of Parent L.P. (“L.P. Merger Sub”), the Company and Prentiss Properties Acquisition Partners, L.P., a Delaware limited partnership (“Company L.P.”) have entered into an Agreement and Plan of Merger, dated as of October 3, 2005 (the “Merger Agreement”), which provides, upon the terms and subject to the conditions set forth therein, for the merger of Merger Sub with the Company (the “REIT Merger”); and
WHEREAS, as a condition to the willingness of Parent, Parent L.P., Merger Sub and L.P. Merger Sub to enter into the Merger Agreement, the Parent Entities have required that Holder agree, and in order to induce the Parent Entities to enter into the Merger Agreement, Holder has agreed, to enter into this Agreement.
Capitalized terms used but not otherwise defined in this Agreement have the meanings assigned to such terms in the Merger Agreement.
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:
Article I.
VOTING OF COMPANY COMMON SHARES AND COMPANY COMMON UNITS
Section 1.1. Voting Agreements. Until the Expiration Date, at every meeting of the shareholders of the Company called, and at every adjournment thereof, and on every action or approval by written consent of the shareholders of the Company, Holder (in its capacity as such) shall vote or cause its Company Shares to be voted (i) in favor of approval of the Merger Agreement and the REIT Merger, (ii) in favor of each of the other transactions contemplated by the Merger Agreement and (iii) in favor of any incidental matter reasonably determined by the Parent Entities to be necessary in order to facilitate consummation of the REIT Merger. At any meeting of the shareholders of the Company, or at any adjournment thereof, or in any other circumstances upon which their vote, consent or other approval is sought, such Holder shall vote (or cause to be voted) the Company Shares against (i) any Takeover Proposal or any action which is a component of any Takeover Proposal, (ii) any merger agreement or merger (other than the Merger Agreement, the REIT Merger and the OP Merger), reorganization, recapitalization, dissolution, liquidation or winding up of or by the Company, (iii) any amendment of the Company Organizational Documents, which amendment would result in a breach of a representation, warranty or covenant of the Company under the Merger Agreement or would in any manner prevent or materially impede, interfere with or delay the REIT Merger, the OP Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement or (iv) any other matter that is inconsistent with the prompt consummation of the REIT Merger, the OP Merger and the other transactions contemplated by the Merger Agreement (each of clauses (i), (ii), (iii) and (iv), a “Competing REIT Transaction”).
1
Section 1.2. Grant of Irrevocable Proxy with Respect to Company Shares. (a) Holder hereby irrevocably (to the fullest extent permitted by law) appoints Gerard H. Sweeney and Walter D’Alessio, and each of them, as Holder’s sole and exclusive attorneys and proxies, with full power of substitution and re-substitution, to vote the Company Shares and to exercise all voting, consent and similar rights of Holder with respect to the Company Shares (including, without limitation, the power to execute and deliver written consents) at every annual, special or adjourned meeting of shareholders of the Company and in every written consent in lieu of such meeting (i) in favor of approval of the Merger Agreement and the REIT Merger, (ii) in favor of each of the other transactions contemplated by the Merger Agreement, (iii) in favor of any incidental matter reasonably determined by the Parent Entities to be necessary in order to facilitate the REIT Merger and (iv) against any Competing REIT Transaction. It is understood and agreed that the attorneys and proxies named above may not exercise these voting rights on any other matter except as provided above. Except as set forth in this Agreement, Holder may vote the Company Shares on all other matters.
(b) Upon Holder’s execution of this Agreement, any and all prior proxies given by Holder with respect to any Company Shares with respect to the matters contemplated by Section 1.2(a) are hereby revoked.
(c) Holder hereby affirms that the proxy set forth in this Section 1.2 is irrevocable (to the fullest extent permitted by law), is coupled with an interest and is granted in consideration of the Parent Entities entering into the Merger Agreement. Holder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of the MGCL.
2
Section 1.3. Transfer of Company Shares and Company Units.
(a) Transferee of Company Shares and Company Units to be Bound by this Agreement. Holder agrees that, during the period from the date of this Agreement through the Expiration Date, other than by operation of Law as part of the REIT Merger or the OP Merger or in any offer to exchange Company Units as contemplated under Section 1.11 of the Merger Agreement, or the redemption or conversion of Company Common Units, Holder shall not cause or permit any Transfer (as defined below) of any of the Company Shares or Company Units to be effected without Parent’s prior written consent to such Transfer and unless each Person to which any of such Company Shares or Company Units, or any interest in any of such Company Shares or Company Units, is or may be Transferred shall have: (a) executed a counterpart of this Agreement and (b) agreed in writing to hold such Company Shares or Company Units (or interest in such Company Shares or Company Units) subject to all of the terms and provisions of this Agreement; provided, however, that Holder shall be entitled to Transfer Company Units (or any interest in such Company Units) to an immediate family member (or trust for the benefit of an immediate family member) or an Affiliate of such Holder if such family member, trust or Affiliate shall have (1) executed a counterpart of this Agreement and (2) agreed in writing to hold such Company Units (or interest in such Company Units) subject to all of the terms and provisions of this Agreement. A Person shall be deemed to have effected a “Transfer”of a security if such person directly or indirectly: (i) sells, pledges, encumbers, grants an option with respect to, transfers or disposes of such security or any interest in such security; or (ii) enters into an agreement or commitment providing for the sale of, pledge of, encumbrance of, grant of an option with respect to, transfer of or disposition of such security or any interest therein.
(b) Transfer of Voting Rights. Holder agrees that, during the period from the date of this Agreement through the Expiration Date, Holder shall not deposit (or permit the deposit of) any Company Shares or Company Units in a voting trust or grant any proxy or enter into any voting agreement or similar agreement in contravention of the obligations of Holder under this Agreement with respect to any of the Company Shares and Company Units.
Section 1.4. No Inconsistent Actions by Holder. While this Agreement is in effect, Holder shall not revoke or rescind, or purport to revoke or rescind, the proxies granted hereby or take any action inconsistent with the provisions of this Agreement.
Section 1.5. Additional Documents. Holder (in its capacity as such) hereby covenants and agrees to execute and deliver any additional documents necessary or desirable, in the reasonable opinion of Parent, to carry out the intent of this Agreement.
Section 1.6. No Solicitation. (a) Holder shall not, and shall use its reasonable best efforts to cause its Affiliates or Representatives not to, directly or indirectly (i) solicit, initiate, encourage or knowingly take any other action to facilitate (including by the furnishing of non-public information) the submission of any inquiry, proposal or offer from any Person (other than Parent, Merger Sub or their Affiliates) relating to, or that could reasonably be expected to lead to, any Takeover Proposal, (ii) agree to, approve or recommend any Takeover Proposal or enter into any agreement with respect to any Takeover Proposal or (iii) enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any Person any non-public information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Takeover Proposal; provided, however, that the foregoing does not restrict any Holder that is a member of the Company Board or an officer of the Company from taking any actions in such capacity to the extent permitted by the Merger Agreement.
3
(b) In addition to the obligations of Holder set forth in paragraph (a) of this Section 1.6, Holder shall notify Parent promptly (but in any event within two business days) after receipt or occurrence of (i) any Takeover Proposal, (ii) any request for information with respect to any Takeover Proposal, (iii) any inquiry, proposal, discussions or negotiation with respect to any Takeover Proposal and (iv) the material terms and conditions of any such Takeover Proposal, request for information, inquiry, proposal, discussion or negotiation and the identity of the Person making any such Takeover Proposal, request for information, inquiry or proposal or with whom discussions or negotiations are taking place. In the event Holder shall receive or become aware of any Takeover Proposal subsequent to the date hereof, Holder shall keep Parent informed in all material respects of the status and details (including amendments or proposed amendments) of any such inquiry, request or Takeover Proposal.
Article II.
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations And Warranties Of Holder. Holder hereby represents and warrants to the Parent Entities as follows:
(a) Due Organization, Authorization, etc. Holder has all requisite legal capacity, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Holder. This Agreement has been duly executed and delivered by or on behalf of Holder and, assuming its due authorization, execution and delivery by the Parent Entities, constitutes a legal, valid and binding obligation of Holder, enforceable against Holder in accordance with its terms.
(b) No Conflicts, Required Filings and Consents.
(i) The execution and delivery of this Agreement by Holder does not, and the performance of this Agreement by Holder will not, (i) conflict with or violate any judgment, order, decree, statute, Law, ordinance, rule or regulation applicable to Holder or by which Holder or any of Holder’s assets or properties is bound or affected or (ii) violate or conflict with any Contract to which Holder is a party or by which any of its assets or properties is bound.
(ii) The execution and delivery of this Agreement by Holder does not, and the performance of this Agreement by Holder will not, require any consent, approval, order or authorization of, or registration, declaration or filing with, or permit from, any Governmental Entity.
4
(iii) Except for this Agreement, there are no voting trusts or other agreements or understandings, including, without limitation, any proxies, in effect governing the voting of the Company Shares or the Company Units.
(c) Title to Company Shares and Company Units. Holder is the beneficial owner of the Company Common Shares and the Company Common Units set forth on the Holder’s signature page hereto and holds sole and full voting rights with respect thereto other than as set forth in Sections 1.1 and 1.2 hereof. On the date hereof, Holder does not beneficially own any other Company Common Shares or Company Common Units (or any other securities or interests in the Company or Company L.P. other than pursuant to existing stock options granted under Company Incentive Plans). No other Person has any voting rights with respect to the Company Common Shares or the Company Units. In addition, the Company Common Shares and the Company Common Units held by Holder are free and clear of any Encumbrances that would adversely affect the ability of Holder to carry out the terms of this Agreement.
(d) Reliance on Information. Holder understands and acknowledges that the Parent Entities are entering into the Merger Agreement in reliance upon the execution and delivery of this Agreement by Holder.
Section 2.2. Representations And Warranties Of Parent and Parent L.P. Parent and Parent L.P. hereby jointly and severally represent and warrant to Holder that: (i) each of Parent and Parent L.P. has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; (ii) the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of each of Parent and Parent L.P.; and (iii) this Agreement has been duly executed and delivered by or on behalf of each of Parent and Parent L.P. and, assuming its due authorization, execution and delivery by Holder, constitutes a legal, valid and binding obligation of each of each of Parent and Parent L.P., enforceable against each of Parent and Parent L.P. in accordance with its terms.
Article III.
MISCELLANEOUS
Section 3.1. Expenses. Except as otherwise provided herein, all costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses.
Section 3.2. Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, (b) on the first business day following the date of dispatch if delivered by a recognized next-day courier service, or (c) on the fifth business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
5
(i) if to the Parent Entities to:
Brandywine Realty Trust
401 Plymouth Road
Plymouth Meeting, PA 19462
Attn: General Counsel
Facsimile: (610) 832-4928
with a copy to:
Pepper Hamilton LLP
3000 Two Logan Square
Philadelphia, PA 19103
Attention: Michael H. Friedman, Esq.
Facsimile: (215) 981-4750
(ii) if to Holder to:
Prentiss Properties Trust
3890 West Northwest Highway
Suite 400,
Dallas, Texas 75220
Attention: General Counsel
Facsimile: (214)358-6443
with a copy to:
Akin Gump Strauss Hauer & Feld LLP
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
Attention: Michael E. Dillard, P.C.
Fax No.: (214) 969-4343
Section 3.3. Incorporation of Other Provisions. Sections 9.04, 9.05, 9.06, 9.08 and 9.10 of the Merger Agreement are hereby incorporated by reference and made a part of this Agreement, mutatis mutandis, as if restated in full herein and without regard to whether the Merger Agreement remains in effect.
Section 3.4. Termination. Unless terminated earlier upon the written agreement of each of the parties hereto, this Agreement and the proxies provided herein shall terminate (the “Expiration Date”) and be of no further force and effect, automatically and without any required action of the parties hereto, upon the earlier to occur of (i) the Effective Time or (ii) such date and time as the Merger Agreement shall have been validly terminated pursuant to Section 8.01 thereof; provided that no such termination shall relieve any party of liability for a breach hereof prior to termination. Notwithstanding the foregoing, Section 3.1 hereof shall survive the Expiration Date in accordance with its terms.
6
Section 3.5. Amendment. This Agreement may not be amended, modified or rescinded except by an instrument in writing signed by each of the parties hereto.
Section 3.6. Capacity. No Holder entering into this Agreement who is or becomes during the term hereof a trustee or officer of the Company makes any agreement or understanding herein in his capacity as a trustee or officer. Holders signs solely in his capacity as the beneficial owner of his Company Shares and Company Units.
Section 3.7. Entire Agreement. This Agreement, together with the documents expressly referred to herein, constitutes the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.
Section 3.8. Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
[Signature Pages Follow]
7
IN WITNESS WHEREOF, Parent and Parent L.P. have caused this Agreement to be executed by their respective officers thereunto duly authorized and Holder has caused this Agreement to be duly executed by an authorized signatory, all as of the date first written above.
| Brandywine Realty Trust | |
| By: /s/ Gerard H. Sweeney | |
| Name: Gerard H. Sweeney | |
| Title: President and Chief Executive Officer | |
| Brandywine Operating Partnership, L.P. | |
| Brandywine Realty Trust, | |
| its general partner | |
| By: /s/ Gerard H. Sweeney | |
| Name: Gerard H. Sweeney | |
| Title: President and Chief Executive Officer |
| HOLDER | |
| By: /s/ Michael V. Prentiss | |
| Name: Michael V. Prentiss | |
| Dated: __________, 2005 | Print Name of Holder: |
| Address of Holder: | |
| fax: __________ | |
| Company Shares beneficially owned: | |
| Company Common Shares_________________ | |
| Company Common Shares | |
| issuable upon exercise of outstanding options_____ | |
| Company Units beneficially owned: | |
| Company Common Units_______________ |
EXHIBIT A
VOTING AGREEMENT
VOTING AGREEMENT
VOTING AGREEMENT, dated as of October 3, 2005 (this “Agreement”), among Brandywine Realty Trust, a Maryland real estate investment trust (“Parent”), Brandywine Operating Partnership, L.P., a Delaware limited partnership (“Parent L.P.”and, together with Parent, the “Parent Entities”),and the undersigned holder (the “Holder”)of common shares of beneficial interest, par value $.01 per share (“Company Common Shares”),of Prentiss Properties Trust, a Maryland real estate investment trust (the “Company”).
WHEREAS, as of the date hereof, Holder beneficially owns the number of Company Common Shares and the number of Company Common Units set forth on the Holder signature page hereto (all other Company Common Shares so owned and all Company Common Shares that may hereafter be acquired by Holder prior to the Expiration Date (as defined in Section 3.4 hereof), whether upon exercise of options, purchase, dividend, distribution or otherwise, being referred to herein as such Holder’s “Company Shares” and all other Company Common Units so owned and all other Company Common Units that may hereafter be acquired by Holder prior to the Expiration Date, whether upon exercise of options, purchase, dividend, distribution or otherwise, being referred to herein as such Holder’s “Company Units”);
WHEREAS, Parent, Parent L.P., Brandywine Cognac I, LLC, a Maryland limited liability company and subsidiary of Parent L.P. (“Merger Sub”), Brandywine Cognac II, LLC, a Delaware limited liability company and subsidiary of Parent L.P. (“L.P. Merger Sub”), the Company and Prentiss Properties Acquisition Partners, L.P., a Delaware limited partnership (“Company L.P.”) have entered into an Agreement and Plan of Merger, dated as of October 3, 2005 (the “Merger Agreement”), which provides, upon the terms and subject to the conditions set forth therein, for the merger of Merger Sub with the Company (the “REIT Merger”); and
WHEREAS, as a condition to the willingness of Parent, Parent L.P., Merger Sub and L.P. Merger Sub to enter into the Merger Agreement, the Parent Entities have required that Holder agree, and in order to induce the Parent Entities to enter into the Merger Agreement, Holder has agreed, to enter into this Agreement.
Capitalized terms used but not otherwise defined in this Agreement have the meanings assigned to such terms in the Merger Agreement.
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:
Article I.
VOTING OF COMPANY COMMON SHARES AND COMPANY COMMON UNITS
Section 1.1. Voting Agreements. Until the Expiration Date, at every meeting of the shareholders of the Company called, and at every adjournment thereof, and on every action or approval by written consent of the shareholders of the Company, Holder (in its capacity as such) shall vote or cause its Company Shares to be voted (i) in favor of approval of the Merger Agreement and the REIT Merger, (ii) in favor of each of the other transactions contemplated by the Merger Agreement and (iii) in favor of any incidental matter reasonably determined by the Parent Entities to be necessary in order to facilitate consummation of the REIT Merger. At any meeting of the shareholders of the Company, or at any adjournment thereof, or in any other circumstances upon which their vote, consent or other approval is sought, such Holder shall vote (or cause to be voted) the Company Shares against (i) any Takeover Proposal or any action which is a component of any Takeover Proposal, (ii) any merger agreement or merger (other than the Merger Agreement, the REIT Merger and the OP Merger), reorganization, recapitalization, dissolution, liquidation or winding up of or by the Company, (iii) any amendment of the Company Organizational Documents, which amendment would result in a breach of a representation, warranty or covenant of the Company under the Merger Agreement or would in any manner prevent or materially impede, interfere with or delay the REIT Merger, the OP Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement or (iv) any other matter that is inconsistent with the prompt consummation of the REIT Merger, the OP Merger and the other transactions contemplated by the Merger Agreement (each of clauses (i), (ii), (iii) and (iv), a “Competing REIT Transaction”).
1
Section 1.2. Grant of Irrevocable Proxy with Respect to Company Shares. (a) Holder hereby irrevocably (to the fullest extent permitted by law) appoints Gerard H. Sweeney and Walter D’Alessio, and each of them, as Holder’s sole and exclusive attorneys and proxies, with full power of substitution and re-substitution, to vote the Company Shares and to exercise all voting, consent and similar rights of Holder with respect to the Company Shares (including, without limitation, the power to execute and deliver written consents) at every annual, special or adjourned meeting of shareholders of the Company and in every written consent in lieu of such meeting (i) in favor of approval of the Merger Agreement and the REIT Merger, (ii) in favor of each of the other transactions contemplated by the Merger Agreement, (iii) in favor of any incidental matter reasonably determined by the Parent Entities to be necessary in order to facilitate the REIT Merger and (iv) against any Competing REIT Transaction. It is understood and agreed that the attorneys and proxies named above may not exercise these voting rights on any other matter except as provided above. Except as set forth in this Agreement, Holder may vote the Company Shares on all other matters.
(b) Upon Holder’s execution of this Agreement, any and all prior proxies given by Holder with respect to any Company Shares with respect to the matters contemplated by Section 1.2(a) are hereby revoked.
(c) Holder hereby affirms that the proxy set forth in this Section 1.2 is irrevocable (to the fullest extent permitted by law), is coupled with an interest and is granted in consideration of the Parent Entities entering into the Merger Agreement. Holder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of the MGCL.
2
Section 1.3. Transfer of Company Shares and Company Units.
(a) Transferee of Company Shares and Company Units to be Bound by this Agreement. Holder agrees that, during the period from the date of this Agreement through the Expiration Date, other than by operation of Law as part of the REIT Merger or the OP Merger or in any offer to exchange Company Units as contemplated under Section 1.11 of the Merger Agreement, or the redemption or conversion of Company Common Units, Holder shall not cause or permit any Transfer (as defined below) of any of the Company Shares or Company Units to be effected without Parent’s prior written consent to such Transfer and unless each Person to which any of such Company Shares or Company Units, or any interest in any of such Company Shares or Company Units, is or may be Transferred shall have: (a) executed a counterpart of this Agreement and (b) agreed in writing to hold such Company Shares or Company Units (or interest in such Company Shares or Company Units) subject to all of the terms and provisions of this Agreement; provided, however, that Holder shall be entitled to Transfer Company Units (or any interest in such Company Units) to an immediate family member (or trust for the benefit of an immediate family member) or an Affiliate of such Holder if such family member, trust or Affiliate shall have (1) executed a counterpart of this Agreement and (2) agreed in writing to hold such Company Units (or interest in such Company Units) subject to all of the terms and provisions of this Agreement. A Person shall be deemed to have effected a “Transfer”of a security if such person directly or indirectly: (i) sells, pledges, encumbers, grants an option with respect to, transfers or disposes of such security or any interest in such security; or (ii) enters into an agreement or commitment providing for the sale of, pledge of, encumbrance of, grant of an option with respect to, transfer of or disposition of such security or any interest therein.
(b) Transfer of Voting Rights. Holder agrees that, during the period from the date of this Agreement through the Expiration Date, Holder shall not deposit (or permit the deposit of) any Company Shares or Company Units in a voting trust or grant any proxy or enter into any voting agreement or similar agreement in contravention of the obligations of Holder under this Agreement with respect to any of the Company Shares and Company Units.
Section 1.4. No Inconsistent Actions by Holder. While this Agreement is in effect, Holder shall not revoke or rescind, or purport to revoke or rescind, the proxies granted hereby or take any action inconsistent with the provisions of this Agreement.
Section 1.5. Additional Documents. Holder (in its capacity as such) hereby covenants and agrees to execute and deliver any additional documents necessary or desirable, in the reasonable opinion of Parent, to carry out the intent of this Agreement.
Section 1.6. No Solicitation. (a) Holder shall not, and shall use its reasonable best efforts to cause its Affiliates or Representatives not to, directly or indirectly (i) solicit, initiate, encourage or knowingly take any other action to facilitate (including by the furnishing of non-public information) the submission of any inquiry, proposal or offer from any Person (other than Parent, Merger Sub or their Affiliates) relating to, or that could reasonably be expected to lead to, any Takeover Proposal, (ii) agree to, approve or recommend any Takeover Proposal or enter into any agreement with respect to any Takeover Proposal or (iii) enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any Person any non-public information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Takeover Proposal; provided, however, that the foregoing does not restrict any Holder that is a member of the Company Board or an officer of the Company from taking any actions in such capacity to the extent permitted by the Merger Agreement.
3
(b) In addition to the obligations of Holder set forth in paragraph (a) of this Section 1.6, Holder shall notify Parent promptly (but in any event within two business days) after receipt or occurrence of (i) any Takeover Proposal, (ii) any request for information with respect to any Takeover Proposal, (iii) any inquiry, proposal, discussions or negotiation with respect to any Takeover Proposal and (iv) the material terms and conditions of any such Takeover Proposal, request for information, inquiry, proposal, discussion or negotiation and the identity of the Person making any such Takeover Proposal, request for information, inquiry or proposal or with whom discussions or negotiations are taking place. In the event Holder shall receive or become aware of any Takeover Proposal subsequent to the date hereof, Holder shall keep Parent informed in all material respects of the status and details (including amendments or proposed amendments) of any such inquiry, request or Takeover Proposal.
Article II.
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations And Warranties Of Holder. Holder hereby represents and warrants to the Parent Entities as follows:
(a) Due Organization, Authorization, etc. Holder has all requisite legal capacity, power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Holder. This Agreement has been duly executed and delivered by or on behalf of Holder and, assuming its due authorization, execution and delivery by the Parent Entities, constitutes a legal, valid and binding obligation of Holder, enforceable against Holder in accordance with its terms.
(b) No Conflicts, Required Filings and Consents.
(i) The execution and delivery of this Agreement by Holder does not, and the performance of this Agreement by Holder will not, (i) conflict with or violate any judgment, order, decree, statute, Law, ordinance, rule or regulation applicable to Holder or by which Holder or any of Holder’s assets or properties is bound or affected or (ii) violate or conflict with any Contract to which Holder is a party or by which any of its assets or properties is bound.
(ii) The execution and delivery of this Agreement by Holder does not, and the performance of this Agreement by Holder will not, require any consent, approval, order or authorization of, or registration, declaration or filing with, or permit from, any Governmental Entity.
4
(iii) Except for this Agreement, there are no voting trusts or other agreements or understandings, including, without limitation, any proxies, in effect governing the voting of the Company Shares or the Company Units.
(c) Title to Company Shares and Company Units. Holder is the beneficial owner of the Company Common Shares and the Company Common Units set forth on the Holder’s signature page hereto and holds sole and full voting rights with respect thereto other than as set forth in Sections 1.1 and 1.2 hereof. On the date hereof, Holder does not beneficially own any other Company Common Shares or Company Common Units (or any other securities or interests in the Company or Company L.P. other than pursuant to existing stock options granted under Company Incentive Plans). No other Person has any voting rights with respect to the Company Common Shares or the Company Units. In addition, the Company Common Shares and the Company Common Units held by Holder are free and clear of any Encumbrances that would adversely affect the ability of Holder to carry out the terms of this Agreement.
(d) Reliance on Information. Holder understands and acknowledges that the Parent Entities are entering into the Merger Agreement in reliance upon the execution and delivery of this Agreement by Holder.
Section 2.2. Representations And Warranties Of Parent and Parent L.P. Parent and Parent L.P. hereby jointly and severally represent and warrant to Holder that: (i) each of Parent and Parent L.P. has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; (ii) the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of each of Parent and Parent L.P.; and (iii) this Agreement has been duly executed and delivered by or on behalf of each of Parent and Parent L.P. and, assuming its due authorization, execution and delivery by Holder, constitutes a legal, valid and binding obligation of each of each of Parent and Parent L.P., enforceable against each of Parent and Parent L.P. in accordance with its terms.
Article III.
MISCELLANEOUS
Section 3.1. Expenses. Except as otherwise provided herein, all costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses.
Section 3.2. Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or by facsimile, upon confirmation of receipt, (b) on the first business day following the date of dispatch if delivered by a recognized next-day courier service, or (c) on the fifth business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
5
(i) if to the Parent Entities to:
Brandywine Realty Trust
401 Plymouth Road
Plymouth Meeting, PA 19462
Attn: General Counsel
Facsimile: (610) 832-4928
with a copy to:
Pepper Hamilton LLP
3000 Two Logan Square
Philadelphia, PA 19103
Attention: Michael H. Friedman, Esq.
Facsimile: (215) 981-4750
(ii) if to Holder to:
Prentiss Properties Trust
3890 West Northwest Highway
Suite 400,
Dallas, Texas 75220
Attention: General Counsel
Facsimile: (214)358-6443
with a copy to:
Akin Gump Strauss Hauer & Feld LLP
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
Attention: Michael E. Dillard, P.C.
Fax No.: (214) 969-4343
Section 3.3. Incorporation of Other Provisions. Sections 9.04, 9.05, 9.06, 9.08 and 9.10 of the Merger Agreement are hereby incorporated by reference and made a part of this Agreement, mutatis mutandis, as if restated in full herein and without regard to whether the Merger Agreement remains in effect.
Section 3.4. Termination. Unless terminated earlier upon the written agreement of each of the parties hereto, this Agreement and the proxies provided herein shall terminate (the “Expiration Date”) and be of no further force and effect, automatically and without any required action of the parties hereto, upon the earlier to occur of (i) the Effective Time or (ii) such date and time as the Merger Agreement shall have been validly terminated pursuant to Section 8.01 thereof; provided that no such termination shall relieve any party of liability for a breach hereof prior to termination. Notwithstanding the foregoing, Section 3.1 hereof shall survive the Expiration Date in accordance with its terms.
6
Section 3.5. Amendment. This Agreement may not be amended, modified or rescinded except by an instrument in writing signed by each of the parties hereto.
Section 3.6. Capacity. No Holder entering into this Agreement who is or becomes during the term hereof a trustee or officer of the Company makes any agreement or understanding herein in his capacity as a trustee or officer. Holders signs solely in his capacity as the beneficial owner of his Company Shares and Company Units.
Section 3.7. Entire Agreement. This Agreement, together with the documents expressly referred to herein, constitutes the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.
Section 3.8. Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
[Signature Pages Follow]
7
IN WITNESS WHEREOF, Parent and Parent L.P. have caused this Agreement to be executed by their respective officers thereunto duly authorized and Holder has caused this Agreement to be duly executed by an authorized signatory, all as of the date first written above.
| Brandywine Realty Trust | |
| By: /s/ Gerard H. Sweeney | |
| Name: Gerard H. Sweeney | |
| Title: President and Chief Executive Officer | |
| Brandywine Operating Partnership, L.P. | |
| Brandywine Realty Trust, | |
| its general partner | |
| By: /s/ Gerard H. Sweeney | |
| Name: Gerard H. Sweeney | |
| Title: President and Chief Executive Officer |
| HOLDER | |
| By: /s/ Thomas F. August | |
| Name: Thomas F. August | |
| Dated: __________, 2005 | Print Name of Holder: |
| Address of Holder: | |
| fax: __________ | |
| Company Shares beneficially owned: | |
| Company Common Shares_________________ | |
| Company Common Shares | |
| issuable upon exercise of outstanding options_____ | |
| Company Units beneficially owned: | |
| Company Common Units_______________ |
EXECUTION COPY
MASTER AGREEMENT
Master Agreement, dated as of October 3, 2005 (this “Agreement”), by and between Brandywine Operating Partnership, L.P., a Delaware limited partnership (“Brandywine”), and The Prudential Insurance Company of America, a New Jersey corporation (“Prudential”).
Background
On the date hereof, Brandywine, Brandywine Realty Trust, a Maryland real estate investment trust (“Parent”), Brandywine Cognac I, LLC, a Maryland limited liability company (“Merger Sub”), Brandywine Cognac II, LLC, a Delaware limited liability company (“L.P. Merger Sub”), Prentiss Properties Trust, a Maryland real estate investment trust (the “Company”), and Prentiss Properties Acquisition Partners, L.P., a Delaware limited partnership (“Company L.P.”), have executed and delivered an Agreement and Plan of Merger (the “Merger Agreement”). Terms used herein as defined terms but not defined herein have the meanings assigned to them in the Merger Agreement.
On the date hereof, Prudential, the Company and Company L.P. have executed and delivered the Prudential Asset Purchase Agreement attached hereto as Exhibit A (the “Prudential Asset Purchase Agreement”).
Brandywine and Prudential desire to enter into this agreement to, among other things, set forth the terms under which Prudential will acquire the Specified Assets (x) from Company L.P. or one or more Company Subsidiaries pursuant to the Prudential Asset Purchase Agreement on the business day prior to the Closing Date as more particularly provided herein and in the Merger Agreement or (y) from Merger Sub pursuant to the Alternative Asset Purchase Agreement (as defined herein) immediately following the OP Effective Time as more particularly provided herein and in the Merger Agreement. The terms “Specified Assets” and “Joint Venture Owned Property” shall have the meanings given to them in the Prudential Asset Purchase Agreement.
NOW, THEREFORE, intending to be legally bound, the parties agree as follows:
1. Acquisition of Specified Assets.
a. In the event that Prudential is obligated to consummate the Prudential Asset Purchase Agreement pursuant to Article X of the Merger Agreement, then Prudential agrees to perform or cause to be performed all of its and the Transferees’ (defined below) obligations thereunder.
b. In the event that the Closing is scheduled to occur under the Merger Agreement and Prudential, Company L.P. and Prentiss Properties Real Estate Fund I, L.P. are not required to consummate the transactions described in the Prudential Asset Purchase Agreement pursuant to Article X of the Merger Agreement, then (1) Prudential shall cause the Transferees to make a capital contribution to Merger Sub in immediately available funds in the aggregate amount of the Specified Assets Purchase Price by noon Eastern Time on the Closing Date, (2) Brandywine and Prudential shall enter into an asset purchase agreement, substantially in the form attached hereto as Exhibit B (the “Alternative Asset Purchase Agreement”), and (3) simultaneously with the Closing, Brandywine will cause the Specified Assets to be transferred and conveyed to Prudential or the Transferees in exchange for the transfer to Company L.P. of the interest of Prudential and the Transferees in Merger Sub. The term “Specified Assets Purchase Price” means $747,650,417, subject to adjustment as provided herein and less the outstanding balance of any indebtedness on any of the Specified Assets (including the Joint Venture Owned Property) that is not repaid in full on or before the Closing date.
1
c. Prudential shall pay all state and local transfer and similar taxes and fees (the “Transfer Taxes”) associated with the transfer of the Specified Assets pursuant to the Merger Agreement, the Prudential Purchase Agreement, the Alternative Asset Purchase Agreement and this Agreement, as applicable; provided, however, that in the event that Prudential and/or a Transferee acquires the Specified Assets pursuant to Paragraph 1.b and the Transfer Taxes associated therewith are higher than they would have been if Prudential had acquired the Specified Assets pursuant to the Prudential Asset Purchase Agreement, then Brandywine shall pay Prudential at Closing the amount of the excess.
d. Brandywine acknowledges that Prudential shall have the right to assign all or any portion of the rights and obligations of Prudential under this Agreement to one (1) or more entities designated by it (each, a “Transferee”). No such assignment shall release Prudential from its obligations under this Agreement.
e. Without limiting the terms of Section 16, Prudential, on behalf of each Transferee, agrees that neither Brandywine nor any Affiliate of Brandywine shall have any liability to Prudential or to any Transferee for any of the representations, warranties or covenants of the Company or Company L.P. contained in the Merger Agreement. However, Brandywine agrees, if requested by Prudential and at Prudential’s cost and expense, to enforce Brandywine’s rights under the Merger Agreement with respect to any misrepresentations or breaches of covenants that have resulted in loss, cost or expense to Prudential and to cooperate with Prudential in all reasonable respects with respect to any such enforcement.
2. Management and Leasing Agreement. On the Final Condition Satisfaction Date (in the event that Prudential and/or a transferee acquires the Specified Assets pursuant to Paragraph 1(a)) and otherwise on the Closing Date, each Transferee and BTRS, Inc., an Affiliate of Brandywine, shall execute and deliver a Leasing and Management Agreement in substantially the form attached hereto as Exhibit C and Brandywine shall cause the existing property management agreements for the Specified Assets to be terminated.
3. Prudential Payments.
a. At the REIT Effective Time, Prudential agrees to pay to Brandywine, or its assignee, One Million Dollars ($1,000,000) in immediately available funds to be used to pay a portion of the fees owing by Brandywine to J.P. Morgan Securities Inc. in connection with the transactions contemplated by the Merger Agreement.
b. At the REIT Effective Time, Prudential agrees to pay to Brandywine Four Million Dollars ($4,000,000) in immediately available funds on account of severance costs that Brandywine will incur in connection with the transactions contemplated by the Merger Agreement.
2
4. Authority Under Merger Agreement.
a. None of Brandywine, Parent, Merger Sub, L.P. Merger Sub or any Affiliate of any of them (collectively, the “BDN Parties”) shall amend the Merger Agreement in any way without in each instance obtaining the prior written consent of Prudential, which consent shall not be unreasonably withheld or delayed.
b. None of the BDN Parties shall grant or withhold any consent or approval under or in connection with the Merger Agreement, or authorize, commit to or agree to any matter in connection with the Merger Agreement, without in each instance obtaining the prior written consent of Prudential, which consent shall not be unreasonably withheld or delayed. Without limiting the foregoing, the terms of this Paragraph 4.b shall apply to (i) any changes in the structure of the transactions contemplated by the Merger Agreement requested pursuant to Section 1.10 of the Merger Agreement and (ii) any matters for which consent of Parent is required under Section 5.01 of the Merger Agreement.
c. None of the BDN Parties shall waive any of its conditions to Closing without in each instance obtaining the prior written consent of Prudential, which consent shall not be unreasonably withheld or delayed.
d. No BDN Party shall exercise any right or remedy under the Merger Agreement, including, without limitation, any termination or extension right, without in each instance obtaining the prior written consent of Prudential, which consent shall not be unreasonably withheld or delayed.
e. In any instance where the consent or approval of Prudential is requested under this Agreement, Prudential will use commercially reasonable efforts to respond to Brandywine within two (2) business days after Brandywine’s request for consent or approval has been submitted to Prudential.
5. Property Diligence and Sharing of Remediation Expenses.
a. Each of Brandywine and Prudential will have until October 20, 2005 (the “Due Diligence Period”) to conduct, at its sole cost and expense (subject to the other terms of this Agreement) diligence on the Company Properties allocated to it (i.e., the Specified Assets, in the case of Prudential, and the other Company Properties, in the case of Brandywine). For purposes of this Paragraph 5, the diligence of Brandywine and Prudential will be limited to title, survey, zoning, permitting and land use, structural and environmental diligence (i.e., leases, rent rolls and tenant credit would not be subject to diligence for purposes of this Paragraph 5) (such permitted due diligence matters, collectively, the “Permitted Due Diligence”). Any such diligence or activities shall be conducted in the manner permitted by Section 6.02 of the Merger Agreement.
b. Each of Brandywine and Prudential, on behalf of the Transferees, agrees to fund a portion of the Eligible Remediation Costs (defined below) for the Company Properties to be acquired by the other. The aggregate maximum amount that Brandywine shall be obligated to pay to Prudential on account of Eligible Remediation Costs (net of any payments made by Prudential to Brandywine on account of Eligible Remediation Costs) is $18,750,000. The aggregate maximum amount that Prudential shall be obligated to pay to Brandywine on account of Eligible Remediation Costs (net of any payments made by Brandywine to Prudential on account of Eligible Remediation Costs) is $6,250,000.
3
c. Neither Brandywine nor Prudential shall have any obligation to make a payment to the other on account of Eligible Remediation Costs for a Company Property to be acquired by the other unless the aggregate amount of Eligible Remediation Costs for such Company Property exceeds ten percent (10%) of the Allocated Value (defined below) of such Company Property. If the aggregate amount of Eligible Remediation Costs for such Company Property exceeds ten percent (10%) of the Allocated Value of such Company Property, then (i) if such Company Property is to be acquired by Brandywine, Prudential will pay to Brandywine an amount equal to the Prudential Percentage multiplied by the amount of such excess over ten percent (10%) of the Allocated Value (subject to the above aggregate $6,250,000 cap) and (ii) if such Company Property is to be acquired by a Transferee, Brandywine will pay to Prudential an amount equal to the Brandywine Percentage (as defined below) multiplied by the amount of such excess over ten percent (10%) of the Allocated Value (subject to the above aggregate $18,750,000 cap). The “Allocated Value” of a Company Property is the dollar amount allocated to such Company Property as set forth on Exhibit D hereto.
d. Notwithstanding the foregoing, if the aggregate amount of Eligible Remediation Costs for a Company Property to be acquired by a Transferee exceeds ten percent (10%) of the Allocated Value of such Company Property, then, if such Company Property is not an Excluded Property (defined below), Prudential shall have the right, on behalf of the applicable Transferee, in Prudential’s sole and absolute discretion, to elect either (i) to drop such Company Property (i.e., not acquire such Company Property), or (ii) to cause the applicable Transferee to acquire a Substitute Property (defined below) in lieu of such Company Property. If Prudential elects to drop a Company Property (such Company Property, a “Dropped Property”), it shall receive a credit against the Specified Assets Purchase Price in an amount equal to (x) the Allocated Value for such Dropped Property minus (y) the Prudential Percentage of all of the Eligible Remediation Costs for such Dropped Property. Any such election must be made by Prudential within fifteen (15) days following expiration of the Due Diligence Period. In no event may Prudential elect to drop or substitute Company Properties that have an aggregate Allocated Value in excess of $150,000,000 (the “$150,000,000 Limit”). In addition, in no event may Prudential elect to drop or substitute a Company Property if Brandywine elects to pay to Prudential the amount by which Eligible Remediation Costs for such Company Property exceed ten percent (10%) of the Allocated Value of such Company Property. Any such election must be made by Brandywine no later than the later of (x) the fifteenth (15th) day after expiration of the fifteen (15) day period referred to above in this Paragraph 5.d and (y) the fifteenth (15th) day after agreement of Brandywine and Prudential as to, or other determination as provided in Paragraph 6 below of, the Eligible Remediation Costs of the applicable Company Property, and all such Eligible Remediation Costs shall be paid to Prudential on the Closing Date. Each of the Company Properties identified on Exhibit E-1 is an “Excluded Property.” In addition to the right of Prudential to elect to drop or cause a substitution of a Company Property that is not an Excluded Property, as provided in this Paragraph 5.d, Prudential may elect to drop any “development property” identified on Exhibit E-2 if Prudential, in its reasonable discretion, is not satisfied with the development potential or the status of land use permits and approvals for such development property. In order to exercise this right with respect to a development property, Prudential must make such an election on or before 5:00 p.m. on October 20, 2005, and in the event that Prudential makes such an election, it will receive a credit against the Specified Assets Purchase Price in an amount equal to the Allocated Value for such dropped development property or properties, and the Allocated Value attributable to such dropped development property or properties shall not count against the $150,000,000 Limit.
4
e. Within fifteen (15) days after the date of this Agreement, Brandywine and Prudential will act in good faith to identify a group of Company Properties which are eligible for exchange in accordance with, and subject to, Section 5(d)(ii) each, a “Substitute Property”); provided that in the event that Prudential, during the thirty (30)-day period (the “Substitute Property Due Diligence Period”) that commences at the expiration of the foregoing fifteen day period, identifies, through Permitted Due Diligence, Eligible Remediation Costs in respect of any of such Substitute Properties in an amount that exceeds, in respect of any given Substitute Property, ten percent (10%) of the Allocated Value of such Substitute Property, then Prudential may remove such Substitute Property from the pool of Substitute Properties. Prudential may exercise its right to acquire a Substitute Property in lieu of a Company Property only if the Company Property has an Allocated Value that is within 10% of the Allocated Value of the Substitute Property. Any such election by Prudential must be made by Prudential within fifteen (15) days following expiration of the Substitute Due Diligence Period, and, for clarity, will be subject to the right of Brandywine to override such election, as provided in Paragraph 5.d, if Brandywine elects to pay to Prudential the amount by which Eligible Remediation Costs for such Company Property exceeds ten percent (10%) of the Allocated Value of such Company Property. Any such election must be made by Brandywine no later than the later of (x) the fifteenth (15th) day after expiration of the fifteen (15) day period referred to in the immediately preceding sentence and (y) the fifteenth (15th) day after agreement of Brandywine and Prudential as to, or other determination as provided in Paragraph 6 below of, the Eligible Remediation Costs of the applicable Company Property. If all of the Substitute Properties exchanged pursuant to this Section 5.e have a lower Allocated Value in the aggregate than the Company Properties for which they were exchanged, the Contribution Amount will be decreased by an amount equal to the difference between the aggregate Allocated Values of such Company Properties and the Substitute Properties. If all of Substitute Properties exchanged pursuant to this Section 5.e have a higher Allocated Value in the aggregate than the Company Properties for which they were exchanged, the Contribution Amount will be increased by an amount equal to the difference between the aggregate Allocated Values of such Company Properties and the Substitute Properties.
f. If either Brandywine or Prudential identifies costs that it believes qualify as Eligible Remediation Costs, Brandywine or Prudential, as applicable, will provide to the other, no later than five (5) days following expiration of the Due Diligence Period, a reasonably detailed description of the cost and reason why Brandywine or Prudential, as applicable, believes the cost so qualifies. The parties will cooperate reasonably and in good faith to resolve any disagreements as to the amount and qualification of any such costs, and any disagreements that are not resolved by the parties by the fifteenth (15th) day following expiration of the Due Diligence Period shall be determined in accordance with Paragraph 6 below.
g. A cost will constitute an “Eligible Remediation Cost” only if (i) the cost relates to removal of, or diminution in the value of a Company Property on account of, an Encumbrance, any other title exception, or any other matter shown on a survey, including, without limitation, any encroachment, in each case that would have a material adverse effect on either (x) the value of the applicable Company Property or (y) its ability to be used for its intended purposes, or (ii) the cost relates to a structural problem at a Company Property that is not in the nature of preventative maintenance and that an owner of a property of a comparable quality would, in the exercise of reasonable and prudent judgment, repair within one year following the date of this Agreement, or (iii) the cost would reasonably be incurred to remediate an environmental condition in, on or about a Company Property that an institutional lender would reasonably require to be remediated, including, without limitation, any such condition posing a threat to the well-being, value or safety of any person or property, or (iv) the cost relates to the curing of any zoning or land use violation affecting a Company Property, or to obtaining any permit, license or approval from a governmental agency relating to the land use, construction or occupancy of a Company Property, which, in each case, if not cured or obtained, would have an adverse effect on (x) the value of the applicable Company Property or (y) its ability to be used for its intended purposes.
5
h. Brandywine and Prudential, on behalf of the Transferees, shall each defend, indemnify, and hold the other harmless on account of any claims, actions, losses, liabilities, damages, costs and expenses, whether arising out of injury or death to persons or damage to any real or personal property, including any property of tenants at Company Properties or otherwise and including but not limited to, reasonable attorneys’ fees and costs incurred, suffered by, or claimed against the other caused by the entry by Brandywine or Prudential (as applicable) or any of its respective representatives upon a Company Property or in carrying out any of its due diligence activities.
6. The parties shall attempt in good faith to resolve any dispute over the amount or qualification of a cost as an Eligible Remediation Cost (a “Dispute”) within ten (10) days from the date that one party notifies the other in writing of the Dispute. In the event that the parties are unable to resolve such Dispute within this ten day period, either party may, within ten (10) days of the expiration of the initial ten (10) day period, notify the other party that the Dispute shall be finally settled under the Commercial Arbitration Rules of the AAA (or any similar successor rules thereto) as are in force on the date when a notice of arbitration is received and such party may initiate such process. The AAA shall propose arbitrator(s) that are, to the extent reasonably possible, experts in the subject matter of the Dispute. The number of arbitrators shall be three (3) unless Brandywine and Prudential agree to one (1) within five (5) days within the receipt of the written notice of the Dispute. The AAA shall provide, upon a party’s request, a list of ten (10) proposed arbitrators, and each of Brandywine and Prudential shall pick one (1) arbitrator from such list within five (5) days within the receipt of such list and the arbitrators so selected shall pick a third arbitrator from such list within five (5) days of the selection of these two arbitrators. The arbitration proceedings shall be conducted in New York, New York. For clarity, the pendency of an arbitration proceeding shall not limit the obligations of Brandywine or Prudential to proceed with the consummation of the transactions provided for in this Agreement or in the Prudential Asset Purchase Agreement; provided, however, that Prudential at its election shall not be obligated to take or cause a Transferee to take title to any Company Property that is subject to a Dispute.
7. Material Adverse Change Following Due Diligence Period. If, following the expiration of the Due Diligence Period and prior to the Final Notice Date (defined below), a change occurs to a Specified Asset and such post-Due Diligence Period change relates to a subject matter of the Permitted Due Diligence and the post-Due Diligence change (if it had occurred prior to the expiration of the Due Diligence Period) would have given rise to an Eligible Remediation Cost, then the terms of Paragraph 5 of this Agreement shall apply just as if such change had occurred and been known and objected to by Prudential during the Due Diligence Period in accordance with the terms of this Agreement; provided that any Eligible Remediation Cost attributable to such post-Due Diligence Period change shall be subject to a new ten percent (10%) threshold that is separate and apart from (and not aggregated with) the ten percent (10%) threshold applicable to Eligible Remediation Costs identified in the Due Diligence Period; and provided further that the right of Prudential in Paragraph 5.d and this Paragraph 7 to elect to drop a Specified Asset or substitute a Company Property, on and subject to the terms and conditions set forth therein and herein, may not be exercised after the Final Notice Date. The “Final Notice Date” is the fifteenth (15th) day prior to the scheduled date of the Parent Shareholders Meeting. For clarity, any Specified Asset or Company Properties that Prudential may elect to drop or substitute, as the case may be, under this paragraph 7 or under Paragraph 5.d shall be subject to the single (aggregate) $150,000,000 Limit except as otherwise expressly provided with respect to dropped development properties and the Membership Interest (defined below).
6
8. Expenses and Expense Recoveries; Other Receipts Under Merger Agreement.
a. The parties agree to be solely responsible for their respective legal and other expenses attributable to the negotiation and preparation of this Agreement and the Prudential Asset Purchase Agreement.
b. In the event that the Merger Agreement is terminated and Brandywine receives payment of the Termination Fee or the Alternate Fee, then the Termination Fee or the Alternate Fee received by Brandywine, minus any portion of the Termination Fee or the Alternate Fee that Brandywine is obligated to pay to Parent Financial Advisor, shall be split between Brandywine and Prudential as follows: Brandywine shall be entitled to the Brandywine Percentage (defined below) and Prudential shall be entitled to the Prudential Percentage (defined below). The “Brandywine Percentage” shall equal (i) the aggregate of all of the Allocated Values for the Company Properties, minus the aggregate of all of the Allocated Values of all of the Specified Assets (excluding any Dropped Properties), divided by (ii) the aggregate of all of the Allocated Values for the Company Properties. The Prudential Percentage shall equal 1.0 minus the Brandywine Percentage (the “Prudential Percentage”). If Brandywine is entitled to be reimbursed for its Expenses pursuant to the terms of the Merger Agreement, any amount of such Expenses that remains after Brandywine pays any and all required fees to Parent Financial Advisor shall be allocated between Brandywine and Prudential in accordance with the Prudential Percentage and Brandywine Percentage; provided, however, that neither Brandywine nor Prudential shall be entitled to a portion of the Expenses that exceeds such party’s out of pocket expenses.
c. Brandywine hereby agrees to indemnify, defend and hold Prudential and the Transferees harmless from and against any and all loss, liability, cost, claim, damage and expense (each, a “Loss”), including, without limitation, reasonable attorney’s fees, suffered or incurred by Prudential or any Transferee at any time in connection with the existence and terms of any Tax Protection Arrangements, but this agreement (except as provided in Paragraph 8(e)) shall not be construed to apply to any tax matters that arise under the joint venture asset included in the Specified Assets known as “Prentiss/Collins del Mar Heights, LLC”. This provision 9.c shall survive Closing and not be merged therein.
7
d. Brandywine hereby agrees to indemnify, defend and hold Prudential and the Transferees harmless from and against any and all Loss suffered or incurred by Prudential or any Transferee on account of its having held in interest in Merger Sub or any other subsidiary or Affiliate of Brandywine. This provision 9.d shall survive Closing and not be merged therein.
e. Brandywine hereby agrees to indemnify, defend and hold Prudential and the Transferees harmless from and against any and all Loss suffered or incurred by Prudential or any Transferee pursuant to Section 8.6 of the Operating Agreement of Prentiss/Collins Del Mar Heights, LLC. and this agreement shall survive Closing and not be merged therein.
f. Brandywine hereby agrees to indemnify and hold harmless Prudential and the Transferees from and against all liability and cost (including reasonable attorneys’ fees) incurred by reason of claims against Prudential and the Transferees relating to Space Leases or the proceeds under Space Leases arising from or relating to the period prior to the date of Closing in respect of Company Properties acquired by Prudential or a Transferee. Prudential hereby agrees to indemnify and hold harmless Brandywine and Company L.P. from and against all liability and cost (including reasonable attorneys’ fees) incurred by reason of claims against Brandywine or Company L.P. relating to the Space Leases or the proceeds under Space Leases arising from or relating to the period from and after the date of Closing in respect of Company Properties acquired by Prudential or a Transferee. The agreements in this Paragraph 8(f) shall survive Closing and not be merged therein.
9. Company Property Substitutions. In the event Prudential elects to acquire a Substitute Property pursuant to Paragraphs 5 and 7 above, such Substitute Property shall become a Specified Asset under the Merger Agreement, the Prudential Asset Purchase Agreement, the Alternative Asset Purchase Agreement and this Agreement for all purposes thereunder and hereunder.
10. In the event that Collins Corporate Center, LLC does not consent in writing, prior to the fifth (5th) day prior to the scheduled Closing Date, to the acquisition by Prudential or a Transferee of the membership interest (the “Membership Interest”) of Company L.P. in the limited liability company known as “Prentiss/Collins Del Mar Heights, LLC (the “Del Mar LLC”), and acknowledge the right of Prudential or such Transferee to hold the position of “Managing Member” under the Operating Agreement dated as of December 17, 2001 of Del Mar LLC (the “Del Mar Operating Agreement”), then Prudential may, by 5:00 p.m. on the day prior to the Final Condition Satisfaction Date or Closing Date, as applicable, elect to drop its acquisition of the Membership Interest, in which case neither Prudential nor any Transferee shall acquire the Membership Interest and Prudential will receive a credit against the Specified Assets Purchase Price in an amount equal to the Allocated Value for the Membership Interest. The Allocated Value attributable to such dropped Membership Interest shall not count against the $150,000,000 Limit.
11. Representations and Warranties of Brandywine. Brandywine hereby represents and warrants to Prudential and the Transferees as of the date hereof and as of Closing as follows:
8
a. Brandywine is a limited partnership duly formed and validly existing under the laws of the State of Delaware, has full limited partnership power and authority to own its properties and to carry on its business as now conducted, and is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of the business it is conducting, or the ownership, operation or leasing of its properties or the management of properties for others makes such qualification or licensing necessary, except where the failure to be so qualified or licensed or in good standing would not reasonably be expected, individually or in the aggregate, to have a material adverse effect.
b. Brandywine has full power and authority to enter into this Agreement and to consummate the transactions contemplated herein. This Agreement has been duly executed and delivered by Brandywine and is a valid and legally binding obligation of Brandywine, enforceable against Brandywine in accordance with its terms.
c. Neither the execution, delivery and performance of this Agreement, nor the consummation of the transactions contemplated herein, will constitute or cause a breach, default or violation of (i) the charter documents or bylaws of Brandywine or (ii) any contract to which Brandywine is a party.
d. Brandywine has not made any agreement or taken any action which may cause anyone claiming through Brandywine to become entitled to a commission as a result of the transactions contemplated pursuant to this Agreement (except for claims which would be made solely against Brandywine).
e. Set forth in Section 3.7(b) of the Company Disclosure Letter is a list of all indebtedness affecting any Fee Owned Property (as defined in the Prudential Asset Purchase Agreement) or the Joint Venture Owned Property (as defined in the Prudential Asset Purchase Agreement), in each case that will not be repaid in full by the Company, the applicable Property Owner or the owner of the Joint Venture Owned Property, as the case may be, at its sole cost and expense on or before the Specified Assets Closing Date (as defined in the Prudential Asset Purchase Agreement) (collectively, the “Outstanding Indebtedness”). The Outstanding Indebtedness is free from default. Except for the Outstanding Indebtedness listed the Company Disclosure Letter and the schedules attached thereto, (the “Consent Required Outstanding Indebtedeness”), the Outstanding Indebtedness may be assumed by each applicable Transferee without the consent of any party thereto and without payment of any fee or other amount to the holder thereof or any other party.
f. None of Company L.P. or any of its Affiliates has transferred or permitted the transfer of any interest in a Fee Owned Property or has granted any person or entity the right or option to acquire any interest in any Fee Owned Property other than as set forth the Company Disclosure Letter and the schedules attached thereto. None of Company L.P. or any of its Affiliates has created, voluntarily or otherwise, or permitted the creation, voluntarily or otherwise, of any lien or encumbrance on any Fee Owned Property or the Joint Venture Owned Property, other than the Permitted Encumbrances (as defined in the Merger Agreement) and as set forth in the Company Disclosure Letter and the schedules attached thereto.
g. None of Company L.P. or any of its Affiliates has transferred any interest in, other otherwise encumbered or permitted the encumbrance of, all or any portion of the Joint Venture Interest, and the Joint Venture Interest is owned by the Joint Venture Interest Owner free and clear of any right, claim, warrant, option, lien or other interest or encumbrance of any nature whatsoever except as set forth in the Operating Agreement dated as of December 17, 2001 (the “Del Mar Operating Agreement”) between Company L.P. and Collins Corporate Center, LLC.
9
h. There are no leasing or similar commissions due in connection with any Space Lease affecting any of the Specified Assets, other than such market-rate commissions as may become due after the date hereof for expansions and renewals pursuant to written agreements provided to Prudential on or before the date hereof.
i. Company L.P. has made available to Prudential all material contracts affecting any Fee Owned Property or the Joint Venture Owned Property or Joint Venture Interest (as defined in the Prudential Asset Purchase Agreement). Company L.P. has delivered to Prudential a true, complete and correct copy of the Del Mar Operating Agreement.
j. The Release and Settlement Agreement dated September 12, 1996 among Shell Oil Company, Cadillac Fairview/California, Inc., GP Holdings, Inc. and The Prentiss/Copley Investment Group has not been modified and is in full force and effect and free of default and constitutes the entire agreement of the parties thereto on the subject covered thereby and Prudential will be a “Successor Party” and not a “Cadillac Party.”
12. Representations and Warranties of Prudential. Prudential hereby represents and warrants to Brandywine as follows (with such representations and warranties applying to any Transferee):
a. Each Transferee is a limited liability company duly formed and validly existing under the laws of the State of Delaware, has full power and authority to own its properties and to carry on its business as now conducted, and is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of the business it is conducting, or the ownership, operation or leasing of its properties or the management of properties for others makes such qualification or licensing necessary, except where the failure to be so qualified or licensed or in good standing would not reasonably be expected, individually or in the aggregate, to have a material adverse effect. Prudential is a corporation duly organized and validly existing under the laws of the State of New Jersey, has full corporate power and authority to own its properties and to carry on its business as now conducted.
b. Each Transferee and Prudential has full power and authority to enter into this Agreement and, if applicable, the Prudential Asset Purchase Agreement and to consummate the transactions contemplated herein and, if applicable, contemplated in the Prudential Asset Purchase Agreement. This Agreement has been duly executed and delivered by Prudential and is a valid and legally binding obligation of Prudential, enforceable against Prudential in accordance with its terms and the Prudential Asset Purchase Agreement, if executed and delivered pursuant to Article X of the Merger Agreement, will be a valid and legally binding obligation of Prudential, enforceable against Prudential in accordance with its terms.
c. Neither the execution, delivery and performance of this Agreement and, if applicable, the Prudential Asset Purchase Agreement, nor the consummation of the transactions contemplated herein or, if applicable, therein, will constitute or cause a breach, default or violation of (i) the charter documents (if applicable) of Prudential or any Transferee or (ii) any contract to which Prudential or any Transferee is a party.
10
d. Prudential has not made any agreement or taken any action which may cause anyone claiming through Prudential to become entitled to a commission as a result of the transactions contemplated pursuant to this Agreement (except for claims which would be made solely against Prudential).
13. Prorations.
a. Ad valorem, personal property and similar taxes (including assessments) for the then current tax period relating to the Specified Assets and, to the extent of the Joint Venture Interest, the Joint Venture Owned Property shall be prorated between the applicable Property Owner or other owner and the applicable Transferee at the Specified Assets Closing as of 11:59 p.m. on the day immediately preceding the Specified Assets Closing Date. If the Specified Assets Closing occurs before the tax rate or assessed valuation for a Specified Asset or the Joint Venture Owned Property, as the case may be, is fixed for the then current tax year, apportionment of taxes and other amounts hereunder shall be made on the basis of the tax rate for the preceding year applied to the latest assessed respective valuation of the applicable Specified Asset or the Joint Venture Owned Property, as applicable, and when the tax rate and assessed valuations are fixed for the tax year in which the Specified Assets Closing occurs, Company L.P. and the applicable Transferee hereby agree to adjust the proration of taxes hereunder and, if necessary, to refund or pay such sums to the other party as shall be necessary to effect such adjustment.
b. All rents and other payments from tenants under the Space Leases affecting the Specified Assets or Company L.P.’s or its Affiliate’s interest in the Joint Venture Owned Property shall be prorated between the applicable Property Owner and the applicable Transferee as of 11:59 p.m. on the day immediately preceding the Specified Assets Closing Date. Each Property Owner shall be entitled to all rents, charges, and other revenue of any kind attributable to any period under the Space Leases affecting its Specified Assets to, but not including, the Specified Assets Closing Date. Each Transferee of a Fee Owned Property shall be entitled to all rents, charges and other revenue of any kind attributable to any period under the Space Leases affecting its Specified Assets on and after the Specified Assets Closing Date. The owner of the Joint Venture Interest and the Transferee thereof shall prorate such rent, charges and other revenue attributable to the Joint Venture Owned Property on a similar basis in accordance with their interests. Rents or other reimbursements due landlord under the Space Leases affecting Specified Assets not collected as of the Specified Assets Closing Date shall not be prorated at the time of the Specified Assets Closing, but each applicable Transferee shall make a good faith effort (which shall not include bringing legal action against a tenant) to collect the same on the applicable Owner’s behalf and to tender the same to Company L.P. upon receipt (which obligation of such Transferee shall survive the Closing and not be merged therein for a period of four (4) months); provided, however, that all rents, escalations and other reimbursements due landlord under the Space Leases affecting its Specified Assets collected by a Transferee on or after the Specified Assets Closing Date, less the reasonable costs of collection, shall first be applied to all amounts due under the Space Leases affecting its Specified Assets at the time of collection (i.e., current rents and sums due such Transferee as the current owner and landlord) with the balance (if any) payable to Company L.P., but only to the extent of amounts delinquent and actually due to Company L.P. The owner of the Joint Venture Interest and the Transferee thereof shall treat rents and other reimbursements due landlord under the Space Leases affecting the Joint Venture Owned Property on a similar basis in accordance with their interests. At the Specified Assets Closing, each applicable Transferee shall receive a credit for any obligations for brokerage commissions or finders’ fees incurred in entering into any Space Leases affecting any of its Specified Assets, or the Joint Venture Owned Property, as the case may be, that was executed on or after the date of this Agreement.
11
c. Operating expenses for the Specified Assets and the Joint Venture Owned Property shall be prorated as of 11:59 p.m. on the day immediately preceding the Specified Assets Closing Date. Each Property Owner shall pay all utility charges and other operating expenses attributable to its Specified Assets to, but not including, the Specified Assets Closing Date, and each Transferee shall pay all utility charges and other operating expenses attributable to its Specified Assets on or after the Specified Assets Closing Date. The Joint Venture Interest Owner and its Transferee shall prorate utility charges and operating expenses attributable to the Joint Venture Owned Property on a similar basis in accordance with their interests. To the extent that the amount of actual consumption of any utility services is not determined prior to the Specified Assets Closing Date, a proration shall be made at the Specified Assets Closing based on the last available reading and post-closing adjustments between each Owner or the Joint Venture Interest Owner and the applicable Transferee and thereafter a final proration shall be made within twenty (20) days following the date that actual consumption for such pre-closing period is determined, which obligation shall survive the Closing and not be merged therein. No Property Owner shall assign to any Transferee any deposits which such Property Owner has with any of the utility services or companies servicing the Specified Assets. Each Transferee shall arrange with such services and companies to have accounts opened in its name beginning at 12:01 a.m. on the Specified Assets Closing Date.
14. Notices and Information under Merger Agreement. Brandywine agrees to provide Prudential promptly with a copy of each notice received from or given to any BDN Party under or pertaining to the Merger Agreement. Brandywine agrees to keep Prudential fully informed as to the status of the transactions contemplated by the Merger Agreement, the status of satisfaction of all conditions to Closing, any Takeover Proposal and all information the BDN Parties obtain with respect to the Specified Assets or the transactions contemplated by the Merger Agreement or this Agreement. Brandywine agrees to consult with Prudential with respect to portions of the Joint Proxy Statement/Prospectus that relate to Prudential or the Specified Assets. Without limiting the foregoing or any other term of this Agreement, Brandywine shall provide Prudential with copies of all Partner Exchange Materials and all other correspondence related to the foregoing and all notices given or received under Sections 6.03(c) or (d) of the Merger Agreement.
15. Public Announcements The parties acknowledge that the BDN Parties will be required to make public disclosures, including filings with the Securities and exchange Commission, in connection with the transactions contemplated by this Agreement. BDN agrees to use good faith and commercially reasonable efforts to afford Prudential an opportunity to review and comment on press releases and public filings that reference Prudential or the transactions contemplated by this Agreement prior to the public disclosure thereof.
16. Default or Failure of Condition Under Merger Agreement. If any BDN Party breaches any term of the Merger Agreement (or fails to perform any obligation of a BDN Party under the Merger Agreement required to be performed prior to Closing, the performance of which is within any BDN Party’s exclusive control, which, for the sake of clarity, does not include the failure to obtain the Required Parent Vote), or if Parent fails to call or hold the Parent Shareholders Meeting in accordance with Section 6.01 of the Merger Agreement and as a result Prudential does not acquire the Specified Assets as contemplated by this Agreement or the Prudential Asset Purchase Agreement, then each BDN Party shall be jointly and severally liable to, and hereby agrees to indemnify, Prudential for all of its actual out-of-pocket costs and expenses incurred in connection with the Merger Agreement, the Prudential Asset Purchase Agreement, this Agreement and the transactions contemplated by the Merger Agreement and this Agreement, plus liquidated damages of $5,000,000. The parties hereto acknowledge and agree that the damages suffered by Prudential as a result of such a breach are difficult to determine and that the above-referenced amount as a result is a reasonable approximation thereof. If Closing does not occur because the Parent does not obtain the Required Parent Vote, then each BDN Party shall be jointly and severally liable to, and hereby agrees to indemnify, Prudential for all of its actual out-of-pocket costs and expenses incurred in connection with the Merger Agreement, the Prudential Asset Purchase Agreement, this Agreement and the transactions contemplated by the Merger Agreement and this Agreement.
12
17. Breach of Representation or Warranty under Merger Agreement. If there exists any breach by Company or Company L.P. of any representation or warranty in the Merger Agreement that pertains to any Specified Asset (other than as to matter(s) that could reasonably have been identified by Prudential in the course of its due diligence activities conducted prior to the Closing Date), then, at any time within six (6) months following the Closing Date and assuming the Closing is consummated, Prudential shall have the right to recover from Brandywine its direct out of pocket expenses resulting from such breach, up to an aggregate recovery of $5,000,000.
18. Loan Guarantees. If any guarantees of the Company or Company L.P. or a Company Subsidiary of any loan that is secured by any of the Specified Assets is not released on the Closing Date or Final Condition Satisfaction Date, as applicable, then Prudential will indemnify the guarantor against any claims that the applicable lender may assert under any such guaranty with respect to any matter first arising after Closing.
19. Notices. All notices, requests and other communications required or permitted to be given under this Agreement shall be in writing and shall be delivered to a party either personally or by sending a copy thereof by first class or express mail, postage prepaid, or by courier services, charges prepaid, or by telecopier (with a copy sent by first class mail), to such party’s address (or to such party’s telecopier number) as set forth below. Any such notice, request or communication shall be deemed to be delivered, given and received for all purposes of this Agreement (i) as of the date so delivered, if delivered personally or by telecopy to the person entitled thereto, (ii) three (3) business days after being deposited in the United States mail, if delivered by first class or express mail, postage prepaid or (iii) one (1) business day after being deposited with a telegraph office or courier service for delivery if notice is sent by telegraph or courier services.
13
If to Brandywine:
401 Plymouth Road
Plymouth Meeting, PA 19462
Attn: Gerard H. Sweeney, President and Chief Executive Officer
Telecopier No.: (610) 832-4919
With a copy to:
401 Plymouth Road
Plymouth Meeting, PA 19462
Attn: Brad A. Molotsky, Senior Vice President and General Counsel
Telecopier No.: (610) 832-4928
and
Pepper Hamilton LLP
3000 Two Logan Square
Philadelphia, PA 19103
Attn: Michael H. Friedman, Esq.
Telecopier No.: (215) 981-4750
If to Prudential:
c/o Prudential Real Estate Investors
8 Campus Drive
Parsippany, NJ 07054
Attn: James P. Walker
(973) 683-1690
Telecopier No.: (973) 683-1752
With a copy to:
c/o Prudential Real Estate Investors
8 Campus Drive
Parsippany, NJ 07054
Attn: Joan Hayden, Esq.
(973) 683-1772
Telecopier No.: (973) 683-1778
and
Goodwin Procter LLP
Exchange Place
Boston, MA 02109
Attn: Minta E. Kay, P.C.
(617) 570-1877
Telecopier No.: (617) 523-1231
14
20. Authorship; Advice of Counsel. Each of the parties has actively participated in the negotiation and drafting of this Agreement, and each has received independent legal advice from its attorney concerning this Agreement. In the event of a dispute regarding this Agreement, the parties will be conclusively deemed to be the joint authors of this Agreement, and no provision of this Agreement will be interpreted against a party by reason of authorship.
21. Prevailing Party Reimbursement. In the event of any dispute between or among the parties arising out of this Agreement resulting in any litigation, the prevailing party in such litigation shall be entitled to recover from the non-prevailing parties all reasonable out-of-pocket costs and expenses in connection with such dispute.
22. Headings. The headings preceding the text of the Paragraphs of this Agreement are inserted solely for convenience of reference and shall not constitute a part of this Agreement or affect its meaning or construction.
23. Governing Law. This Agreement shall be construed in accordance with, and governed in all respects by, the laws of the State of Delaware.
24. Amendments. This Agreement may not be amended or otherwise changed in any respect whatsoever except by a writing signed by Brandywine and Prudential.
25. Entire Agreement. This Agreement contains the entire agreement between the parties concerning the subject matter hereof and supersedes any and all prior or contemporaneous agreements, whether written or oral, concerning the subject matter hereof.
26. Cooperation. The parties hereto agree to cooperate with each other in all reasonable respects with respect to their obligations under this Agreement and, if applicable, under the Prudential Asset Purchase Agreement and consummation of the transactions contemplated thereby and hereby.
27. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.
28. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one instrument.
29. Facsimile. A facsimile copy of an original written signature shall be deemed to have the same effect as an original written signature.
15
IN WITNESS THEREOF, this Agreement has been executed by Brandywine and Prudential as of the day, month and year first above written.
| BRANDYWINE OPERATING PARTNERSHIP, L.P. | |
| By: Brandywine Realty Trust, | |
| its General Partner | |
| By: /s/ Gerard H. Sweeney | |
| Name: Gerard H. Sweeney | |
| Title: President and Chief Executive Officer | |
| THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, | |
| a New Jersey corporation | |
| By: /s/ James P. Walker | |
| Name: James P. Walker | |
| Title: Vice President and Chief Executive Officer |
| Exhibit A: Prudential Asset Purchase Agreement |
| Exhibit B: Form of Alternate Asset Purchase Agreement |
| Exhibit C: Form of Leasing/Management Agreement |
| Exhibit D: Property Allocated Value Schedule |
| Exhibit E-1: Excluded Property Schedule |
| Exhibit E-2: Development Properties |
PRUDENTIAL ASSET PURCHASE AGREEMENT
This PRUDENTIAL ASSET PURCHASE AGREEMENT is entered into as of this 3rd day of October, 2005 among PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P., a Delaware limited partnership (“Company L.P.”), PRENTISS PROPERTIES REAL ESTATE FUND I, L.P., a Delaware limited partnership ("Other Seller" and, collectively with Company L.P., "Seller") and THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation (together with its successors and assigns, “Prudential”).
RECITALS
Reference is made to the Agreement and Plan of Merger dated as of the date hereof by and among Brandywine Realty Trust, Brandywine Operating Partnership, L.P., Brandywine Cognac I, LLC, Brandywine Cognac II, LLC, Prentiss Properties Trust and Company L.P. (as it may be amended, the “Merger Agreement”) and the Master Agreement dated as of the date hereof between Brandywine Operating Partnership, L.P. and Prudential (the “Master Agreement”). This Agreement is referred to in the Merger Agreement as the “Prudential Asset Purchase Agreement” and is being delivered in connection with the Merger Agreement and the Master Agreement, in each case subject to the terms and conditions hereof.
In consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, the parties hereto hereby agree as follows:
Section 1. Capitalized Terms. Capitalized terms used in this Agreement without definition shall have the respective meaning given them in the Merger Agreement.
Section 2. Effectiveness of this Agreement. Notwithstanding anything to the contrary, including, without limitation, the execution and delivery of this Agreement as of the date hereof, this Agreement shall not become effective unless and until the following conditions (the “Effectiveness Conditions”) are satisfied: (i) the Final Condition Satisfaction Date occurs, and (ii) each of Company L.P. and Brandywine Operating Partnership, L.P. delivers to Prudential a certification, in form and substance reasonably satisfactory to Prudential, that confirms that all conditions to such party’s and its affiliates’ obligations to effect the REIT Merger and the OP Merger have been irrevocably satisfied or waived in writing. Upon the occurrence of the Effectiveness Conditions, this Agreement shall become fully effective as if executed and delivered as of such date.
Section 3. Capitalized Terms. Listed on Exhibit A hereto are certain properties (collectively, the “Fee Owned Properties”), which are owned by the entities listed on Exhibit A as the owners thereof (each, a “Property Owner”). Listed on Exhibit B hereto is a property commonly known as High Bluff Ridge located in Del Mar, California (the “Joint Venture Owned Property”) owned by the entity listed thereon as the owner thereof (the “Joint Venture Property Owner”). The Fee Owned Properties and all of the right, title and interest of the Company or its Affiliate (the “Joint Venture Interest Owner”) in the Joint Venture Owned Property (the “Joint Venture Interest”) shall be conveyed to one (1) or more entities designated by Prudential (each such entity, a “Transferee”) in accordance with the terms of this Agreement. The Fee Owned Properties, the identity of which may change as described in Section 5 of this Agreement, are more particularly described below and are referred to in this Agreement with the following and with the Joint Venture Interest, collectively, as the “Specified Assets”:
1
| (a) | All of that land more particularly described on Exhibit C and all improvements located thereon (the “Real Property”); |
| (b) | All right, title and interest, if any, of the applicable Property Owner, in and to any land lying in the bed of any street, road or access way, opened or proposed, in front of, at a side of or otherwise adjoining the Real Property; |
| (c) | All right, title and interest of the applicable Property Owner, reversionary or otherwise, in and to all easements in, upon or benefiting the Real Property and all other rights and appurtenances belonging or in any wise pertaining thereto; |
| (d) | Any condemnation award to be made after the date of this Agreement for any claim of condemnation hereafter occurring, in connection with the Real Property and/or the other interests described in the foregoing subparagraphs 10.01(a) through (c), of this Section 3, and in and to any award for damage hereafter occurring to the Real Property and/or such interests; |
| (e) | All right, title and interest of the applicable Property Owner in and to any permits, approvals, agreements, rights and entitlements pertaining to the Real Property, in each of the foregoing cases to the extent assignable; |
| (f) | All right, title and interest of the applicable Property Owner in and to all air rights, water rights and mineral rights with respect to the Real Property or appurtenant to the Real Property; |
| (g) | Any and all rights to the present or future use of wastewater, drainage, water or other utility facilities that pertain to or benefit the Real Property, including, without limitation, all reservations, credits, commitments or letters covering any such use in the future; |
| (h) | All right, title and interest of the applicable Owner in and to any and all reversionary rights attributable to the Real Property; |
| (i) | All right, title and interest of the applicable Property Owner in and to all consents, authorizations, variances or waivers, licenses, credits, permits and approvals from any governmental or quasi-governmental agency, department, board, commission, bureau or other entity or instrumentality with respect to the Real Property, in each of the foregoing cases to the extent assignable; and |
| (j) | All right, title and interest of the applicable Property Owner in and to all contracts, agreements, plans, specifications, site plans, construction drawings, schematics and renderings, studies, reports, documents, materials and information, and any other tangible or intangible property, rights and benefits relating to the Real Property, in each of the following cases to the extent assignable. |
2
Section 4 Conveyance of Specified Assets and Joint Venture Interest; Specified Assets Purchase Price. On the business day immediately preceding the Closing Date (such business day, the “Specified Assets Closing Date”), Company L.P. shall cause to be conveyed by each Property Owner and the Joint Venture Interest Owner to the applicable Transferee(s) such Property Owner’s Specified Asset(s). The closing under this Section 4 (the “Specified Assets Closing”) shall take place at the offices of Pepper Hamilton LLP, Philadelphia, Pennsylvania. Each such conveyance by a Property Owner shall be made by delivery and recordation of a deed in the applicable form of Exhibit D hereto (each, a “Deed”) and delivery and recordation, if applicable, of the other documents and instruments listed in Section 6. The conveyance of the Joint Venture Interest by the Joint Venture Interest Owner shall be made by delivery of an assignment of interest in the form of Exhibit E hereto (the “Assignment of Interest”). In exchange for the conveyance of all of the Specified Assets in accordance with the terms of this Section, Prudential shall pay or cause to be paid to Company L.P. the sum of $747,650,417 (the “Specified Assets Purchase Price”), subject to adjustment as provided in this Agreement and less the outstanding balance of any indebtedness on any of the Specified Assets or the Joint Venture Owned Property that is not repaid in full on or before the Closing Date. The Specified Assets Purchase Price, as adjusted as provided herein, shall be paid by wire transfer of immediately available funds pursuant to wiring instructions provided by Company L.P. to Prudential in writing not less than two (2) business days prior to the Specified Assets Closing Date.
Section 5 Change in Specified Assets. Company L.P. and Other Seller acknowledge and agree that Prudential has certain rights under the Master Agreement to modify the list of properties included in Specified Assets, including, without limitation, to drop or substitute the Joint Venture Interest from the transactions contemplated hereby and by the Master Agreement. Company L.P. and Other Seller further acknowledge and agree that Prudential shall have the right under this Agreement to modify the list of properties included in the Specified Assets, including without limitation, to drop or substitute the Joint Venture Interest if it does so under the Master Agreement, by delivering written notice thereof to Company L.P. or Other Seller, as the case may be. Upon each such modification and substitution, “Specified Assets” as used in this Agreement shall be deemed to include the then-current list of Specified Assets, as so modified and “Joint Venture Interest” shall be dropped from this Agreement or modified, as the case may be, in accordance with the terms hereof. Notwithstanding anything to the contrary in this Agreement, no Seller shall be required to convey any real property interest in a Specified Asset other than those listed in Exhibit A and Exhibit B as of the date of this Agreement unless and until either (a) any tenant or other party having a right to purchase such property or having another purchase-related right (such as to approve the property purchaser) has waived such party's rights, such rights have expired or Seller can otherwise convey the real property without violating such tenant's or other party's rights, or (b) Prudential shall have agreed to indemnify Seller for any loss, cost or damages relating to the applicable matter set forth in item (a) of this sentence.
Section 6 Delivery of Documents by Company L.P. On the Specified Assets Closing Date, Company L.P. and Other Seller shall, notwithstanding anything to the contrary, deliver or cause to be delivered to Prudential the following:
3
| (a) | The Deeds and the Assignment of Interest, duly executed and delivered by the applicable Property Owner or the Joint Venture Interest Owner, as the case may be; |
| (b) | All transfer, recordation and similar tax forms required in connection with the Deeds and the Assignment of Interest, in form and substance reasonably satisfactory to Prudential, duly executed and delivered by the applicable Property Owner or the Joint Venture Interest Owner, as the case may be; |
| (c) | A Bill of Sale in the form of Exhibit F hereto (each, a “Bill of Sale”), duly executed and delivered by each applicable Property Owner; |
| (d) | An Assignment of Leases in the form of Exhibit G hereto (each, an “Assignment of Leases”), duly executed and delivered by each applicable Property Owner; |
| (e) | An Assignment of Intangibles in the form of Exhibit H hereto (each, an “Assignment of Intangibles”), duly executed and delivered by each applicable Property Owner, together with original copies of all permits, licenses, approvals, contracts and other matters conveyed thereby to the extent reasonably available in Company L.P.’s possession or under Company L.P.’s control; |
| (f) | All on-site books, records, files and keys related to each Specified Asset and the Joint Venture Owned Property; |
| (g) | Such affidavits and indemnities as are customarily required by the title insurance company issuing the title insurance policies on the Specified Assets or the Joint Venture Owned Property, including, without limitation, as to parties in possession, mechanic’s liens, a gap closing, if applicable, contest of encumbrances and no transfer of the Specified Assets or Joint Venture Owned Property or grant of any option or similar matter, and evidence of each Property Owner’s and the Joint Venture Interest Owner’s authority to convey the Specified Assets, which affidavits and indemnities are reasonably satisfactory to Prudential and such title insurance company. Notwithstanding the foregoing, with respect to Specified Assets located in Virginia, no Property Owner of any such Specified Asset shall be required to deliver an affidavit covering mechanic’s liens on such Specified Asset to the extent resulting from work of a tenant under a lease affecting such Specified Asset; |
| (h) | A non-foreign affidavit in the form of Exhibit I hereto, duly executed and delivered by each Property Owner and the Joint Venture Interest Owner; |
| (i) | To the extent obtained by Company L.P. or its affiliates, the Debt Assignment and Assumption Documents (as defined below) duly executed and delivered by Company L.P. and all parties thereto other than the applicable Transferee, it being acknowledged by Prudential, however, that it shall not be a condition to Prudential’s obligation to close under this Agreement that Company L.P. deliver any Debt Assignment and Assumption documents Company L.P. has not been able to obtain despite the efforts required under the Merger Agreement; |
4
| (j) | Notices to all tenants under the Space Leases affecting the Specified Properties in the form of Exhibit J hereto, duly executed by or on behalf of each respective Property Owner; |
| (k) | Such other documents and instruments as are customary for real property sales of comparable property in the applicable jurisdiction and may be reasonably required by Prudential or the title company in connection with the transactions contemplated by this Agreement. |
Section 7. Delivery of Documents by Transferees. On the Specified Assets Closing Date, Prudential shall deliver or cause to be delivered to Company L.P. the following:
| (a) | The Assignment of Interest, duly executed and delivered by the applicable Transferee; |
| (b) | All transfer, recordation and similar tax forms required in connection with the Deeds and the Assignment of Interest, in form and substance reasonably satisfactory to Prudential, duly executed and delivered by the applicable Transferee; |
| (c) | Each Assignment of Lease, duly executed and delivered by each applicable Transferee; |
| (d) | Each Assignment of Intangibles, duly executed and delivered by each applicable Transferee; |
| (e) | The Debt Assignment and Assumption Documents, duly executed and delivered by the applicable Transferees; |
| (f) | The Closing Statements, duly executed and delivered by each Transferee; |
| (g) | A certification by Prudential that all representations and warranties of Prudential contained in this Agreement are true and correct; |
| (i) | The Specified Assets Purchase Price; and | |
| (j) | Such other documents and instruments as may be reasonably required by Company L.P. in connection with the transactions contemplated by this Agreement. |
Section 7 Assignment. Company L.P. and Other Seller acknowledge and agree that Prudential shall have the right to assign all of its right, title and interest in, to and under this Agreement to one (1) or more entities owned or advised by Prudential or any of its Affiliates (Prudential and each of the foregoing, a “Transferee”). Upon any such assignment, each applicable Transferee shall succeed to all applicable right, title and interest of Prudential under this Agreement, and each applicable Transferee shall assume all applicable obligations of Prudential under this Article first arising from and after the date of such assignment. No such assignment by Prudential shall release Prudential from its obligations under this Agreement.
5
Section 8 Termination; Remedies. If the Merger Agreement is terminated in accordance with its terms, this Agreement shall be deemed terminated and of no further force or effect, except for any provisions which by their terms are to survive Closing. Without limiting any other term of this Agreement or any rights at law or in equity, Company L.P. and Other Seller acknowledge and agree that the terms of this Agreement shall be enforceable by one (1) or more actions in specific performance.
Section 9 Representations and Warranties. Company L.P. and Other Seller hereby jointly and severally represent and warrant to Prudential, as of the date on which this Agreement becomes effective and as of the Closing Date, as follows:
| (a) | Neither Company L.P. nor Other Seller is, and is not an affiliate (as defined in Section V(c) of Prohibited Transaction Class Exemption 84-14 (“PTE 84-14”)) of, any of the Trustees of the Western Conference of Teamsters Pension Trust Fund. None of Company L.P., Other Seller or any affiliate (within the meaning of Part V(c) of PTE 84-14) of either of them has the authority to appoint or terminate Prudential as investment manager of any assets of the Western Conference of Teamsters Pension Trust Fund or to negotiate the terms of any management agreement with Prudential on behalf of the Western Conference of Teamsters Pension Trust Fund, and neither Company L.P. nor Other Seller is a participating employer in the Western Conference of Teamsters Pension Trust Fund. The transaction contemplated by this Agreement (the “Transaction”) is not specifically excluded by Part I(b) of PTE 84-14. Neither Company L.P. nor Other Seller is a related party of Prudential (as defined by Part V(h) of PTE 84-14). The terms of the Transaction have been negotiated and determined at arm’s length, as such terms would be negotiated and determined by unrelated parties. |
| (b) | Neither Company L.P. nor Other Seller is a party in interest (as defined in Section 3(14) of ERISA) with respect to the Virginia Retirement System, the PRISA II 10% Plan or any of the PRISA III 10% Plans (all as defined below), other than by reason of providing services to the Virginia Retirement System, a PRISA II 10% Plan or a PRISA III 10% Plan, as the case may be, or by reason of a relationship to such a service provider described in Section 3(14)(F), (G), (H) or (I) of ERISA. Further, neither Company L.P. nor Other Seller exercises discretionary authority, control, responsibility or influence with respect to the investment of assets of the Virginia Retirement System, the PRISA II 10% Plan in Prudential Property Investment Separate Account II (“PRISA II”) or a PRISA III 10% Plan in Prudential Property Investment Separate Account III (“PRISA III”) or has discretionary authority, control, responsibility or influence with respect to the management or disposition of the assets of the Virginia Retirement System, the PRISA II 10% Plan held in PRISA II or a PRISA III 10% Plan held in PRISA III. For purposes hereof, (i) “PRISA II 10% Plan” shall mean the Virginia Supplemental Retirement System, and (ii) “PRISA III 10% Plans” shall mean (A) the General Board of Pension and Health Benefits of the United Methodists Church incorporated in Missouri as trustee of certain benefit and pension plans of the United Methodists Church, (B) STA-ILA of Baltimore Pension Fund, and (C) the New York State Teachers’ Retirement System. |
6
| (c) | Neither Company L.P. nor Other Seller is an employee pension benefit plan subject to the provisions of Title IV of ERISA or subject to the minimum funding standards under Part 3, Subtitle B, Title I of ERISA or Section 412 of the Internal Revenue Code or Section 302 of ERISA. None of Company L.P.’s or Other Seller’s assets constitute assets of any employee benefit plan subject to Part 4 of Subtitle B of Title I of ERISA and/or Section 4975 of the Code. Neither Company L.P nor Other Seller is a “governmental plan” within the meaning of Section 3(32) of ERISA and none of the Specified Assets or the Joint Venture Owned Property is subject to State statutes regulating the investments of and fiduciary obligations with respect to governmental plans. |
| (d) | The transactions contemplated by this Agreement, the Merger Agreement and the Master Agreement are exempt from any requirement to make any filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the implementing regulations thereto, 16 C.F.R. parts 801-803, because Company L.P. and Other Seller have determined that the aggregate fair market value of the non-exempt assets constituting a portion of the Specified Assets of Company L.P. and Other Seller and the entities controlled by Company L.P. or Other Seller is less than $53,100,000. |
Section 10 Consent Required Outstanding Indebtedness. Notwithstanding anything to the contrary contained in this Agreement, at all times prior to the Specified Assets Closing Date, Company L.P. and Other Seller shall use commercially reasonable efforts to obtain the consent to the assumption of each Consent Required Outstanding Indebtedness by the applicable Transferee from each holder thereof and any other necessary party thereto (each, a “Required Debt Consent”). Neither Company L.P. nor Other Seller shall have any obligation to pay any assumption fee or other amount due to any holder of any Consent Required Outstanding Indebtedness in order to obtain a Required Debt Consent. Each Required Debt Consent so obtained shall be in form and substance reasonably satisfactory to Prudential. Company L.P. and Other Seller agree that they shall not modify or permit to be modified any term of the Consent Required Outstanding Indebtedness without Prudential’s prior consent. If Company L.P. or Other Seller is not released from any obligations under a non-recourse carve-outs guaranty pursuant to a Required Debt Consent, Prudential shall indemnify, defend and hold harmless Company L.P. and/or Other Seller from any and all liability under such guaranty first arising from and after such time as Prudential or the applicable Transferee becomes the borrower thereunder.
Section 11 Closing Costs. Prudential shall pay or cause to be paid all transfer and similar taxes and fees associated with the direct one(1) time transfer of the Fee Owned Properties and Joint Venture Interest to each Transferee pursuant to the terms of this Article, and each of Company L.P., Other Seller and Prudential shall pay their own legal fees and expenses associated with the transactions contemplated by this Agreement.
7
Section 12 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland, regardless of the laws that might otherwise govern under applicable conflict or choice or law rules.
Section 13 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or law, or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that such transactions are fulfilled to the fullest extent possible.
Section 14 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.
Section 15 Entire Agreement; No Third Party Counterparts. This Agreement (including any exhibits and schedules hereto), taken together with the Merger Agreement and the Master Agreement (a) constitutes the entire agreement, and supersedse all prior agreements and understandings, both written and oral, among the parties with respect to the transactions contemplated hereby and thereby. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 16 Assignments. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties, except as expressly permitted herein. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
Section 17 Assignments. This Agreement may not be amended except in writing by all parties hereto.
[Remainder of page intentionally blank.]
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date above written.
| COMPANY L.P.: | |
| PRENTISS PROPERTIES ACQUISITION | |
| PARTNERS, L.P., a Delaware limited partnership | |
| By: Prentiss Properties I, Inc., a Delaware | |
| corporation, its general partner | |
| By: /s/ Thomas F. August | |
| Name: Thomas F. August | |
| Title: President and Chief Executive Officer | |
| OTHER SELLER: | |
| PRENTISS PROPERTIES REAL ESTATE FUND I, | |
| L.P., a Delaware limited partnership | |
| By: Prentiss Properties Real Estate Fund I, LLC, | |
| a Delaware limited liability company, its | |
| general partner | |
| By: Prentiss Properties II, Inc., a | |
Delaware
corporation, its member |
|
| By: /s/ Thomas F. August | |
| Name: Thomas F. August | |
| Title: President and Chief Executive Officer | |
| PRUDENTIAL: | |
| THE PRUDENTIAL INSURANCE COMPANY | |
| OF AMERICA, a New Jersey corporation | |
| By: /s/ James P. Walker | |
| James P. Walker, Vice President |
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of October 3, 2005 is by and among Brandywine Realty Trust, a Maryland real estate investment trust (“Parent”), Brandywine Operating Partnership, L.P., a Delaware limited partnership (“Parent L.P.”) and Michael V. Prentiss (“Prentiss”).
RECITALS
WHEREAS, Prentiss currently serves as the Chairman of the Board of Trustees of Prentiss Properties Trust, a Maryland real estate investment trust (the “Company”);
WHEREAS, Parent has entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated as of October 3, 2005, with the Company, Company L.P., Parent L.P., Merger Sub and L.P. Merger Sub pursuant to which the Company will merge with Merger Sub and L.P. Merger Sub will merge with Company L.P. on the terms set forth therein. Capitalized terms used herein but not defined herein shall have the meanings given to such terms in the Merger Agreement;
WHEREAS, Parent and Parent L.P. are obligated to enter into this Agreement pursuant to the Merger Agreement to be effective at the Effective Time.
AGREEMENT
NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Parent, Parent L.P. and Prentiss, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 Specific Definitions. The following terms are defined as follows:
“Affiliate” is defined in Rule 12b-2 under the Exchange Act.
“Board” means Parent’s board of trustees.
“Class A Units” shall have the meaning given to such term in the L.P. Partnership Agreement.
“CommonShares” means common shares of Parent, par value $.01 per share.
“Company Common Unit” means the issued and outstanding common units of limited partner interests of Company L.P.
1
“Effectiveness Period” is defined in Section 2.2.
“ExchangeAct” means the Securities Exchange Act of 1934, as amended.
“Holder” means Prentiss or Prentiss’ permitted assignees under Section 8.
“IndemnifiedParty” is defined in Section 6.3.
“IndemnifyingParty” is defined in Section 6.3.
“Inspectors” is defined in Section 3.1(i).
“Loss” or “Losses” is defined in Section 6.1.
“L.P. Partnership Agreement” means the Agreement of Limited Partnership, as amended through the date hereof, of Parent L.P.
“Person” means any business entity (including a corporation, partnership (limited or general), limited liability company or business trust) or a natural person.
“register,” “registered” and “registration” and words of similar import mean a registration effected by preparing and filing with the SEC a registration statement in compliance with the Securities Act, and the declaration and ordering by the SEC of effectiveness of such registration statement or document.
“Registrable Common Shares” means any (1) Common Shares beneficially held by a Holder that were issued in connection with the REIT Merger, (2) Common Shares issuable to Holders upon redemption in accordance with the L.P. Partnership Agreement of Class A Units that were issued in connection with the OP Merger and (3) securities issued or issuable in respect thereof by way of any stock split or stock dividend or in connection with any combination of shares, recapitalization, merger, consolidation, reorganization or otherwise; provided that Registrable Common Shares shall exclude Common Shares: (i) sold by a Person in a transaction in which a Holder’s rights under this Agreement are not assigned under this Agreement; (ii) that have been sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, (iii) have been sold in a transaction exempt from the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale, (iv) that are able to be sold pursuant to Rule 144(k); or (v) that are held by a Holder that does not “beneficially own” more than 1% of the outstanding Common Shares and such Common Shares are able to be sold under Rule 144 (other than Rule 144(k)).
“Rule 144” means Rule 144 under the Securities Act.
“SEC” means the United States Securities and Exchange Commission.
2
“SecuritiesAct” means the Securities Act of 1933, as amended.
“Shelf Registration Statement” is defined in Section 2.2.
SECTION 2
REGISTRATION RIGHTS
The Holders shall have the right to register Registrable Common Shares in accordance with the following provisions:
2.1 Demand Registration Rights. The following terms are defined as follows:
(a) Upon receipt of a written request from Holders holding more than 30% of the Registrable Common Shares to register under the Securities Act (whether for purposes of a public offering, an exchange offer or otherwise) all or part of the Registrable Common Shares held by such Holders, Parent shall as expeditiously as reasonably practicable prepare and file (but not more than 30 days after receiving notice), and use its reasonable best efforts to cause to become effective as soon thereafter as practicable, a registration statement on Form S-1 or Form S-3 (including a shelf registration statement under Rule 415) under the Securities Act to effect the offering of such Registrable Common Shares in the manner specified in such request.
(b) Notwithstanding anything to the contrary contained elsewhere herein, the registration rights granted to the Holders in Section 2.1(a) are subject to the following terms and conditions:
| (i) | Upon receipt of a request to register Registrable Common Shares pursuant to Section 2.1(a), Parent shall give all of the Holders prompt written notice of the proposed registration and will give all of such Holders the right to include their Registrable Common Shares in such registration on the same terms and conditions as the requesting Holders. Each Holder so notified shall have ten days to request that their Registrable Common Shares be included in such registration. Failure to so request shall be deemed a waiver of such Holder’s rights with respect to such registration unless such registration is not completed. |
| (ii) | The Holders will be limited to two registration requests under Section 2.1(a). | |
| (iii) | Parent shall be entitled to defer for a reasonable period of time, but not in excess of 90 days and only three times in any twenty-four month period, the filing of any registration statement otherwise required to be prepared and filed by it under Section 2.1(a) if Parent furnishes the Holders a certified resolution of the Board within ten days after Parent has received the registration request under Section 2.1 that Parent (a) is at such time conducting or about to conduct an underwritten public offering of its securities for its own account and the Board determines in good faith that such offering would be materially adversely affected by such registration requested by the Holders or (b) would be required to disclose in such registration statement information not otherwise then required by law to be publicly disclosed and, in the good faith judgment of the Board, such disclosure would be reasonably likely to affect adversely any material business transaction or negotiation in which Parent is then engaged. If Parent elects to defer the filing of a registration statement pursuant to this Section 2.1(b)(iii), the Holders shall be deemed to have withdrawn their request during the time of such deferral and shall retain their rights pursuant to Section 2.1(b)(ii). Holders agree to keep any such information confidential until it becomes generally known to the public. |
3
| (iv) | No demand for registration may be made under Section 2.1(a) within 180 days of the consummation of the last offering for which registration has been provided under Section 2.1(a). |
2.2 Shelf Registration. Notwithstanding anything contained herein, Parent will use good faith commercially reasonable efforts to file, on or within thirty (30) days following the Closing Date, a shelf registration statement (the “Shelf Registration Statement”) pursuant to Rule 415 under the Securities Act to enable the resale of the Registrable Common Shares by Holders from time to time on a delayed or continuous basis. The Shelf Registration Statement shall be filed on Form S-3 and, if Parent is eligible, the Shelf Registration Statement shall utilize the automatic shelf registration process under Rule 415 and Rule 462 as amended by Securities Act Release No. 8591. Parent will use its reasonable best efforts to maintain its status as a “well known seasoned issuer” as defined in Rule 405 as amended by Securities Act Release No. 8591. If Parent is not a “well known seasoned issuer” or is otherwise ineligible to utilize the automatic shelf registration process, then Parent shall use its reasonable best efforts to have the Shelf Registration Statement declared effective under the Securities Act as expeditiously as practicable. Parent will use its reasonable best efforts to maintain the effectiveness of the Shelf Registration Statement, including by filing any necessary post-effective amendments and prospectus supplements, or, alternatively, by filing new registration statements relating to the Registrable Common Shares as required by Rule 415 under the Securities Act to permit the disposition of all Registrable Common Shares pursuant hereto until the earliest date on which (i) all Registrable Common Shares registered pursuant to the Shelf Registration Statement or any successors thereto have been sold or (ii) all Registrable Common Shares may be sold pursuant to Rule 144(k) under the Securities Act (“Effectiveness Period”). If Parent registers all of the Registrable Common Shares on a Shelf Registration and maintains the effectiveness of the Shelf Registration, and otherwise satisfies its obligations under this Agreement in all material respects, no Holder shall be permitted to exercise the registration rights set forth in Section 2.1 of this Agreement.
SECTION 3
COVENANTS
3.1 Covenants of Parent. In connection with any offering of Registrable Common Shares pursuant to this Agreement, Parent shall:
| (a) | Prepare and file with the SEC such amendments and post-effective amendments to the registration statement as may be necessary to keep the registration statement effective for a period of not less than 120 days (unless filed pursuant to Rule 415 under the Securities Act, in which case such period shall be until the end of the Effectiveness Period), or such shorter period which will terminate when all Registrable Common Shares covered by such registration statement have been sold or withdrawn at the request of participating holders of Common Shares and cause the prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act; |
4
| (b) | Make available to each Holder (i) at least two business days prior to filing with the SEC, any registration statement covering shares of Registrable Common Shares, any amendment or supplement thereto, and any prospectus used in connection therewith, which documents will be subject to the reasonable review of such Holders, and, with respect to a registration statement prepared pursuant to Section 2, Parent shall not file any such documents with the SEC to which any such Holder shall reasonably object, and (ii) a copy of any and all transmittal letters or other correspondence with the SEC or any other governmental agency or self-regulatory body or other body having jurisdiction (including any domestic securities exchange) relating to such offering of Registrable Common Shares; |
| (c) | Furnish to each Holder such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein except to the extent available on the internet) and the prospectus included in such registration statement (including each preliminary prospectus and prospectus supplement) as such Holder may reasonably request to facilitate the sale of the Registrable Common Shares; |
| (d) | After the filing of such registration statement, promptly notify each Holder of any stop order issued or, to Parent’s knowledge, threatened to be issued by the SEC and promptly take all reasonable actions to prevent the entry of such stop order or to obtain its withdrawal if entered; |
| (e) | Promptly inform each Holder (i) in the case of any offering of Registrable Common Shares in respect of which a registration statement is filed under the Securities Act, of the date on which such registration statement or any post-effective amendment thereto becomes effective and, if applicable, of the date of filing a Rule 430A or 430B prospectus, and (ii) of any request by the SEC, any securities exchange, government agency, self-regulatory body or other body having jurisdiction for any amendment of or supplement to any registration statement or preliminary prospectus or prospectus included therein or any offering memorandum or other offering document relating to such offering; |
| (f) | Subject to Section 3.1(h), until the earlier of (i) such time as all of the Registrable Common Shares being offered have been disposed of in accordance with the intended method of disposition by such Holder set forth in the registration statement or other offering document (and the expiration of any prospectus delivery requirements in connection therewith) and (ii) the expiration of 120 days after such registration statement or other offering document becomes effective (unless the offering is a continuous offering of securities pursuant to Rule 415, in which case until the end of the Effectiveness Period) (provided however, that if the effectiveness of such registration statement is suspended for any reason, then the contemplated period shall extend for the time such registration statement’s effectiveness was suspended), keep effective and maintain any registration, qualification or approval obtained in connection with the offering of the Registrable Common Shares, and amend or supplement the registration statement or prospectus or other offering document used in connection therewith to the extent necessary to comply with applicable securities laws; |
5
| (g) | Use its commercially reasonable efforts to have the Registrable Common Shares listed on any domestic and foreign securities exchanges on which the Common Shares are then listed; |
| (h) | As promptly as practicable, notify each Holder at any time when a prospectus relating to the sale of the Registrable Common Shares is required by law to be delivered in connection with sales by a dealer, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such shares, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statement therein, in light of the circumstances under which they were made, not misleading, and as promptly as practicable make available to each Holder any such supplement or amendment; |
| (i) | Make available for inspection during the normal business hours of Parent by any Holder and any attorney, accountant or other agent retained by any such Holder in connection with the sale of Registrable Common Shares (collectively, the “Inspectors”), all relevant financial and other records, pertinent corporate documents and properties of Parent as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the officers, trustees, directors and employees of Parent to supply all information reasonably requested by any such Inspector in connection with such registration statement; provided, however, that (i) in connection with any such inspection, any such Inspectors shall cooperate to the extent reasonably practicable to minimize any disruption to the operation by Parent of its business and (ii) any records, information or documents shall be kept confidential by such Inspectors, unless (A) such records, information or documents are in the public domain or otherwise publicly available or (B) disclosure of such records, information or documents is required by a court or administrative order or by applicable law and notice of such requirement is promptly given to Parent after being received; |
| (j) | Take such other actions as are reasonably required to expedite or facilitate the sale of the Registrable Common Shares; |
| (k) | Make “generally available to its security holders” (within the meaning of Rule 158 under the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder no later than 45 days, or such shorter period as may be required if Parent is an accelerated filer as defined in Rule 12b-2 promulgated under the Exchange Act, (or 90 days, or such shorter period as may be required if Parent is an accelerated filer as defined in Rule 12b-2 promulgated under the Exchange Act, after the end of any 12-month period if such period is a fiscal year) beginning with the first day of Parent’s first fiscal quarter commencing after the effective date of the registration statement, which earnings statement shall cover said 12-month period; |
| (l) | Take all other commercially reasonable steps necessary to effect the registration of the Registrable Common Shares contemplated hereby. |
6
3.2 Covenant of Holders. Each Holder agrees and covenants that, upon receipt of any notice from Parent of the happening of any event of the kind described in Section 3.1(h), such Holder will forthwith discontinue disposition of Registrable Common Shares pursuant to the registration statement covering such Registrable Common Shares until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.1(h), and, if so directed by Parent, such Holder will deliver to Parent all copies, other than permanent file copies, then in such Holder’s possession of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice.
SECTION 4
EXPENSES
All expenses incurred in connection with the registration of Registrable Common Shares, including all filing fees, escrow fees, fees and expenses of compliance with securities or blue sky laws (including fees and disbursements, if any, of Parent’s counsel in connection with blue sky qualifications of the Registrable Common Shares), rating agency fees, printing expenses, messenger and delivery expenses, internal expenses (including all salaries and expenses of Parent’s officers and employees performing legal or accounting duties), the fees and expenses incurred in connection with the listing of the securities to be registered on each securities exchange on which similar securities issued by Parent are then listed, and fees and disbursements of counsel for Parent and Parent’s independent certified public accountants (including the expenses of any special audit or “cold comfort” letters required by or incident to such performance) directly attributable to the registration of securities, Securities Act liability insurance (if Parent elects to obtain such insurance), the fees of counsel retained by a Holder and the fees and expenses of any special experts or other Persons retained by Parent will be borne by Parent. Parent shall have no obligation to pay and shall not pay any underwriting fees, discounts or commissions in connection with any Registrable Common Shares registered pursuant to this Agreement.
SECTION 5
INDEMNIFICATION
5.1 Indemnification by Parent and Parent L.P.. Parent and Parent L.P. agree to (a) indemnify and hold harmless each Holder, its officers, directors and agents, and each Person, if any, who controls any of the foregoing Persons within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (individually, a “Loss”; collectively, “Losses”) arising from or caused by (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Common Shares or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any failure by Parent to fulfill any undertaking in the relevant registration statement, and (iii) any violation or alleged violation by Parent or Parent L.P. of the Securities Act, any blue sky laws, securities laws or other applicable laws of any state in which Registrable Common Shares are offered and relating to action or inaction required of Parent in connection with such offering, and (b) reimburse each such Person for any legal or other out-of-pocket expenses reasonably incurred in connection with investigating, or defending against, any such Loss (or any proceeding in respect thereof), subject to Section 5.3, except that the indemnification provided for in this Section 5.1 shall not apply to Losses that are caused by any such untrue statement or omission or alleged untrue statement or omission based upon and in conformity with information furnished in writing to Parent or Parent L.P. by or on behalf of any Holder expressly for use therein. Notwithstanding the foregoing, Parent and Parent L.P. shall not be liable in any such case to the extent that any such Loss arises out of, or is based upon, an untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact in the prospectus included in the relevant registration statement, if such untrue statement or alleged untrue statement or omission or alleged omission is corrected in any amendment or supplement to the prospectus and if, having previously been furnished by or on behalf of Parent with copies of the prospectus as so amended or supplemented, a Holder thereafter fails to deliver such prospectus as so amended or supplemented prior to or at the time of sale of Registrable Common Shares if such delivery is required by the Securities Act.
7
5.2 Indemnification by Holders. Each Holder agrees to indemnify and hold harmless Parent and Parent L.P., their respective officers, trustees and directors, and each Person, if any, who controls Parent and Parent L.P. within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity made pursuant to Section 5.1 from Parent and Parent L.P. to such Holder, but only with reference to information furnished in writing by or on behalf of such Holder expressly for use in any registration statement or prospectus relating to the Registrable Common Shares, or any amendment or supplement thereto, or any preliminary prospectus.
5.3 Conduct of Indemnification Proceedings. In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to Section 5.1 or 5.2, such Person (the “Indemnified Party”) shall promptly notify the Person against whom such indemnity may be sought (the “IndemnifyingParty”) in writing, provided, however, that the omission to so notify the Indemnifying Party will not relieve the Indemnifying Party of any liability it may have under this Agreement or otherwise except if such failure materially prejudices the Indemnifying Party. The Indemnifying Party, upon the request of the Indemnified Party, shall retain counsel reasonably satisfactory to such Indemnified Party and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (a) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention, (b) the Indemnifying Party shall have failed to comply with its obligations under the preceding sentence or (c) the Indemnified Party shall have been advised by its counsel in writing that actual interests exist between the Indemnifying Party and the Indemnified Party. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld. The Indemnifying Party shall not agree to any settlement as the result of which any remedy or relief, other than monetary damages for which the Indemnifying Party shall be fully responsible, shall be applied to or against an Indemnified Party without the prior written consent of the applicable Indemnified Party.
8
5.4 Contribution. If the indemnification provided for in Sections 5.1 and 5.2 from the Indemnifying Party is unavailable to an Indemnified Party in respect of any Losses referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses in such proportion to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions which resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the Losses referred to above shall be deemed to include, subject to the limitations set forth in Sections 5.1 and 5.2, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. No party shall be liable for contribution with respect to any action or claim settled without its written consent, which consent shall not be unreasonably withheld. Notwithstanding the provisions of this Section 5.4, no Holder shall be required to contribute any amount in excess, if the amount of the net proceeds such Holder received exceeds the amount of any Losses which such Holder has otherwise been required to pay due to such untrue or alleged untrue statement or omission of alleged omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5.4 were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraphs. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
SECTION 6
TERMINATION
So long as Parent has made the filings contemplated by Article 7 and, as a result Holders may make resales of its Registrable Common Shares under Rule 144, this Agreement shall be suspended with respect to Holders that (i) “beneficially own” less than 1% of the issued and outstanding Common Shares and such Common Shares are able to be sold under Rule 144 (other than Rule 144(k)) or (ii) are eligible to sell all of their Registrable Common Shares in accordance with Rule 144(k). In addition, this Agreement shall terminate with respect to a Holder if such Holder ceases to own any Registrable Common Shares. For this Section 6, a Holder shall be deemed to own any and all Common Shares such Holder “beneficially owns” as such term is defined under Rule 13d-3 of the Exchange Act. Notwithstanding the foregoing, Parent’s and Holders’ rights, duties and obligations under Section 4, Section 5 and Section 7 shall survive the termination or suspension of this Agreement.
9
SECTION 7
AVAILABLE INFORMATION
Parent shall take such reasonable actions and file such information, documents and reports as shall be required by the SEC as a condition to the availability of Rule 144 and Rule 144A, or any successor provisions.
SECTION 8
ASSIGNMENT OF RIGHTS
The rights of any Holder under this Agreement with respect to any Registrable Common Shares owned by such Holder may be freely assigned to any Holder who becomes the owner of at least 25% of the Registrable Common Shares owned by such Holder as of the date hereof.
SECTION 9
MISCELLANEOUS
9.1 Provision of Information. Each Holder shall, and shall cause it officers, directors, employees and agents to complete and execute all such questionnaires as Parent shall reasonably request in connection with any registration pursuant to this Agreement.
9.2 Injunctions. Irreparable damage would occur if any provision of this Agreement were not performed in accordance with its specified terms or were otherwise breached. Therefore, the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms of provisions hereof in any court having jurisdiction, such remedy being in addition to any other remedy to which they may be entitled.
9.3 Severability. If any term or provision of this Agreement is held by a court of competent jurisdiction to be unenforceable, the remainder of the terms and provisions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term or provision.
9.4 Further Assurances. Subject to the specific terms of this Agreement, each Holder, Parent and Parent L.P. shall make, execute, acknowledge and deliver such other instruments and documents, and take all such other actions, as may be reasonably required to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby.
9.5 Entire Agreement; Modification. This Agreement contains the entire understanding of the parties with respect to the transactions contemplated hereby and supersede all agreements and understandings entered into prior to the execution hereof. This Agreement may be modified or provisions may be waived hereunder only by a written instrument duly executed by or on behalf of Parent, Parent L.P. and Holders who collectively own in excess of 50% of the Registrable Common Shares.
10
9.6 Counterparts. For the convenience of the parties hereto, any number of counterparts of this Agreement may be executed by the parties hereto, but all such counterparts shall be deemed one and the same instrument.
9.7 Notices. All notices, consents, requests, demands, and other communications hereunder shall be in writing and shall be given by hand or by mail (return receipt requested) or sent by overnight delivery service, cable, telegram, or facsimile transmission to the parties at the address specified beside each party’s name on the signature pages hereto or at such other address as shall be specified by the parties by like notice. Notice so given shall, in the case of notice so given by mail, be deemed to be given and received on the fourth business day after posting, in the case of notice so given by overnight delivery service, on the day after notice is deposited with such service, and in the case of notice so given by cable, telegram, facsimile transmission or, as the case may be, personal delivery, on the date of actual delivery.
9.8 Governing Law. THIS AGREEMENT IS GOVERNED BY THE LAWS OF THE STATE OF MARYLAND WITHOUT REGARD TO ANY CHOICE OF LAW OR CONFLICT OF LAW PRINCIPLES (WHETHER OF THE STATE OF Maryland OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF MAryland.
9.9 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of and be enforceable by and against the successors and permitted assigns of the parties hereto, including and without the need for an express assignment, subsequent holders of Registrable Common Shares that are permitted assigns pursuant to Article 8. Except as provided herein, the parties may not assign their rights under this Agreement and Parent and Parent L.P. may not delegate its obligations under this Agreement. Any attempted assignment or delegation prohibited hereby shall be void.
9.10 Parties in Interest. Except as otherwise specifically provided herein, nothing in this Agreement expressed or implied is intended or shall be construed to confer any right or benefit upon any Person other than the Holders, Parent and Parent L.P. and their respective successors and permitted assigns.
9.11 Effectiveness. Notwithstanding the date of this Agreement, the terms and provisions of and rights and obligations under this Agreement shall become effective at the Effective Time. In the event the transactions contemplated by the Merger Agreement are not consummated, this Agreement shall become null and void and have no further force or effect.
[Signature Page Follows]
11
IN WITNESS WHEREOF, Parent, Parent L.P. and Prentiss have duly executed this Agreement, all as of the date first written above.
BRANDYWINE REALTY TRUST
| BRANDYWINE REALTY TRUST | |
| By: /s/ Gerard H. Sweeney | |
| Name: Gerard H. Sweeney | |
| Title: President and Chief Executive Officer | |
| BRANDYWINE OPERATING PARTNERSHIP, L.P. | |
| By: Brandywine Realty Trust | |
| its General Partner | |
| By: /s/ Gerard H. Sweeney | |
| Name: Gerard H. Sweeney | |
| Title: President and Chief Executive Officer |
| Address: | /s/ Michael V. Prentiss |
| 3890 West Northwest Highway | Michael V. Prentiss |
| Suite 400 |
| Dallas, TX 75220 |
October 3, 2005
Brandywine Operating Partnership, L.P. and
Brandywine Realty Trust
Senior Credit Facilities
Commitment Letter
Brandywine Operating
Partnership, L.P.
Brandywine Realty Trust
401 Plymouth Road
Plymouth Meeting, PA 19462
Attention: Gerard H. Sweeney
President and Chief Executive Officer
Ladies and Gentlemen:
In connection with the proposed Acquisition (as defined below), you (the “Borrowers”) have requested that J.P. Morgan Securities Inc. (“JPMSI”) agree to structure, arrange and syndicate (a) a term loan facility in an aggregate amount of up to $750,000,000 (the “Term Loan Facility”), (b) an amendment and restatement of the existing revolving credit facility in an aggregate amount of up to $600,000,000 (the “Revolving Credit Facility”), and (c) an interim term loan facility in an aggregate amount of up to $240,000,000 (subject to reduction as set forth in the Interim Facility Term Sheet (as defined below)) (the “Interim Facility”), and together with the Term Loan Facility and the Revolving Credit Facility, collectively, the “Facilities”). You have also requested that JPMorgan Chase Bank, N.A. (“JPM”) commit to provide the entire principal amount of each of the Facilities and to serve as administrative agent for the each of Facilities.
JPMSI is pleased to advise you that it is willing to act as exclusive arranger and bookrunner for the Facilities.
Furthermore, JPM is pleased to advise you of its commitment to provide the entire amount of the Facilities; provided that (x) JPM shall only provide the Revolving Credit Facility if the Existing Credit Agreement (as defined below) has not been amended and restated and increased to $600,000,000 after the date hereof so as to permit the consummation of the Acquisition and (y) JPM shall only provide the Interim Facility if the sales of all of Subject Properties (as defined in the Purchase Agreement (as defined below) and listed on Schedule 3 hereto) have not been consummated prior to the closing date of the Acquisition.
1
The commitments of JPMSI and JPM hereunder are subject to the terms and conditions set forth in this commitment letter (the “Commitment Letter”), the Fee Letter referred to below and (a) with respect to the Term Loan Facility, in the Summary of Terms and Conditions attached hereto as Exhibit A (the “Term Loan Facility Term Sheet”), (b) with respect to the Revolving Credit Facility, in the Summary of Terms and Conditions attached hereto as Exhibit B (the “Revolving Credit Facility Term Sheet”), and (c) with respect to the Interim Facility, in the Summary of Terms and Conditions attached hereto as Exhibit C (the “Interim Facility Term Sheet”, and together with the Term Loan Facility Term Sheet and the Revolving Credit Facility Term Sheet, collectively, the “Term Sheets”).
Although the Term Sheets set forth the principal terms of the Facilities, this Commitment Letter and the Term Sheets do not include all of the representations, warranties, defaults, definitions, covenants (affirmative and negative) and other terms which will be contained in the definitive financing documents for the transaction. Accordingly, we reserve the right to propose additional terms which (i) are not materially inconsistent with any provision in the Term Sheets, (ii) except as expressly modified by the Term Sheets, are substantially in the form of the Credit Agreement dated as of May 24, 2004, as amended, among the Borrowers, JPM, as Administrative Agent, and the other parties thereto (the “Existing Credit Agreement”), and (iii) except as provided in the Fee Letter, will not materially alter the financial terms of this Commitment Letter and the Term Sheets.
It is agreed that JPM will act as the sole and exclusive Administrative Agent, and that JPMSI will act as the sole and exclusive arranger and bookrunner (in such capacities, the “Arranger”), for the Facilities, and each will, in such capacities, perform the duties and exercise the authority customarily performed and exercised by it in such roles. You agree that no other agents, co-agents or arrangers will be appointed, no other titles will be awarded and no compensation (other than that expressly contemplated by the Term Sheets and the Fee Letter) will be paid in connection with the Facilities unless you and we shall so agree.
We intend and shall have the right to syndicate the Facilities to a group of financial institutions (together with JPM, the “Lenders”) identified by us in consultation with you. JPMSI intends to commence syndication efforts promptly upon the public announcement of the proposed Acquisition, and in any event by October 31, 2005, and you agree actively to assist JPMSI in completing a syndication satisfactory to it. Such assistance shall include (a) your using commercially reasonable efforts to ensure that the syndication efforts benefit materially from your existing lending relationships, (b) direct contact between senior management and advisors of the Borrowers and the proposed Lenders, (c) assistance in the preparation of a Confidential Information Memorandum and other marketing materials to be used in connection with the syndication and (d) the hosting, with JPMSI, of one or more meetings of prospective Lenders.
2
As the Arranger, JPMSI will manage all aspects of the syndication, including decisions as to the selection of institutions to be approached and when they will be approached, when their commitments will be accepted, which institutions will participate, the allocations of the commitments among the Lenders and the amount and distribution of fees among the Lenders. In acting as the Arranger, JPMSI will have no responsibility other than to arrange the syndication. To assist JPMSI in its syndication efforts, you agree promptly to prepare and provide to JPMSI and JPM all information with respect to the Borrowers, the Acquisition and the other transactions contemplated hereby, including all financial information and projections (the “Projections”), as we may reasonably request in connection with the arrangement and syndication of the Facilities. You hereby represent and covenant that (a) all information other than the Projections (the “Information”) that has been or will be made available to JPM or JPMSI by you or any of your representatives is or will be, when furnished, complete and correct in all material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be made available to JPM or JPMSI by you or any of your representatives have been or will be prepared in good faith based upon assumptions believed to be reasonable. You understand that in arranging and syndicating the Facilities we may use and rely on the Information and Projections without independent verification thereof.
You agree to supplement the Projections and Information from time to time until the later to occur of (i) the execution and delivery of definitive financing documents for the Facilities and (ii) completion of the syndication, so that the representations and warranties in the preceding paragraph remain correct.
3
As consideration for JPM’s commitments hereunder and JPMSI’s agreement to perform the services described herein, you agree, jointly and severally, to pay to JPM the nonrefundable fees set forth in the Term Sheets and in the Fee Letter dated the date hereof and delivered herewith (the “Fee Letter”).
JPM’s commitments hereunder and JPMSI’s agreement to perform the services described herein are subject to (a) there not occurring or becoming known to us any event, change or development that has had or would reasonably be expected to have a material adverse effect on the business, operations, property, condition (financial or otherwise) or prospects of the Borrowers and Guarantors and their subsidiaries taken as a whole (a “Material Adverse Effect”), (b) our not becoming aware after the date hereof of any information or other matter affecting the Borrowers and Guarantors, the Target (as defined below), the Acquisition, or the transactions contemplated hereby which is inconsistent with any such information or other matter disclosed to us prior to the date hereof, if such inconsistency has had or would reasonably be expected to have a Material Adverse Effect, (c) our satisfaction that prior to and during the syndication of the Facilities there shall be no competing offering, placement or arrangement of any debt securities or bank financing by or on behalf of the Borrowers or any affiliate thereof, other than an offering or financing that would refinance the Term Loan Facility or the Interim Facility, (d) the negotiation, execution and delivery on or before the earlier of (x) the closing date of the Acquisition or (y) December 31, 2005 of definitive financing documents with respect to the Facilities consistent with this Commitment Letter and the Term Sheets and otherwise satisfactory to JPM and its counsel, (e) the payment of all fees and expenses of JPM, JPMSI and its counsel and representatives, (f) there not being any “Default” or “Event of Default” continuing under the definitive financing documents for the Facilities, (g) there not having occurred (1) any Company Material Adverse Effect (as defined in the Purchase Agreement) under the terms of the Purchase Agreement or (2) any failure to satisfy the conditions precedent under the Purchase Agreement to cause the effectiveness thereof (and if such Company Material Adverse Effect or failure to satisfy conditions precedent has occurred, the Borrowers agree not to waive any Company Material Adverse Effect or any such conditions precedent without the consent of JPMSI and JPM), (h) there not having occurred any material changes in governmental regulation or policy affecting, in any material and adverse respect, us or the Borrowers (including tax status, trading status or securities law compliance) prior to closing that would enjoin, prohibit or restrain the closing of any Facility, (i) the closing of the Borrower’s proposed merger and acquisition transaction substantially as described on Schedule 1 hereto (resulting in (A) Brandywine Realty Trust as the surviving entity and remaining as a real estate investment trust and (B) the capital and ownership structure substantially as described on Schedule 2 hereto) (the “Acquisition”) with [Prentiss Properties] (the “Target”) in accordance with the terms of the Agreement and Plan of Merger dated as of _________, 2005 among the Borrowers, the Target and certain other parties (the “Purchase Agreement”), and no material provision of such Purchase Agreement shall have been amended, waived or otherwise modified without the prior written consent of JPM and JPMSI and (j) the other conditions set forth or referred to in the Term Sheets.
4
You agree, jointly and severally, (a) to indemnify and hold harmless JPM, JPMSI, their affiliates and their respective officers, directors, employees, advisors, and agents (each, an “indemnified person”) from and against any and all losses, claims, damages and liabilities to which any such indemnified person may become subject arising out of or in connection with this Commitment Letter, the Facilities, the use of the proceeds thereof or any related transaction or any claim, litigation, investigation or proceeding relating to any of the foregoing, regardless of whether any indemnified person is a party thereto, and to reimburse each indemnified person upon demand for any legal or other expenses incurred in connection with investigating or defending any of the foregoing, provided that the foregoing indemnity will not, as to any indemnified person, apply to losses, claims, damages, liabilities or related expenses to the extent they arise from the willful misconduct or gross negligence of such indemnified person, and (b) to reimburse JPM, JPMSI and their affiliates on demand for all reasonable out-of-pocket expenses (including due diligence expenses, syndication expenses, consultant’s fees and expenses, travel expenses, and reasonable fees, charges and disbursements of counsel) incurred in connection with the Facilities and any related documentation (including this Commitment Letter, the Term Sheets, the Fee Letter and the definitive financing documents) or the administration, amendment, modification or waiver thereof. No indemnified person shall be liable for any indirect or consequential damages in connection with its activities related to the Facilities. No indemnified person shall be liable for any damages arising from the use by others of Information or other materials obtained through electronic, telecommunications or other information transmission systems or for any special, indirect, consequential or punitive damages in connection with the Facilities.
This Commitment Letter shall not be assignable by you without the prior written consent of JPM and JPMSI (and any purported assignment without such consent shall be null and void), is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto. This Commitment Letter may not be amended or waived except by an instrument in writing signed by you, JPM and JPMSI. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. This Commitment Letter, the Term Sheets and the Fee Letter are the only agreements that have been entered into among us with respect to the Facilities and set forth the entire understanding of the parties with respect thereto. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York.
5
This Commitment Letter is delivered to you on the understanding that neither this Commitment Letter, the Term Sheets or the Fee Letter nor any of their terms or substance shall be disclosed, directly or indirectly, to any other person (including any lender bidding for the financing contemplated by this Commitment Letter) except (a) to your officers, agents and advisors who are directly involved in the consideration of this matter or (b) as may be compelled in a judicial or administrative proceeding or as otherwise required by law (in which case you agree to inform us promptly thereof); provided, that this Commitment Letter only (and not the Term Sheets and the Fee Letter) may be disclosed to pursuant to any requirements of the Securities and Exchange Commission or pursuant to such governmental regulations as advised by your counsel once this Commitment Letter has been accepted by you, with the understanding that JPMSI and JPM have the right to change the amounts, structure, pricing, and terms of the Facilities as set forth in the Fee Letter.
The reimbursement, indemnification and confidentiality provisions contained herein and in the Fee Letter shall remain in full force and effect regardless of whether definitive financing documents shall be executed and delivered and notwithstanding the termination of this Commitment Letter or JPM’s commitments hereunder.
You acknowledge that JPM and JPMSI may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you may have conflicting interests regarding the transactions described herein and otherwise. JPM and JPMSI will not use confidential information obtained from you by virtue of the transactions contemplated by this Commitment Letter or its other relationships with you in connection with the performance of services for other companies, nor will any of them furnish any such information to other companies. You also acknowledge that JPM and JPMSI have no obligation to use in connection with the transactions contemplated by this letter, or to furnish to you, confidential information obtained from other companies.
6
In order to enable JPMSI to bring relevant expertise to bear on its engagement under this Commitment Letter from among its global affiliates, the Borrowers agree that JPMSI may perform the services contemplated hereby in conjunction with its affiliates, and that any JPMSI affiliates performing services hereunder shall be entitled to the benefits and subject to the terms of this Commitment Letter.
If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms hereof and of the Term Sheets and the Fee Letter by returning to us executed counterparts hereof and of the Fee Letter not later than 5:00 p.m., New York City time, on October 3, 2005. JPM’s commitments and JPMSI’s agreements herein will expire at such time in the event JPM has not received such executed counterparts in accordance with the immediately preceding sentence.
[Remainder of Page Intentionally Left Blank]
7
JPM and JPMSI are pleased to have been given the opportunity to assist you in connection with this important financing.
| Very truly yours, | |
| JPMORGAN CHASE BANK, N.A. | |
| By: __________________________________ | |
| Name: | |
| Title: | |
| J.P. MORGAN SECURITIES INC. | |
| By: __________________________________ | |
| Name: | |
| Title: |
Accepted and agreed to as of
the date first written above by:
BRANDYWINE OPERATING
PARTNERSHIP, L.P.
By: __________________________________
Name:
Title:
BRANDYWINE REALTY TRUST
By: __________________________________
Name:
Title:
Schedule 3
SUBJECT PROPERTIES
| 1. | One Northwestern |
| 2. | Wood Dale I & II |
| 3. | 155 Alexandria Way |
| 4. | 16801 S. Exchange |
| 5. | One O’Hare Center |
| 6. | Corporate Lakes III |
| 7. | Corporetum Combined |
| 8. | 1717 Deerfield |
| 9. | Bannockburn |
| 10. | Salton |
| 11. | 410 Warrenville Road |
| 12. | Lakeside Point I & II |
| 13. | O’Hare Plaza |
Exhibit 99.2
FOR IMMEDIATE RELEASE
PRESS RELEASE
BRANDYWINE REALTY TRUST ANNOUNCES MERGER
WITH PRENTISS PROPERTIES TRUST
PRUDENTIAL REAL ESTATE INVESTORS TO PURCHASE
$753 MILLION OF PRENTISS ASSETS
PLYMOUTH MEETING, PA, OCTOBER 3, 2005 – Brandywine Realty Trust (NYSE: BDN) announced today the execution of a merger agreement pursuant to which it will acquire Prentiss Properties Trust in a transaction valued at approximately $3.3 billion. As part of the agreement, Prudential Real Estate Investors (PREI) will acquire a portfolio with a value of approximately $753 million of Prentiss Properties assets. It is anticipated that the merger will be completed during the fourth quarter of 2005 or in the first quarter of 2006. Prior to closing, Prentiss Properties intends to proceed with its previously announced Chicago and Detroit divestitures.
As part of this transaction, Brandywine will acquire Prentiss Properties’ assets in Washington, D.C., northern and southern California, all properties in Austin and Dallas, Texas, as well as related land holdings. Upon completion of the merger, Brandywine will own/manage a portfolio of 49 million square feet of space, making it one of the largest office REITs in the industry. PREI will acquire all of Prentiss Properties’ assets in Denver, Colorado and select assets in northern and southern California and Washington, D.C. Brandywine and PREI have also entered into an agreement whereby Brandywine will provide management and leasing for the PREI assets with the exception of the Denver market. PREI, the real estate investment management and advisory business of Prudential Financial, Inc., is acting on behalf of investors.
The total consideration payable in the merger (including proceeds from the sale to PREI and expected transaction expenses) will be approximately $3.3 billion, consisting of $2.2 billion in cash and assumption of Prentiss Properties debt and approximately 35.5 million Brandywine common shares and units. Each holder of Prentiss Properties common shares will receive $21.50 per share in cash and 0.690 Brandywine common shares for each Prentiss Properties common share, based on a Brandywine share price of $31.16.
It is expected that Michael V. Prentiss, chairman of Prentiss Properties, and Thomas F. August, president and chief executive officer of Prentiss Properties, will be joining Brandywine’s Board of Trustees. The combined company’s corporate structure will include several Prentiss Properties executives, and Brandywine fully expects that the Prentiss Properties regional operations will be incorporated into their operating platform.
Gerard H. Sweeney, president and chief executive officer of Brandywine, stated, “This merger is a transformational event for both companies, creating a significant multi-market growth platform for Brandywine. We have a longstanding respect for Prentiss Properties’ senior management and the integration will strengthen our management infrastructure at both the operating and executive levels. This transaction expands the companies’ tenant diversity, creates tremendous growth through our combined development pipeline and significantly broadens our capital deployment opportunities. Furthermore, this transaction also presented a unique opportunity to work with PREI to create a positive result for all three parties.”
1
Thomas F. August, president and chief executive officer of Prentiss Properties, commented, “This merger will create one of the premier real estate companies in the industry and represents a tremendous platform for future growth for our shareholders and employees. The combined entity will have a substantial land inventory to put into development over the next few years and will have strong positions in some of the most dynamic markets in the country. We are very pleased to team with Brandywine on an exciting new future for both of our companies.”
“We are delighted to participate in this transaction, which gives our investors the opportunity to acquire these fine properties from the Prentiss portfolio,” said Charles Lowrey, CEO of PREI. “Additionally, we're especially pleased to begin a new relationship with Brandywine.”
In this transaction, J.P. Morgan Securities Inc. acted as exclusive advisor to both Brandywine and PREI, while Lazard Freres & Co. LLC, served as exclusive advisor to Prentiss Properties. The law firm of Pepper Hamilton LLP advised Brandywine, the law firm of Akin Gump advised Prentiss Properties, and the law firm of Goodwin Procter LLP advised PREI.
Brandywine President and Chief Executive Officer Gerard H. Sweeney will be hosting a joint conference call with Michael V. Prentiss and Thomas F. August on Monday, October 3, at 11 a.m. Eastern Time. Call 1-888-889-5602. After the conference, a taped replay of the call can be accessed 24 hours a day through October 17, 2005 by calling 1-877-519-4471, access code 656-3891.
Brandywine has prepared an information package to support the announcement of this acquisition. This information package is available through Brandywine’s Web site, www.brandywinerealty.com, in the “Investor Relations/Financial Reports” section.
About Prentiss Properties Trust
Prentiss Properties is a self-administered and self-managed real estate investment trust (REIT). It owns interests in 135 operating properties with approximately 18.8 million square feet–16.6 million of office properties and 2.2 million of industrial properties. Prentiss Properties also has a 158,000-square-foot development project in construction at this time. Prentiss Properties, through various management subsidiaries, manages approximately 28 million square feet of office and industrial properties owned by Prentiss Properties, its affiliates and third parties.
With its headquarters in Dallas, Texas, Prentiss Properties focuses on the ownership of office properties in Metropolitan Washington D.C., Chicago, Dallas, Austin, Northern California and Southern California. It is a full-service real estate company with in-house expertise in areas such as acquisitions, development, facilities management, property management and leasing.
About Prudential Real Estate Investors
PREI’s specialized operating units offer a broad range of investment opportunities and investment management services in the United States, Europe, Asia and Latin America. PREI, headquartered in Parsippany, N.J., managed $25.4 billion for more than 300 clients as of June 30, 2005; net assets under management (i.e. after deduction of associated debt and liabilities) were $18.1 billion. For more information, visit www.prei.com.
2
About Brandywine Realty Trust
Brandywine, with headquarters in Plymouth Meeting, PA and regional offices in Philadelphia, PA, Mt. Laurel, NJ and Richmond, VA, is one of the Mid-Atlantic region's largest full service real estate companies. Brandywine owns, manages or has an ownership interest in 297 office and industrial properties, aggregating 23.9 million square feet.
For more information, visit Brandywine’s Web site at www.brandywinerealty.com.
# # #
FORWARD LOOKING STATEMENTS: Certain statements in this release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance, achievements or transactions of Brandywine, Prentiss Properties and their affiliates or industry results or the benefits of the proposed merger to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors relate to, among others, difficulties encountered in integrating the companies, approval of the transaction by the shareholders of the companies, the satisfaction of closing conditions to the transaction, the companies’ ability to lease vacant space and to renew or relet space under expiring leases at expected levels, the potential loss of major tenants, interest rate levels, the availability and terms of debt and equity financing, competition with other real estate companies for tenants and acquisitions, risks of real estate acquisitions, dispositions and developments, including cost overruns and construction delays, unanticipated operating costs and the effects of general and local economic and real estate conditions. Additional information or factors which could impact the companies and the forward-looking statements contained herein are included in each company’s filings with the Securities and Exchange Commission. The companies assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
# # #
Additional Information about the Merger and Where to Find It
This press release does not constitute an offer of any securities for sale. In connection with the proposed transaction, Brandywine and Prentiss Properties will file a joint proxy statement/prospectus as part of a registration statement on Form S-4 and other documents regarding the proposed merger with the Securities and Exchange Commission. Investors and security holders are urged to read the join proxy statement/prospectus when it becomes available because it will contain important information about Brandywine and Prentiss Properties and the proposed merger. A definitive proxy statement/prospectus will be sent to shareholders of Brandywine and Prentiss Properties seeking their approval of the transaction. Investors and security holders may obtain a free copy of the definitive proxy statement/prospectus (when available) and other documents filed by Brandywine and Prentiss Properties with the SEC at the SEC’s website at www.sec.gov. The definitive joint proxy statement/prospectus and other relevant documents may also be obtained, when available, free of cost by directing a request to Brandywine Realty Trust, 401 Plymouth Road, Suite 500, Plymouth Meeting, PA 19462, Attention Investor Relations, (telephone 610-325-5600) or Prentiss Properties Trust, 3890 W. Northwest Highway, Suite 400, Dallas, Texas 75220, Attention: Investor Relations (telephone 214-654-0886). Investors and security holders are urged to read the proxy statement, prospectus and other relevant material when they become available before making any voting or investment decisions with respect to the merger.
3
Brandywine and Prentiss Properties and their respective trustees and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Brandywine and Prentiss Properties in connection with the merger. Information about Brandywine and its trustees and executive officers, and their ownership of Brandywine securities, is set forth in the proxy statement for Brandywine’s 2005 Annual Meeting of Shareholders, which was filed with the SEC on April 1, 2005. Information about Prentiss Properties and its trustees and executive officers, and their ownership of Prentiss Properties securities, is set forth in the proxy statement for the 2005 Annual Meeting of Shareholders of Prentiss Properties, which was filed with the SEC on April 5, 2005. Additional information regarding the interests of those persons may be obtained by reading the proxy statement/prospectus when it becomes available.
This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
# # #
4