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Document Preview Agreement and Plan of Merger |
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Title: |
Agreement and Plan of Merger |
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Entities: |
Hallwood Group Inc.; Hallwood Realty Partners LP; HRPT Properties Trust; Lehman Brothers Inc.; Morgan Stanley & Co. Inc.; REIT Management & Research LLC; Jenkens & Gilchrist; Sullivan & Worcester LLP |
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Date: |
2004 |
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Size: |
224KB total |
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Price: |
$65 |
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ID: |
#319575 |
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AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 16, 2004
BY AND AMONG
HRPT PROPERTIES TRUST,
HWP LP ACQUISITION LLC,
HALLWOOD REALTY, LLC
AND
HALLWOOD REALTY PARTNERS, L.P.
================================================================================
{PAGE}
INDEX OF DEFINED TERMS
{TABLE}
{CAPTION}
Term Section
---- -------
{S} {C}
affiliate ..................................................... 9.03
Agreement ..................................................... Preamble
business day .................................................. 9.03
Certificate of Merger ......................................... 1.03
Certificates .................................................. 2.02(b)
Closing ....................................................... 1.02
Closing Date .................................................. 1.02
Code .......................................................... 2.02(g)
Confidentiality Agreement ..................................... 6.05(f)
Consent ....................................................... 3.05(b)
Contingent Liabilities ........................................ 9.03
Continuing Employees .......................................... 6.13(b)
Contract ...................................................... 3.03(b)
Declaration ................................................... 9.13
Defect ........................................................ 6.02
Deposit ....................................................... 6.01
Determination Date ............................................ 9.03
DRULPA ........................................................ 1.01
DLLCA ......................................................... 1.01
Effective Time ................................................ 1.03
Encumbrances .................................................. 3.18(c)
Environmental Claim ........................................... 3.14
Environmental Laws ............................................ 3.14
ERISA ......................................................... 3.11(e)
ERISA Affiliate ............................................... 3.11(e)
Exchange Act .................................................. 3.05(b)(i)
Exchange Fund ................................................. 2.02(a)
1st Odyssey ................................................... 3.08(d)
GAAP .......................................................... 3.06(c)
General Partner ............................................... Preamble
Governmental Entity ........................................... 3.05(b)
Gross Merger Consideration .................................... 2.01(b)(i)(x)
Group ......................................................... Recitals
Hazardous Substance ........................................... 3.14
HCRE .......................................................... Recitals
HWG95 ......................................................... Recitals
HWG98 ......................................................... Recitals
HWG Realty .................................................... Recitals
HWG, LLC ...................................................... Recitals
HWG Parties ................................................... Recitals
in the ordinary course of business ............................ 9.03
{/TABLE}
{PAGE}
{TABLE}
{S} {C}
Indemnification Obligations ................................... 3.21
Indemnified Party ............................................. 6.06(a)
Indemnitees ................................................... 6.08(a)
Inspection Period ............................................. 6.02
Intellectual Property ......................................... 3.20(a)
Judgment ...................................................... 3.05(a)(iii)
Law ........................................................... 3.05(a)(iii)
Legal Requirements ............................................ 3.18(d)
Lehman Brothers ............................................... 3.16
Liens ......................................................... 3.05(a)(ii)
Litigation .................................................... 9.03
Material Contracts ............................................ 3.15(a)
Merger ........................................................ Recitals
Merger Price .................................................. 2.01(b)(i)
Morgan Stanley ................................................ 3.16
Mortgage Document ............................................. 9.03
MREIT ......................................................... 9.03
Net Indebtedness .............................................. 9.03
Net Working Capital ........................................... 9.03
Other Transactions ............................................ Recitals
Parent ........................................................ Preamble
Parent Material Adverse Effect ................................ 4.04(a)
Partnership ................................................... Preamble
Partnership Agreement ......................................... 1.05(b)
Partnership Benefit Agreements ................................ 3.11(a)(ii)
Partnership Benefit Plans ..................................... 3.11(a)(i)
Partnership Certificate ....................................... 3.01(c)
Partnership Disclosure Letter ................................. 3.01(a)
Partnership Employees ......................................... 6.13(b)
Partnership Leased Property ................................... 3.18(a)(ii)
Partnership Leases ............................................ 3.19(a)
Partnership Material Adverse Effect ........................... 9.03
Partnership Owned Property .................................... 3.18(a)(i)
Partnership Pension Plans ..................................... 3.11(a)
Partnership Real Property ..................................... 3.18(a)(ii)
Partnership SEC Documents ..................................... 3.06(a)
Partnership Takeover Proposal ................................. 5.02(b)(i)
Paying Agent .................................................. 2.02(a)
Permits ....................................................... 3.13(c)
Permitted Encumbrances ........................................ 3.18(c)
Permitted Investments ......................................... 2.02(f)
person ........................................................ 9.03
Post Closing Employer ......................................... 6.13(a)
Prepaid Debt .................................................. 9.03
Proxy Statement ............................................... 3.05(b)(i)
Purchase Agreement ............................................ Recitals
{/TABLE}
{PAGE}
{TABLE}
{S} {C}
Purchaser ..................................................... Preamble
Rent Defect ................................................... 6.03(c)(ii)
Representatives ............................................... 5.02(a)
Rights Agent .................................................. 3.03(a)
Rights Agreement .............................................. 3.03(a)
Sarbanes-Oxley Act ............................................ 3.06(b)
SEC ........................................................... 3.05(b)(i)
Securities Act ................................................ 3.06(b)
Subsidiary .................................................... 3.01(a)
subsidiary .................................................... 9.03
Subsidiary Corporation ........................................ 6.15(d)
Subsidiary Organizational Documents ........................... 3.01(c)
Subsidiary Partnership ........................................ 3.09(a)
Subsidiary Resulting LLC ...................................... 6.15(d)
Successor GP .................................................. Recitals
Superior Partnership Proposal ................................. 5.02(b)(ii)
Surveys ....................................................... 6.03(b)
Survey Defect ................................................. 6.03(b)
Survivor ...................................................... 1.01
Tax Authority ................................................. 3.09(p)
Tax Return .................................................... 3.09(p)
Taxes ......................................................... 3.09(p)
Tenant Rent Roll .............................................. 3.19(a)
Termination Fee ............................................... 6.09(b)
Title Company ................................................. 9.03
Title Defect .................................................. 6.03(a)
Title Policies ................................................ 6.03(a)
Transaction Costs ............................................. 9.03
Transactions .................................................. 3.04(a)
Transfer Taxes ................................................ 6.11
Treasury Regulations .......................................... 3.09(p)
Unitholder Approval ........................................... 3.04(d)
Unitholder Meeting ............................................ 6.04(b)
Unit Option ................................................... 6.07(c)
Unit Option Plan .............................................. 6.07(c)
Unit Purchase Right ........................................... 3.03(a)
Units ......................................................... Recitals
Working Capital Adjustment .................................... 9.03
{/TABLE}
{PAGE}
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of April 16, 2004 (this
"Agreement"), is by and among HRPT PROPERTIES TRUST, a Maryland real estate
investment trust ("Parent"), HWP LP ACQUISITION LLC, a Delaware limited
liability company and a wholly-owned subsidiary of Parent ("Purchaser"),
HALLWOOD REALTY PARTNERS, L.P., a Delaware limited partnership (the
"Partnership") and HALLWOOD REALTY, LLC, a Delaware limited liability company
and the general partner (the "General Partner") of the Partnership.
RECITALS:
The Board of Trustees of Parent and the sole Member of the Purchaser have
approved the merger (the "Merger") of the Purchaser into the Partnership on the
terms and subject to the conditions set forth in this Agreement, whereby each
unit of limited partner interest in the Partnership (the "Units") outstanding
immediately before the closing of the Merger, shall be converted into the right
to receive an amount in cash equal to the Merger Price.
The Board of Directors of the General Partner has determined that the
Merger is fair to, and in the best interests of, the holders of Units, has
approved the Merger and resolved to recommend that holders of Units approve this
Agreement and the Merger.
The Parent, HRP GP, LLC, a Delaware limited liability company and a
wholly-owned subsidiary of Parent ("Successor GP"), the General Partner, HWG,
LLC, a Delaware limited liability company ("HWG, LLC"), Hallwood Commercial Real
Estate, LLC, a Delaware limited liability company ("HCRE"), HWG Realty
Investors, LLC, a Delaware limited liability company ("HWG Realty"), HWG 98
Advisors, Inc., a Delaware corporation ("HWG98"), HWG 95 Advisors, Inc., a
Delaware corporation ("HWG95") and The Hallwood Group Incorporated, a Delaware
corporation ("Group") (the General Partner, HWG, LLC, HCRE, HWG Realty, HWG98,
HWG95 and Group are referred to collectively as the "HWG Parties"), have
separately entered into an agreement (the "Purchase Agreement"), dated the same
date as this Agreement, providing for the consummation of certain other
transactions (the "Other Transactions"), including, without limitation, the
acquisition (x) by Parent from HWG, LLC of all of the Units owned by HWG, LLC
and (y) by Successor GP from the General Partner of the entire general partner
interest in the Partnership immediately before the closing of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and other terms contained in this Agreement, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. On the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware Revised Uniform Limited
Partnership Act (the "DRULPA") and the Delaware Limited Liability Company Act
(the "DLLCA"), the Purchaser
{PAGE}
shall be merged with and into the Partnership at the Effective Time. At the
Effective Time, the separate limited liability company existence of the
Purchaser shall cease and the Partnership shall continue as the survivor (as
such, the "Survivor") and a wholly-owned subsidiary of Parent.
1.02 Closing. Subject to the satisfaction or waiver of all of the
conditions set forth in Article VII, the closing (the "Closing") of the Merger
shall take place at the offices of Sullivan & Worcester LLP at 10:00 a.m. on the
business day following the satisfaction (or, to the extent permitted by Law,
waiver) of the conditions set forth in Article VII (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
fulfillment or, to the extent permitted by Law, waiver of those conditions), or
at such other place, time and date as shall be agreed in writing between Parent
and the Partnership. The date on which the Closing occurs is referred to in this
Agreement as the "Closing Date."
1.03 Effective Time. On the Closing Date the Partnership shall file with
the Secretary of State of the State of Delaware, a certificate of merger (the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DRULPA and the DLLCA and shall make all other filings or recordings required
under the DRULPA and the DLLCA. The Merger shall become effective at such time
as the Certificate of Merger is duly filed with such Secretary of State of
Delaware (the time the Merger becomes effective being the "Effective Time").
1.04 Effects. The Merger shall have the effects set forth in Section
17-211 of the DRULPA and Section 18-209 of the DLLCA.
1.05 Agreement of Limited Partnership.
(a) The certificate of limited partnership of the Partnership shall
be the certificate of limited partnership of the Survivor until thereafter
changed or amended in accordance with the provisions thereof and applicable Law.
(b) The Amended and Restated Agreement of Limited Partnership of the
Partnership ("Partnership Agreement") as in effect immediately prior to the
Effective Time shall be the agreement of limited partnership of the Survivor
until thereafter changed or amended in accordance with the provisions thereof
and applicable Law.
1.06 General Partner. On the Closing Date, pursuant to the Purchase
Agreement, the General Partner shall withdraw from the Partnership and the
Successor GP shall be admitted to the Partnership as a successor general
partner.
2
{PAGE}
ARTICLE II
EFFECT ON THE UNITS AND THE EQUITY INTERESTS IN
THE PURCHASER; EXCHANGE OF CERTIFICATES
2.01 Effect on Interests. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any Units, the equity
interests in Purchaser or the general partner interest in the Partnership:
(a) Membership interests of Purchaser. Each issued and outstanding
membership interest in Purchaser shall be converted into one newly issued Unit
of the Survivor.
(b) Conversion of Units.
(i) Each Unit issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive an amount in cash
equal to 91.5% of the quotient which results by dividing:
(x) two hundred fifty million dollars ($250,000,000), increased or
decreased, as the case may be, by the Working Capital Adjustment
(but not decreased to less than two hundred forty-five million
dollars ($245,000,000)) (the "Gross Merger Consideration"), by
(y) the sum of (1) the total number of Units outstanding immediately
prior to the Effective Time, plus (2) the total number of Units for
which Unit Options outstanding immediately prior to the Effective
Time are then exercisable
(such quotient, the "Merger Price"), without interest, less any
withholding (as provided in Section 2.02(g)), upon surrender and exchange
of the Certificate representing such Unit.
(ii) As of the Effective Time, all such Units shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a Certificate representing any such Units shall
cease to have any rights with respect thereto, except the right to receive the
Merger Price, without interest, less any required withholding taxes, upon
surrender of such Certificate in accordance with Section 2.02.
(c) Unit Options. All Unit Options outstanding immediately prior to
the Effective Time shall be cancelled and shall cease to exist, and each holder
of a Unit Option shall cease to have any rights with respect thereto, except as
provided in Section 6.07.
(d) General Partner Interest. The general partner interest in the
Partnership shall remain outstanding as a general partner interest of the
Survivor and no payment or distribution shall be made by the Partnership with
respect thereto.
2.02 Exchange of Certificates.
3
{PAGE}
(a) Paying Agent. Prior to the Effective Time, Parent shall select a
bank or trust company reasonably acceptable to the Partnership to act as paying
agent (the "Paying Agent") for the payment of the Merger Price upon surrender of
Certificates. The Purchaser shall, and Parent shall cause the Purchaser to,
deposit with the Paying Agent prior to the Effective Time, an amount in cash
which, together with the Deposit, is equal to the aggregate Merger Price payable
to holders of all the Units converted pursuant to Section 2.01(b) (such cash,
inclusive of the Deposit, being hereinafter referred to as the "Exchange Fund").
The expenses of the Paying Agent shall not be paid from the Exchange Fund, but
shall be paid directly by the Purchaser.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Survivor shall cause the Paying Agent to mail to each holder
of record of Units whose Units were converted into the right to receive the
Merger Price pursuant to Section 2.01(b), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificate or certificates that immediately prior to the Effective Time
represented outstanding Units (the "Certificates") shall pass, only upon
delivery of the Certificates to the Paying Agent and shall be in such form and
have such other provisions as Parent may reasonably specify), and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Price. Upon surrender of a Certificate for cancellation to the
Paying Agent or to such other agent or agents as may be appointed by the
Survivor, together with such letter of transmittal, duly executed, and such
other documents as may reasonably be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor
cash in an amount equal to the product of (A) the number of Units theretofore
represented by such Certificate, and (B) the Merger Price, and the Certificate
so surrendered shall forthwith be canceled. No interest shall be paid or shall
accrue on the cash payable upon surrender of any Certificate. For purposes of
this Article II, the Successor GP shall be deemed to be the record owner of all
Units purchased pursuant to the Purchase Agreement.
(c) No Further Ownership Rights in Units; Transfer Books. The Merger
Price paid in accordance with the terms of this Article II upon conversion of
Units shall be deemed to have been paid in full satisfaction of all rights
pertaining to such Units, subject, however, to the Survivor's obligation to pay
any distributions with a record date prior to the Effective Time that may have
been declared or made by the Partnership on such Units in accordance with the
terms of this Agreement and which remain unpaid at the Effective Time, and after
the Effective Time there shall be no further registration of transfers on the
transfer books of the Survivor of Units that were outstanding immediately prior
to the Effective Time. If, after the Effective Time, any Certificates are
presented to the Survivor or the Paying Agent for any reason, they shall be
canceled and exchanged as provided in this Article II.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
(including any interest or other income received by the Paying Agent in respect
thereof that has not previously been distributed pursuant to Section 2.02(f))
that remains undistributed to the holders of Units for one hundred eighty (180)
days after the Effective Time shall be delivered to the Survivor, upon demand,
and any holder of Units who has not theretofore complied with this
4
{PAGE}
Article II shall thereafter look only to the Survivor for payment of such
holder's claim for the Merger Price.
(e) No Liability. None of Parent, Purchaser, the General Partner,
the Successor GP, the Partnership, the Survivor or the Paying Agent shall be
liable to any person in respect of any payments or distributions payable from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
(f) Investment of Exchange Fund. The Paying Agent shall invest any
cash included in the Exchange Fund, as directed by the Survivor, on a daily
basis; provided, however, that substantially all of such investments shall be in
obligations of or guaranteed by the United States of America, in commercial
paper obligations receiving the highest rating from either Moody's Investors
Service, Inc. or Standard & Poor's Ratings Group, or in certificates of deposit,
bank repurchase agreements or bankers' acceptances of commercial banks with
capital exceeding One Billion Dollars ($1,000,000,000) (collectively, "Permitted
Investments") or in money market funds which are invested solely in Permitted
Investments; provided further, however, that the maturities of Permitted
Investments shall be such as to permit the Paying Agent to make prompt payment
of the Merger Price at and after the Effective Time. Any interest and other
income resulting from such Permitted Investments shall be payable to the
Survivor on demand.
(g) Withholding Rights. Parent, Purchaser or the Survivor shall be
entitled to deduct and withhold, or cause the Paying Agent to deduct and
withhold, from the consideration otherwise payable to any holder of Units
pursuant to this Agreement, (i) such amounts as may be required to be deducted
and withheld with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended (the "Code"), or under any provision of state,
local or foreign Law, and (ii) such amounts as may be required to be deducted or
withheld from or paid by holders of Units upon the order of the Court of
Chancery of the state of Delaware, New Castle County in connection with the
Litigation. To the extent that amounts are so deducted and withheld by Parent,
Purchaser or the Survivor, such deducted and withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
Units in respect of which such deduction and withholding was made by Parent,
Purchaser or the Survivor.
(h) Transfers of Units. If the Merger Price (or any portion thereof)
is to be paid to a person other than the person in whose name the Certificate
surrendered in exchange therefor is registered, it shall be a condition to the
payment of the Merger Price that the Certificate so surrendered shall be
properly endorsed or accompanied by appropriate stock powers or assignments
(with signatures guaranteed in accordance with the transmittal form) and
otherwise in proper form for transfer, that such transfer otherwise be proper
and that the person requesting such transfer pay to the Paying Agent any
transfer or other Taxes payable by reason of the foregoing or establish to the
satisfaction of the Paying Agent that such Taxes have been paid or are not
required to be paid.
(i) 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
5
{PAGE}
be lost, stolen or destroyed and, if required by the Survivor, the posting by
such person of a bond, in such reasonable amount as the Survivor may direct, as
indemnity against any claim that may be made against Parent or the Survivor with
respect to such Certificate, the Paying Agent will pay, in exchange for such
lost, stolen or destroyed Certificate, the Merger Price to be paid in respect of
the Units represented by such Certificate, as contemplated by this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE PARTNERSHIP
The Partnership hereby represents and warrants to Parent and Purchaser
that:
3.01 Organization, Standing and Power.
(a) Each of the Partnership and each subsidiary (a "Subsidiary") of
the Partnership listed in Section 3.02 of the letter dated as of the date of
this Agreement from the Partnership to the Parent and Purchaser (the
"Partnership Disclosure Letter") is an entity duly organized, validly existing
and in good standing under the Laws of the state of its organization and has all
requisite power and authority necessary to enable it to own, lease, operate or
otherwise hold its properties and assets and to conduct its business as
currently conducted.
(b) The Partnership and each Subsidiary is duly qualified to do
business in each jurisdiction where (i) the nature of its business or its
ownership or leasing of its properties make such qualification necessary, or
(ii) the failure to so qualify, individually or in the aggregate, has had or
could reasonably be expected to have a Partnership Material Adverse Effect.
(c) The Partnership has delivered to Parent true, correct and
complete copies of the certificate of limited partnership of the Partnership, as
amended to the date of this Agreement (as so amended, the "Partnership
Certificate"), and the Partnership Agreement, as amended to the date of this
Agreement, and complete copies of the organizational documents of the
Subsidiaries (the "Subsidiary Organizational Documents").
(d) The Partnership Certificate, the Partnership Agreement and the
Subsidiary Organizational Documents are in full force and effect, and no other
organizational documents are applicable to or binding upon the Partnership or
any Subsidiary.
(e) Neither the Partnership nor any Subsidiary is in violation of
any provision of the Partnership Certificate, the Partnership Agreement or the
Subsidiary Organizational Documents.
3.02 Subsidiaries; Equity Interests. The Partnership has no subsidiaries
and does not own, directly or indirectly, any capital stock, membership
interest, partnership interest, joint venture interest or other equity or
ownership interest in any person, other than as set forth in Section 3.02 of the
Partnership Disclosure Letter.
6
{PAGE}
3.03 Capital Structure.
(a) At the close of business on the date of this Agreement, (i)
1,593,948 Units were issued and outstanding, (ii) 64,800 Units were subject to
issuance upon exercise of outstanding Unit Options under the Unit Option Plan at
an exercise price of $11.875 per Unit, and (iii) one unit purchase right (a
"Unit Purchase Right") for each Unit outstanding was issued and outstanding, and
one Unit Purchase Right was reserved for issuance in connection with each Unit
Option, in accordance with that certain Unit Purchase Rights Agreement, dated as
of November 30, 1990, as amended by Amendment No. 1 to Unit Purchase Rights
Agreement, dated February 14, 2000, as further amended by Amendment No. 2 to
Unit Purchase Rights Agreement, dated March 28, 2003, (as amended, the "Rights
Agreement") between the Partnership and Equiserve Trust Company, N.A., as Rights
Agent (the "Rights Agent"). Except as set forth above, at the close of business
on the date of this Agreement, no other voting securities of the Partnership
were issued, reserved for issuance or outstanding.
(b) All outstanding Units are, and all such Units that may be issued
prior to the Effective Time will be when issued, duly authorized, validly
issued, fully paid and nonassessable (subject to the obligation of a limited
partner to repay the amount of any distribution wrongly received from the
Partnership for a period of three (3) years from the date of the distribution),
and not subject to or issued in violation of any purchase option, call option,
right of first refusal, preemptive right, subscription right or any similar
right under any provision of the DRULPA, the Partnership Certificate, the
Partnership Agreement or any contract, lease, license, indenture, note, bond,
agreement, permit, concession, franchise or other instrument (a "Contract") to
which the Partnership is a party or otherwise bound.
(c) Except as set forth in this Section or in Section 3.03(c) of the
Partnership Disclosure Letter, there are no options, warrants, calls, rights,
convertible or exchangeable securities, units, commitments, Contracts,
arrangements or undertakings to which the Partnership is a party or by which it
is bound (x) obligating the Partnership to issue, deliver or sell, or cause to
be issued, delivered or sold, additional Units or other equity interests in, or
any security convertible or exercisable for or exchangeable into Units or other
equity interest in, the Partnership, or (y) obligating the Partnership to issue,
grant, extend or enter into any such option, warrant, call, right, security,
unit, commitment, Contract, arrangement or undertaking. There are not any
outstanding contractual obligations of the Partnership to repurchase, redeem or
otherwise acquire any Units of the Partnership. Other than the Purchase
Agreement, there are no unitholder agreements, voting trusts or other agreements
or understandings to which the Partnership is a party or to which it is bound
relating to the holding, voting or disposition of any Units of the Partnership.
(d) The Board of Directors of the General Partner or a committee
administering the Unit Option Plan has the power and authority to cause the Unit
Option Plan to terminate as of the Effective Time. Following the Effective Time,
no holder of a Unit Option or any participant in the Unit Option Plan or other
Partnership Benefit Plan will have any right thereunder to acquire any
partnership interest in the Survivor.
7
{PAGE}
(e) All Unit Options outstanding as of the date of this Agreement,
the price at which they are exercisable and the vesting schedule therefor are
listed on Section 3.03(e) of the Partnership Disclosure Letter.
(f) The capital structure of each Subsidiary is as set forth in
Section 3.03(f) of the Partnership Disclosure Letter. The capital stock or other
equity ownership interest in each Subsidiary is owned by the Partnership or by
an affiliate of the Partnership, as set forth in Section 3.03(f) of the
Partnership Disclosure Letter.
(g) There are no options, warrants, calls, rights, convertible or
exchangeable securities, units, commitments, Contracts, arrangements or
undertakings to which any Subsidiary is a party or by which it is bound (x)
obligating any Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, equity interests in, or any security convertible or
exercisable for or exchangeable into equity interests in, any Subsidiary or (y)
obligating any Subsidiary to issue, grant, extend or enter into any such option,
warrant, call, right, security, unit, commitment, Contract, arrangement or
undertaking.
(h) Each outstanding share of capital stock or other equity
ownership interest of each Subsidiary is duly authorized, validly issued, fully
paid and nonassessable (subject to the requirements, if any, under applicable
state Law, obligating any limited partner of a Subsidiary that is a limited
partnership to repay the amount of any distribution wrongly received from such
Subsidiary), and, except as set forth in Section 3.03(h) of the Partnership
Disclosure Letter, each such share or other equity ownership interest is owned
by the Partnership or another Subsidiary free and clear of all Liens, options,
rights of first refusal, agreements, limitations on the Partnership's or any
Subsidiary's voting rights, charges and other encumbrances whatsoever.
3.04 Authority; Execution and Delivery; Enforceability.
(a) The Partnership has all requisite partnership power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby (the "Transactions").
(b) The execution, delivery and performance by the Partnership of
this Agreement and the consummation by the Partnership of the Transactions have
been duly authorized by all necessary partnership action on the part of the
Partnership, subject to receipt of Unitholder Approval.
(c) The Partnership has duly executed and delivered this Agreement,
and this Agreement constitutes its legal, valid and binding obligation,
enforceable against the Partnership in accordance with its terms, except that
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the enforcement of
creditor's rights generally and the application of general principles of equity
(regardless of whether that enforceability is considered in a proceeding at law
or in equity).
8
{PAGE}
(d) The affirmative vote of the holders of a majority of the
outstanding Units ("Unitholder Approval") is the only vote of any class or
series of the Partnership's limited partner interests required to approve the
Merger and adopt this Agreement.
(e) (i) The Audit Committee of the Board of Directors of the General
Partner has approved the payment of the "Purchase Price" provided for in the
Purchase Agreement and the Merger Price, and (ii) the Board of Directors of the
General Partner has duly adopted resolutions (A) approving this Agreement, the
Merger, and the Other Transactions (including the payment to certain of the HWG
Parties of the consideration to be paid to such parties pursuant to the Purchase
Agreement) in accordance with the applicable provisions of the DRULPA and the
Partnership Agreement, (B) determining that the terms of the Merger and the
Other Transactions are fair to and in the best interests of the Partnership and
its unitholders, other than the General Partner and its affiliates, and (C)
recommending that the holders of Units approve and adopt this Agreement and the
Merger and the transfer of the general partner interest in the Partnership
pursuant to the Purchase Agreement.
3.05 No Conflicts; Consents.
(a) Except as set forth in Section 3.05(a) of the Partnership
Disclosure Letter, the execution, delivery and performance by the Partnership of
this Agreement do not, and the consummation of the Merger and the Other
Transactions and compliance with the terms of this Agreement will not:
(i) conflict with or result in any violation of any provision
of the Partnership Certificate, the Partnership Agreement or the Subsidiary
Organizational Documents,
(ii) subject to the filings and other matters referred to in
Section 3.05(b), 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 obligation or to loss of a
material benefit under, or to increased, additional, accelerated or guaranteed
rights or entitlements of any person under, or result in the creation of any
pledge, lien, charge, mortgage, deed of trust, claims against title, encumbrance
or security interest of any kind or nature whatsoever (collectively, "Liens")
upon any of the properties or assets of the Partnership or any Subsidiary under,
or require the consent of any person under, any provision of any Contract to
which the Partnership or any Subsidiary is a party or by which any of its
properties or assets is bound or affected, or
(iii) subject to the filings and other matters referred to in
Section 3.05(b)(i), conflict with or result in any violation of any domestic or
foreign judgment, verdict, jury award, injunction, order or decree ("Judgment")
or domestic or foreign statute, law (including common law), ordinance, rule or
regulation ("Law") applicable to the Partnership or any Subsidiary or their
respective properties or assets,
except in the case of clauses (ii) and (iii) above, for such matters as,
individually or in the aggregate, could not reasonably be expected to have a
Partnership Material Adverse Effect.
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(b) No consent, approval, license, permit, order or authorization
("Consent") of, or registration, declaration or filing with, or notice to, or
Permit from, any federal, state, local or foreign government or any court of
competent jurisdiction, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a "Governmental
Entity") is required to be obtained or made by or with respect to the
Partnership or any Subsidiary in connection with the execution, delivery and
performance of this Agreement or the consummation of the Transactions, other
than:
(i) the filing with the Securities and Exchange Commission
(the "SEC") of (A) a proxy statement relating to the Unitholder Approval (the
definitive form of such proxy statement is referred to as the "Proxy
Statement"), and (B) such reports under Sections 13 and 14 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in
connection with this Agreement, the Merger and the Other Transactions;
(ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of the other jurisdictions in which the Partnership is
qualified to do business;
(iii) such filings as may be required in connection with the
Transfer Taxes described in Section 6.11; and
(iv) such filings as may be required after the consummation of
the Merger to reflect the fact that the Merger has been consummated.
(c) The Board of Directors of the General Partner has amended the
Rights Agreement so that (i) neither Parent nor Purchaser nor any of its
"affiliates" or "associates" is or will become an "Acquiring Person" (each as
defined in the Rights Agreement) by reason of this Agreement, the Merger or any
Other Transaction, and (ii) a "Distribution Date" (as defined in the Rights
Agreement) will not occur by reason of this Agreement, the Merger or any of the
Other Transactions. The Unit Purchase Rights will expire concurrently with the
consummation of the Merger.
3.06 SEC Documents; Undisclosed Liabilities.
(a) The Partnership has timely filed all reports, schedules, forms,
statements and other documents with the SEC required to be filed by it on or
after December 31, 2000 (such reports, schedules, forms, statements and other
documents, collectively with all other reports, schedules, forms, statements and
other documents filed by the Partnership with the SEC, if any, being hereinafter
referred to as the "Partnership SEC Documents").
(b) As of their respective dates, the Partnership SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933 (the "Securities Act"), the Exchange Act and the Sarbanes-Oxley Act of 2002
(the "Sarbanes-Oxley Act") and the rules and regulations of the SEC promulgated
thereunder, to the extent applicable to such Partnership SEC Documents, and none
of the Partnership SEC Documents as of such dates contained any
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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. None of the Subsidiaries is required to file any forms, reports or
other documents with the SEC pursuant to Section 12 or 15 of the Exchange Act.
(c) The consolidated financial statements of the Partnership
included in the Partnership 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, including all applicable
requirements of the Sarbanes-Oxley Act, have been prepared in accordance with
generally accepted accounting principles in the United States ("GAAP") (except,
in the case of unaudited quarterly statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may
otherwise be indicated in the notes thereto) and fairly present in all material
respects the financial position of the Partnership as of the dates thereof and
the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited quarterly statements, to normal year-end
audit adjustments).
(d) Except as set forth in the financial statements included in the
Partnership's Annual Report on Form 10-K for the Year Ended December 31, 2003,
as of the date of those financial statements, neither the Partnership nor any
Subsidiary had any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) which would be required by GAAP to be
reflected in the Partnership's financial statements, and there was no condition,
situation or set of circumstances that could reasonably be expected to result in
such a liability or obligation. All Contingent Liabilities and off-balance sheet
financing arrangements of the Partnership are identified on Section 3.06(d) of
the Partnership Disclosure Letter.
3.07 Information Supplied. Subject to Parent's and Purchaser's fulfillment
of their obligations with respect thereto, the Proxy Statement will contain (or
will be amended in a timely manner so as to contain) all information that is
required to be included therein in accordance with the Exchange Act and the
rules and regulations thereunder and any other applicable Law and will conform
in all material respects with the requirements of the Exchange Act and any other
applicable Law; and neither the Proxy Statement nor any amendment or supplement
thereto will, at the time they are filed with the SEC or published, sent or
given to the Partnership's unitholders, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading or, in the case of the
Proxy Statement, will, at the time of the Unitholder Meeting, omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Unitholder Meeting which
shall have become false or misleading in any material respect. Notwithstanding
the foregoing, no representation or warranty is hereby made by the Partnership
with respect to any information supplied by Parent or Purchaser in writing for
inclusion in or incorporation by reference into, the Proxy Statement.
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3.08 Absence of Certain Changes or Events. Except as contemplated by this
Agreement, since December 31, 2003, the Partnership and the Subsidiaries have
conducted their respective business only in the ordinary course of business, and
there has not been:
(a) any event, change, occurrence, effect or development that,
individually or in the aggregate, has had or could reasonably be expected to
have a Partnership Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, limited partner interests, stock, property
or otherwise) with respect to any limited partner interests of the Partnership
or equity securities of any Subsidiary or any repurchase, redemption or other
acquisition by the Partnership or any Subsidiary of any limited partner
interests, capital stock or other equity securities of, or other ownership
interests in, the Partnership or any Subsidiary;
(c) any split, combination or reclassification of any limited
partner interests, capital stock or any issuance of or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for, limited partner interests of the Partnership or equity securities of any
Subsidiary;
(d) except as set forth in Section 3.08(d) of the Partnership
Disclosure Letter, (i) any grant by any of the Partnership, any Subsidiary, or
HWG, LLC to any director or officer of HWG, LLC or to any individual considered
to be jointly employed by HWG, LLC and 1st Odyssey Group, Inc. ("1st Odyssey"),
of any increase in compensation, bonus or other benefits, other than increases
to persons who are not directors or officers of HWG, LLC, granted in the
ordinary course of business consistent with past practice, or (ii) any grant or
increase by the Partnership, any Subsidiary, or HWG, LLC to any such director,
officer or employee of any severance, change of control or termination pay
benefits;
(e) any change in accounting methods, principles or practices by the
Partnership or any Subsidiary, except for such changes as may have been required
by a change in GAAP;
(f) any (i) material elections with respect to Taxes by the
Partnership or any Subsidiary, (ii) settlement or compromise by the Partnership
or any Subsidiary of any material Tax liability or refund or (iii) assessment of
a material Tax against the Partnership or any Subsidiary by any Governmental
Entity;
(g) any amendment of any term of any outstanding security of the
Partnership or any Subsidiary;
(h) any incurrence, assumption or guarantee by the Partnership or
any Subsidiary of any indebtedness for borrowed money;
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(i) any making of any loan, advance or capital contribution to or
investment in any person by the Partnership or any Subsidiary other than in
connection with any acquisition or capital expenditure permitted by Section
5.01;
(j) except as set forth in Section 3.08(j) of the Partnership
Disclosure Letter, (i) any acquisition by the Partnership or any Subsidiary by
merging or consolidating with, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, joint venture, association or other business
organization or division thereof or any acquisition by the Partnership or any
Subsidiary of any assets that are material to the Partnership and its
Subsidiaries, taken as a whole, (ii) any sale, lease, license, encumbrance or
other disposition (other than Partnership Leases) of material assets of the
Partnership or any Subsidiary, (iii) any material incurrence of capital
expenditures by the Partnership or any Subsidiary, other than in the ordinary
course of business, or (iv) any modification, amendment, assignment, termination
or relinquishment by the Partnership or any Subsidiary of any Contract, license
or other right that, individually or in the aggregate with all such
modifications, amendments, assignments, terminations and relinquishments, has
had or could reasonably be expected to have a Partnership Material Adverse
Effect;
(k) except as set forth in Section 3.08(k) of the Partnership
Disclosure Letter, any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of the Partnership or any Subsidiary that,
individually or in the aggregate, has had or could reasonably be expected to
have a Partnership Material Adverse Effect;
(l) except as provided by the Purchase Agreement, any entry by the
Partnership or any Subsidiary into any commitment or transaction material to the
Partnership and its Subsidiaries, taken as a whole;
(m) any revaluation by the Partnership or any Subsidiary of any of
their material assets, including but not limited to writing down the value of
any Partnership Owned Property, inventory or writing off of notes or accounts
receivable, other than in the ordinary course of business; or
(n) any agreement, commitment or undertaking to take any action
referred to in Sections 3.08(a) through 3.08(m).
3.09 Taxes.
(a) Each of the Partnership and each Subsidiary listed in Section
3.09(a) of the Partnership Disclosure Letter (a "Subsidiary Partnership") is,
and since its formation has been, properly characterized as a partnership (or a
"disregarded entity" under Treasury Regulation Sections 301.7701-2 and
301.7701-3) for United States federal (and except as set forth in Section
3.09(a) of the Partnership Disclosure Letter for state or local) income tax
purposes and not as an association taxable as a corporation and for avoidance of
doubt has never been a "publicly traded partnership" treated as a corporation
under Section 7704 of the Code (or any similar Tax Law). The Subsidiaries listed
in Section 3.09(a) of the Partnership Disclosure
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Letter represent all of the Subsidiaries characterized as partnerships (or
"disregarded entities," as the case may be) for U.S. federal income tax
purposes. Except as disclosed in Section 3.09(a) of the Partnership Disclosure
Letter, for each Taxable year since the Partnership's inception:
(i) ninety percent (90%) or more of the gross income of the
Partnership (as measured under the Code) has consisted of "qualifying income" as
defined by Section 7704(d) of the Code;
(ii) neither the Partnership nor any Subsidiary Partnership
(including for this purpose any partnership or disregarded entity for tax
purposes in which the Partnership or any Subsidiary Partnership directly or
indirectly held or holds an interest) has received or accrued, or will receive
or accrue, rent with respect to any property attributable to personal property,
except where the average adjusted bases (for Taxable years beginning after
December 31, 2000, the average fair market value) of the personal property with
respect to such property at the beginning and at the end of such Taxable year,
leased in connection with each lease of real property, do not exceed fifteen
(15%) of the average adjusted bases (for Taxable years beginning after December
31, 2000, the average fair market value) of the real property and the personal
property together with respect to such property at the beginning and at the end
of such Taxable year, all within the meaning of Section 856(d)(1) of the Code;
(iii) neither the Partnership nor any Subsidiary Partnership
(including for this purpose any partnership or disregarded entity for tax
purposes in which the Partnership or any Subsidiary Partnership directly or
indirectly held or holds an interest) has received or accrued, or will receive
or accrue, directly or indirectly, any rent or interest with respect to real or
personal property, including base rent, percentage rent or any other amount
received or accrued in the nature of rent or interest, where the determination
of the amount of rent or interest depends in whole or in part on the income or
profits derived by any person from the property, except where rent or interest
is based on a fixed percentage or percentages of receipts or sales within the
meaning of Section 856(d)(2)(A) or Section 856(f)(1)(A) of the Code;
(iv) any sublease interest entered into between the
Partnership's or any Subsidiary Partnership's (including for this purpose any
partnership or disregarded entity for tax purposes in which the Partnership or
any Subsidiary Partnership directly or indirectly held or holds an interest)
tenants and their subtenants has not been based and will not be based, in whole
or in part, on the income or profits of any person; and
(v) each of the Partnership and each Subsidiary Partnership
(including for this purpose any partnership or disregarded entity for tax
purposes in which the Partnership or any Subsidiary Partnership directly or
indirectly held or holds an interest) has not received or accrued, and will not
receive or accrue, directly or indirectly, rent or any other consideration under
a lease from any person in which the Partnership or any Subsidiary Partnership
(including for this purpose any partnership or disregarded entity for tax
purposes in which the Partnership or any Subsidiary Partnership directly or
indirectly held or holds an interest) owned or owns (a) in the case of a
corporation, 9.5 percent or more of the total combined voting power of all
classes of stock entitled to vote, or 9.5 percent or more of the value or total
number of shares of all
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classes of stock, or (b) in the case of an entity other than a corporation, an
interest of 9.5 percent or more in the assets or net profits of such entity (it
being understood that for purposes of determining ownership in the Partnership
or any Subsidiary Partnership, in a tenant or in any other person, the
constructive ownership rules specified in Section 318 of the Code (as modified
by Sections 856(d)(5) and 7704(d)(3)(B) of the Code) shall apply).
(b) Except as will not and could not reasonably be expected to have,
individually or in the aggregate, a Partnership Material Adverse Effect, each of
the Partnership and each Subsidiary has timely filed, or has caused to be timely
filed on its behalf, all Tax Returns (including those returns requiring
estimates of Tax payments) required to be filed by it, and all such Tax Returns
are true, complete and accurate in all material respects. Such Tax Returns have
been prepared in accordance with all applicable Laws. All Taxes shown to be due
on such Tax Returns, or otherwise owed, have been timely paid. Section 3.09(b)
of the Partnership Disclosure Letter contains a list of all jurisdictions
(whether foreign or domestic) in which the Partnership or any Subsidiary
currently files Tax Returns.
(c) Except as set forth in Section 3.09(c) of the Partnership
Disclosure Letter, (i) neither the Partnership nor any Subsidiary requested any
extension of time in which to file any Tax Return, which Tax Return has not
since been filed, and (ii) no audits, investigations or other proceedings by a
Governmental Entity are presently pending against the Partnership or any
Subsidiary that could materially affect the liability of the Partnership and its
Subsidiaries, taken as a whole, for Taxes, and no notification has been received
by the Partnership or any Subsidiary that any such audit, investigation or
proceeding is threatened. Section 3.09(c) of the Partnership Disclosure Letter
includes a list of all issues in dispute in any audit, investigation or
proceeding against the Partnership or any Subsidiary and an estimate of the
amount of Tax in dispute as to each issue.
(d) The most recent financial statements contained in the
Partnership SEC Documents reflect an adequate reserve for all Taxes payable by
the Partnership and its Subsidiaries, taken as a whole, for all Taxable periods
and portions thereof through the date of such financial statements. No material
claim or deficiency with respect to any Taxes has been threatened, proposed,
asserted or assessed against the Partnership or any Subsidiary, and no waivers
or extensions of the statute of limitations for assessments or payment with
respect to any Taxes of the Partnership or any Subsidiary are pending.
(e) There are no material Liens for Taxes (other than for current
Taxes not yet due and payable) on the assets of the Partnership or any
Subsidiary. Neither the Partnership nor any Subsidiary is bound by any agreement
with respect to Taxes. Neither the Partnership nor any Subsidiary has ever been
a member of any "affiliated group" of corporations within the meaning of Section
1504(a) of the Code. Other than with respect to the Partnership or a Subsidiary
Partnership, neither the Partnership nor any Subsidiary Partnership is party to
any joint venture, partnership, or other arrangement or contract which could be
treated as a partnership for Tax purposes.
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(f) Within the past three (3) years, neither the Partnership nor any
Subsidiary has made any change in Tax reporting method, received a ruling from
any Tax Authority or signed an agreement with regard to Taxes, other than any
ruling received or agreement signed in the ordinary course of business with
respect to real estate Taxes. Section 3.09(f) of the Partnership Disclosure
Letter describes the real estate Taxes paid or payable with respect to each
Partnership Owned Property for each of the last three years.
(g) To the extent that the Tax Returns of the Partnership and each
Subsidiary have been examined by the applicable Tax Authorities (or the
applicable statutes of limitation for the assessment of Taxes for such periods
have expired) for periods through and including December 31, 2003, no material
adjustments were asserted as a result of such examinations which have not been
resolved and fully paid, and no issue has been raised by any Tax Authority in
any audit that, if raised with respect to any other period not so audited, could
be expected to result in a proposed material deficiency for any period not so
audited.
(h) Neither the Partnership nor any Subsidiary has made or filed an
election under Sections 108, 441 or 1017 of the Code.
(i) Neither the Partnership nor any Subsidiary is a party to any
safe harbor lease within the meaning of Section 168(f)(8) of the Code, as in
effect prior to the amendment by the Tax Equity and Fiscal Responsibility Act of
1982. Neither the Partnership nor any Subsidiary has any property or asset which
is "tax-exempt use property" within the meaning of Section 168(h) of the Code.
(j) Neither the Partnership nor any Subsidiary is liable for any
material Taxes to the Tax Authority of any foreign country. Neither the
Partnership nor any Subsidiary has or has had a permanent establishment in any
foreign country, as defined by the laws of such foreign country as supplemented
by any applicable Tax treaty or convention between the United States and such
foreign country.
(k) Neither the Partnership nor any Subsidiary is required to
include in income any adjustment under Section 481(a) of the Code by reason of a
change in accounting method initiated by the Partnership or any Subsidiary, and
no Tax Authority has proposed any such adjustment or change in accounting
method.
(l) Neither the Merger under this Agreement nor any Other
Transaction will terminate, invalidate or cause the recapture of any Tax
abatements, Tax credits, Tax exemptions, or Tax rebates which are in effect for
the Partnership or any Subsidiary, all of which are described in Section 3.09(l)
of the Partnership Disclosure Letter.
(m) Fifty percent (50%) or more of the value of the gross assets of
the Partnership consist of "U.S. real property interests" (as defined under
Section 897 of the Code) and ninety percent (90%) or more of the value of the
gross assets of the Partnership consist of "U.S. real property interests" plus
cash or cash equivalents (as defined under Treasury Regulation Section
1.1445-11T(d)).
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(n) Except as set forth in Section 3.09(n) of the Partnership
Disclosure Letter, no Subsidiary has Subchapter C current or accumulated
earnings and profits (as measured for Code purposes).
(o) Except as set forth in Section 3.09(o) of the Partnership
Disclosure Letter, the Partnership (i) has not made an election pursuant to
Section 10.08 of Internal Revenue Service Revenue Procedure 89-31, 1989-1 C.B.
895 relating to withholding on effectively connected income allocable to
"foreign partners" (as defined in Section 1446(e) of the Code) and (ii) has
complied with the withholding requirements with respect to any "foreign
partners" (as defined in Section 1446(e) of the Code) consistent with Section 10
of Internal Revenue Service Revenue Procedure 89-31, 1989-1 C.B. 895.
(p) For purposes of this Agreement:
"Tax Authority" means the Internal Revenue Service and any other domestic
or foreign governmental authority responsible for the administration of
any Taxes.
"Taxes" means any and all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income,
gross receipts, excise, stamp, real or personal property, ad valorem,
withholding, social security (or similar), unemployment, occupation, use,
service, service use, license, net worth, payroll, franchise, severance,
transfer, recording, employment, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties, capital
stock, profits, disability, sales, registration, value added, alternative
or add-on minimum, estimated or other taxes, assessments or charges
(whether or not determined on a consolidated, combined or stand alone
basis) imposed by any federal, state, local or foreign governmental entity
and interest, penalties or additions to tax attributable thereto.
"Tax Return" means any federal, state, local, provincial or foreign Tax
return, declaration, statement, report, schedule, form or information
return or any amended Tax return relating to Taxes.
"Treasury Regulations" means one or more regulations promulgated under the
Code by the Treasury Department of the United States.
3.10 Absence of Changes in Benefit Plans. Neither the Partnership nor any
Subsidiary has or ever had any employees. The individuals who perform services
for the Partnership are currently employees of HWG, LLC through 1st Odyssey, a
professional employer organization. None of the Partnership, the Subsidiaries or
HCRE is a party to any collective bargaining agreement or other labor union
contract applicable to persons employed by the General Partner, HCRE or 1st
Odyssey.
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3.11 ERISA Compliance; Excess Parachute Payments.
(a) Section 3.11(a) of the Partnership Disclosure Letter contains a
list of all plans or arrangements providing compensation or benefits to any
current or former employee (including those individuals considered to be jointly
employed by 1st Odyssey and HWG, LLC), officer or director or consultant of HWG,
LLC, or with respect to which the Partnership or any ERISA Affiliate of the
Partnership has or may have any liability:
(i) "employee pension benefit plans" (as defined in Section
3(2) of ERISA), "employee welfare benefit plans" (as defined in Section 3(1) of
ERISA), collective bargaining agreement, or bonus, pension, profit sharing,
deferred compensation, incentive compensation, Unit ownership, Unit purchase,
Unit option, retirement, thrift, savings, Unit bonus, restricted Units,
cafeteria, severance, disability, medical or other compensation or benefit plan,
(each of the foregoing, a "Partnership Benefit Plan," and collectively,
"Partnership Benefit Plans"); and
(ii) employment, consulting, deferred compensation,
indemnification, severance or termination agreements or arrangements,
non-compete agreements, confidentiality agreements, nonsolicitation and business
diversion agreements or tax gross-up agreements (each a "Partnership Benefit
Agreement," and collectively, "Partnership Benefit Agreements").
(b) Except as set forth in Section 3.11(b) of the Partnership
Disclosure Letter, since December 31, 2003, there has not been any adoption or
amendment in any material respect of any Partnership Benefit Plan or Partnership
Benefit Agreement.
(c) The Partnership has made available to Purchaser true, complete
and correct copies of:
(i) each Partnership Benefit Plan and Partnership Benefit
Agreement (or, in the case of any unwritten Partnership Benefit Plan or
Partnership Benefit Agreement, a description thereof);
(ii) the most recent annual report on Form 5500 filed with the
Internal Revenue Service with respect to each Partnership Benefit Plan (if any
such report was required under ERISA);
(iii) the most recent summary plan description for each
Partnership Benefit Plan for which a summary plan description is required; and
(iv) each trust agreement and group annuity contract relating
to any Partnership Benefit Plan.
(d) Except as set forth in Section 3.11(d) of the Partnership
Disclosure Letter, all Partnership Pension Plans that are eligible to do so have
received favorable determination letters from the Internal Revenue Service, to
the effect that such Partnership Pension Plans are
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qualified and exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, and no such determination letter has been revoked
nor, to the knowledge of the Partnership, has revocation been threatened, nor
has any such Partnership Pension Plan been amended since the date of its most
recent determination letter or application therefor in any respect that would
adversely affect its qualification or materially increase its costs. There is no
material pending or, to the knowledge of the Partnership, threatened litigation
relating to the Partnership Benefit Plans or Partnership Benefit Agreements.
Each Partnership Benefit Plan and Partnership Benefit Agreement has been
maintained in compliance with its terms and with the requirements prescribed by
all applicable laws, including but not limited to ERISA and the Code, which are
applicable thereto, except to the extent that any failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Partnership Material Adverse Effect.
(e) No Partnership Benefit Plan is or has been subject to Title IV
of ERISA. No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by the Partnership with respect to any ongoing, frozen
or terminated "single-employer plan," within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by it, or any ERISA Affiliate. None
of such Partnership Benefit Plans and trusts has been terminated. No Partnership
Benefit Plan is a multiemployer plan, within the meaning of Section 4001(a)(3)
of ERISA, and the Partnership has not incurred a "complete withdrawal" or a
"partial withdrawal" (as such terms are defined in Sections 4203 and 4205,
respectively, of ERISA) since the effective date of such Sections 4203 and 4205.
For the purposes hereof, "ERISA Affiliate" of any person means any other person
which, together with such person, would be treated as a single employer under
Section 4001 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or Section 414(b) or (c) of the Code.
(f) With respect to any Partnership Benefit Plan that is an employee
welfare benefit plan, (i) each such Partnership Benefit Plan that is a "group
health plan" (as such term is defined in Section 5000(b)(1) of the Code)
complies with the applicable requirements of Section 4980B(f) of the Code and
(ii) each such Partnership Benefit Plan (including any such Partnership Benefit
Plan covering retirees or other former employees) may be amended or terminated
without material liability to the Partnership on or at any time after the
Effective Time. There are no obligations for retiree health and life benefits
under any Partnership Benefit Plan or Partnership Benefit Agreement.
(g) Except as disclosed in Section 3.11(g) of the Partnership
Disclosure Letter, the consummation of the Merger or any Other Transaction will
not (i) entitle any employee, officer or director of the Partnership, the
General Partner or HCRE to severance pay or an election to terminate and receive
severance pay, (ii) accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any of the Partnership Benefit Plans or Partnership
Benefit Agreements, or (iii) result in any breach or violation of, or a default
under, any of the Partnership Benefit Plans or Partnership Benefit Agreements.
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(h) No amount or economic benefit that could be received (whether in
cash or property or the vesting of property) under any Partnership Benefit Plan
or Partnership Benefit Agreement or otherwise as a result of the Merger, any
Transaction, any Other Transaction, or any other event (including upon, as a
result of or in connection with a termination of employment on or following the
Effective Time) by any employee, officer or director of the General Partner,
HCRE or any of their affiliates who is a "disqualified individual" (as such term
is defined in Treasury Regulation Section 1.280G-1, Q&A 15) will be
characterized as an "excess parachute payment" (as defined in Section 280G(b)(1)
of the Code). The payments and estimated cost of benefit continuation that could
be provided to disqualified individuals as a result of the Merger, any
Transaction, any Other Transaction, or any other event (including upon, as a
result of or in connection with a termination of employment on or following the
Effective Time) are listed on Section 3.11(h) of the Partnership Disclosure
Letter.
(i) After the Closing, the Partnership will not have any obligation,
liability or expense under or with respect to any Partnership Benefit Plan or
Partnership Benefit Agreement to any person, including any employee, service
provider or insurer (other than such obligations, liabilities or expenses
incurred prior to the Effective Time which are reflected or reserved against in
the financial statements of the Partnership (or the notes thereto) or are
otherwise taken into account in determining the Working Capital Adjustment).
3.12 Litigation.
(a) Except as set forth in Section 3.12(a) of the Partnership
Disclosure Letter and other than routine appeals relating to real property Tax
assessments, there is no suit, claim, action, proceeding or investigation
pending against, or to the knowledge of the Partnership threatened against or
affecting, the General Partner, the Partnership or any Subsidiary or any of
their respective properties before any arbitrator, court or other Governmental
Entity (and neither the Partnership nor any Subsidiary is aware of any basis for
any such suit, action, proceeding or investigation) that, individually or in the
aggregate, could reasonably be expected to have a Partnership Material Adverse
Effect.
(b) Except as set forth in Section 3.12(b) of the Partnership
Disclosure Letter, there are no suits, claims, actions, proceedings or
investigations pending or, to the knowledge of the Partnership or any
Subsidiary, threatened, seeking to prevent, hinder, modify or challenge the
transactions contemplated by this Agreement or the Other Transactions.
(c) Except as set forth in Section 3.12(c) of the Partnership
Disclosure Letter, neither the Partnership nor any Subsidiary is subject to any
outstanding Judgment against them or naming them as a party.
3.13 Compliance with Applicable Laws.
(a) Except as set forth in Section 3.13(a) of the Partnership
Disclosure Letter, the Partnership and each Subsidiary is, and their operations
are being conducted, in compliance
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with all applicable Laws, except for such failures to comply as, individually or
in the aggregate, could not reasonably be expected to have a Partnership
Material Adverse Effect.
(b) Except as set forth in Section 3.13(b) of the Partnership
Disclosure Letter, neither the Partnership nor any Subsidiary has received any
written notice: (i) of any administrative, civil or criminal investigation or
audit (other than Tax audits) by any Governmental Entity relating to the
Partnership or any Subsidiary or (ii) during the past two (2) years, from any
Governmental Entity alleging that the Partnership or any Subsidiary is not in
compliance in any material respect with any applicable Law.
(c) The Partnership and each Subsidiary, to their knowledge, has in
effect all approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights of or with all Governmental Entities
("Permits") necessary for it to own, lease or otherwise hold and to operate its
properties and assets and to carry on their business and operations as now
conducted, except for the failure to have such Permits that, individually or in
the aggregate, has not had and could not reasonably be expected to have a
Partnership Material Adverse Effect. Neither the Partnership nor any Subsidiary
has received notice of any defaults under, or violations of, any such Permit,
except for such defaults and violations that, individually and in the aggregate,
have not had and could not reasonably be expected to have a Partnership Material
Adverse Effect. The Merger, in and of itself, will not cause the revocation or
cancellation of any such Permit that, individually or in the aggregate, could
reasonably be expected to have a Partnership Material Adverse Effect.
(d) This Section 3.13 does not relate to matters with respect to
Taxes, which are the subject of Section 3.09, or to environmental matters, which
are the subject of Section 3.14.
3.14 Environmental Matters.
(a) Each of the Partnership, each Subsidiary and each Partnership
Real Property is, and within the period of all applicable statutes of limitation
has been, in material compliance with all applicable Environmental Laws.
(b) Each of the Partnership and each Subsidiary holds and is, and
within the period of all applicable statutes of limitation has been, in material
compliance with all Permits required to conduct its business and operations
under all applicable Environmental Laws.
(c) Except as disclosed in Section 3.14(c) of the Partnership
Disclosure Letter, neither the Partnership nor any Subsidiary has received any
written Environmental Claim against it, and neither the Partnership nor any
Subsidiary has knowledge of any such Environmental Claim being threatened.
(d) To the knowledge of the Partnership and each Subsidiary, no
Hazardous Substance or other conditions are present on any property owned,
leased or operated by the Partnership or any Subsidiary, or at any other
location, that are in violation of any applicable
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Environmental Law or are reasonably likely to form the basis of any
Environmental Claim against the Partnership or any Subsidiary or against any
person (including any predecessor of the Partnership or any Subsidiary) whose
liability the Partnership or any Subsidiary has retained or assumed either
contractually or by operation of law.
(e) Neither the Partnership nor any Subsidiary has entered into or
agreed to any Governmental Entity decree, order or agreement or is subject to
any Judgment or order relating to compliance with, or to investigation or
cleanup, or to liability, under any Environmental Law.
(f) No person has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any Hazardous
Substance, or owned or operated any property or facility in a manner that has
given or would reasonably be expected to give rise to any liability, including
any liability for response costs, corrective action costs, personal injury,
property damage, natural resources damages or attorney fees, pursuant to any
Environmental Laws.
(g) None of the property owned, leased or operated by the
Partnership or any Subsidiary contains (i) any underground storage tanks, (ii)
any friable asbestos, (iii) any urea formaldehyde foam insulation, or (iv) any
landfills, surface impoundments or disposal areas.
(h) None of the property now or formerly owned, operated or leased
by the Partnership or any Subsidiary is listed or proposed for listing on the
National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Comprehensive
Environmental Response, Compensation and Liability Information System or on any
analogous list maintained by any Governmental Entity.
(i) True and complete copies of all environmental reports, studies
and analyses possessed or commissioned by the Partnership or any Subsidiary have
been provided to Parent and are listed on Section 3.14(i) of the Partnership
Disclosure Letter.
(j) For purposes of this Agreement:
"Environmental Claim" means any claim, demand, action, suit, complaint,
proceeding, directive, investigation, information request, Lien, demand
letter or notice of noncompliance, violation or liability by any person
asserting liability or potential liability (including liability or
potential liability for enforcement, investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damage,
personal injury, fines or penalties) arising out of, based on or resulting
from (x) the presence, discharge, emission, release or threatened release
of any Hazardous Substance at any location, (y) circumstances forming the
basis of any violation or alleged violation of any Environmental Law or
any Permit issued under any Environmental Law, or (z) matters otherwise
relating to obligations or liabilities under any Environmental Law.
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"Environmental Laws" means any and all applicable federal, state, local,
foreign statutes, regulations, ordinances, guidelines, codes, decrees, or
other legally enforceable requirement (including common law) of any
foreign government, the United States, or any state, local, municipal or
other Governmental Entity, regulating, relating to or imposing liability
or standards of conduct concerning protection of the environment
(including indoor air, ambient air, surface water, groundwater, land
surface, subsurface strata, or plant or animal species) or human health as
affected by the environment or pollutants, contaminants, chemicals,
industrial, hazardous, toxic, explosive or radioactive substances,
materials or waste (including employee health and safety).
"Hazardous Substance" means all explosive or radioactive substances,
materials or wastes, hazardous or toxic substances, materials or wastes,
asbestos, asbestos-containing materials, pollutants and contaminants
(including petroleum or any fraction thereof) and all other substances,
materials or wastes, whether or not defined as such, that are regulated
pursuant to or that could result in liability under any applicable
Environmental Law.
3.15 Contracts.
(a) Except as set forth in Section 3.15(a) of the Partnership
Disclosure Letter, neither the Partnership nor any Subsidiary is a party to or
bound by or otherwise subject to any Contracts of the following nature
(collectively, the "Material Contracts"):
(i) any Contract which restricts the Partnership or any of its
affiliates from competing in any line of business or with any person in any
geographical area;
(ii) any Contract involving (A) the acquisition, merger or
purchase of all or substantially all the assets or business of a third party,
(B) the purchase or sale or other transfer of assets, or a series of purchases
or sales or other transfers of assets involving consideration of $100,000 or
more or any Partnership Real Property, or (C) the grant to any person of any
preferential right to purchase or lease any material asset or assets of the
Partnership or any Subsidiary;
(iii) any Contract that contains a "change in control" or
similar provision pursuant to which the execution and delivery of this
Agreement, the consummation of the Merger or any of the Other Transactions would
give rise to any right (including any right of termination, cancellation,
acceleration or vesting) or benefit;
(iv) any Contract, including any mortgage or other grant of
security interests, guarantee or note, relating to the borrowing of money;
(v) any Contract to indemnify for any Environmental Claim or
any other liability or cost with respect to any Environmental Law;
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(vi) any Contract that would prohibit or materially delay the
consummation of the Merger or any of the Other Transactions;
(vii) any other Contract that is material to the business,
assets, condition (financial or otherwise), prospects or results of operations
of the Partnership and its Subsidiaries, taken as a whole (provided Partnership
Leases identified on the Tenant Rent Roll need not be separately listed in
Section 3.15(a)(vii) of the Partnership Disclosure Letter).
(viii) any Contract with the General Partner or an affiliate
of the General Partner; or
(ix) any "material contract" (as such term is defined in item
601(b)(10) of regulation S-K of the SEC).
(b) Except as, individually or in the aggregate, could not
reasonably be expected to have a Partnership Material Adverse Effect, neither
the Partnership nor any Subsidiary is in breach or default (and no event has
occurred that, with notice or the lapse of time or both, would constitute a
default by the Partnership or any Subsidiary) under any Material Contract nor,
to the knowledge of the Partnership or any Subsidiary, is any other party to any
Material Contract in breach or default thereunder (and no event has occurred
that, with notice or the lapse of time or both, would constitute such a
default).
3.16 Brokers; Fees and Expenses. No broker, investment banker, financial
advisor or other person, other than Morgan Stanley & Co. Incorporated ("Morgan
Stanley") and Lehman Brothers Inc. ("Lehman Brothers"), the fees and expenses of
which will be paid by the Partnership, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with, the
Merger and the Other Transactions based upon arrangements made by or on behalf
of the Partnership or any Subsidiary. The Partnership has furnished to Parent a
true and complete copy of all agreements between the Partnership (or any
Subsidiary) and Morgan Stanley and Lehman Brothers Inc. relating to the Merger
and the Other Transactions and disclosed to Parent all fees and expenses to be
paid to such advisors.
3.17 Opinion of Financial Advisors. The Partnership has received (a) the
opinion of Morgan Stanley, dated April 15, 2004, that the aggregate
consideration to be received by the holders of the limited and general
partnership interests of the Partnership pursuant to this Agreement and the
Purchase Agreement is fair from a financial point of view to such holders, and
(b) the opinion of Lehman Brothers, dated April 15, 2004, that (i) the
consideration to be received by the holders of Units (other than the General
Partner and its affiliates, including but not limited to HWG, LLC) in connection
with the Merger, taking into account the consideration received by or otherwise
allocated to the General Partner or its affiliates, on the one hand, and the
holders of the Units (other than the General Partner and its affiliates as
holders of Units), on the other hand, is fair, from a financial point of view,
to the holders of Units of the Partnership (other than the General Partner and
its affiliates, including but not limited to HWG, LLC), and (ii) the allocation
of the consideration between the General Partner and its affiliates, on the one
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hand, and the holders of the Units (other than the General Partner and its
affiliates as holders of Units), on the other hand, is reasonable.
3.18 Properties.
(a) Section 3.18(a) of the Partnership Disclosure Letter sets forth:
(i) all real properties (indicating the name of the owner and
the address or location of the property) owned by the Partnership or any
Subsidiary (the "Partnership Owned Property"), and
(ii) all real properties (indicating the name of the lessee
and lessor and the address or location of the property) leased or operated by
the Partnership or any Subsidiary as lessee (the "Partnership Leased Property").
The Partnership Owned Property and the Partnership Leased Property are referred
to as the "Partnership Real Property."
(b) The Partnership or the Subsidiaries own fee simple title to the
Partnership Owned Property and a valid leasehold i