Other Matters
At this time, we know of no other matters to be voted on at the special meeting. If any other matters properly come before the special meeting,
your shares of Silver Bay common stock will be voted in accordance with the discretion of the appointed proxy holders.
Householding of Special Meeting Materials
We have adopted a procedure approved by the SEC called "householding." Under this procedure, Silver Bay stockholders who have the same address
and last name will receive only one copy of this proxy statement unless one or more of these stockholders notifies us that they wish to continue receiving individual copies. This procedure reduces
printing costs, postage fees and the use of natural resources. Each Silver Bay stockholder who participates in householding will continue to be able to access or receive a separate proxy card.
If
you wish to receive a separate set of our disclosure documents at this time, contact Broadridge Financial Solutions, Inc. by telephone at 866-540-7095 (inside or outside of the
U.S.), or by writing to Broadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, New York 11717. If you wish to receive a separate set of our
disclosure documents in the future, you may contact Investor Relations, Silver Bay Realty Trust Corp. at 3300 Fernbrook Lane North, Suite 210, Plymouth, MN 55447.
If
you are a stockholder who has multiple accounts in your name or you share an address with other stockholders and would like to receive a single set of our disclosure documents for
your household, you may notify your broker, if your shares are held in a brokerage account, or if you hold registered shares, by notifying either Silver Bay Investor Relations or Broadridge using the
contact methods above.
Important Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on [
·
],
[
·
], 2017
This proxy statement is available at
www.silverbayrealtytrustcorp.com
under "Investor
Relations—SEC Filings."
Questions and Additional Information
If you have any questions concerning the merger, the special meeting or this proxy statement, would like additional copies of this proxy
statement or need help voting your shares of Silver Bay common stock, please contact our proxy solicitor:
470
West Avenue
Stamford, CT 06902
Stockholders May Call: (800) 662-5200 (Toll-Free from the U.S. and Canada)
or
(203) 658-9400 (From other locations)
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THE MERGER
This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached as Annex A to this
proxy statement and incorporated into this proxy statement by reference. You should read the entire merger agreement carefully as it is the legal document that governs the merger.
Parties Involved in the Merger
Silver Bay.
Silver Bay Realty Trust Corp. is a Maryland corporation focused on the acquisition, renovation, leasing, and management of
single-family
properties in select markets in the United States. Our objective is to generate attractive risk-adjusted returns for our stockholders over the long term through dividends and capital appreciation. We
generate virtually all of our revenue by leasing our portfolio of single-family properties. As of December 31, 2016, we owned 9,044 single-family properties in Arizona, California, Florida,
Georgia, Nevada, North Carolina, Ohio, South Carolina and Texas, excluding properties reflected as assets held for sale on our consolidated balance sheets.
Silver
Bay's common stock is listed on the New York Stock Exchange, which we refer to as "NYSE," under the symbol "SBY."
Silver Bay LP.
Silver Bay Operating Partnership L.P. is a Delaware limited partnership. Silver Bay conducts its business and
owns all
of its properties through Silver Bay LP.
Silver Bay GP.
Silver Bay Management LLC, a Delaware limited liability company, a wholly owned subsidiary of Silver Bay, is
the sole
general partner of Silver Bay LP and generally has the exclusive power to manage and conduct the business and affairs of Silver Bay LP, subject to certain limited approval and voting
rights of the limited partners.
The
business address of Silver Bay, Silver Bay LP and Silver Bay GP is 3300 Fernbrook Lane North, Suite 210, Plymouth, MN 55447 and the telephone number at that
location is (925) 358-4400.
Tricon Ultimate Parent.
Tricon Capital Group Inc., a corporation organized under the laws of the province of Ontario, Canada, is
principal
investor and asset manager focused on the residential real estate industry in North America with approximately $3.0 billion (C$4.0 billion) of assets under management. Tricon owns, or
manages on behalf of third-party investors, a portfolio of investments in land and homebuilding assets, single-family rental homes, manufactured housing communities and multi-family development
projects. Tricon's business objective is to invest for investment income and capital appreciation through its principal investment business segments and to earn fee income through its private funds
and advisory business.
Tricon
Ultimate Parent's common stock is listed on Toronto Stock Exchange, which we refer to as "TSX," under the symbol "TCN."
Tricon.
TAH Acquisition Holdings LLC, a Delaware limited liability company, is an indirect subsidiary of Tricon Ultimate Parent
and the sole
owner of Tricon LP and was recently formed solely for the purpose of engaging in the transactions contemplated by the merger agreement and has not engaged in any business activities other than
in connection with the transactions contemplated by the merger agreement.
Tricon LP.
TAH Acquisition LP, a Delaware limited partnership, was recently formed solely for the purpose of engaging in the
transactions contemplated by the merger agreement and has not
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engaged
in any business activities other than in connection with the transactions contemplated by the merger agreement.
The
business address of Tricon Ultimate Parent, Tricon and Tricon LP is 1067 Yonge Street, Toronto, Ontario, Canada M4W 2L2 and the telephone number at that location is
(416) 925-7228.
Effect of the Merger
Upon the terms and subject to the conditions of the merger agreement, Silver Bay will merge with and into Tricon, with Tricon continuing as the
surviving entity. As a result of the merger, Silver Bay will cease to be a publicly traded company and will be delisted from the NYSE. If the merger is completed, you will not own any shares of the
capital stock of or other equity interests in the surviving entity.
The
effective time of the merger will occur upon the later of the filing of the certificate of merger with the Secretary of State of the State of Delaware or the articles of merger have
been accepted for recording by the State Department of Assessments and Taxation of the State of Maryland (or at such later time as Silver Bay and Tricon may agree and specify in such certificate of
merger).
In
addition, immediately prior to the effective time of the merger, Tricon LP will merge with and into Silver Bay LP, with Silver Bay LP continuing as the surviving
entity.
Effect on Silver Bay if the Merger is Not Completed
If the merger, the merger agreement and the other actions and transactions contemplated by the merger agreement are not approved by Silver Bay
stockholders or if the merger is not completed for any other reason, Silver Bay stockholders will not receive any payment for their
shares of Silver Bay common stock. Instead, Silver Bay will remain an independent public company, our common stock will continue to be listed and traded on the NYSE and registered under the Exchange
Act and we will continue to file periodic reports with the SEC. In addition, if the merger is not completed, we expect that management will operate the business in a manner similar to that in which it
is being operated today and that Silver Bay stockholders will continue to be subject to the same risks and opportunities to which they are currently subject.
Furthermore,
if the merger is not completed, and depending on the circumstances that caused the merger not to be completed, the price of our common stock may decline significantly. If
that were to occur, it is uncertain when, if ever, the price of our common stock would return to the price at which it trades as of the date of this proxy statement.
Accordingly,
if the merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of Silver Bay common stock. If
the merger is not completed, the Board will continue to evaluate and review, among other things, Silver Bay's business operations, strategic direction and capitalization, and will make whatever
changes it deems appropriate. If the merger and the merger agreement are not approved by Silver Bay stockholders or if the merger is not completed for any other reason, Silver Bay's business,
prospects or results of operation may be adversely impacted.
Under
specified circumstances, Silver Bay will be required to pay Tricon a termination fee of $24.5 million upon the termination of the merger agreement. Under specified
conditions, Tricon will be required to pay Silver Bay a termination fee of $62.5 million. For more information, see the section of this proxy statement captioned "The Merger
Agreement—Termination Fee Payable by Silver Bay to Tricon" and "—Termination Fee Payable by Tricon to Silver Bay."
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Merger Consideration
In the merger, each outstanding share of Silver Bay common stock (other than shares held by (1) Silver Bay (whether as treasury stock or
otherwise); (2) any Tricon Party; or (3) any direct or indirect subsidiary of Silver Bay, Silver Bay LP, Tricon or Tricon LP), will be cancelled and automatically converted
into the right to receive $21.50 in cash, without interest and less any applicable withholding taxes. The per share merger consideration is subject to adjustment for any stock split,
combination, reclassification, reorganization, recapitalization or exchange or other like change and for dividends or other distributions in shares of Silver Bay common stock.
In
addition, in the merger, each outstanding share of Silver Bay preferred stock will be converted into the right to receive an amount in cash equal to $1,000 per share, plus an amount
equal to all dividends accrued and unpaid on such share of preferred stock immediately prior to the effective time of the merger, without interest, subject to withholding tax.
In
addition, each OP common unit will be converted into the right to receive an amount in cash, equal to (i) the number of shares of Silver Bay common stock that would have been
received from Silver Bay in exchange for such OP common unit under the terms of the limited partnership agreement if Silver Bay had issued and delivered Silver Bay common stock in exchange for such OP
common unit immediately prior to the effective time of the partnership merger (as if such OP common unit were a "Tendered Unit" pursuant to the limited partnership agreement and Silver Bay GP
had elected to cause Silver Bay to acquire such OP common unit pursuant to the limited partnership agreement), multiplied by (ii) the per share merger consideration.
At
or prior to the effective time of the merger, Tricon will deposit sufficient funds to pay the aggregate merger consideration, preferred merger consideration and OP unit consideration
with a designated paying agent. Once a Silver Bay stockholder has provided the paying agent with his, her or its stock certificates (or customary agent's message with respect to uncertificated
shares), letter of transmittal and the other items specified by the paying agent, the paying agent will promptly pay the Silver Bay stockholder the per share merger consideration, preferred merger
consideration or OP unit consideration, as applicable. For more information, see the section of this proxy statement captioned "The Merger Agreement—Procedures for Surrendering Silver Bay
Stock Certificates or Book-Entry Shares."
After
the merger is completed, you will have the right to receive the per share merger consideration, the preferred merger consideration or the OP unit consideration, as applicable, but
you will no longer have any rights as a Silver Bay stockholder or OP common unit holder.
Background of the Merger
The following chronology summarizes the key meetings and events that led to the signing of the merger agreement. This chronology does not
purport to catalogue every conversation among the Strategic Committee (as defined below), the Board or the representatives of Silver Bay, and other parties. In this summary, "Tricon" refers to Tricon
Capital Group Inc.
The
Board regularly evaluates Silver Bay's strategic direction and ongoing business plans with a view toward strengthening its core businesses and enhancing stockholder value. As part of
this evaluation, the Board has from time to time considered a variety of strategic alternatives, including (1) the continuation of Silver Bay's current business plan as a standalone entity;
(2) modifications to Silver Bay's business plan and strategy; (3) repurchases of Silver Bay common stock and other financing/recapitalization alternatives; (4) potential expansion
opportunities into new business lines, including investment management for third parties; (5) growth of Silver Bay's equity base through the issuance of common stock or other securities; and
(6) other strategic alternatives such as acquisitions of assets, business combination transactions and joint ventures.
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Silver
Bay was the first publicly traded single-family residential REIT upon its initial public offering in December 2012. As additional companies listed their shares on the public
markets, Silver Bay's stock price performance, along with that of its peers, began to face increasing headwinds, which caused Silver Bay's stock to trade at prices that management and the Board
believed to be significantly below Silver Bay's estimates of the underlying value of its assets (based on comparable sales analysis in the owner-occupant market) starting in the second half of 2013.
From 2013 through the middle of 2015, Silver Bay undertook numerous strategic and financing initiatives with the goal of increasing the trading price of its stock and unlock the underlying value of
its assets for stockholders. The major initiatives included a continued focus on making operational improvements for its platform, launch of a share buyback program in March 2013, the successful
closing of a $313 million securitization transaction in August 2014, internalization of Silver Bay's former Advisory Manager in September 2014, and the acquisition of the portfolio of
approximately 2,400 properties from The American Home on April 1, 2015. Despite these initiatives and the positive reception thereof among analysts and investors, Silver Bay stock continued to
trade at prices below management's estimate of the value of its assets (based on comparable sales analysis in the owner-occupant market).
In
light of Silver Bay common stock continuing to trade at prices below management's estimate of the value of its assets, in May 2015, Mr. Irvin Kessler, Chairman of the Board,
discussed with Mr. Thomas Brock, then serving as Lead Independent Director, and Mr. Thomas Siering, Board member, whether to engage a financial advisor to help Silver Bay explore
strategic alternatives. Each supported the idea and Mr. Kessler then discussed this proposal with David N. Miller, Silver Bay's then-current President and Chief Executive Officer.
Mr. Miller agreed with Mr. Kessler's assessment and suggested the Board discuss the same at its regularly scheduled meeting on May 20, 2015.
On
May 20, 2015, at its regularly scheduled meeting, the Board held a discussion concerning the competitive landscape in the single-family residential industry as a whole and
Silver Bay's related strategic positioning. At this time, there were three other U.S. publicly traded single-family residential REITs in addition to Silver Bay. The Board observed that a significant
challenge facing Silver Bay was the inability to grow its asset base, which could in turn reduce its expenses (and in particular its general and administrative expenses) as a percentage of revenue and
on a per home basis. The Board further
observed that a principal cause of its inability to acquire additional homes was that raising equity capital at a reasonable cost had become difficult due to generally depressed valuations for
publicly traded single-family residential REITS. The Board also discussed speculation among investors and the media that the single-family residential industry was soon likely to see competitors
engaging in major corporate transactions to increase scale, which could have the effect of disrupting others in the industry, including Silver Bay. Following this discussion, the Board determined that
Silver Bay should continue to explore its strategic options which might include a business combination with a competitor, a sale to a strategic or financial buyer, or to grow its asset base with an
influx of additional capital. In light of this discussion, the Board requested that management explore engaging a financial advisor to assist Silver Bay in assessing its options for growth or to
otherwise maximize value for Silver Bay stockholders, in part, to help ensure that the Board remained in a strong position to proactively guide Silver Bay's strategic future as opposed to being
compelled to react to other industry events.
Following
this Board meeting, Messrs. Kessler and Miller led a process to identify a financial advisor with the requisite skills and expertise to advise the Board. On
June 11, 2015, Messrs. Kessler and Miller, along with Messrs. Brock and Siering, met with representatives of two highly-respected investment banking firms, including Goldman
Sachs.
On
June 17, 2015, the Board held a telephonic meeting and received an update on Silver Bay's business initiatives and results. The Board also received an update from management
with respect to its meetings with financial advisors and discussed Mr. Kessler's recommendation that Silver Bay engage Goldman Sachs to assist Silver Bay in a strategic review process. The
Board requested that Mr. Miller negotiate an appropriate engagement letter with Goldman Sachs. During the second half of June 2015,
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Mr. Miller
negotiated a fee arrangement with Goldman Sachs with input from Messrs. Kessler, Brock and Siering.
On
August 7, 2015, the Board met, with representatives of each of Silver Bay management and Goldman Sachs in attendance. Also attending the meeting were representatives of Orrick,
Herrington & Sutcliffe LLP, outside legal counsel to Silver Bay, which we refer to as "Orrick." The representatives of Orrick discussed with the members of the Board their fiduciary
duties. The members of the Board discussed with representatives of Goldman Sachs the current state of the single-family residential industry, potential strategic alternatives that Silver Bay might
pursue, illustrative, valuation reference points, and initial matters to consider should the Board elect to move forward with a strategic review process. Following their presentation, representatives
of Goldman Sachs left the meeting. The Board then discussed the potential engagement of a financial advisor. The Board reviewed Goldman Sachs' expertise, its familiarity with Silver Bay's business and
the single-family residential industry and other matters, including other financial firms with which management had spoken. Mr. Miller summarized the key terms of a proposed engagement letter
previously shared with the Board, and following further discussion, the Board approved the engagement of Goldman Sachs on the terms presented to the
Board. An engagement letter with Goldman Sachs was signed on August 10, 2015. Goldman Sachs was engaged because of, among other factors, its substantial experience, knowledge of the
single-family residential industry and familiarity with Silver Bay's business. The Board also discussed at its meeting its concerns with employee retention during any strategic review and discussed
the importance of putting in place a change of control severance plan for certain key employees who would be aware of the process.
On
August 24, 2015, the Board met and approved a retention plan for certain key non-executive Silver Bay employees who would likely be involved with the strategic review process.
Mr. Miller also shared the current status of the outreach underway by Goldman Sachs to potential strategic partners and his expectation that the Board would receive a fulsome update at its next
regularly scheduled meeting.
During
the months of August and September 2015, representatives of Silver Bay management populated a due diligence data room with confidential information about Silver Bay,
representatives of Orrick prepared a form of confidentiality, non-solicitation and standstill agreement, which is referred to as an "NDA," and, at the direction of the Board, representatives of
Goldman Sachs began an outreach program to potential strategic partners for Silver Bay. During this process, more than 50 parties were contacted to gauge their potential interest in the single-family
residential industry or a large platform opportunity with an incumbent. These parties included public and private strategic players, financial sponsors, insurance companies, pension funds, sovereign
wealth funds, and other potential buyers or partners. Of those contacted, eight strategic partners (three public and five private) and four financial sponsors executed a negotiated NDA, undertook due
diligence and received a bid instruction letter requesting formal feedback by October 5, 2015. These parties included Tricon.
On
September 21, 2015, Starwood Waypoint Residential Trust, a publicly traded single-family residential REIT announced its plans to merge with Colony American Homes, Inc.,
a privately held single-family residential REIT company in a stock-for-stock transaction.
On
September 25, 2015, the Board met, with representatives of Silver Bay management, Goldman Sachs, and Orrick in attendance at its regularly scheduled meeting. The Board received
an update on Silver Bay's business results year to date and progress on key operating initiatives for the remainder of the year. The representatives of Goldman Sachs discussed with the members of the
Board an overview of the performance of certain single-family residential competitors and also reviewed the merger transaction announced on September 21, 2015 between Colony American Homes and
Starwood Waypoint, in a stock-for-stock transaction. Representatives of Goldman Sachs also provided an update on the progress of their outreach efforts, describing the status of conversations with 11
high priority
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and
interested parties and feedback from the parties who had expressed a lack of interest in the single-family residential industry or a large platform opportunity, including financial sponsors,
insurance companies, pension funds, sovereign wealth funds, non-traded REITs, residential finance companies and strategic single-family residential players. The Board discussed with representatives of
Goldman Sachs several potential strategic alternatives based on preliminary indications of interest, including a private partner contributing assets, a going private transaction, a merger of equals
transaction and a portfolio sale. The Board also discussed with representatives of Goldman Sachs certain strategic considerations in a potential merger of equals transaction with Company A, which had
executed an NDA. The Board directed Goldman Sachs to continue to pursue the potential merger of equals' transaction while continuing to seek feedback from other interested parties.
Between
September 25, 2015 and October 9, 2015, representatives of Goldman Sachs continued their outreach efforts and received indications of interest. Through these
efforts, the total number of parties contacted regarding their potential interest in the single-family residential industry or a large platform opportunity increased to approximately 70, with 13
having signed a negotiated NDA. In connection with the strategic review process, Goldman Sachs received three non-binding indications of interest from parties interested in acquiring all of the
outstanding equity of Silver Bay for cash. Company B proposed acquiring Silver Bay for $17.30 per share in cash. Company C proposed acquiring Silver Bay for $18.00 per share in cash, although such
offer was subsequently verbally revised downward, including, amongst other reasons, to reflect anticipated transaction costs. Tricon proposed acquiring Silver Bay for $18.50 per share in cash and
indicated that its financing plan may include an institutional investment partner. In addition, Company D and Company E each proposed to acquire limited assets from Silver Bay in certain markets.
Company F and Company G each indicated an interest to participate in a broader roll up transaction that would create an entity with significant scale. At the request of the Board, representatives of
Goldman Sachs also continued discussions with advisors to Company A in an attempt to arrange a discussion between management of Silver Bay and management of Company A regarding a potential
combination, discussing the preconditions for such meeting requested by Company A's representatives.
On
October 9, 2015, the Board met, with representatives of Silver Bay management, Goldman Sachs, and Orrick in attendance. The representatives of Goldman Sachs updated the members
of the Board on their outreach efforts and indications of interest described in the preceding paragraph. The Board requested that Goldman Sachs prepare a further financial analysis. The Board also
requested that Goldman Sachs continue conversations with each identified bidder, explore the potential to pair bidders to achieve an overall higher price, and continue to seek a discussion with the
management of Company A regarding a potential merger of equals. In addition, in light of the significant workload associated with a strategic review and the possibility that management might need
feedback and direction on relatively short notice, the Board discussed the formation of a committee to continue the strategic review process, noting that a committee would facilitate increased meeting
frequency. Mr. Kessler noted that the materials and meetings would be open and available to all members of the Board to attend and that the committee would periodically report and consult with
the full board on matters related to the strategic review process. The Board further discussed the formation of a committee composed of Messrs. Brock, Kessler, and Miller and requested Silver
Bay's Secretary to prepare and circulate a written consent to establish such committee.
On
October 12, 2015, the Board formed a Strategic Review Committee, which is referred to as the "Strategic Committee," and appointed Messrs. Brock, Kessler, and Miller to
the Strategic Committee. The Strategic Committee was authorized to (1) advise and direct Silver Bay management with respect to the consideration, investigation, assessment, and endorsement of a
strategic transaction, (2) facilitate the negotiation of a strategic transaction and any alternative transaction, and (3) report to the Board on a regular basis. The Board retained the
authority to approve the execution of a definitive agreement for any strategic transaction.
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Between
October 9, 2015 and October 14, 2015, at the request of the Board, representatives of Goldman Sachs continued discussions with advisors to Company A regarding a
potential merger of equals transaction.
On
October 14, 2015, the Strategic Committee met, with an additional member of the Board and representatives of Silver Bay management, Goldman Sachs, and Orrick in attendance.
Representatives of Goldman Sachs began with an update on conversations with advisors to Company A on continuing to explore a potential merger of equals transaction and the governance issues related to
such a transaction. The Strategic Committee directed Goldman Sachs to express to Company A its willingness to agree that a combined company would be led by a new chief executive officer to be
identified at or following the time of the transaction announcement, but not to offer control of the combined company to the current board of directors of Company A. The Strategic Committee also
discussed whether the combined company would require additional capital to grow its asset base and whether to explore an investment by a third party financial sponsor as part of such a transaction, as
well as the complexities of involving a third party in such negotiations. The members of the Strategic Committee also discussed with representatives of Goldman Sachs Tricon's ability to fund its
initial non-binding indication of interest at $18.50 per share and the Board's desire to obtain a higher price per share for Silver Bay stockholders. At the same meeting, Goldman Sachs also reviewed
with the Strategic Committee its financial analysis. The Strategic Committee directed Goldman Sachs to respond to the parties who had provided indications of interest to let them know that the prices
indicated were not adequate and to guide them to a higher price. Representatives of Goldman Sachs also provided the Board with an update on all the potential bidders that had been contacted since
their engagement, provided feedback from that outreach and reviewed the responses to date.
In
the second half of October, a representative of Tricon informed representatives of Goldman Sachs that Tricon's institutional capital partners could no longer participate in the
proposed transaction and that Tricon may no longer be able to confirm its full company cash bid, but that it was still interested in acquiring approximately 50-60% of Silver Bay's portfolio and
requested to be paired with other potential bidders that wished to acquire the remaining assets. During this period, representatives of Goldman Sachs also arranged a meeting between Mr. Kessler
and the Chair and Chief Executive Officer of Company A on November 2, 2015 to continue to explore discussions with respect to a merger of equals transaction.
On
October 30, 2015, the Strategic Committee met, with additional members of the Board and representatives of Silver Bay management, Goldman Sachs, and Orrick in attendance. The
members of the Strategic Committee discussed with representatives of Goldman Sachs the conversations with Tricon reflected in the preceding paragraph. After considering potential partners with which
Silver Bay might pair Tricon, the Strategic Committee determined Silver Bay should seek to control negotiations with third parties rather than pairing them directly with Tricon and directed Goldman
Sachs to seek indications of interest from potential bidders for assets not included in the Tricon proposal. The Strategic Committee also discussed with representatives of Goldman Sachs certain topics
to be discussed between Mr. Kessler and the Chair and Chief Executive Officer of Company A, including financial analysis and governance matters, at the meeting scheduled for November 2,
2015. Representatives of Goldman Sachs also discussed the strategic rationale for such a combination, the portfolio overlap and potential synergies.
On
November 2, 2015, Mr. Kessler and the Chair and Chief Executive Officer of Company A met in person to discuss a potential combination between Silver Bay and Company A,
including high level discussions on how a potential transaction between the parties could be structured.
Between
October 14, 2015 and November 12, 2015, each of Company B and Company C expressed its inability to meet the higher price requested by Silver Bay.
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Between
November 2, 2015 and November 12, 2015, representatives of Goldman Sachs, at the request of the Strategic Committee, and advisors to Company A continued to discuss
a potential combination between Silver Bay and Company A. Representatives of Goldman Sachs also sought to schedule a meeting between an expanded group of board members from each company.
Representatives of Goldman Sachs, at the request of the Strategic Committee, also continued discussions with Tricon with respect to Tricon acquiring a significant portion of Silver Bay's portfolio.
On
November 4, 2015, representatives of Goldman Sachs received a call from a representative of Company H, a potential strategic buyer who had not yet executed an NDA, expressing
potential interest in a combination with Silver Bay.
On
November 12, 2015, the Strategic Committee met, with additional members of the Board and representatives of Silver Bay management, Goldman Sachs, and Orrick in attendance. The
representatives of Goldman Sachs provided the members of the Strategic Committee an update on ongoing conversations with Company A and Tricon, as well as a recent outreach by Company H.
Representatives of Goldman Sachs described various market perspective metrics for publicly traded single-family residential REITs, as well as certain publicly available operating metrics based on the
third quarter financial results of such publicly traded single-family residential REITs. The members of the Strategic Committee also discussed the following with representatives of Goldman Sachs:
(1) updated bids from Tricon for 54% of Silver Bay's assets at indicative pricing that was below Silver Bay management's estimated fair market value of such assets (based on comparable sales
analysis in the owner-occupant market), and (2) an analysis of the implied equity value of a share of Silver Bay stock assuming a sale of assets to Tricon at indicated levels, and a sale of
remaining assets to a hypothetical third party at various illustrative valuations or through a one-by-one liquation of assets. The members of the Strategic Committee discussed with representatives of
Goldman Sachs the competitive impact of seeking proposals for smaller portions of its portfolio from potential bidders and the perception that current bidders may have if Silver Bay were to terminate
its strategic review process.
Subsequent
to the November 12, 2015 meeting of the Strategic Committee, and at the request of the Strategic Committee, representatives of Goldman Sachs informed Tricon that its
bid range would need to increase in order to proceed. On November 18, 2015, Tricon reaffirmed its bid range to representatives of Goldman Sachs.
On
November 17, 2015, advisors to Company A informed representatives of Goldman Sachs that they had been instructed to discontinue conversations with Silver Bay and its advisors
regarding a potential combination.
On
November 23, 2015, the Board met, with representatives of Silver Bay management, Goldman Sachs, and Orrick in attendance. The representatives of Goldman Sachs provided members
of the Board with an update on the strategic review process since October 2015, as reflected in the preceding paragraphs. Representatives of Goldman Sachs then noted that since the last Board meeting,
three parties with preliminary cash proposals would no longer continue in the process at the current time, and relayed the withdrawal rationale provided to Goldman Sachs by each party: in two
instances due to an inability to increase the offer price originally presented and in the case of Tricon, due to an inability to raise additional equity financing from a capital partner. The Board
again considered pairing Tricon with other interested parties to create a bid for the entire company but determined it should instead seek to obtain bids for portions of its portfolio in order to
better control the process. The Board also discussed the fact that the potential merger of equals discussions had been terminated by Company A and deliberated on the potential timing of engaging in
discussions for a potential combination with Company H in the first quarter of 2016. The Board then discussed next steps with respect to the ongoing strategic review process.
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On
December 3, 2015, Mr. Miller and representatives of Goldman Sachs had separate telephonic discussions with the Chief Executive Officer of Company H regarding their
potential interest in a transaction with Silver Bay.
On
December 7, 2015, Company I, a potential strategic buyer who had not yet executed an NDA, executed a negotiated NDA and was subsequently provided access to confidential
information of Silver Bay.
On
December 11, 2015, Company J, a potential strategic buyer who had not yet executed an NDA, executed a negotiated NDA and was subsequently provided access to confidential
information of Silver Bay.
From
November 23, 2015 through December 17, 2015, at the request of the Board, representatives from Goldman Sachs contacted Companies I and J and six other parties that had
previously executed a negotiated NDA to request indicative bids for portions of Silver Bay's portfolio. By December 17, 2015, six of these parties indicated an interest in submitting such a
bid, with four of such parties submitting non-binding indications of interests, and two parties indicating they did not have an interest in submitting a bid at that time.
On
December 17, 2015, the Board met at its regularly scheduled meeting, with representatives of Silver Bay management, Goldman Sachs, and Orrick in attendance. Silver Bay
management provided the Board with an overview of Silver Bay's year to date performance and progress towards achieving its 2015 initiatives. The Board discussed with representatives of Goldman Sachs
the current state of the single-family residential industry, including recent M&A activity in the industry. The representatives of Goldman Sachs also updated the Board on the status of current bids
for portions of Silver Bay's portfolio, including the implied equity value of Tricon's latest proposal if Silver Bay were to sell assets to Tricon at the mid-point of Tricon's indicative pricing range
and achieved a variety of hypothetical sale prices for its remaining assets. The Board also discussed with representatives of Goldman Sachs a potential combination with Company H, which had not yet
executed an NDA but had expressed interest in discussing a potential combination. The Board reviewed the current state of Silver Bay's strategic options, acknowledging that the greatest impediment to
cash flow growth remained its relatively high level of general and administrative expense compared to its equity base, and discussed the potential to use Silver Bay's existing infrastructure to build
a third-party property and asset management business, the importance of reducing general and administrative expense and the potential to sell a more limited number of assets to fund additional share
repurchases. The Board agreed it would review the potential to build a third party management business at an upcoming meeting and would defer consideration of additional share repurchases until after
having completed its strategic review.
On
January 8, 2016, Silver Bay entered into a NDA with Company H. On January 9, 2016, at the request of Silver Bay management, representatives of Goldman Sachs delivered
confidential information regarding Silver Bay to Company H.
On
January 14, 2016, Mr. Miller and Mr. Wetmore met with the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer of Company H to discuss the
business and operations of Silver Bay in greater detail and to discuss high level views regarding a potential transaction with Silver Bay.
On
January 14, 2016, Company J submitted an indicative bid for approximately 1,000 Silver Bay properties at a price that represented more than an 18% discount to Silver Bay's
estimate of the value of such properties (based on comparable sales analysis in the owner-occupant market).
On
January 15, 2016, the Board met, with representatives of Silver Bay management, Goldman Sachs, and Orrick in attendance. The representatives of Goldman Sachs discussed with
members of the Board recent developments in the single-family residential industry and provided an update on revised
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indications
of interest from various interested parties, including a discussion of the implied valuation of Silver Bay at various assumed sales prices. Although Silver Bay had not received bids for
the entirety of the markets in which it held assets, the Board extrapolated the most reasonable offered prices across the entire portfolio resulting in an estimated value of Silver Bay stock of less
than $18.00 per share. The Board also discussed Mr. Miller's conversation with representatives of Company H and representatives of Goldman Sachs presented an illustrative potential transaction
with Company H, reviewing various illustrative exchange ratios and the resulting valuations for Silver Bay. Members of the Board observed that the highest exchange ratio Company H might reasonably
consider represented only a 10% premium to Silver Bay's then-current stock price and determined such a transaction was not likely viable under current conditions. Members of the Board also discussed
and determined that current bid levels and other options did not warrant further action by the Board and they decided to abandon the strategic review process to focus on portfolio refinement,
increased share repurchases, operational improvements and other strategic initiatives.
On
January 19, 2016, Mr. Miller resigned as President and Chief Executive Officer of Silver Bay and Mr. Brock was appointed Interim President and Chief Executive
Officer.
On
January 28, 2016, the Board met, with representatives of Silver Bay management in attendance. Representatives of Silver Bay management and members of the Board discussed their
intermediate term strategy, which included disposing of non-core assets to fund additional share repurchases, the exploration of launching a property and asset management business to leverage Silver
Bay's existing infrastructure and personnel, and a continued focus on improving operations. The Board also reviewed the previous bid submitted by Tricon for significant portions of the Silver Bay
portfolio, and Mr. Kessler informed the Board that he had asked Goldman Sachs to assist the Silver Bay management team in negotiating a smaller portfolio sale with Tricon focused on certain
identified markets.
On
February 9, 2016, the Board met at its regularly scheduled meeting, with representatives of Silver Bay management in attendance. Representatives of Silver Bay management
presented Silver Bay's intermediate strategy with which members of the Board concurred. The strategy consisted of maintaining a core property portfolio of 8,000 to 9,000 homes over the intermediate
term; a focus on continual improvement of operational performance; opportunistic disposition of assets with redeployment of capital into a combination of share repurchases and debt pay downs;
aggressive overhead expense reductions; exploration of raising side-by-side capital in the private markets and other ancillary revenue streams to leverage the existing Silver Bay platform; and
opportunistic acquisition of portfolios from institutional sellers. The Board also received an update on conversations with Tricon to acquire certain limited assets of Silver Bay.
On
February 17, 2016, as a result of the Board's decision to focus on its intermediate strategy and to no longer actively engage in discussions with respect to a strategic
transaction or pursue a strategic alternative analysis, Silver Bay and Goldman Sachs agreed that Goldman Sachs would cease taking actions under the engagement letter.
On
February 24, 2016, Silver Bay submitted a request to the Internal Revenue Service for a ruling confirming that a contemplated liquidation of Silver Bay would not trigger the
prohibited transactions tax under Section 857(b)(6) of the Internal Revenue Code of 1986, as amended, which is referred to as the "Code", in order to better understand the financial impact of
any proposed liquidation transaction. A favorable ruling was received in July 2016.
On
March 1, 2016, Mr. Gary Berman, President and CEO of Tricon, contacted representatives of Goldman Sachs to express interest in meeting Mr. Brock, the Interim
Chief Executive Officer of Silver Bay.
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On March 23, 2016, the Board met at its regularly scheduled meeting and received an update from management of financial results and operating metrics for
the first quarter of the year. The Board also received an update with respect to plans to refine Silver Bay's existing portfolio in certain markets in accordance with the strategy previously reviewed
with the Board.
On
March 29, 2016, Mr. Brock and Mr. Gary Berman communicated by email for the first time and agreed to meet in-person for an informal conversation.
On
April 1, 2016, representatives of Goldman Sachs provided Mr. Brock with a company profile of Tricon.
On
April 25, 2016, Mr. Gary Berman and Mr. Brock met for lunch in New York City where they discussed in general terms the current state of the single-family
residential industry and each of their respective companies. They did not discuss a potential transaction at this meeting.
On
May 17, 2016, the Board met at its regularly scheduled meeting and received an update on Silver Bay's business and operating performance. The Board also received an update with
respect to disposition activities in certain markets and requested that management present an updated liquidation analysis as a result of such activities.
On
June 21, 2016, the Board met and appointed Mr. Brock as permanent President and Chief Executive Officer. The Board also received an update on Silver Bay's performance
and the single-family residential industry as a whole. The Board also discussed Silver Bay's capital allocation and recent acquisition activity. Silver Bay management also presented the Board with an
analysis of the economics of a potential liquidation of Silver Bay and the Board discussed the benefits and risks of pursing a liquidation and compared the range of outcomes with the range of
projected outcomes associated with using capital to acquire additional single-family residential properties.
Beginning
in July 2016, members of Silver Bay management and the Board met with various sources of capital to have initial discussions related to the formation of a fund or joint venture
that would invest in single-family rental homes alongside Silver Bay and that Silver Bay would manage. Such capital sources included pension funds, charitable endowments, and private equity firms. On
July 11, 2016, Mr. Brock was introduced to the portfolio manager of Company K via email.
On
July 6, 2016, Mr. Gary Berman contacted Mr. Brock via email to request a lunch meeting, noting that Tricon had done additional analysis and would like to discuss
a potential transaction between Silver Bay and Tricon. Mr. Gary Berman also communicated that he had informed representatives of Goldman Sachs of his intentions regarding such a meeting and
noted that he preferred to communicate Tricon's proposal in person.
On
July 15, 2016, Messrs. Brock and Gary Berman met for a lunch meeting in New York City. At this meeting, Mr. Gary Berman presented a written non-binding proposal
from Tricon to acquire all shares of Silver Bay for $19.00 per share, payable 90% in cash and 10% in stock of Tricon, subject to certain conditions. Tricon's proposal noted that Tricon would have
fully-committed financing in place prior to executing a definitive agreement and there would be no financing condition in the definitive agreement. On July 18, 2016, Mr. Brock provided a
copy of the Tricon proposal to representatives of Goldman Sachs, asking Goldman Sachs to review and assess the feasibility of executing and consummating the proposed transaction.
On
July 22, 2016, Goldman Sachs and Silver Bay reinstated the August 10, 2015 engagement letter between Goldman Sachs and Silver Bay in order to reengage the services of
Goldman Sachs as a financial advisor to assist with the conduct of a strategic review.
On
August 1, 2016, Mr. Brock discussed illustrative potential transactions with Tricon, Company H, and Company I with representatives of Goldman Sachs.
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On
August 1, 2016, Messrs. Brock and Wetmore met for lunch with representatives of Company K to discuss the single-family residential industry in general and potential
interest in pursuing a business relationship.
On
August 2, 2016, the Audit Committee of the Board met, with all members of the Board but one present. The Audit Committee received an update on the second quarter business and
financial results. Mr. Brock also briefed the Board on the unsolicited non-binding proposal received from Tricon on July 15, 2016, noting that he would provide further analysis of the
proposal at its regularly scheduled meeting in September. Mr. Brock also briefed the Board on Silver Bay's plans to raise additional capital with a third party to acquire properties that Silver
Bay would manage.
On
August 12, 2016, at the request of Mr. Brock, representatives of Goldman Sachs had a telephone call with management of Tricon to discuss an upcoming call regarding
Tricon's plans to finance a proposed transaction with Silver Bay.
During
the week of August 8, 2016, Messrs. Brock and Wetmore met again with representatives of Company K to discuss a potential joint venture with Silver Bay, and on
August 15, 2016, a representative from Company K sent a non-binding term sheet outlining the high-level terms for such a transaction.
On
August 15, 2016, at the request of Mr. Brock, representatives of Goldman Sachs had a telephone call with management of Tricon and Tricon's financial advisor,
RBC Dominion Securities Inc., which is referred to as "RBC," to discuss Tricon's plans to finance the proposed transaction. During this call, Tricon and RBC reviewed a presentation with
representatives of Goldman Sachs describing Tricon's financing plans.
On
August 17, 2016, Goldman Sachs delivered an update of the information it had received regarding Tricon's financing plans to Mr. Brock, and the representatives of Goldman
Sachs expressed a view that Tricon's financing plan, which assumed an acquisition of Silver Bay at a price per share of $19.00, might become more challenging to execute if the offer price were
increased.
On
August 17, 2016, Mr. Brock provided an email update to Messrs. Kessler and Siering regarding the Tricon proposal and the diligence conducted to date related to
Tricon's ability to finance the transaction, which included an update of Goldman Sachs based on its discussions with RBC.
On
August 19, 2016, Mr. Brock had a follow up discussion with the portfolio manager of Company K where they discussed the philosophy of a potential joint venture and
agreed that Silver Bay would provide a more detailed term sheet regarding a potential joint venture. The parties also agreed to schedule an onsite diligence meeting for mid-September 2016.
On
September 6, 2016, Mr. Brock sent an email to Mr. Gary Berman providing an update on Silver Bay's review of the Tricon proposal. He indicated that the Board
intended to review the proposal at a meeting later in the month, noted that the single-family residential industry had continued to improve since the offer submission in July, and inquired whether
Mr. Gary Berman had any updates to the offer or additional information that Mr. Brock should share with the Board.
On
September 7, 2016, Messrs. Brock and Wetmore held a call with representatives of Goldman Sachs to discuss the Tricon proposal and other matters, noting that additional
conversations with advisors to Tricon had been held subsequent to the August 17, 2016 meeting. On this call, representatives of Goldman Sachs reaffirmed their view that Tricon had a viable
financing strategy to execute on a $19.00 per share offer price but that such plan might become more challenging to execute upon if the offer price were increased. Representatives of Goldman Sachs
also updated Messrs. Brock and Wetmore on conversations they had had with management of Company H regarding the single-family residential industry during which Company H's management expressed
a continued desire to grow but indicated a limit of $19.00 or $20.00 per share for Silver Bay. Messrs. Brock and Wetmore
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and
representatives of Goldman Sachs also discussed Silver Bay's pursuit of a joint venture with Company K and various equity raise options. Representatives of Goldman Sachs expressed their view that
investors would react to a joint venture with Company K quite favorably given Company K's highly-respected real estate practice.
On
September 9, 2016, Messrs. Brock and Gary Berman held a call during which Mr. Gary Berman indicated that it would be difficult for Tricon to improve the implied
value of its offer but that Tricon might be able to alter the mix of cash and stock consideration.
In
early September 2016, Silver Bay delivered a detailed non-binding term sheet to Company K related to a potential joint venture. On September 13 and September 14, 2016,
representatives of Company K met with representatives of Silver Bay's management at Silver Bay's offices in Plymouth, MN and Atlanta, GA, respectively, to allow Company K to conduct due diligence
activities. Throughout September 2016, Silver Bay and Company K continued to discuss the terms and size of a potential joint venture. Company K expressed a strong preference to launch the joint
venture in connection with a
large portfolio purchase. On September 30, 2016, representatives of Silver Bay delivered to representatives of Company K follow up due diligence materials and potential property acquisition
opportunities.
On
September 22, 2016, the Board met at its regularly scheduled meeting, with representatives of Silver Bay management in attendance. Mr. Brock presented Silver Bay's
current strategy, which was focused on unlocking the value in its stock to allow Silver Bay to grow to sufficient scale. Mr. Brock discussed with members of the Board the key elements of such
strategy, including seeking private capital to manage in a fund or joint venture structure, portfolio optimization, and acquisitions through equity issuance. Messrs. Kessler and Brock also
presented the proposal from Tricon to acquire Silver Bay for $19.00 per share and described the work performed by Goldman Sachs to understand Tricon's financing plans. Mr. Buechler, Silver
Bay's General Counsel and Secretary, reviewed the Board's duties in considering the proposal. Members of the Board discussed Silver Bay's recent trading price range relative to the latest Tricon
proposal, the certainty of financing and their views of Tricon's ability to improve its proposal. The Board also reviewed Silver Bay's progress with respect to other strategic initiatives and the
current state of the single-family residential industry, including the expected initial public offering of Invitation Homes, one of the largest owners of single-family rental homes in the United
States. After further consideration, the Board determined not to engage in further discussions with Tricon and to instead continue to focus on its current strategic initiatives.
On
September 26, 2016, Mr. Brock called Mr. Gary Berman to relay the Board's decision.
Throughout
October and November 2016, Silver Bay and Company K continued discussions regarding a potential joint venture, with Silver Bay sharing additional property acquisition
opportunities. Discussions between Silver Bay and Company K ceased in December 2016. In his role as Chief Executive Officer, Mr. Brock periodically met with other executives in the
single-family residential industry, including the CEO of Company I, to discuss the state of the single-family residential industry, amongst other matters.
On
October 27, 2016, Mr. Brock called the Chief Executive Officer of Company I in response to a request to do so, during which call the Chief Executive Officer of Company I
described the benefits of combining operations and noted that Company I was in a better position to make a strong proposal than when Silver Bay had previously engaged in a strategic review process in
late 2015. Mr. Brock and the Chief Executive Officer of Company I also discussed reviving the previously executed NDA, subject to confirming that the terms of the NDA still worked for both
parties. Mr. Brock confirmed that while Silver Bay was not engaged in an active strategic review process, Silver Bay was comfortable with Company I submitting a proposal and he committed to
share any such proposal with the Board.
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On
October 28, 2016, the Chief Executive Officer of Company I requested updated property information via email to Mr. Brock and Mr. Brock requested an extension of
the non-solicitation portion of the NDA between the parties.
On
October 30, 2016, Mr. Brock informed Mr. Kessler of the expression of interest from Company I and noted he planned to share the information with all
members of the Board after receiving an offer.
On
October 31, 2016, Mr. Gary Berman contacted Mr. Brock to suggest the two meet for lunch in New York on November 14, 2016 and Mr. Brock declined
given previously scheduled business travel.
On
October 31, 2016, Silver Bay and Company I entered into an amendment to the NDA to extend the non-solicitation provision and clarify certain other provisions. Following
execution, the Chief Executive Officer of Company I requested an updated property data tape from Mr. Brock and shared a desire to begin conducting exterior inspections of occupied homes and
interior physical inspections of vacant homes. Mr. Brock responded by expressing a desire to avoid physical diligence until Silver Bay had confirmed the interest of Company I and received an
initial indication of interest and price based on publicly available data and following receipt of the updated confidential data tape that had been requested by Company I. Mr. Brock and the
Chief Executive Officer then spoke by phone at which time Mr. Brock reiterated the points from the email exchange and agreed to provide an updated property data tape, and the Chief Executive
Officer of Company I expressed a desire to understand the current renovation reserve for Silver Bay's properties.
On
November 1, 2016, Mr. Wetmore provided representatives of Company I with an updated property data tape.
On
November 14, 2016, Company I provided a non-binding written indication of interest to Mr. Brock, offering to acquire Silver Bay in a stock-for-stock merger at an
exchange ratio that equated to less than $19.00 per Silver Bay share based on the prior day closing price, which offer was subject to certain conditions. Mr. Brock and the Chief Executive
Officer of Company I then spoke by telephone regarding the indication of interest where Mr. Brock reiterated that he would share the proposal with members of the Board and review it at the next
board meeting but noted that the Board had previously received and turned down all cash offers that exceeded the current value of Company I's indicated per share price. On November 14, 2016,
Mr. David Berman reached out to Mr. Kessler through a mutual contact to request a meeting in December 2016.
On
November 16, 2016, Mr. Gary Berman informed Mr. Brock by email that Mr. David Berman, Tricon's Executive Chairman and Co-Founder, had scheduled an
in-person meeting with Mr. Kessler. Mr. Brock responded by encouraging Mr. Gary Berman to join the meeting and expressing his regrets that he would not also be able to attend.
On
December 14, 2016, Messrs. David Berman and Gary Berman met in-person with Mr. Kessler in Phoenix, Arizona to discuss the prior acquisition proposal submitted by
Tricon and the reaction of the Board.
On
December 17, 2016, Mr. Gary Berman, on behalf of Tricon, informed Mr. Brock that Tricon was prepared to propose to acquire Silver Bay at a cash price of $21.00
per share.
On
December 19, 2016, Tricon sent to Silver Bay a written non-binding proposal to acquire Silver Bay at a price of $21.00 per share in cash, subject to certain conditions, and
described the general contours of Tricon's plans to finance the acquisition.
On
December 20, 2016, the Board met at its regularly scheduled meeting, with representatives of Silver Bay management in attendance, and Goldman Sachs and Orrick joining for the
portion of the meeting to consider Company I's indication of interest and the Tricon non-binding proposal. Management of Silver Bay presented Silver Bay's 2016 operating results to date, 2017 budget
and going
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forward
strategy assuming that Silver Bay remained a standalone company. Mr. Brock discussed his recent discussions with Mr. Berman. Representatives of Goldman Sachs reviewed recent
developments in, and the current state of, the single-family residential industry and the history of Silver Bay's prior strategic review with the Board. The Board discussed the offer from Company I, a
stock proposal with an indicative value below $19.00 per share based on the then-recent closing price of Company I stock in the days immediately prior to the meeting. The Board also discussed the
proposal from Tricon, a cash offer of $21.00 per share, which included a request for exclusivity during the due diligence and negotiation phases of the potential transaction. The Board discussed these
proposals and determined the proposal from Tricon warranted continued discussion and exploration. The Board also discussed the risk that the due diligence process could be damaging to employee morale
and future performance of Silver Bay and stressed that, accordingly, procedures should be implemented to reduce this risk. The Board also discussed the relative merits of negotiating with one party
exclusively versus engaging in negotiations with multiple parties and determined that Company I should be provided an opportunity to increase the value of its proposal, but failing to do so, a counter
proposal should be made to Tricon of $22.00 per share with a requirement that the merger agreement include a "go-shop" provision allowing Silver Bay to seek a better offer following signing of the
merger agreement, and a willingness by the Board to consider a portion of the consideration to be provided by Tricon in the form of Tricon shares.
On
December 21, 2016, Mr. Brock spoke with the Chief Executive Officer of Company I and relayed that the Board had met and considered the proposal from Company I; that
Silver Bay had previously
received other higher offers; that a business combination of Silver Bay and Company I could be compelling but not on the current terms proposed by Company I; and that Silver Bay would be open to
continued conversations if Company I significantly improved its proposal. The Chief Executive Officer from Company I responded that the proposed exchange ratio was what Company I currently was
prepared to pursue and followed up the same day by email to confirm the conversation. Company I did not submit a revised proposal subsequent to such communications.
On
December 22, 2016, at the request of the Board, representatives of Goldman Sachs spoke with management and advisors of Tricon and presented Silver Bay's counter proposal and
discussed process and timing, including a two stage diligence process where Tricon would be allowed to move to the second phase only after satisfying certain conditions indicating a strong likelihood
that a transaction could be agreed upon quickly, along with Silver Bay's request for an extension of the standstill and non-solicitation provisions of the NDA between Silver Bay and Tricon.
On
December 26, 2016, representatives of Goldman Sachs spoke with representatives of RBC. During such meeting, RBC communicated the following revised proposal on behalf of Tricon,
noting that Tricon was serious about pursuing this opportunity but was prepared to discontinue discussions if a possible transaction did not gain traction
soon:
-
•
-
$21.50 per share all cash offer;
-
•
-
exclusivity during the due diligence period;
-
•
-
a "no-shop" rather than a "go-shop" provision, with a customary fiduciary out in the merger agreement;
-
•
-
customary deal protections;
-
•
-
no financing condition to closing; and
-
•
-
two stages of due diligence, the first of which would be expected to last 30 days and focus on all diligence aspects other than physical
property inspections and would conclude with the delivery of highly-confident letters from Tricon's financing sources, and the second of which would include a certain number of physical property
inspections.
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On
January 4, 2017, the Board met to review the status of the discussions with Tricon, with representatives of Silver Bay management, Goldman Sachs, and Orrick in attendance.
Representatives of Goldman Sachs reviewed the Tricon revised proposal described in the preceding paragraph with members of the Board along with the current value of the all stock offer from Company I
Members of the Board discussed providing exclusivity and a "no shop" provision in the merger agreement and determined that Silver Bay would not be meaningfully disadvantaged by providing either in
light of the acquisition price and other terms proposed by Tricon and alternatives already explored or available to Silver Bay, but only if the merger agreement contained a "fiduciary out" to accept a
better offer for Silver Bay and reasonable deal protections. The Board also discussed seeking a higher price from Tricon in exchange for exclusivity but determined not to make the request given their
view that Tricon had presented its best and final offer price. The Board appointed Mr. Kasnet to the previously formed Strategic Committee, which was then composed of Messrs. Brock and
Kessler.
On
January 5, 2017, representatives of Goldman Sachs contacted representatives of RBC. The representatives of Goldman Sachs informed representatives of RBC that Silver Bay was
prepared to proceed on the terms and schedule that Tricon had proposed on December 26, 2016 provided, that the second diligence period last only 15 days. Later in the day,
representatives of RBC informed representatives of Goldman Sachs that they had spoken with Tricon, who expressed interest in proceeding on this schedule and the terms it had previously proposed.
On
January 6, 2017, an extension of the standstill and non-solicitation provisions of the NDA between Silver Bay and Tricon was executed.
During
the first half of January 2017, management and employees of Silver Bay gathered due diligence information requested by Tricon and its representatives and advisors.
On
January 13, 2017, the Strategic Committee met, with other members of the Board and representatives of Silver Bay management, Goldman Sachs, and Orrick in attendance.
Representatives of Orrick reviewed the key terms of the proposed draft of the merger agreement with members of the
Strategic Committee, including the deal structure, principal conditions to closing the transaction, the proposed no-shop provision and related concepts of a fiduciary out, superior proposal and
situations where the Board could exercise a change in recommendation. Representatives of Orrick provided a detailed description of the termination rights of each party under the merger agreement, and
engaged in a broad discussion of these issues with the members of the Strategic Committee and the Board. Members of the Strategic Committee and the Board discussed with representatives of Goldman
Sachs and Orrick, among other issues, the potential remedies that Silver Bay could pursue under the merger agreement in the event of a breach by Tricon or failure by Tricon to obtain its financing and
close the acquisition, and whether to provide for a reverse termination fee, or instead rely on the right to seek specific performance or contractual damages for any such breach or failure, and the
size of the termination fees payable by Silver Bay and Tricon under certain circumstances. After further discussion, and weighing the relative benefits and disadvantages of specific performance,
contractual damages and a reverse termination fee, the Strategic Committee directed Orrick to provide in the draft merger agreement a termination fee equal to 2% of total equity value and a reverse
termination fee equal to 10% of total equity value.
On
January 14, 2017, representatives of Goldman Sachs delivered a draft of the merger agreement and a proposed form of support agreement to RBC and Paul Weiss Rifkind,
Wharton & Garrison LLP, which we refer to here as "Paul Weiss," legal advisor to Tricon.
On
January 17, 2017, Silver Bay and Tricon entered into an exclusivity agreement pursuant to which Silver Bay agreed to negotiate a potential transaction only with Tricon through
February 15, 2017.
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On
January 23, 2017, advisors to Tricon delivered to representatives of Goldman Sachs comments to the merger agreement. The revised draft merger agreement provided for a
termination fee and reverse termination fee each equal to 4% of total equity value, as well an expense reimbursement obligation by Silver Bay to Tricon in the event that either party terminated the
merger agreement as a result of a failure to obtain the requisite stockholder approval of the merger at a meeting convened for such purpose. The draft merger agreement delivered to Silver Bay and its
advisors also rejected Silver Bay's position that payment of a termination fee by Silver Bay to Tricon would represent Tricon's sole and exclusive remedy for such related termination. The draft merger
agreement also expanded the situations in which a termination fee would be payable by Silver Bay to Tricon, while limiting the situations where a reverse termination fee would be payable by Tricon to
Silver Bay. Finally, the draft merger agreement provided for a so called "force the vote" provision, which rejected Silver Bay's right to terminate the merger agreement in order to enter into an
alternative acquisition agreement with respect to a superior proposal prior to its stockholder vote, and instead required Silver Bay to hold a meeting of stockholders to vote on the merger even if the
Board had determined that an alternative acquisition proposal would provide greater value to stockholders than the consideration payable to stockholders pursuant to the transaction with Tricon.
Through
the second half of January 2017, management and employees of Silver Bay continued to work to provide due diligence information requested by Tricon and its representatives and
advisors. This work included conversations between personnel of Tricon and Silver Bay and their advisors on topics related to due diligence. On January 18, 2017, senior management of Tricon and
Silver Bay, along with their respective financial advisors and lenders to Tricon, met in Minneapolis for an in-person due diligence meeting. During such meeting, the attending parties discussed
various topics related to Silver Bay, including Silver Bay's business and operations, an approach to the diligence needs of Tricon's lenders, and an approach to physical due diligence of Silver Bay
properties. During this period, representatives of Goldman Sachs and Orrick continued to have discussions with representatives of RBC and Paul Weiss regarding various aspects of transaction terms,
process and timing.
On
January 27, 2017, Messrs. Brock and Gary Berman had a telephone conversation during which they discussed elements of transaction timing and Silver Bay's upcoming renewal
of its existing revolving credit facility. During the conversation, Mr. Gary Berman requested that Silver Bay seek a waiver of the "cash trap" provisions of its revolving credit facility rather
than a full renewal of the facility. Mr. Brock indicated he was not yet comfortable discussing such an option with Silver Bay's lenders and thought such a conversation put Silver Bay at risk if
the transaction with Tricon did not occur.
On
January 27, 2017, the Strategic Committee met, along with all other members of the Board and representatives of Silver Bay management, Goldman Sachs, and Orrick in attendance.
Representatives of Goldman Sachs provided an update on the status of the transaction and shared Tricon's anticipated timing for announcing a definitive transaction at the end of February, rather than
the middle of February as previously requested by Silver Bay so that Tricon could most effectively pursue its "bought deal" financing being used to partially fund the transaction by ensuring that its
earnings and Silver Bay's earnings were announced simultaneously with or in advance of any announcement of the proposed merger. Goldman Sachs reviewed Tricon's revised proposed timeline, including an
assessment of Tricon's rationale, as stated to Goldman Sachs by Tricon, to Silver Bay. Representatives of Orrick then reviewed the material proposed changes to the merger agreement proposed by Tricon
with the Board. After discussion, the Strategic Committee instructed Goldman Sachs and Orrick to inform Tricon's advisors that the termination fee and reverse termination fee amounts and the expense
reimbursement obligation proposed by Tricon were not acceptable and to reject the "force the vote" provisions proposed by Tricon because the Board needed the right to terminate the merger agreement to
enter into an alternative acquisition agreement representing a superior proposal prior to a vote of its stockholders. In addition, the Strategic Committee instructed Orrick to seek to reach a
compromise
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position
on the situations in which the respective termination fees would be payable by the parties that was reasonable but more beneficial to the interests of Silver Bay, and to more generally seek
market terms on other key deal points. The Strategic Committee also determined that Tricon would need to make significant progress on the terms of the merger agreement, and that acceptance of its
revised proposed timeline would be acceptable only if Tricon offered additional concessions given the potential risks to Silver Bay in extending the timeline.
On
January 27, 2017, representatives of Paul Weiss sent to Orrick a revised draft of the support agreement.
On
January 28, 2017, representatives of Goldman Sachs and Orrick delivered an issues list to RBC and Paul Weiss and relayed the Strategic Committee's determinations.
On
January 29, 2017, advisors to both parties held a telephonic conversation to discuss the issues list. Based upon the discussions, Tricon and its advisors accepted the position
that Silver Bay should have the right to terminate the merger agreement to enter into an alternative acquisition agreement representing a superior proposal prior to a vote of its stockholders, and
also offered to cap the amount of any expense reimbursement obligation by Silver Bay to Tricon at an amount equal to 1% of total equity value. In addition, Silver Bay and Tricon reached partial
agreement on certain situations where the termination fee and reverse termination fee would be payable. However, Tricon and Silver Bay did not reach full agreement on when the fees would be payable
nor on the size of the respective fees and whether payment by Silver Bay to Tricon of the termination fee would be Tricon's exclusive remedy for such termination.
On
January 31, 2017, RBC delivered a draft commitment letter and term sheet and highly-confident letters, which are collectively referred to as the "RBC Commitment Letter," and
the financing contemplated by the RBC Commitment Letter, which is referred to as the "RBC Financing." RBC also delivered an annotated issues list to the draft merger agreement.
On
February 1, 2017, Mr. Buechler shared comments from Orrick on the RBC Commitment Letter with Mr. David Veneziano, Tricon's Vice President and General Counsel,
primarily adding customary "limited conditionality" provisions for an acquisition commitment letter and term sheet.
On
February 1, 2017, representatives of RBC sent representatives of Goldman Sachs a draft of the commitment letter and term sheet from Deutsche Bank AG and its affiliates, which
is referred to as "DB," and the letter and term sheet as the "DB Commitment Letter," and the financing contemplated by the DB Commitment Letter as the "DB Financing."
On
February 1, 2017, representatives of Tricon began touring Silver Bay properties as part of the second phase of their due diligence efforts.
On
February 3, 2017, representatives of Orrick delivered an updated issues list to Paul Weiss that described Silver Bay's position on the remaining key issues to be negotiated.
Orrick indicated to Paul Weiss that Silver Bay continued to reject entirely any expense reimbursement obligation (even if subject to a cap), and proposed compromise proposals on the situations in
which the termination fee and
reverse termination fee would be payable. Orrick also reiterated that the payment by Silver Bay to Tricon of the termination fee should be Tricon's exclusive remedy for such termination. Finally,
Orrick emphasized to Paul Weiss that the size of the termination fee and reverse termination fee was a fundamental transaction issue and that in order to reach agreement, Silver Bay would require a
significantly lower termination fee and higher reverse termination fee than Tricon had previously proposed.
On
February 4, 2017, Mr. Brock received an email from Mr. Gary Berman indicating that Tricon intended to issue a press release on February 6, 2017 announcing
its earnings release date, noting that Tricon needed to provide several weeks' advance notice to the investor community.
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On
February 4, 2017, representatives of Orrick had a telephonic conversation with Paul Weiss regarding the outstanding issues list for the merger agreement. On the same day,
representatives of Orrick delivered a revised draft of the merger agreement to Paul Weiss. The draft merger agreement reflected the result of prior negotiations between the advisors on certain key
issues. The draft merger agreement however continued to reject any expense reimbursement obligation by Silver Bay to Tricon and provided that payment by Silver Bay to Tricon of the termination fee
would be Tricon's exclusive remedy for such termination. In addition, the draft merger agreement also proposed a new package of situations where the termination fee and reverse termination fee would
be payable by Silver Bay and Tricon. The draft merger agreement also noted that the size of the respective fees remained an open issue subject to further negotiations.
On
February 5, 2017, at the direction of Mr. Brock, representatives of Goldman Sachs discussed termination fees with representatives of RBC and shared market data regarding
such fees.
On
February 5, 2017, representatives of Orrick had a telephonic conference with representatives of Paul Weiss, Tricon (including Mr. Veneziano) and Tricon's single-family
rental financing counsel at Goulston & Storrs PC, which is referred to as "Goulston", to discuss the structure of the proposed DB Financing. The discussion focused on the various terms set
forth in the DB Commitment Letter conditioning the size and availability of the DB Financing on the eligibility of the properties financed thereunder.
On
February 6, 2017, Messrs. Brock and Gary Berman exchanged emails regarding resolution of open points, with Mr. Brock expressing concerns regarding time
constraints with announcing an earnings date and expressing a desire to resolve major deal points before such an announcement.
On
February 6, 2017, the Strategic Committee met, with all other members of the Board, representatives of Silver Bay management, Goldman Sachs, and Orrick in attendance.
Mr. Brock provided an update on the timing of the proposed transaction, and noted his perspective that Tricon's proposed timing was reasonable in light of the rationale previously given.
Representatives of Orrick outlined certain previously open terms in the merger agreement that had been resolved, including that Silver Bay would have no expense reimbursement obligation under the
merger agreement (as initially proposed by Tricon). Representatives of Orrick then also outlined the key issues that remained open in the merger agreement sent by Orrick to Paul Weiss on
February 4, 2017. Goldman Sachs noted in particular that on the termination fee payable by Silver Bay, Silver Bay had proposed 2.5% of total equity value while Tricon had proposed 3.5%, and on
the reverse termination fee payable by Tricon, Silver Bay had proposed 8.5% of total equity value while Tricon proposed 6%. Members of the Strategic Committee and other attending members of the Board
then engaged in a discussion of other key terms of the merger agreement, including whether progress could be independently made on key deal terms while leaving resolution of the respective
terminations fees to later in negotiations. With all members of the Board participating, the Strategic Committee reiterated its directive to achieve market or better terms on the major open deal
points and expressed comfort in extending the exclusivity period through the end of February if Tricon so requested.
On
February 6, 2017, at the direction of Mr. Brock, representatives of Goldman Sachs discussed Silver Bay's position on key deal points such as the size of the respective
termination fees with representatives of RBC.
On
February 7, 2017, Mr. Buechler sent Mr. Veneziano comments from Orrick on the DB Commitment Letter requesting further certainty on the size of the facility and
availability based on insertion of customary "limited conditionality" provisions.
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On February 7 and 8, 2017, Messrs. Brock and Gary Berman communicated via email regarding the status of the transaction discussions.
Mr. Brock indicated that Silver Bay planned to announce an earnings date of February 27, 2017 and sought to begin discussions on transition and retention issues as well as deal
communications issues. Mr. Gary Berman indicated that Tricon hoped to begin discussions on such topics with Silver Bay in the following week.
On
February 10, 2017, Mr. Gary Berman sent to Mr. Brock via email a list of topics to discuss regarding a proposed communications plan for a transaction
announcement, employee retention, and post-merger integration.
On
February 10, 2017, representatives of Paul Weiss delivered a revised draft of the merger agreement to Orrick. The draft merger agreement reflected Tricon's previous proposal on
the size of the termination fees of 3.5% of total equity value payable by Silver Bay and 6% total equity value payable by Tricon in the event of terminations in certain circumstances. The draft merger
agreement, however, also reflected Tricon's prior agreement expressed by its representatives that there would be no expense reimbursement obligation payable by Silver Bay, and Tricon's agreement that,
in circumstances where a termination fee was payable by Silver Bay, payment of the termination fee by Silver Bay would be its
exclusive remedy in the event of such termination. The draft merger agreement also proposed a slightly revised set of situations where the termination fees would be payable by Tricon and Silver Bay,
which reflected further compromise by the parties on this issue.
On
February 10, 2017, at the direction of Mr. Brock, representatives of Goldman Sachs spoke with representatives of RBC regarding transaction status and matters of
diligence, employee retention and communications.
On
February 14, 2017, Mr. Brock informed Mr. Gary Berman via email that Silver Bay had reached an agreement in principle with its lenders to waive the "cash trap"
provisions of its existing revolving credit facility for six months. Mr. Gary Berman responded indicating he had received positive feedback from the physical due diligence efforts being
undertaken by Tricon.
On
February 15, 2017, Silver Bay and Tricon executed an extension of the exclusivity agreement until February 27, 2017 at 11:59 p.m. Eastern Time.
On
February 16, 2017, members of management of both Silver Bay and Tricon held a call to discuss matters related to a proposed communications plan for a transaction announcement,
employee retention, and post-merger integration.
On
February 17, 2017, Mr. Brock requested via email that he and Mr. Gary Berman discuss employee retention matters.
On
February 18, 2017, Messrs. Brock and Gary Berman discussed such matters by telephone and agreed on the relative size of a retention or severance payment that would be
made to Silver Bay employees that were not otherwise covered by an existing severance arrangement.
From
February 16, 2017 to February 27, 2017, representatives of Orrick and Goldman Sachs on behalf of Silver Bay, and Paul Weiss and RBC, on behalf of Tricon, continued to
negotiate the remaining open issues in the merger agreement, disclosure letter and the proposed support agreements. The principal issues that were the subject of negotiation during this period
included: (1) the amounts of the respective termination fees payable by Silver Bay and Tricon, and the specific situations where such termination fees would be payable by each party, which was
the subject of numerous proposals and counterproposals; (2) the financing cooperation terms; (3) the outside termination date; and (4) employee retention matters. Also during this
period, Tricon confirmed it was requesting support agreements from all of Silver Bay's directors and certain executive officers, and Orrick and Paul Weiss, on behalf of Silver Bay and Tricon
respectively, negotiated and finalized the terms of the support agreements.
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On
February 21, 2017, the Board met at its regularly scheduled meeting, with representatives of Silver Bay management, Goldman Sachs, and Orrick in attendance. Representatives of
Goldman Sachs provided the Board with an update on the status of negotiations and Tricon's due diligence process, and indicated that both phases of this due diligence were largely completed.
Representatives of Orrick provided a detailed review of the current draft of the merger agreement and led a discussion of those terms that continued to be negotiated.
On
February 21, 2017, Messrs. Brock and Gary Berman discussed by telephone Silver Bay's dividend for the first quarter of 2017.
On
February 22, 2017, Goulston distributed updated drafts of the DB Commitment Letter to Orrick. From February 23, 2017 through February 26, 2017, representatives of
Orrick had numerous group and individual calls with representatives of Tricon, Paul Weiss and Goulston on the terms of the DB Financing and why the changes relating to conditionality and certainty of
financing requested by Orrick had been rejected (particularly given Silver Bay's and Tricon's interests were aligned in having these comments incorporated by DB and its counsel). Tricon and its
counsel conveyed that they had raised these comments on numerous occasions over the past few weeks with DB and its counsel (both prior to and subsequent to receiving comments from Silver Bay on the DB
Commitment Letter), and that DB had been unwilling to negotiate any further on these issues. Orrick and Goldman Sachs then conveyed to RBC that the size of the reverse termination fee would need to be
increased in light of the additional financing risk raised by the DB Commitment Letter.
On
February 24, 2017 and February 25, 2017, Messrs. Kessler and Gary Berman discussed by telephone issues relating to the transition plan for management.
From
February 23, 2017 to February 25, 2017, Messrs. Buechler and Veneziano exchanged email correspondence with a view towards further clarifying the details of
employee retention, transition and transaction announcement matters.
On
February 25, 2017, the Strategic Committee met, with representatives of Silver Bay management, Goldman Sachs and Orrick in attendance. Representatives of Silver Bay provided a
status update on the RBC Commitment Letter and DB Commitment Letter being negotiated by Tricon with Royal Bank of Canada and DB. Representatives of Silver Bay further noted that Tricon and Silver Bay
had sought to remove certain conditionality provisions to DB's obligation to fund from the DB Commitment Letter, but that these efforts had not been successful. Representatives of Orrick then provided
additional background on the negotiations and conditionality provisions that were at issue.
Representatives of Goldman Sachs provided an update on the status of negotiations relating to the size of the termination fee and reverse termination fee, and noted that they had emphasized to
representatives of RBC that the size of the reverse termination fee needed to be increased based on the current status of the DB Commitment Letter. Members of the Strategic Committee then had a
discussion regarding the size of the termination fees in light of the risks presented by the commitment letters. After concluding this discussion, all of the members of the Strategic Committee agreed
that the outcome of negotiations with DB on these conditionality provisions in the DB Commitment Letter should not prevent Silver Bay from entering into a transaction because, among other reasons, the
merger agreement did not include a condition to Tricon's obligations that any financing be available and as a result Tricon was also directly assuming financing risk and responsibility for the reverse
termination fee. The members of the Strategic Committee finally directed Goldman Sachs and representatives of Silver Bay management to continue to negotiate the size of the respective termination
fees.
On
February 26, 2017, prior to the meeting of the Board scheduled for later that day, Messrs. Buechler and Veneziano discussed via telephone and email the size of the
termination fee and reverse termination fee.
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On
February 26, 2017, the Board met, with representatives of Silver Bay management, Goldman Sachs and Orrick in attendance. Representatives of Orrick provided an update on the
status of negotiations of the terms of the merger agreement, and noted that the final open points were the size of the respective termination fees. Mr. Buechler reported that the most recent
proposals from Tricon were for a termination fee of $24.5 million to be paid by Silver Bay in certain circumstances, and a reverse termination fee of $62.5 million to be paid by Tricon
in certain circumstances. The Board then discussed, with input of Goldman Sachs and Orrick, the key terms, status and risks of Tricon's proposed financing for the transaction (in particular, the DB
financing) and determined that the respective termination fees were reasonable in light of the totality of the key points in the merger agreement and the potential financing and other closing risks.
Representatives of Goldman Sachs reviewed in detail with the Board Goldman Sachs' financial analysis of the $21.50 per share cash consideration offered to Silver Bay stockholders in the proposed
mergers. Representatives of Orrick reviewed with the Board their duties with respect to the proposed transactions. The Board then discussed providing additional cash compensation for the independent
directors due to the significant time and effort they had devoted to Silver Bay's exploration of strategic alternatives and related matters.
On
February 26, 2017, following the meeting of the Board, Mr. Buechler communicated to Mr. Veneziano that Tricon's most recent proposal concerning the size of the
termination fee and reverse termination fee was acceptable to the Board after their review and determination.
On
February 27, 2017, the Board met, with representatives of Silver Bay management, Goldman Sachs and Orrick in attendance. The representatives of Goldman Sachs rendered Goldman
Sachs' oral opinion to the Board, which opinion was subsequently confirmed by delivery of a written opinion dated February 27, 2017, that, as of February 27, 2017, and based upon and
subject to the various assumptions, considerations, limitations and other matters set forth therein, the per share merger consideration to be received by the holders of shares of Silver Bay common
stock (other than Tricon or any affiliate of Tricon) pursuant to the merger agreement was fair from a financial point of view to such holders. For more information about Goldman Sachs' analysis and
opinion, see the section of this proxy statement captioned "—Fairness Opinion of Goldman, Sachs & Co." After further discussion, the Board unanimously approved, among other
things, the execution and delivery of the merger agreement by Silver Bay; directed that the approval of the merger, the merger agreement and other actions and transactions contemplated by the merger
agreement be submitted to a vote at the special meeting; and resolved to recommend that the stockholders of Silver Bay vote in favor of the approval of the merger, the merger agreement and other
actions and transactions contemplated by the merger agreement.
Later
in the day on February 27, 2017, Silver Bay and Tricon executed and delivered the merger agreement and Silver Bay issued a press release announcing the entry into the merger
agreement and disclosing Silver Bay's fourth quarter 2016 and full year 2016 financial results.
Recommendation of the Board and Reasons for the Merger
The Board has unanimously (1) determined that the merger agreement, the merger in accordance with the terms of
the merger agreement and other actions and transactions contemplated by the merger agreement are advisable and in the best interests of Silver Bay and its stockholders and of Silver Bay LP and
the holders of limited partnership common units; (2) approved and authorized the execution and delivery of the merger agreement by Silver Bay, the performance by Silver Bay of its covenants and
other obligations in the merger agreement, and the consummation of the merger and other actions and transactions set forth in the merger agreement upon the terms and subject to the conditions set
forth in the merger agreement; (3) directed that the approval of the merger, the merger agreement and other actions and transactions contemplated by the merger agreement be submitted to the
stockholders of Silver Bay entitled to vote thereon for their consideration and approval; and
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(4) resolved to recommend that the stockholders of Silver Bay entitled to vote thereon vote in favor of the approval of the merger, the merger agreement and other actions and transactions
contemplated by the merger agreement.
The Board unanimously recommends that you vote (1) "FOR" the approval of the merger, the merger agreement and the other actions and transactions
contemplated by the merger agreement, and; (2) "FOR" any proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there
are insufficient votes to approve the merger, the merger agreement and the other actions and transactions contemplated by the merger agreement at the time of the special
meeting.
In evaluating the merger agreement, the merger and the other transactions contemplated by the merger agreement, the Board consulted with
management, its financial advisor and its outside legal advisors. In recommending that the stockholders vote in favor of approval of the merger and the merger agreement, the Board considered a number
of factors, including the following (which factors are not necessarily presented in order of relative importance):
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Silver Bay's competitive positioning and prospects as a standalone company;
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Silver Bay's business operations and management;
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Silver Bay's historical and projected financial performance, results of operation and financial prospects, including the risks associated with
achieving the Forecasts;
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the financial analysis presentation of Goldman Sachs, and the opinion of Goldman Sachs delivered to the Board on February 27, 2017, and
subsequently confirmed in writing, that, as of such date, and based upon and subject to the factors and assumptions set forth therein, the $21.50 in cash per share of Silver Bay common stock to be
paid to the holders (other than Tricon and its affiliates) of Silver Bay common stock pursuant to the merger agreement was fair from a financial point of view to such holders, as more fully described
in the section of this proxy statement captioned "—Fairness Opinion of Goldman, Sachs & Co.";
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the relationship of the per share merger consideration to the historical trading prices of Silver Bay common stock, including that the per
share merger consideration constituted a premium of approximately (1) 19% to the closing price of Silver Bay common stock on February 24, 2017, the last trading day prior to the public
announcement of the proposed merger transaction; (2) 24% to the three-month volume-weighted average price per share of Silver Bay common stock, which we refer to as the "VWAP," for the period
ending February 24, 2017; (3) 22% to the six-month VWAP for the period ending February 24, 2017; (4) 24% to the nine-month VWAP for the period ending February 24,
2017; and (5) 19% to the 12-month VWAP for the period ending February 24, 2017;
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based on its review of the process conducted by the Board and negotiations with Tricon as well as the other parties participating in such
process, the Board's belief that $21.50 per share in cash and the terms of the merger agreement offer the best value reasonably attainable for the stockholders;
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that the all-cash merger consideration will provide certainty of value and liquidity to the stockholders, while eliminating the effect of
long-term business and execution related risks;
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the Board's view that the merger agreement was the product of arm's-length negotiation and contained customary terms and conditions;
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the terms of the merger agreement, including:
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Silver Bay's ability, under certain circumstances, to furnish information to and conduct negotiations with third parties regarding
unsolicited acquisition proposals;
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the Board's view that the terms of the merger agreement would be unlikely to deter third parties from making a superior proposal,
including the merger agreement's terms and conditions as they relate to the ability to make changes in the recommendation of the Board (see the sections of this proxy statement captioned "The Merger
Agreement—Covenants and Agreements—No Solicitation of Transactions");
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Silver Bay's ability to terminate the merger agreement in order to accept an unsolicited superior proposal, subject to paying
Tricon a termination fee of $24.5 million and complying with the other conditions of the merger agreement;
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the Board's belief that the termination fee of $24.5 million, which is approximately 3% of Silver Bay's implied equity
value in the merger, was extensively negotiated with Tricon in connection with the merger agreement, is reasonable, particularly in light of applicable market precedent and was necessary in order to
reach an agreement with Tricon in light of significant resources that Tricon committed and will commit to the transaction;
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that the consummation of the merger is not subject to any financing condition;
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Silver Bay's entitlement, subject to certain limitations, to specific performance to prevent breaches of the merger agreement and
to enforce specifically the terms of the merger agreement, including the consummation of the merger in accordance with the terms of the merger agreement if all conditions to closing have been
satisfied and Tricon fails to close even though it has obtained or would obtain its financing; and
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Silver Bay's right to be paid a reverse termination fee of $62.5 million in the event that it terminates the merger
agreement for any breach of the merger agreement by Tricon or because Tricon fails to consummate the merger in accordance with the terms of the merger agreement where all conditions to closing have
been satisfied, including where Tricon is unable to obtain financing to complete the merger;
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the requirement that the merger will only be consummated if the merger and the merger agreement are approved by the holders of at least a
majority of the outstanding shares of common stock;
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the extensive process employed by the Board prior to entering into negotiations with Tricon to identify potential acquirers of Silver Bay,
including contacting a broad range of companies and financial sponsors to assess their interest in a potential acquisition of Silver Bay;
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extensive, arm's-length negotiations with Tricon which, among other things, resulted in an increase in the merger consideration to $21.50 per
share of Silver Bay common stock, an increase from Tricon's original proposed merger consideration of $18.50 per share and Tricon's July 2016 proposal of $19.00 per share and a further increase from
Tricon's December 2016 proposal of $21.00 per share;
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the perceived risk of continuing as a standalone public company or pursuing other alternatives, including (1) the continuation of Silver
Bay's business plan as an independent enterprise; (2) modifications to Silver Bay's strategy; and (3) potential expansion opportunities through acquisitions and combinations of Silver
Bay with other businesses, in addition to other operating risks identified in Silver Bay's public filings with the SEC;
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the ability to complete the merger within a reasonable period of time; and
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the Board's duties in light of the foregoing.
The
Board also considered a number of uncertainties and risks concerning the merger, including the following (which factors are not necessarily presented in order of relative
importance):
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that Silver Bay stockholders will not participate in any future earnings or growth of Silver Bay and will not benefit from any appreciations in
the value of Silver Bay, including any appreciation in value that could be realized as a result of the combination of Silver Bay with Tricon;
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that Silver Bay common stockholders will not have the availability of appraisal or dissenters' rights in connection with the merger under
applicable provisions of the MGCL, which would otherwise allow stockholders to certain rights to receive payment of the "fair value" of their shares of Silver Bay common stock pursuant to certain
procedures set forth in the MGCL;
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the risk that the merger might not be completed unless and until certain specified conditions are satisfied or waived (as more fully described
in the section of this proxy statement captioned "The Merger Agreement—Conditions to the Closing of the Merger");
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the right of Tricon to terminate the merger agreement under certain circumstances (as more fully described in the section of this proxy
statement captioned "The Merger Agreement—Termination of the Merger Agreement");
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the risk that Tricon will be unable to complete or obtain the necessary financing to complete the merger and the transactions contemplated by
the merger;
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the effect of the resulting public announcement of the termination of the merger agreement on the trading price of the Silver Bay common stock;
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that under the terms of the merger agreement, Silver Bay is unable to solicit other acquisition proposals during the pendency of the merger;
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the restrictions on the conduct of Silver Bay's business prior to the consummation of the merger, including the requirement that Silver Bay
conduct its business in the ordinary course, subject to specific limitations, which may delay or prevent Silver Bay from undertaking business opportunities that may arise before the completion of the
merger and that, absent the merger agreement, Silver Bay might have pursued;
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the requirement that Silver Bay pay Tricon a termination fee of $24.5 million under certain circumstances following termination of the
merger agreement, including if the Board changes its recommendation or terminates the merger agreement to accept a superior offer;
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that the termination fee payable by Tricon to Silver Bay in the event the merger agreement is terminated under certain circumstances may not be
sufficient compensation to the stockholders of Silver Bay for any lost share premium represented by Tricon's offer price per share;
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the requirement that the merger will only be consummated if the merger and the merger agreement are approved by the holders of at least a
majority of the outstanding shares of Silver Bay common stock;
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the significant costs involved in connection with entering into the merger agreement and completing the merger, and the substantial time and
effort of Silver Bay management required to complete the merger, which may disrupt Silver Bay's business operations;
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that Silver Bay's business and financial results could suffer in the event that the merger is not consummated;
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that Silver Bay's directors and officers may have interests in the merger that may be different from, or in addition to, those of other Silver
Bay's stockholders (see the section of this proxy
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The
foregoing discussion is not meant to be exhaustive, but summarizes the material factors considered by the Board in its consideration of the merger. After considering these and other
factors, the Board concluded that the potential benefits of the merger outweighed the uncertainties and risks. In view of the variety of factors considered by the Board and the complexity of these
factors, the Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the foregoing factors in reaching its determination and recommendations. Moreover, each
member of the Board applied his or her own business judgment to the process and may have assigned different weights to different factors. The Board unanimously approved the merger agreement, the
merger and the other transactions contemplated by the merger agreement and recommends that Silver Bay stockholders approve the merger and the merger agreement based upon the totality of the
information presented to and considered by the Board.
Fairness Opinion of Goldman, Sachs & Co
Goldman Sachs rendered its opinion to the Board on February 27, 2017, which opinion was subsequently confirmed in a written opinion dated
as of the same date, that, as of the date of such opinion, and based upon and subject to the factors and assumptions set forth therein, the $21.50 in cash per share of Silver Bay common stock to be
paid to the holders (other than Tricon and its affiliates) of shares of Silver Bay common stock pursuant to the merger agreement was fair from a financial point of view to such holders.
The full text of the written opinion of Goldman Sachs, dated February 27, 2017, which sets forth the assumptions made, procedures followed, matters
considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B. Goldman Sachs provided its advisory services
and opinion for the information and assistance of the Board in connection with its consideration of the transaction. The Goldman Sachs opinion is not a recommendation as to how any holder of shares of
Silver Bay common stock should vote with respect to the transaction or any other matter.
In
connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other
things:
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the merger agreement;
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annual reports to stockholders and Annual Reports on Form 10-K of Silver Bay for the four fiscal years ended December 31, 2015;
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a draft Annual Report on Form 10-K of Silver Bay for the fiscal year ended December 31, 2016 provided to Goldman Sachs and
approved for its use by Silver Bay;
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certain interim reports to stockholders and Quarterly Reports on Form 10-Q of Silver Bay;
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certain other communications from Silver Bay to its stockholders;
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certain publicly available research analyst reports for Silver Bay; and
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certain internal financial analyses and forecasts for Silver Bay prepared by its management and approved for Goldman Sachs' use by Silver Bay,
which we refer to here as the "Forecasts".
Goldman
Sachs also held discussions with members of the senior management of Silver Bay regarding their assessment of the past and current business operations, financial condition and
future prospects of Silver Bay; reviewed the reported price and trading activity for shares of Silver Bay common stock; compared certain financial and stock market information for Silver Bay with
similar information for certain other companies the securities of which are publicly traded; reviewed the acquisition premia of certain recent business combinations in the U.S. real estate investment
trust, which is referred to here as REIT, industry; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.
For
purposes of rendering its opinion, Goldman Sachs, with Silver Bay's consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax,
accounting and other information provided to, discussed with or reviewed by, it, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with
Silver Bay's consent that the Forecasts were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Silver Bay. Goldman Sachs did not make
an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of Silver Bay or any of its subsidiaries
and it was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the
transaction will be obtained without any adverse effect on Silver Bay or on the expected benefits of the transaction in any way meaningful to its analysis. Goldman Sachs has also assumed that the
transaction will be consummated on the terms set forth in the merger agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its
analysis.
Goldman
Sachs' opinion does not address the underlying business decision of Silver Bay to engage in the transaction, or the relative merits of the transaction as compared to any
strategic alternatives that may be available to Silver Bay; nor does it address any legal, regulatory, tax or accounting matters. Since January 1, 2016, Goldman Sachs was not requested to
solicit, and did not solicit, interest from other parties with respect to an acquisition of, or other business combination with, Silver Bay or any other alternative transaction. Goldman Sachs' opinion
addresses only the fairness from a financial point of view to the holders (other than Tricon and its affiliates) of shares of Silver Bay common stock, as of the date of such opinion, of the $21.50 in
cash per share of Silver Bay common stock to be paid to such holders pursuant to the merger agreement. Goldman Sachs' opinion does not express any view on, and does not address, any other term or
aspect of the merger agreement or transaction or any term or
aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the transaction, including the merger of Tricon LP with and into
Silver Bay LP or any other term or aspect of such merger, the fairness of the transaction to, or any consideration received in connection therewith by, the holders of any other class of
securities of Silver Bay, including the 10% Cumulative Redeemable Preferred Shares of Silver Bay, any class of securities of Silver Bay LP or Silver Bay GP, including the OP common units
and the limited partnership interests in Silver Bay LP designated as a preferred units under its limited partnership agreement, any equity interests in Silver Bay GP, or any other
person, creditors, or other constituencies of Silver Bay, Silver Bay LP or Silver Bay GP; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any
of the officers, directors or employees of Silver Bay, or class of such persons, in connection with the transaction, whether relative to the $21.50 in cash per share of Silver Bay common stock to be
paid to the holders (other than Tricon and its affiliates) of shares of Silver Bay common stock pursuant to the merger agreement or otherwise. Goldman Sachs' opinion does not express any opinion as to
the impact of the transaction on the solvency or viability of Tricon Ultimate Parent,
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Tricon
and Tricon LP, Silver Bay or any of its subsidiaries or the ability of Tricon Ultimate Parent, Tricon and Tricon LP, Silver Bay or any of its subsidiaries to pay their respective
obligations when they come due. Goldman Sachs' opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the
date of the opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of the
opinion. Goldman Sachs' advisory services and the opinion expressed in its opinion were provided for the information and assistance of the Board in connection with its consideration of the transaction
and the Goldman Sachs opinion is not a recommendation as to how any holder of shares of Silver Bay common stock should vote with respect to the transaction or any other matter. Goldman Sachs' opinion
was approved by a fairness committee of Goldman Sachs.
The
following is a summary of the material financial analyses delivered by Goldman Sachs to the Board in connection with rendering the opinion described above. The following summary,
however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to
those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary
and are alone not a complete description of Goldman Sachs' financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is
based on market data as it existed on or before February 24, 2017 and is not necessarily indicative of current market conditions.
Historical Stock Trading Analysis.
Goldman Sachs reviewed the historical trading prices and volumes for
Silver Bay common stock for the fifty-two week period ended February 24, 2017. In addition, Goldman Sachs analyzed the consideration to be paid to holders of Silver Bay common stock pursuant to
the merger agreement in relation to the fifty-two week high and low market prices of Silver Bay common stock, as well as the price at which Silver Bay's initial public offering was undertaken.
This
analysis indicated that the price per share to be paid to Silver Bay stockholders pursuant to the merger agreement represented:
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•
-
a premium of 19.4% based on the closing price of $18.01 as of February 24, 2017;
-
•
-
a discount of 11.1% based on the SNL Consensus (a financial data platform) net asset value of $24.18 as of February 24, 2017;
-
•
-
a premium of 16.2% based on the price at which Silver Bay's initial public offering was undertaken of $18.50 per share;
-
•
-
a premium of 24.2% based on the 90-day VWAP of $17.31 as of February 24, 2017;
-
•
-
a premium of 11.9% based on the latest fifty-two week high closing market price of $19.21 per share; and
-
•
-
a premium of 58.1% based on the latest fifty-two week low closing market price of $13.60 per share.
Selected Companies Analysis.
Goldman Sachs reviewed and compared certain financial information for Silver Bay to corresponding
financial information,
ratios and public market multiples for the following publicly traded corporations in the single family rental industry, which are collectively referred to as the "selected
companies":
-
•
-
Invitation Homes Inc.;
-
•
-
American Homes 4 Rent; and
-
•
-
Colony Starwood Homes.
56
Table of Contents
Although none of the selected companies is directly comparable to Silver Bay, the companies included were chosen because they are publicly traded companies with
operations that for purposes of analysis may be considered similar to certain operations of Silver Bay.
Goldman
Sachs also calculated and compared various financial multiples and ratios, including the funds from operations multiples, using financial data as of February 24, 2017 and
information it obtained from SEC filings and Institutional Brokers' Estimate System ("IBES") estimates. The multiples and ratios of Silver Bay were calculated using Silver Bay closing price on
February 24, 2017 and the Forecasts and other information provided by Silver Bay's management. The multiples and ratios for each of the selected companies were calculated using the most recent
publicly available information. With respect to the selected companies and Silver Bay, Goldman Sachs calculated:
The
estimated funds from operations, or "FFO", multiples for fiscal years 2017 and 2018, which are publicly available and were obtained through IBES estimates and other Wall Street
research, except for Silver Bay, which was provided by Silver Bay's management and set forth in the Forecasts.
The
results of these analyses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Companies
|
|
|
|
|
FFO Multiples for fiscal year::
|
|
Range
|
|
Median
|
|
Silver Bay
|
|
|
2017
|
|
|
17.0x - 21.5x
|
|
|
21.1x
|
|
|
20.5x
|
|
Premiums Paid Analysis.
Goldman Sachs analyzed the premiums paid in cash, stock and mixed consideration acquisitions of publicly traded
REITs in the
United States from January 2007 through February 2017 with enterprise values exceeding $750 million. For the entire period, using publicly available information, Goldman Sachs calculated the
median, 25th percentile and 75th percentile premiums of the price paid in the transactions using the last undisturbed closing stock price of the target company prior to the announcement
of the transaction. This analysis indicated a 25th percentile premium of 9% and 75th percentile premium of 22% across the period. Using this analysis, Goldman Sachs applied a range of
illustrative premiums of 9% to 22% to Silver Bay's closing price per share of Silver Bay common stock on February 24, 2017, to derive an illustrative range of implied values per share of Silver
Bay common stock of $19.63 to $21.97.(1)
Illustrative Present Value of Future Share Price Analysis.
Goldman Sachs performed an illustrative analysis of the implied present
value of the
future value per share of Silver Bay common stock, which is designed to provide an indication of the present value of a theoretical future value of a company's equity as a function of such company's
estimated future FFO and its assumed price to future FFO per share multiple. For this analysis, Goldman Sachs used the Forecasts for each of the fiscal years 2018 to 2019. Goldman Sachs first
calculated the implied values per share of Silver Bay common stock as of December 31 for each of the fiscal years 2017 to 2018, by applying one year forward FFO multiples of 18.0x to 22.0x to
the estimated FFO per share of Silver Bay common stock for each of the fiscal years 2018 to 2019, and then discounted such values plus estimated future dividends per share of Silver Bay common stock
back to February 24, 2017, using an illustrative discount rate of 7.5%, reflecting an
estimate of Silver Bay's cost of equity. This analysis resulted in a range of implied present values of $16.20 to $19.85 per share of Silver Bay common stock.
Illustrative Discounted Cash Flow Analysis.
Using the Forecasts, Goldman Sachs performed an illustrative discounted cash flow analysis
on Silver Bay.
Using discount rates ranging from 5.0% to
-
(1)
-
In
its presentation to the Board on February 26, 2017, Goldman Sachs performed this analysis by applying a range of illustrative premiums of 9% to 22% to the
closing price per share of Silver Bay common stock on February 13, 2017, to derive an illustrative range of implied values per share of Silver Bay common stock of $19.43 to $21.75.
57
Table of Contents
6.0%,
reflecting estimates of Silver Bay's weighted average cost of capital, Goldman Sachs discounted to present value as of December 31, 2016 (i) estimates of unlevered free cash flow
for Silver Bay for the fiscal years 2017 through 2019 as reflected in the Forecasts and (ii) a range of illustrative terminal values for Silver Bay, which were calculated by applying
capitalization rates for terminal values ranging from 5.7% to 6.3%, to a terminal year estimate of the free cash flow to be generated by Silver Bay, as reflected in the Forecasts, including a net
operating income long term, steady state growth rate of 1.5%
provided by Silver Bay's management. Goldman Sachs derived ranges of illustrative enterprise values for Silver Bay by adding the ranges of present values it derived above. Goldman Sachs then
subtracted from the range of illustrative enterprise values it derived for Silver Bay assumed net debt, as provided by the management of Silver Bay, to derive a range of illustrative equity values for
Silver Bay. Goldman Sachs then divided the range of illustrative equity values it derived by the number of fully diluted outstanding shares of Silver Bay, as provided by the management of Silver Bay,
to derive a range of illustrative present values per share ranging from $17.57 to $21.66.
The
preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the
summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to
fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly
comparable to Silver Bay or the contemplated transaction.
Goldman
Sachs prepared these analyses for purposes of Goldman Sachs' providing its opinion to the Board as to the fairness from a financial point of view of the $21.50 in cash per share
of Silver Bay common stock to be paid to the holders (other than Tricon and its affiliates) of shares of Silver Bay common stock pursuant to the merger agreement. These analyses do not purport to be
appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual
future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or
events beyond the control of the parties or their respective advisors, none of Silver Bay, Goldman Sachs or any other person assumes responsibility if future results are materially different from
those forecast.
The
merger consideration was determined through arm's-length negotiations between Silver Bay and Tricon and was approved by the Board. Goldman Sachs provided advice to Silver Bay during
these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to Silver Bay or the Board or that any specific amount of consideration constituted the only
appropriate consideration for the transaction.
As
described above, Goldman Sachs' opinion to the Board was one of many factors taken into consideration by the Board in making its determination to approve the merger, the merger
agreement and other actions and transactions contemplated by the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in
connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex B.
Goldman
Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and
non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities in which they invest or with which they co-invest,
may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities,
58
Table of Contents
currencies,
credit default swaps and other financial instruments of Silver Bay, Tricon Ultimate Parent, any of their respective affiliates and third parties or any currency or commodity that may be
involved in the transactions contemplated by the merger agreement for the accounts of Goldman Sachs and its affiliates and employees and their customers. Goldman Sachs acted as financial advisor to
Silver Bay in connection with, and participated in certain of the negotiations leading to, the transaction contemplated by the merger agreement. Goldman Sachs has provided certain financial advisory
and/or underwriting services to Silver Bay and/or its affiliates from time to time for which the Investment Banking Division of Goldman Sachs has received, and may receive, compensation. During the
two year period ended February 27, 2017, the Investment Banking Division of Goldman Sachs has not been engaged by Silver Bay or its affiliates to provide financial advisory or underwriting
services for which Goldman Sachs has received compensation. During the two year period ended February 27, 2017, the Investment Banking Division of Goldman Sachs has not been engaged by Tricon
or its affiliates to provide financial advisory or underwriting services for which Goldman Sachs has received compensation. Goldman Sachs may also in the future provide investment banking services to
Silver Bay, Tricon and their respective affiliates for which the Investment Banking Division of Goldman Sachs may receive compensation. Affiliates of Goldman, Sachs & Co. also may have
co-invested with Tricon and its affiliates from time to time and may have invested in limited partnership units of affiliates of Tricon from time to time and may do so in the future.
The
Board selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to
the transaction. Pursuant to a letter agreement dated August 10, 2015, as reinstated pursuant to that certain letter agreement dated July 22, 2016, Silver Bay engaged Goldman Sachs to
act as its financial advisor in connection with the contemplated transaction(s). The engagement letter between Silver Bay and Goldman Sachs provides for a transaction fee that is estimated, based on
the information available as of the date of announcement, at $8 million, $7.5 million of which is payable upon consummation of the transaction. In addition, Silver Bay has agreed to
reimburse Goldman Sachs for certain of its expenses, including attorneys' fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain
liabilities under the federal securities laws.
Interests of Silver Bay's Directors and Executive Officers in the Merger
When considering the recommendation of the Board that you vote to approve the merger, the merger agreement and the other actions and
transactions contemplated by the merger agreement, you should be aware that our directors and executive officers have interests in the merger that are different from, or in addition to, the interests
of Silver Bay stockholders generally, as more fully described below. The Board was aware of and considered these interests to the extent that they existed at the time, among other matters, in
approving the merger agreement, the merger and the other actions and transactions contemplated by the merger agreement and recommending that the merger, the merger agreement and the other actions and
transactions contemplated by the merger agreement be approved by Silver Bay stockholders. This section discusses such interests as held by each of (1) our directors, consisting of Daryl Carter,
Tanuja Dehne, Stephen Kasnet, Irvin Kessler, W. Reid Sanders, Thomas Siering and Mark Weld, and (2) individuals who serve or have served as our executive officers, including named executive
officers of Silver Bay specified in the annual proxy statement of Silver Bay filed on April 4, 2016, consisting of Thomas Brock, Daniel Buechler, Julie Ellis, Lawrence Shapiro, Griffin Wetmore,
David Miller and Christine Battist. Mr. Miller and Ms. Battist's service with us ended in February 2016 and September 2016, respectively.
The merger agreement provides that the surviving entity will (and Tricon Ultimate Parent will cause the surviving entity to), during the six
year period commencing at the effective time of the
59
Table of Contents
merger,
indemnify and hold harmless each any manager, director or officer of Silver Bay and its subsidiaries, against all losses, damages, liabilities, costs, expenses, judgments, fines, penalties and
amounts paid in settlement arising out of or pertaining to matters that relate to such indemnified person's duties or service as a manager, director or officer of Silver Bay and its subsidiaries for
acts and omissions in such capacity as well as legal proceedings relating to the merger, including with respect to transactions contemplated by the merger agreement. Prior to the closing of the
merger, Silver Bay will be permitted to purchase, or after the closing Tricon will maintain, a "tail" policy to its directors' and officers' insurance policies prior to the effective time of the
merger, provided that the
annual premium for such insurance does not exceed 300% of the aggregate annual premiums currently paid by Silver Bay and if the annual premiums exceed 300%, Silver Bay or the Tricon Parties will be
permitted to obtain as much similar insurance as is possible for an annual premium equal to 300% of the current annual premium. For more information, see the section of this proxy statement captioned
"The Merger Agreement—Indemnification; Directors' and Officers' Insurance."
From and after the closing of the merger and for a period of 12 months after the merger closing (or if earlier, the date of the
employee's termination of employment with Tricon Ultimate Parent, Tricon or any of their subsidiaries), Tricon Parties have agreed that they will provide each employee of Silver Bay who remains
employed by Silver Bay or any of its subsidiaries, the surviving company or Tricon Ultimate Parent or any subsidiary of Tricon immediately following the closing (each, a "continuing employee" and
collectively, the "continuing employees") with compensation (base salary and bonus opportunity) that are, in the aggregate, no less favorable than the compensation (base salary and bonus opportunity)
provided to each continuing employee immediately prior to the closing and benefits, that are, in the aggregate, no less favorable than those provided to, at Tricon's election, either similarly
situated employees of Silver Bay or any of its subsidiaries immediately prior to the closing or Tricon Ultimate Parent, Tricon or any of their subsidiaries, as applicable, immediately following the
closing. The Tricon Parties have also agreed to provide each continuing employee, including Silver Bay executive officers as described under the section of this proxy statement captioned "The
Merger—Interests of Silver Bay's Directors and Officers in the Merger—Payments upon Change in Control or Termination in Connection with Change in Control," to the extent their
employment is severed during the 12 months following the merger closing, with severance payments and benefits equal to the severance payment and benefits provided by Silver Bay and Silver Bay
subsidiaries as of the date of the merger agreement.
For
more information, see the section of this proxy statement captioned "The Merger Agreement—Other Covenants and Agreements."
The discussion below describes the treatment of Silver Bay's outstanding equity awards under the merger agreement. Any cash payments with
respect to Silver Bay equity awards described below will be subject to any applicable tax withholdings and unless otherwise noted below, will be made shortly following the effective time.
At the effective time of the merger, any issuance and forfeiture conditions, or other restrictions, on any shares of Silver Bay common stock
subject to Silver Bay restricted stock awards will be deemed satisfied in full, contingent upon the closing of the merger, and such shares of Silver Bay common stock will be entitled to receive the
merger consideration.
60
Table of Contents
Assuming the closing of the merger occurs on June 1, 2017, there would be 245,921 shares of Silver Bay common stock issuable pursuant to
outstanding Silver Bay PSUs, including all related DERs (but excluding any new DERs issued between March 14, 2017 and June 1, 2017) (measured at the target number of shares, or 330,862
at the maximum number of shares as determined under the merger agreement, including all related DERs (but excluding any new DERs issued between March 14, 2017 and June 1, 2017), with
fractional DERS shares rounded to the nearest whole share, but subject to a cap of 330,862 shares upon the closing of the merger) held by Thomas Brock, Lawrence Shapiro, Julie Ellis, Griffin Wetmore
and Daniel Buechler. None of the other executive officers or directors of Silver Bay hold any Silver Bay PSUs.
At
the effective time of the merger, each Silver Bay PSU that is outstanding will vest in accordance with the terms thereof, as amended, including all related DERs, and be converted into
the right to receive an amount in cash, without interest and subject to any applicable withholding tax, equal to the product obtained by multiplying the number of shares of Silver Bay common stock
subject to such Silver Bay PSU, after taking into account the vesting in connection with the merger, by the per share merger consideration.
Under
the merger agreement, the number of vested shares of Silver Bay common stock subject to each Silver Bay PSU will be determined as follows: (i) to the extent the performance
period relating to any such Silver Bay PSU has not expired as of the effective time of the merger and the grant date of the Silver Bay PSU occurred less than 18 months prior to the effective
time of the merger, the number of
shares of Silver Bay common stock will be determined as if the "total stockholder return" applicable to such Silver Bay PSU was achieved at the target level of performance; (ii) to the extent
the performance period relating to any such Silver Bay PSU has not expired as of the effective time of the merger and the grant date of the Silver Bay PSU occurred 18 months or more prior to
the effective time of the merger, the number of shares of Silver Bay common stock will be determined as if the "total stockholder return" applicable to such Silver Bay PSU was achieved at the maximum
level of performance; and (iii) to the extent the performance period relating to any such Silver Bay PSU has expired as of the effective time of the merger, the number of shares of Silver Bay
common stock will be determined based on the actual achievement of all "total stockholder return" targets applicable to such Silver Bay PSU through the effective time of the merger. Each Silver Bay
PSU that vests will no longer be subject to any issuance and forfeiture conditions, or other restrictions.
The following table sets forth the number of shares of Silver Bay common stock and the number of shares of Silver Bay common stock underlying
equity awards held by each of Silver Bay's executive officers and employee directors outstanding as of the closing of the merger, assuming that such closing occurs on June 1, 2017. Except as
noted below, the numbers do not forecast any future grants, exercises or forfeitures that may occur between March 14, 2017 and June 1, 2017, inclusive, and the forecasts of the number of
shares and equity awards that will be outstanding on June 1, 2017, are based on the shares and equity awards held as of March 13, 2017, with the vesting of such awards updated as of
March 13, 2017.
61
Table of Contents
The table also sets forth the values of these shares and equity awards based on the per share merger consideration.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Number
of Vested
Shares
(#)(1)
|
|
Value
of Vested
Shares
($)(2)
|
|
Number
of
Unvested
Shares of
Restricted
Stock
(#)(3)
|
|
Value
of
Unvested
Shares of
Restricted
Stock
($)(4)
|
|
Number of
Shares Subject
to Unvested
Silver Bay
PSUs
(including
DERs)
(#)(5)
|
|
Value of
Shares Subject
to Unvested
Silver Bay
PSUs
(including
DERs)
($)(6)
|
|
Total
Value
($)
|
|
|
Thomas Brock
|
|
|
18,539
|
|
|
398,589
|
|
|
17,836
|
|
|
383,474
|
|
|
134,570
|
(7)
|
|
2,893,261
|
|
|
3,675,324
|
|
|
Larry Shapiro
|
|
|
67,174
|
|
|
1,444,241
|
|
|
14,863
|
|
|
319,555
|
|
|
72,506
|
(7)(8)
|
|
1,558,869
|
|
|
3,322,665
|
|
|
Julie Ellis
|
|
|
9,555
|
|
|
205,433
|
|
|
7,218
|
|
|
155,187
|
|
|
5,870
|
|
|
126,205
|
|
|
486,825
|
|
|
Griffin Wetmore
|
|
|
22,994
|
|
|
494,371
|
|
|
13,288
|
|
|
285,692
|
|
|
58,958
|
(7)(8)
|
|
1,267,596
|
|
|
2,047,659
|
|
|
Daniel Buechler
|
|
|
19,891
|
|
|
427,657
|
|
|
9,215
|
|
|
198,123
|
|
|
58,958
|
(7)(8)
|
|
1,267,596
|
|
|
1,893,376
|
|
-
(1)
-
This
column reflects the number of shares of common stock not subject to restrictions held as of March 13, 2017.
-
(2)
-
This
column reflects the number of vested shares multiplied by the per share merger consideration, which is $21.50.
-
(3)
-
This
column reflects the number of unvested shares of restricted stock outstanding as of March 13, 2017.
-
(4)
-
Under
the merger agreement, each unvested share of restricted stock outstanding will vest in full and be cancelled in exchange for a cash payment equal to the per
share merger consideration, which is $21.50.
-
(5)
-
This
column reflects the number of shares of Silver Bay common stock subject to any unvested Silver Bay PSUs outstanding as of March 13, 2017, including the
related DERs. Fractional amounts of DERs have been rounded to the nearest whole share.
-
(6)
-
Under
the merger agreement, Silver Bay PSUs (including the related DERs) will vest into a number of shares of Silver Bay common stock per the following, and each
vested Silver Bay PSU will be cancelled in exchange for a cash payment equal to the per share merger consideration:
-
(a)
-
to
the extent the performance period applicable to such Silver Bay PSU has not expired as of the closing and the grant date was less than eighteen months prior to
the closing, as if the "total stockholder return" applicable to the Silver Bay PSU was achieved at the target level of performance.
-
(b)
-
to
the extent the performance period applicable to such Silver Bay PSU has not expired as of the closing and the grant date was eighteen months or more prior to the
closing, as if the "total stockholder return" applicable to the Silver Bay PSU was achieved at the maximum level of performance (200% of target).
-
(c)
-
to
the extent the performance period applicable to such Silver Bay PSU has expired as of the closing, based on actual achievement of all "total stockholder return"
targets applicable to the Silver Bay PSU.
-
(7)
-
Messrs. Brock's,
Shapiro's, Wetmore's and Buechler's awards also accumulated DERs equal to 1,370.28, 1,852.77, 1,543.97 and 1,543.97, respectively.
-
(8)
-
Among
other grants, Messrs. Shapiro, Wetmore and Buechler were each granted a Silver Bay PSU award on February 12, 2015, subject to a three-year
performance period, with a target number of shares of Silver Bay common stock equal to 30,000, 25,000 and 25,000, respectively. Because the
62
Table of Contents
grant
date is more than eighteen months prior to the closing, these awards (and the related DERs are treated as having been awarded at the maximum level of performance (200% of target plus the related
DERs).
Payments Upon Change in Control or Termination in Connection with Change in Control
We have entered into severance and change in control agreements with each of Thomas Brock, Lawrence Shapiro, Julie Ellis, Griffin Wetmore and
Daniel Buechler, which we refer to as the "change in control agreements." Pursuant to the change in control agreements, each of the forgoing executives will receive severance benefits if such
executive's employment is involuntarily terminated by Silver Bay without cause or if such executive resigns for good reason (either event, a "qualifying termination") subject to such executive
executing a release of claims. If such a termination occurs, Silver Bay will provide to the executive the following severance benefits:
-
•
-
A lump sum payment equal to one times such executive's annual base salary;
-
•
-
If the termination occurs on or after July 1 of any year, an annual bonus equivalent to the cash portion of the annual bonus for the
prior year, pro-rated based on the number of days during the year that such executive was employed by Silver Bay or one of our subsidiaries;
-
•
-
Reimbursement of a portion of COBRA premiums for 18 months after the date of termination, in an amount equal to the amount we would pay
for a similarly situated active employee; and
-
•
-
Full vesting of restricted stock awards granted prior to the date of the change in control agreement.
The
following defined terms apply under the change in control agreements:
-
•
-
"cause" shall mean (i) executive's conviction of, or pleading guilty or nolo contendere to, any felony or a lesser crime involving
dishonesty or moral turpitude; (2) executive's willful failure to perform executive's duties and responsibilities to Silver Bay or executive's violation of any written Company policy or
agreement; (3) executive's commission of any act of fraud, embezzlement, dishonesty against Silver Bay or any other intentional misconduct that has caused or is reasonably expected to result in
injury to Silver Bay; (4) executive's unauthorized use or disclosure of any proprietary information or trade secrets of Silver Bay or any other party to whom the executive owes an obligation of
nondisclosure as a result of his or her relationship with Silver Bay; (5) executive's failure to reasonably cooperate with Silver Bay in any investigation or formal proceeding after receiving a
written request to do so; or (6) executive's material breach of any of his or her obligations under any written agreement or covenant with Silver Bay.
-
•
-
"good reason" means executive's termination of employment within ninety (90) days following the expiration of any cure period (discussed
below) following the occurrence, without executive's consent, of one or more of the following: (1) a material reduction of executive's duties, authority or responsibilities, relative to
executive's duties, authority or responsibilities in effect immediately prior to such reduction; provided, however, that a reduction in duties, authority or responsibilities solely by virtue of Silver
Bay being acquired and made part of a larger entity will not constitute good reason; (2) a material reduction in executive's base compensation (except where there is a reduction applicable to
all similarly situated executive officers generally); provided, that a reduction of less than ten percent will not be considered a material reduction in base compensation; (3) a material change
in the geographic location of executive's primary work facility or location; provided, that a relocation of less than thirty-five miles from executive's then-present work location will not be
considered a material change in geographic location; or (4) a material breach by Silver Bay of a material provision of the change in control agreement or a failure of a successor entity in the
change of control to assume the change in control
63
Table of Contents
The
following table sets forth the amounts that the executives may be entitled to under the terms of the merger agreement, outstanding equity award agreements or existing change in
control agreements in the event of a qualifying termination:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Change-in-Control ("CIC") Payments(1)
|
|
|
|
|
|
|
|
Severance Benefits Triggered Upon a Qualifying Termination
following a CIC (Double-Trigger Benefits)(2)
|
|
|
|
Value of Unvested Equity
that Vests Immediately
Upon Closing Pursuant to
the Merger Agreement
(Single-Trigger Benefits)
|
|
|
|
|
|
Prior
Year
Bonus
(n/a if
already
received
FY 2016
Bonus)(5)
|
|
|
|
|
|
|
|
|
|
|
|
Pro-Rata
Bonus
(n/a
unless
Closing
after
July 1)(5)
|
|
|
|
|
|
|
|
Value of
Outstanding
Restricted
Stock(3)
|
|
Value of
Outstanding
Silver Bay
PSUs(4)
|
|
Base(5)
|
|
COBRA
Continuation
Payments(5)(6)
|
|
Total CIC
Payments
|
|
|
Thomas Brock
|
|
$
|
383,474
|
|
$
|
2,893,261
|
|
$
|
500,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
3,776,735
|
|
|
Larry Shapiro
|
|
$
|
319,555
|
|
$
|
1,558,869
|
|
$
|
250,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
22,147
|
|
$
|
2,150,570
|
|
|
Julie Ellis
|
|
$
|
155,187
|
|
$
|
126,205
|
|
$
|
250,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
531,392
|
|
|
Griffin Wetmore
|
|
$
|
285,692
|
|
$
|
1,267,596
|
|
$
|
250,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
22,788
|
|
$
|
1,826,076
|
|
|
Dan Buechler
|
|
$
|
198,123
|
|
$
|
1,267,596
|
|
$
|
250,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
22,788
|
|
$
|
1,738,506
|
|
|
Total
|
|
$
|
1,342,030
|
|
$
|
7,113,527
|
|
$
|
1,500,000
|
|
$
|
—
|
|
$
|
—
|
|
$
|
67,723
|
|
$
|
10,023,279
|
|
-
(1)
-
These
calculations assume, for illustrative purposes only, that all executive officers are terminated without "cause" or resign for "good reason" (as such terms are
defined in their change in control agreements) upon closing.
-
(2)
-
All
outstanding equity will be accelerated and cashed-out pursuant to the terms of the merger agreement and, therefore, no additional "double-trigger" acceleration
will apply with respect to the outstanding restricted stock or Silver Bay's PSUs.
-
(3)
-
The
merger agreement provides that each outstanding share of restricted stock will vest in full and be cancelled in exchange for a cash payment equal to the per
share merger consideration. The quantifications above do not attempt to forecast future grants or forfeitures between the execution of the merger agreement and the closing.
-
(4)
-
The
merger agreement provides that the Silver Bay PSUs (including the related DERs) will vest into a number of shares of Silver Bay common stock per the below, and
each vested Silver Bay PSU will be cancelled in exchange for a cash payment equal to the per share merger consideration:
-
(a)
-
to
the extent the performance period applicable to such Silver Bay PSU has not expired as of the closing and the grant date was less than eighteen months prior to
the closing, as if the "total stockholder return" applicable to the Silver Bay PSU was achieved at the target level of performance;
-
(b)
-
to
the extent the performance period applicable to such Silver Bay PSU has not expired as of the closing and the grant date was eighteen months or more prior to the
closing, as if the "total stockholder return" applicable to the Silver Bay PSU was achieved at the maximum level of performance; and
-
(c)
-
to
the extent the performance period applicable to such Silver Bay PSU has expired as of the closing, based on actual achievement of all applicable "total
stockholder return" targets applicable to the Silver Bay PSU. The quantifications above do not attempt to forecast future grants or forfeitures between the execution of the merger agreement and the
closing.
-
(5)
-
If
the executive's employment is terminated without cause or for good reason during the 24-month period following a CIC, then subject to the execution of a release
of claims and certain restrictive covenants, they will receive: (i) a lump sum severance payment equal to one hundred percent (100%) of their Base Salary (ii) earned but unpaid bonus
(based on actual performance and paid on the normal date of payment) if their employment terminates after the end of a performance period but prior to the date of payment, (iii) if the
64
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executive
is employed for six months or more during the fiscal year including the date of termination, then they will receive a pro-rata bonus equal to (x) their prior year bonus multiplied by
(y) a fraction determined by the number of days the executive was employed in the fiscal year, and (iv) reimbursement for a portion of the COBRA premiums for the executives and their
eligible dependents for a period up to 18 months in an amount equal to the amount paid for a similarly situated active employee (at the coverage levels in effect immediately prior to the
executive's termination or resignation). The amount of the prior year bonus for Messrs. Brock and Shapiro, Ms. Ellis, and Messrs. Wetmore and Buechler were $225,000, $350,000,
$135,000, $230,000 and $220,000, respectively.
-
(6)
-
The
COBRA Continuation Payments are estimated at $1,230.38 per month for Mr. Shapiro and $1,266 per month for Messrs. Wetmore and Buechler multiplied
by 18 months.
Tricon has initially indicated that it intends to retain Messrs. Shapiro and Buechler and Ms. Ellis for a transition period of 60
to 90 days pursuant to their current terms of employment. Tricon has also indicated an intention to retain Ms. Ellis as a consultant for a period of time thereafter, but specific terms have not
been negotiated. Except as described in the two immediately preceding sentences, as of the date of this proxy statement, none of Silver Bay's executive officers have reached an understanding on
potential employment or other retention terms with Tricon, and no Silver Bay executive officers have entered into any definitive agreements or arrangements regarding employment or other retention with
Tricon following the consummation of the merger. However, prior to the effective time of the merger, Tricon may initiate discussions regarding employment or other retention terms and may enter into
definitive agreements regarding employment or retention for certain of Silver Bay's employees, to be effective as of the effective time of the merger.
Closing and Effective Time of the Merger
The closing of the merger will take place no later than the third business day following the satisfaction or waiver in accordance with the
merger agreement of all of the conditions to closing of the merger (as described under the section of this proxy statement captioned "The Merger Agreement—Conditions to Completion of the
Merger"), other than conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or waiver of each of such conditions.
Material U.S. Federal Income Tax Consequences of the Merger
The following discussion is a summary of material U.S. federal income tax consequences of the merger to U.S. Holders and Non-U.S. Holders (each
as defined below) of shares of Silver Bay common stock whose shares are converted into the right to receive cash pursuant to the merger. This discussion is based upon the Code, Treasury Regulations
promulgated under the Code, court decisions, published positions of the Internal Revenue Service, which we refer to as the "IRS," and other applicable authorities, all as in effect on the date of this
proxy statement and all of which are subject to change or differing interpretations, possibly with retroactive effect. This discussion is limited to holders who hold their shares of Silver Bay common
stock as "capital assets" within the meaning of Section 1221 of the Code (generally, property held for investment purposes).
This
discussion is for general information only and does not address all of the tax consequences that may be relevant to holders in light of their particular circumstances. For example,
this discussion does not address:
-
•
-
tax consequences that may be relevant to holders who may be subject to special treatment under U.S. federal income tax laws, such as financial
institutions, tax-exempt organizations, S corporations or any other entities or arrangements treated as partnerships or pass-through entities for U.S. federal income tax purposes, insurance
companies, mutual funds, dealers in stocks and securities, traders in securities that elect to use the mark-to-market method of accounting for their securities, regulated investment companies, REITs,
entities subject to the U.S. anti-inversion rules, or certain former citizens or long-term residents of the United States;
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-
•
-
tax consequences to holders holding the shares as part of a hedging, constructive sale or conversion, straddle or other risk reduction
transaction;
-
•
-
tax consequences to holders who received their shares of Silver Bay common stock in a compensatory transaction or pursuant to the exercise of
options or warrants;
-
•
-
tax consequences to holders who own an equity interest, actually or constructively, in Tricon or the surviving entity following the merger;
-
•
-
tax consequences to U.S. Holders whose "functional currency" is not the U.S. dollar;
-
•
-
tax consequences to holders who hold their Silver Bay common stock through a bank, financial institution or other entity, or a branch thereof,
located, organized or resident outside the United States;
-
•
-
non-U.S. Holders, as defined below, that hold, or at any time have held, more than 10% of any class of Silver Bay stock (except to the extent
specifically set forth below);
-
•
-
tax consequences to holders who are "controlled foreign corporations," "passive foreign investment companies" or "personal holding companies"
for U.S. federal income tax purposes;
-
•
-
tax consequences arising from the Medicare tax on net investment income;
-
•
-
U.S. federal estate, gift or alternative minimum tax consequences, if any; or
-
•
-
any state, local or foreign tax consequences.
If
a partnership (including an entity or arrangement, domestic or foreign, treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of Silver Bay
common stock, then the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partner and the partnership. Partnerships holding
shares of Silver Bay common stock and partners therein should consult their tax advisors regarding the consequences of the merger to them.
No
ruling has been or will be obtained from the IRS regarding the U.S. federal income tax consequences of the merger described below. If the IRS contests a conclusion set forth herein,
no assurance can be given that a holder would ultimately prevail in a final determination by a court.
THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE TO ANY HOLDER. A HOLDER SHOULD CONSULT ITS OWN TAX ADVISORS
CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER FEDERAL NON-INCOME TAX LAWS OR THE LAWS OF ANY
STATE, LOCAL OR NON-U.S. TAXING JURISDICTION.
For purposes of this discussion, a "U.S. Holder" is a beneficial owner of shares of Silver Bay common stock that is for U.S. federal income tax
purposes:
-
•
-
an individual who is a citizen or resident of the United States;
-
•
-
a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any state thereof or
the District of Columbia;
-
•
-
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
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-
•
-
a trust (1) that is subject to the primary supervision of a court within the United States and the control of one or more United States
persons as defined in section 7701(a)(30) of the Code; or (2) that has a valid election in effect under applicable Treasury Regulations to be treated as a United States person.
For
U.S. federal income tax purposes, the merger should be treated as a sale of all of Silver Bay's assets by Silver Bay to Tricon American Homes LLC for the merger consideration
and the assumption of all of Silver Bay's liabilities followed by the distribution of the merger consideration to the holders of the Silver Bay's stock in liquidation of Silver Bay. Because Silver
Bay, as a REIT, is entitled to receive a deduction for liquidating distributions and Silver Bay anticipates that the deemed liquidating distribution will exceed Silver Bay's taxable income recognized
as a result of the merger, Silver Bay anticipates that it will not be subject to U.S. federal income tax on any gain recognized in connection with the merger and the other transactions contemplated by
the merger agreement.
The
receipt of cash by a U.S. Holder in exchange for shares of Silver Bay common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In
general, such U.S. Holder's gain or loss will be equal to the difference, if any, between the amount of cash received and the U.S. Holder's adjusted tax basis in the shares surrendered pursuant to the
merger. A U.S. Holder's adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares (less any distributions to the U.S. Holder by Silver Bay that reduced the U.S.
Holder's tax basis). Gain or loss will be calculated separately for each block of shares of stock, with a block consisting of shares acquired at the same cost in a single transaction. Such gain or
loss will be capital gain or loss and will be long-term capital gain or loss if such U.S. Holder's holding period in such shares is more than one year at the time of the completion of the merger. A
reduced tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations.
In addition, the IRS has the authority to prescribe, but has not yet prescribed, regulations that would apply a tax rate of 25% to a portion of capital gain realized by a non-corporate stockholder on
the sale of REIT stock that would correspond to the REIT's "unrecaptured Section 1250 gain."
A U.S. Holder who has held Silver Bay common stock for less than six months at the time of the merger, taking into account the holding period
rules of Section 246(c)(3) and (4) of the Code, and who recognizes a loss on the exchange of Silver Bay common stock in the merger, will be treated as recognizing a long-term capital
loss to the extent of any capital gain dividends received from Silver Bay, or such holder's share of any designated retained capital gains, with respect to such stock.
For purposes of this discussion, the term "Non-U.S. Holder" means a beneficial owner of shares of Silver Bay common stock that is neither a U.S.
Holder nor a partnership for U.S. federal income tax purposes.
Non-U.S.
Holders (and investors therein) should consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them in
light of their particular circumstances.
The
U.S. federal income tax consequences of the merger to a non-U.S. Holder will depend on various factors, including whether the receipt of merger consideration is treated as a
distribution from Silver Bay to its stockholders that is attributable to gain from the sale of "United States real property interests." The IRS announced in Notice 2007-55 that it intends to
(1) take the position that under
67
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current
law a non-U.S. Holder's receipt of a liquidating distribution from a REIT (including the receipt of cash in exchange for Silver Bay stock in the merger, which will be treated as a deemed
liquidation for U.S. federal income tax purposes) is generally subject to tax under FIRPTA as a distribution to the extent attributable to gain from the sale of United States real property interests,
and (2) issue regulations that will be effective for transactions occurring on or after June 13, 2007, clarifying this treatment. Although legislation effectively overriding Notice
2007-55 has previously been proposed, it is not possible to say if or when any such legislation will be enacted. As a result, the following paragraphs provide alternative discussions of the tax
consequences that would arise to the extent the tax treatment set forth in Notice 2007-55 does or does not apply. Notwithstanding the discussion in the following paragraphs, Silver Bay intends to take
the position that the cash received in exchange for Silver Bay common stock will be subject to tax in accordance with Notice 2007-55 as described in more detail below. In general, the provisions
governing the taxation of distributions by REITs can be less favorable to non-U.S. Holders than the taxation of sales or exchanges of REIT stock by non-U.S. Holders, and non-U.S. Holders should
consult their tax advisors regarding the application of these provisions.
To the extent the tax treatment set forth in Notice 2007-55 applies, and to the extent cash received by non-U.S. Holders in the merger is
attributable to gain from the deemed sale of Silver Bay's United States real property interests (which Silver Bay expects to be a substantial portion of such cash), then such amount will be treated as
income effectively connected with a United States trade or business of the non-U.S. Holder and generally will be subject to U.S. federal income tax on a net basis. A corporate non-U.S. Holder will
also be subject to the 30% branch profits tax (or such lower rate as may be specified by an applicable income tax treaty). In addition, 35% (or 20% to the extent provided in Treasury Regulations) of
any such amounts paid to a non-U.S. Holder will be withheld and remitted to the IRS. Notwithstanding the foregoing, to the extent the tax treatment set forth in Notice 2007-55 does not apply, or if a
non-U.S. Holder has not owned more than 10% of Silver Bay common stock at any time during the one-year period ending on the date of the merger and Silver Bay common stock is regularly traded on an
established securities market located in the United States (within the meaning of Section 897(c)(3) of the Code and Treasury Regulation 1.897-9T), the 35% withholding tax described above
would not apply, and such non-U.S. Holder would instead be subject to the rules described below under "—Taxable Sale of Silver Bay Common Stock." Silver Bay believes that Silver Bay common
stock is regularly traded on an established securities market in the United States as of the date of this proxy statement.
Subject to the discussion of distribution of gain from the disposition of United States real property interests above and backup withholding
below, any gain realized by a Non-U.S. Holder pursuant to the merger generally will not be subject to U.S. federal income tax unless:
-
•
-
the gain is effectively connected with a trade or business of such Non-U.S. Holder in the United States (and, if required by an applicable
income tax treaty, is attributable to a permanent establishment maintained by such Non-U.S. Holder in the United States), in which case such gain generally will be subject to U.S. federal income tax
at rates generally applicable to U.S. persons, and, if the Non-U.S. Holder is a corporation, such gain may also be subject to the branch profits tax at a rate of 30% (or a lower rate under an
applicable income tax treaty);
-
•
-
such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of the merger, and
certain other specified conditions are met, in which case such gain will be subject to U.S. federal income tax at a rate of 30% (or a lower rate under an applicable income tax treaty); or
-
•
-
such shares of stock constitute a "United States real property interest" under FIRPTA.
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If
a non-U.S. Holder's stock constitutes a United States real property interest under FIRPTA, any gain recognized by such holder in the merger will treated as income effectively
connected with a United States trade or business of the non-U.S. Holder and generally will be subject to U.S. federal income tax
on a net basis in the same manner as a U.S. Holder. A non-U.S. Holder's shares of Silver Bay common stock generally will not constitute a U.S. real property interest if either (1) Silver Bay is
a "domestically controlled qualified investment entity" at the effective time of the merger, or (2) both (a) that class of Silver Bay stock is regularly traded on an established
securities market at the date of the merger and (b) the non-U.S. Holder holds 10% or less of the total fair market value of that class of stock at all times during the shorter of (x) the
five-year period ending with the effective time of the merger and (y) the non-U.S. Holder's holding period for the stock. As discussed above, Silver Bay believes that Silver Bay common stock is
regularly traded on an established securities market as of the date of this proxy statement. A "qualified investment entity" includes a REIT. Assuming Silver Bay qualifies as a REIT, Silver Bay will
be a "domestically controlled qualified investment entity" at the merger effective time if non-U.S. Holders held directly or indirectly less than 50% in value of Silver Bay common stock at all times
during the five-year period ending with the effective time of the merger. While Silver Bay believes that it is currently a domestically controlled REIT, no assurances can be given that the actual
ownership of Silver Bay stock has been or will be sufficient for Silver Bay to qualify as a "domestically controlled qualified investment entity" at the merger effective time.
As described above, it is unclear whether the receipt of the merger consideration by a non-U.S. Holder will be treated as a sale or exchange of
Silver Bay common stock or as a distribution from Silver Bay that is attributable to gain from the deemed sale of Silver Bay's United States real property interests in the mergers. Accordingly, Silver
Bay intends to withhold U.S. federal income tax at a rate of 35% (or 20% to the extent provided in applicable Treasury Regulations) from the portion of the merger consideration that is, or is treated
as, attributable to gain from the sale of United States real property interests and paid to a non-U.S. Holder unless such holder qualifies for the 10% exception described above. If a non-U.S. Holder
holds its stock through a nominee, that nominee may take a contrary position and conclude that withholding applies to the merger consideration payable to such non-U.S. Holder.
A
non-U.S. Holder may be entitled to a refund or credit against the holder's U.S. federal income tax liability, if any, with respect to any amount withheld pursuant to FIRPTA, provided
that the required information is furnished to the IRS on a timely basis. Non-U.S. Holders should consult their tax advisors regarding withholding tax considerations.
If a non-U.S. Holder is eligible for treaty benefits under an income tax treaty with the United States, the non-U.S. Holder may be able to
reduce or eliminate certain of the U.S. federal
income tax consequences discussed above, such as the branch profits tax. Non-U.S. Holders should consult their tax advisors regarding possible relief under an applicable income tax treaty.
Information reporting and backup withholding (at a rate of 28%) may apply to the proceeds received by a holder pursuant to the merger. Backup
withholding generally will not apply to (1) a U.S. Holder that furnishes a correct taxpayer identification number and certifies that such U.S. Holder is not subject to backup withholding on IRS
Form W-9 (or a substitute or successor form); or (2) a Non-U.S. Holder that (a) provides a certification of such Non-U.S. Holder's foreign status on the appropriate IRS
Form W-8 (or a substitute or successor form) or (b) otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts
69
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withheld
under the backup withholding rules will be allowed as a refund or a credit against the holder's U.S. federal income tax liability, provided that the required information is timely furnished
to the IRS.
Withholding taxes may be imposed under Sections 1471 through 1474 of the Code (such Sections commonly referred to as "FATCA") on certain
types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. The application of FATCA to the payment of the merger consideration made to a non-U.S. Holder with
respect to Silver Bay common stock pursuant to the merger is not entirely clear. Holders are urged to consult their own tax advisors regarding FATCA and the application of these rules to such payment.
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FUTURE STOCKHOLDER PROPOSALS
If the merger is completed, we will have no public stockholders and there will be no public participation in any future meetings of stockholders
of Silver Bay. However, if the merger is not completed, Silver Bay stockholders will continue to be entitled to attend and participate in stockholder meetings.
Silver
Bay will hold an annual meeting of stockholders in 2017 only if the merger has not already been completed.
Pursuant
to Article II, Section 11 of our bylaws, if a Silver Bay stockholder intends to submit a proposal or director nomination for consideration at our annual meeting in
2017, if held, that is not intended to be included in the proxy statement for that meeting, the stockholder must give notice in accordance
with the requirements set forth in our bylaws not earlier than the 150th day nor later than 5:00 p.m., Eastern Time, on the 120th day prior to the first anniversary of the date of
the proxy statement for the preceding year's annual meeting; provided, however, in the event that the date of the annual meeting is advanced or delayed by more than 30 days from the first
anniversary of the date of the preceding year's annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the 150th day prior to the date of the annual
meeting and not later than 5:00 p.m., Eastern Time, on the later of the 120th day prior to the date of the annual meeting, as originally convened, or the tenth day following the day on
which public announcement of our 2017 annual meeting is first made. Such notice must be sent to our Secretary at Silver Bay Realty Trust Corp., 3300 Fernbrook Lane North, Suite 210, Plymouth,
MN 55447. In addition, our bylaws require that certain information and acknowledgments with respect to the proposal or the nominee and the Silver Bay stockholder making the proposal or nomination be
set forth in the notice.
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WHERE YOU CAN FIND MORE INFORMATION
The SEC allows us to "incorporate by reference" information into this proxy statement, which means that we can disclose important information to
you by referring you to other documents filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement, except for any information superseded by
information in this proxy statement or incorporated by reference subsequent to the date of this proxy statement. This proxy statement incorporates by reference the documents set forth below that we
have previously filed with the SEC. These documents contain important information about us and our financial condition and are incorporated by reference into this proxy statement.
The
following Silver Bay filings with the SEC are incorporated by reference:
-
•
-
Silver Bay's Annual Report on Form 10-K for the fiscal year ended December 31, 2016; and
-
•
-
Silver Bay's Current Reports on Form 8-K filed on January 9, 2017 and February 27, 2017.
We
also incorporate by reference into this proxy statement additional documents that we may file with the SEC between the date of this proxy statement and the earlier of the date of the
special meeting or the termination of the merger agreement. These documents include periodic reports, such as Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as well as
Current Reports on Form 8-K and proxy soliciting materials. The information provided on our website is not part of this proxy statement and therefore is not incorporated by reference herein.
Information
furnished under Item 2.02 or Item 7.01 of any Current Report on Form 8-K, including related exhibits, is not and will not be incorporated by reference
into this proxy statement.
You
may read and copy any reports, statements or other information that we file with the Securities and Exchange Commission at the SEC's public reference room at the following location:
100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of those documents at prescribed rates by writing to the Public Reference Section of the SEC at that
address. Please call the SEC at (800) SEC-0330 for further information on the public reference room. These SEC filings are also available to the public from commercial document retrieval
services and at
www.sec.gov
.
You
may obtain any of the documents we file with the SEC, without charge, by requesting them in writing or by telephone from us at the following address:
Silver
Bay Realty Trust Corp.
Attention: Secretary
3300 Fernbrook Lane North, Suite 210
Plymouth, MN 55447
If
you would like to request documents from us, please do so as soon as possible to receive them before the special meeting. If you request any documents from us, we will mail them to
you by first class mail, or another equally prompt method. Please note that all of our documents that we file with the SEC are also promptly available through the Investor Relations section of our
website,
www.silverbayrealtytrustcorp.com
. The information included on our website is not incorporated by reference into this proxy statement.
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If
you have any questions concerning the merger, the special meeting or this proxy statement, would like additional copies of this proxy statement or need help voting your shares of
common stock, please contact our proxy solicitor:
470
West Avenue
Stamford, CT 06902
Stockholders May Call: (800) 662-5200 (Toll-Free from the U.S. and Canada)
or
(203) 658-9400
(From other locations)
MISCELLANEOUS
Silver Bay has supplied all information relating to Silver Bay, Silver Bay GP and Silver Bay LP, and Tricon has supplied all of
the information relating to Tricon, Tricon LP and Tricon Ultimate Parent contained in this proxy statement.
You
should rely only on the information contained in this proxy statement, the annexes to this proxy statement and the documents that we incorporate by reference in this proxy statement
in voting on the approval of the merger, the merger agreement and the other actions and transactions contemplated by the merger agreement. We have not authorized anyone to provide you with information
that is different from what is contained or incorporated by reference in this proxy statement. This proxy statement is dated
[
·
], 2017. You should not assume that the information contained in this proxy
statement is accurate as of any date other than that date (or as of an earlier date if so indicated in this proxy statement), and the mailing of this proxy statement to Silver Bay stockholders does
not create any implication to the contrary. This proxy statement does not constitute a solicitation of a proxy in any jurisdiction where, or to or from any person to whom, it is unlawful to make a
proxy solicitation.
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Annex A
AGREEMENT AND PLAN OF MERGER
by and among
TRICON CAPITAL GROUP INC.,
TAH ACQUISITION HOLDINGS LLC,
TAH ACQUISITION LP,
SILVER BAY REALTY TRUST CORP.,
SILVER BAY MANAGEMENT LLC
and
SILVER BAY OPERATING PARTNERSHIP L.P.
Dated as of February 27, 2017
A-1
Table of Contents
TABLE OF CONTENTS
A-2
Table of Contents
A-3
Table of Contents
A-4
Table of Contents
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of February 27, 2017 (this "
Agreement
"), is
by and among Tricon Capital Group Inc., a company incorporated under the laws of the Province of Ontario ("
Ultimate Parent
"), TAH Acquisition
Holdings LLC, a Delaware limited liability company ("
Parent
"), TAH Acquisition LP, a Delaware limited partnership
("
Parent LP
"), Silver Bay Realty Trust Corp., a Maryland corporation ("
Company
"), Silver Bay
Management LLC, a Delaware limited liability company ("
Company GP
") and Silver Bay Operating Partnership L.P., a Delaware limited
partnership ("
Company LP
"). Parent, Parent LP, Company, Company GP and Company LP are each sometimes referred to herein as a
"
Party
" and collectively as the "
Parties
". Ultimate Parent, Parent and Parent LP are collectively
referred to herein as the "
Parent Parties
". Company, Company GP and Company LP are collectively referred to herein as the
"
Company Parties
".
WHEREAS,
the board of directors of Ultimate Parent (the "
Ultimate Parent Board
"), the board of directors of Parent (the
"
Parent Board
") and the board of directors of Company (the "
Company
Board
") have determined that it is advisable and in the best interests of their respective companies for Parent and Company to consummate the acquisition of Company by Parent
by way of a merger of Company with and into Parent, with Parent being the surviving entity (the "
Parent Merger
"), on the terms and subject to the
conditions set forth in this Agreement and in accordance with the Delaware Limited Liability Company Act (the "
DLLCA
") and the Maryland General
Corporation Law (the "
MGCL
");
WHEREAS,
TAH Acquisition GP LLC, a wholly owned subsidiary of Parent, as the sole general partner of Parent LP, and Company GP and Company, as the sole
general partner and majority ("special") limited partner, respectively, of Company LP, deem it advisable and, as applicable, in the best interest of their respective limited partners for
Parent LP and Company LP to consummate the merger of Parent LP with and into Company LP, with Company LP being the surviving entity (the
"
Partnership Merger
" and, together with the Parent Merger, the "
Mergers
"), 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
");
WHEREAS,
each of the Ultimate Parent Board, Parent Board and the Company Board has taken all actions required for the execution of this Agreement by Ultimate Parent, Parent and Company,
respectively, and approved the consummation of the Mergers and the other transactions contemplated hereby upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS,
TAH Acquisition GP LLC, in its capacity as the sole general partner of Parent LP, and Company GP, in its capacity as the sole general partner of
Company LP and Company, in its capacity as a majority ("special") limited partner of Company LP, have each taken all actions required for the execution of this Agreement by
Parent LP and Company LP, respectively, and approved the consummation by Parent LP and Company LP, respectively, of the transactions contemplated hereby;
WHEREAS,
as an inducement to the Parent Parties' willingness to enter into this Agreement, concurrently with the execution and delivery of this Agreement, certain of the Stockholders (as
defined below) have executed an agreement (the "
Support Agreement
"), dated as of the date hereof, providing among other things, that such Stockholders
will vote all shares of Company Common Stock (as defined below) held by them in favor of the authorization and approval of this Agreement and the transactions contemplated hereby; and
WHEREAS,
the Parties desire to make certain representations, warranties and agreements in connection with the execution of this Agreement and to prescribe various conditions to the
Mergers.
NOW,
THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and for other good and valuable
consideration,
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the
receipt and adequacy of which are hereby acknowledged, intending to be legally bound, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1
Definitions.
"Acceptable Confidentiality Agreement
" means a confidentiality agreement having provisions that are no more favorable to the applicable
counterparty than those contained in the Confidentiality Agreement with respect to Parent and does not prohibit or otherwise restrict the Company Parties from complying with their obligations under
this Agreement, provided that such confidentiality agreement may contain a less restrictive, or no, standstill restriction and shall not be required to restrict the submission of an Acquisition
Proposal to Company or the Company Board.
"
Acquisition Proposal
" means any inquiry, proposal or offer with respect to any transaction or series of related transactions (other than
the Mergers) that constitutes (a) any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or other similar transaction involving Company (or
any Company Subsidiary); (b) any sale, lease, license, exchange, transfer or other disposition of, or joint venture involving, assets or businesses that constitute or represent more than 10% of
the gross revenue, operating income or fair market value of the consolidated assets of Company and the Company Subsidiaries, taken as a whole; (c) any sale, exchange, transfer or other
disposition of more than 10% of the outstanding (i) shares of Company Common Stock or (ii) Company OP Common Units; or (d) any tender offer or exchange offer that, if consummated,
would result in any Person (other than Parent and its Affiliates) becoming the beneficial owner of more than 10% of the outstanding shares of Company Common Stock.
"
Action
" means any claim, action, suit, proceeding, arbitration, mediation or other investigation.
"
Affiliate
" of a specified Person means a Person that directly or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such specified Person. For purposes of the immediately preceding sentence, the term "control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through ownership of voting securities, by contract or otherwise.
"
Business Day
" means any day other than a Saturday, Sunday or any day on which banks located in New York, New York or Toronto, Ontario are
authorized or required to be closed.
"
Change in Control Severance Plan
" means the Company 2015 Change in Control Severance Plan that was adopted and became effective as of
August 21, 2015.
"
Code
" means the Internal Revenue Code of 1986, as amended.
"
Company Bylaws
" means the bylaws of Company, as amended, restated and supplemented and in effect on the date hereof.
"
Company Charter
" means the charter of Company, as amended and supplemented and in effect on the date hereof.
"
Company Common Stock
" means shares of common stock in Company, par value $0.01 per share.
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"Company Equity Incentive Plan"
means the Company 2012 Equity Incentive Stock Plan (as amended thereafter from time to time).
"
Company LP Agreement
" means the Amended and Restated Limited Partnership Agreement of Company LP, dated as of
December 19, 2012, as amended, modified or supplemented from time to time.
"
Company Material Adverse Effect
" means any event, circumstance, change or effect that, individually or in the aggregate, (a) has
had, or would be reasonably expected to have, a material adverse effect on the business, assets, properties, liabilities, condition (financial or otherwise) or results of operations of Company and the
Company Subsidiaries taken as a whole or (b) that will or would reasonably be expected to, prevent or materially impair or materially delay the ability of the Company Parties to consummate the
Mergers or any of the other transactions contemplated hereby in the manner contemplated hereby; provided, however, that for purposes of clause (a) "Company Material Adverse Effect" shall not
include any event, circumstance, change or effect to the extent arising out of or resulting from (i) any failure of Company and the Company Subsidiaries to meet any internal or external
projections or forecasts or any estimates of earnings, revenues, or other metrics for any period (it being understood that the underlying cause of such failure may, except as otherwise provided in the
other clauses of this proviso, be taken into account in determining whether a Company Material Adverse Effect has occurred); (ii) any events, circumstances, changes or effects generally
affecting any of the industries in which Company and the Company Subsidiaries operate; (iii) any changes in the United States or global economy or capital, financial, banking, credit or
securities markets generally, including changes in interest or exchange rates; (iv) any changes in legal, tax, political or regulatory conditions; (v) the commencement, escalation or
worsening of a war (whether or not declared) or armed hostilities or the occurrence of acts of terrorism or sabotage (including cyberterrorism or cyber-attacks); (vi) the announcement of this
Agreement, including the impact thereof on the relationships of Company and the Company Subsidiaries with employees, customers, suppliers or partners; (vii) the taking of any action at the
written request of an executive officer of any Parent Party; (viii) earthquakes, hurricanes, floods or other natural disasters or acts of god; (ix) changes in Law or GAAP or any
interpretations thereof or any accounting principles, practices or policies that Company or any Company Subsidiary is required to adopt; (x) any Action brought, asserted or threatened by or on
behalf of any holder or holders of capital stock, units or other equity interests in Company or any Company Subsidiary arising out of or relating to this Agreement, the Mergers or any of the other
transactions contemplated by this Agreement; or (xi) any decline in the market price of the shares of Company Common Stock (it being understood that the underlying cause of such decline may,
except as otherwise provided in the other clauses of this proviso, be taken into account in determining whether a Company Material Adverse Effect has occurred); provided that, in the case of each of
clauses (ii), (iii), (iv), (v), (viii) and (ix), such events, circumstances, change or effects do not materially disproportionately affect Company and the Company Subsidiaries, taken as
a whole, relative to other similarly situated participants in the industries in the United States.
"
Company OP Common Unit
" shall mean a limited partnership interest in Company LP designated as a "Partnership Common Unit" under
the Company LP Agreement.
"
Company OP Preferred Unit
" shall mean a limited partnership interest in Company LP designated as a "Partnership Preferred Unit"
under the Company LP Agreement.
"
Company Properties
" means collectively the Leased Real Property and Owned Real Property.
"
Company PSU
" shall mean each performance restricted stock unit that is subject to performance based vesting criteria representing the
right to receive Company Common Stock under the Company Equity Incentive Plan or otherwise; provided that for purposes hereunder, the term "Company PSU" shall include the aggregate restricted stock
units granted as "dividend equivalents" (the "
DER Stock Units
") with respect to, and subject to the same vesting conditions as, such Company PSU.
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"
Company Restricted Stock Award
" means each award of Company Common Stock granted under the Company Equity Incentive Plan that are
unvested or subject to a substantial risk of forfeiture.
"
Company Subsidiary
" means Company GP, Company LP and any corporation, other partnership, limited liability company, joint
venture, business trust, real estate investment trust or other organization, whether incorporated or unincorporated, or other legal entity of which (a) Company and/or Company LP directly
or indirectly owns or controls at least a majority of the capital stock or other equity interests having by their terms ordinary voting power to elect a majority of the board of directors or others
performing similar functions, (b) Company and/or any Person that is a Company Subsidiary by reason of the application of clause (a) or clause (c) of this definition of "Company
Subsidiary" is a general partner, manager, managing member, trustee, director or the equivalent, or (c) Company and/or Company LP, directly or indirectly, holds a majority of the
beneficial, equity, capital, profits or other economic interest.
"
Confidentiality Agreement
" means the confidentiality agreement, dated August 21, 2015 between Ultimate Parent and Company (as
amended thereafter from time to time).
"
Debt Financing Sources
" means the Persons (including without limitation, lenders, agents or arrangers) on the Debt Financing and their
respective Affiliates' former, current or future general or limited partners, stockholders, managers, members, officers, directors, employees and representatives and their successors and assigns,
including any parties to any joinder agreements, credit agreements, indentures or other agreements relating thereto.
"
Employee Benefit Plan
" means any "employee benefit plan" (within the meaning of Section 3(3) of ERISA) and any employment,
consulting, termination, severance, change in control, separation, retention, stock option, restricted stock, restricted stock unit, equity, equity-based, outperformance, stock purchase, deferred
compensation, bonus, incentive compensation, fringe benefit, health, medical, dental, vision, disability, accident, life insurance, welfare benefit, cafeteria, vacation, paid time off, perquisite,
retirement, pension, profit sharing or savings or any other compensation or employee benefit plan, agreement, program, policy or other arrangement, whether or not subject to ERISA,
whether funded or unfunded, written or unwritten, pursuant to which there are any obligations, liabilities or exposure, whether actual or contingent, with respect to any current or former employee,
officer, manager, director or consultant.
"
Environmental Law
" means any Law relating to the pollution or protection of the environment (including air, surface water, groundwater,
land surface or subsurface land), or human health or safety (as such matters relate to Hazardous Substances), including Laws relating to the use, handling, presence, transportation, treatment,
storage, disposal, release or discharge of or exposure to Hazardous Substances.
"
Environmental Permit
" shall mean any certificate, variance, exemption, order, franchise, permit, approval, license or other authorization
required under any applicable Environmental Law.
"
ERISA
" means the Employee Retirement Income Security Act of 1974, as amended.
"
ERISA Affiliate
" means any entity, trade or business (whether or not incorporated) that, together with any other entity, trade or
business (whether or not incorporated), is required to be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code.
"
Exchange Act
" means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"
Existing Company Indebtedness
" means all indebtedness, obligations and liabilities of Company and/or any Company Subsidiary under or
otherwise in connection with (i) that certain SBY 2014-1 Credit Facility, dated August 12, 2014, by and between SBY 2014-1 Borrower LLC, as borrower, and JPMorgan Chase Bank,
National Association, as lender, and all documents, agreements and
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instruments
executed or delivered in connection therewith (in each case, as the same have been and may be further amended, assigned or otherwise modified), and/or (ii) that certain Amended and
Restated Revolving Credit Agreement, dated as of February 18, 2015, by and among the property owners party thereto from time to time, as borrowers, Company LP, as master property
manager, SB Financing Trust Owner LLC, as borrower representative, U.S. Bank National Association, as calculation agent and paying agent, Bank of America, National Association, as joint
lead arranger, agent and a lender, and JPMorgan Chase Bank, National Association, as joint lead arranger and a
lender, and all documents, agreements and instruments executed or delivered in connection therewith (in each case, as the same have been and may be further amended, assigned or otherwise modified).
"
Expenses
" means all expenses (including all 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, preparation, negotiation, execution and performance of this Agreement, the
preparation, printing, filing and mailing of the Proxy Statement and all SEC and other regulatory filing fees incurred in connection with the Proxy Statement, the solicitation of stockholder or
partner approvals, engaging the services of the Paying Agent, obtaining third party consents, any other filings with the SEC and all other matters related to the closing of the Mergers and the other
transactions contemplated by this Agreement.
"
GAAP
" means the United States generally accepted accounting principles.
"
Governmental Authority
" means any United States (federal, state, county or local) or foreign government or political subdivision thereof,
or any governmental or quasi-governmental, regulatory, judicial, arbitral or administrative authority, board, bureau, agency, commission or self-regulatory organization.
"
Hazardous Substances
" means those substances listed in, defined in or regulated as hazardous, toxic, pollutants, contaminants or harmful
to human health or the environment under any applicable Environmental Law.
"
Indebtedness
" shall mean, with respect to any Person, (i) all indebtedness, notes payable, accrued interest payable or other
obligations for borrowed money, whether secured or unsecured, (ii) all obligations under conditional sale or other title retention agreements, or incurred as financing, in either case with
respect to property acquired by such Person, (iii) all obligations for the payment of the deferred purchase price for any property or assets, (iv) all obligations under leases required
to be capitalized in accordance with GAAP, (v) all obligations in respect of bankers acceptances or letters of credit, in each case to the extent drawn down, (vi) all obligations under
interest rate cap, swap, collar or similar transaction or currency hedging transactions, and (vii) any guarantee (other than customary non-recourse carve-out or "badboy" guarantees) of any of
the foregoing, whether or not evidenced by a note, mortgage, bond, indenture or similar instrument.
"
Intellectual Property
" shall mean any of the following, as they exist anywhere in the world: (i) patents, patent applications,
invention disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions and extensions thereof, (ii) trademarks, service marks, trade
dress, logos, trade names, corporate names, Internet domain names, design rights and other source identifiers, together with the goodwill symbolized by any of the foregoing, (iii) copyrightable
works, copyrights, mask works and designs, (iv) confidential and proprietary information, including trade secrets, know-how, ideas, formulae, models and methodologies, (v) computer
software programs, including all source code, object code, specifications, designs and documentation related thereto; (vi) all
rights in the foregoing and in other similar intangible assets, and (vi) all applications and registrations for the foregoing.
"
Intervening Event
" means a material event, development or change in circumstances with respect to Company and the Company Subsidiaries,
taken as a whole, that occurred or arose after the date of
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this
Agreement, which (a) was unknown to, nor reasonably foreseeable by, the Company Board as of or prior to the date of this Agreement and (b) becomes known to or by the Company Board
prior to the receipt of the Company Stockholder Approval; provided, however, that none of the following will constitute, or be considered in determining whether there has been, an Intervening Event:
(x) the receipt, existence of or terms of any inquiry, discussion, offer or request that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal or any matter relating
thereto or consequence thereof and (y) changes in the market price or trading volume of the Company Common Stock or the fact that Company meets or exceeds internal or external projections or
forecasts or any estimates of earnings, revenues, or other metrics for any period (it being understood that the underlying cause of such change or fact shall not be excluded by this
clause (y)).
"
Investment Company Act
" means the Investment Company Act of 1940, as amended.
"
IRS
" means the United States Internal Revenue Service or any successor agency.
"
IT Assets
" means all computer hardware, peripheral equipment, software and firmware, source code, processed data, information technology
infrastructure (including firewalls, servers, workstations, routers, hubs, switches, and data communications lines) middleware and other information technology that are used to operate the business,
including all associated documentation owned by Company or any Company Subsidiary or licensed or leased to Company or any Company Subsidiary.
"
Knowledge
" (a) where used herein with respect to any of the Company Parties means the actual (and not constructive or imputed)
knowledge of the persons named in
Schedule A
and (b) where used herein with respect to any of the Parent Parties means the actual (and not
constructive or imputed) knowledge of the persons named in
Schedule B
.
"
Law
" means any and all domestic (federal, state or local) or foreign laws, statutes, codes, directives, rules, regulations, orders,
judgments, injunctions or decrees promulgated by any Governmental Authority.
"
Leased Real Property
" means all real property leased or subleased or otherwise occupied, in whole or in part (whether as a tenant or
subtenant), by Company or any Company Subsidiary.
"
Lien
" shall mean with respect to any asset (including any security), any mortgage, deed of trust, option, claim, condition, covenant,
lien, right of way, easement, pledge, charge, security interest, preferential arrangement, right of first refusal or first offer or encumbrance of any kind.
"
NYSE
" means the New York Stock Exchange.
"
Offering Document
" means the preliminary prospectus and the prospectus of Ultimate Parent with respect to the BD Financing.
"
Order
" means a judgment, decision, order, decree, settlement, injunction, writ, stipulation, determination or award issued by any
Governmental Authority.
"
Owned Real Property
" means all real property owned by Company or any Company Subsidiary.
"
Parent Material Adverse Effect
" means any event, change, circumstance, occurrence, effect or state of facts that materially impairs the
ability of any Parent Party to consummate, or prevents or materially delays or impedes, the Mergers or any of the other transactions contemplated by this Agreement in the manner contemplated hereby.
"
Parent Subsidiary
" means Parent LP and any corporation, other partnership, limited liability company, joint venture, business
trust, real estate investment trust or other organization, whether incorporated or unincorporated, or other legal entity of which (a) Parent and/or Parent LP directly or indirectly owns
or controls at least a majority of the capital stock or other equity interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing
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similar
functions, (b) Parent and/or any Person that is a Parent Subsidiary by reason of the application of clause (a) or clause (c) of this definition of "Parent Subsidiary" is a
general partner, manager, managing member, trustee, director or the equivalent, or (c) Parent and/or Parent LP, directly or indirectly, holds a majority of the beneficial, equity,
capital, profits or other economic interest.
"
Parent Termination Fee
" means sixty two million five hundred thousand dollars ($62,500,000).
"
Permitted Liens
" shall mean any (i) Liens that result from any statutory or other Liens for Taxes or assessments that are not yet
subject to penalty or the validity of which is being contested in good faith by appropriate proceedings and for which there are adequate reserves on the financial statements of Company (if such
reserves are required pursuant to GAAP), (ii) Liens imposed or promulgated by Law, including zoning regulations, permits and licenses, (iii) Liens that are disclosed on the existing
Company Title Insurance Policies made available by or on behalf of Company or any Company Subsidiary to Parent prior to the date hereof that do not interfere in any material manner with the current
use of the applicable Company Property, (iv) any inchoate cashiers', landlords', workers', mechanics', carriers', workmen's, repairmen's and materialmen's liens and other similar Liens imposed
by Law and incurred in the ordinary course of business consistent with past practice that are not yet subject to penalty or the validity of which is being contested in good faith by appropriate
proceedings, (v) as to any Leased Real Property, any Lien affecting any interest in the lessor thereof and (vi) such imperfections in title, easements, restrictions, covenants and
similar Liens that do not or will not interfere in any material manner with the current use of the Company Properties (assuming its continued use in the manner it is currently used).
"
Person
" or "
person
" means an individual, corporation, partnership, limited partnership,
limited liability company, person (including a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or other entity or a Governmental Authority or a political
subdivision, agency or instrumentality of a Governmental Authority.
"
Proxy Statement
" shall mean the letter to the Stockholders, notice of meeting, proxy statement and form of proxy to be distributed to the
Stockholders of Company in connection with the Company Stockholder Meeting to approve the Mergers and other transactions contemplated hereby.
"
Real Property Lease
" means a lease, sublease, license or other occupancy agreement pursuant to which Company or a Company Subsidiary
leases, subleases or otherwise occupies or has the right to occupy real property.
"
Representative
" means, with respect to any Person, such Person's directors, officers, employees, consultants, advisors (including
attorneys, accountants, consultants, investment bankers, and financial advisors), financing sources, agents and other representatives.
"
SEC
" means the United States Securities and Exchange Commission (including the staff thereof).
"
Securities Act
" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"
Stockholders
" means the holders of shares of Company Common Stock.
"
Superior Proposal
" means a bona fide written Acquisition Proposal (except that, for purposes of this definition, the references in the
definition of "Acquisition Proposal" to "ten percent (10%)" shall be replaced by "eighty percent (80%)") made by a Third Party that are on terms that the Company Board determines in its good faith
judgment, after consultation with its outside legal counsel and financial advisors, and taking into account all factors and matters deemed relevant in good faith by the Company Board (including
(i) financial, legal, regulatory and any other aspects of the transaction described in such proposal, (ii) the likelihood and timing of consummation (as compared to the Mergers) and
(iii) any changes to this Agreement proposed by Parent in response to such Acquisition Proposal) would, if consummated, be more favorable to Company and its Stockholders than the transactions
contemplated by this Agreement.
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"
Tax
" or "
Taxes
" means any U.S. federal, state, local and foreign
income, gross receipts, license, withholding, property, recording, stamp, transfer, sales, use, abandoned property, escheat, franchise, employment, payroll, excise, environmental and other taxes,
tariffs or governmental charges of any nature whatsoever, together with penalties, interest or additions thereto.
"
Tax Return
" 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
" means twenty four million five hundred thousand dollars ($24,500,000).
"
Third Party
" means any Person or group of Persons other than a Party to this Agreement or their respective Affiliates.
"
TSX
" means the Toronto Stock Exchange.
"
WARN Act
" means the Worker Adjustment and Retraining Notification Act of 1988, as amended, and any state law analogs or statutes of
similar effect, including any statutes that require advance notice of plant closings, mass layoffs or similar group personnel or employment actions.
(b) The
following terms have the respective meanings set forth in the sections set forth below opposite such term:
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Defined Terms
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Location of Definition
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Acceptable Confidentiality Agreement
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Section 1.1(a)
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Acquisition Agreement
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Section 7.4(a)
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Acquisition Proposal
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Section 1.1(a)
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Action
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Section 1.1(a)
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Affiliate
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Section 1.1(a)
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Agreement
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Preamble
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Alternative Financing
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Section 7.7(a)
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Alternative Financing Agreements
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Section 7.7(a)
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Alternative Financing Source
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Section 7.7(a)
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BD Financing
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Section 5.9(a)
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BD Financing Commitment
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Section 5.9(a)
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BD Investors
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Section 5.9(a)
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Book-Entry Share
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Section 3.1(b)
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Business Day
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Section 1.1(a)
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Certificate
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Section 3.1(b)
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Change in Company Recommendation
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Section 7.4(a)(iii)
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Claim
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Section 7.6(a)
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Claim Expenses
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Section 7.6(a)
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Closing
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Section 2.3
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Closing Date
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Section 2.3
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Code
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Section 1.1(a)
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Company
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Preamble
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Company Board
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Recitals
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Company Bylaws
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Section 1.1(a)
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Company Charter
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Section 1.1(a)
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Company Common Stock
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Section 1.1(a)
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Company Employee Benefit Plans
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Section 4.12(a)
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Company Equity Incentive Plan
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Section 1.1(a)
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Company GP
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Preamble
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Company LP
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Preamble
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Defined Terms
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Location of Definition
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Company LP Agreement
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Section 1.1(a)
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Company Material Adverse Effect
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Section 1.1(a)
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Company Material Contract
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Section 4.18(b)
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Company OP Common Unit
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Section 1.1(a)
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Company OP Preferred Unit
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Section 1.1(a)
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Company OP Unit Certificate
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Section 3.2(a)
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Company OP Unit Consideration
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Section 3.2(a)
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Company Parties
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Preamble
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Company Partner Approval
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Section 4.20
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Company Permits
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Section 4.6(a)
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Company Preferred Stock
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Section 4.3(a)
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Company Properties
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Section 1.1(a)
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Company PSU
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Section 1.1(a)
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Company Recommendation
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Section 4.4(b)
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Company Restricted Stock Award
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Section 1.1(a)
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Company SEC Documents
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Section 4.7(a)
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Company Stockholder Approval
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Section 4.20
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Company Stockholder Meeting
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Section 7.1(b)
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Company Subsidiary
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Section 1.1(a)
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Company Subsidiary Partnership
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Section 4.11(g)
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Company Tax Protection Agreements
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Section 4.11(g)
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Company Third Party
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Section 4.17(g)
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Company Title Insurance Policies
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Section 4.17(i)
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Company Title Insurance Policy
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Section 4.17(i)
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Confidentiality Agreement
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Section 1.1(a)
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Continuing Employee
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Section 7.17(a)
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Continuing Employees
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Section 7.17(a)
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Contract Property
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Section 4.17(b)
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Data Tape
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Section 4.17(k)
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Delaware Courts
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Section 10.8(a)
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Debt Financing
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Section 5.9(a)
|
|
Debt Financing Commitments
|
|
Section 5.9(a)
|
|
Debt Financing Sources
|
|
Section 1.1(a)
|
|
DER Stock Units
|
|
Section 1.1(a)
|
|
Disclosure Letter
|
|
Article 4
|
|
DLLCA
|
|
Recitals
|
|
DRULPA
|
|
Recitals
|
|
Employee Benefit Plan
|
|
Section 1.1(a)
|
|
Enforceability Exceptions
|
|
Section 4.4(a)
|
|
Environmental Law
|
|
Section 1.1(a)
|
|
Environmental Permit
|
|
Section 1.1(a)
|
|
ERISA
|
|
Section 1.1(a)
|
|
ERISA Affiliate
|
|
Section 1.1(a)
|
|
Exchange Act
|
|
Section 1.1(a)
|
|
Existing Company Indebtedness
|
|
Section 1.1(a)
|
|
Expenses
|
|
Section 1.1(a)
|
|
Financing
|
|
Section 5.9(a)
|
|
Financing Commitments
|
|
Section 5.9(a)
|
|
Financing Sources
|
|
Section 5.9(a)
|
|
GAAP
|
|
Section 1.1(a)
|
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|
|
|
|
|
Defined Terms
|
|
Location of Definition
|
|
Governmental Authority
|
|
Section 1.1(a)
|
|
GS
|
|
Section 4.19
|
|
Hazardous Substances
|
|
Section 1.1(a)
|
|
Indebtedness
|
|
Section 1.1(a)
|
|
Indemnified Parties
|
|
Section 7.6(a)
|
|
Indemnifying Party
|
|
Section 7.6(a)
|
|
Intellectual Property
|
|
Section 1.1(a),
|
|
Interim Period
|
|
Section 6.1(a)
|
|
Intervening Event Notice Period
|
|
Section 7.4(a)(v)
|
|
Investment Company Act
|
|
Section 1.1(a)
|
|
IRS
|
|
Section 1.1(a)
|
|
IT Assets
|
|
Section 1.1(a)
|
|
Knowledge
|
|
Section 1.1(a)
|
|
Law
|
|
Section 1.1(a)
|
|
Leased Real Property
|
|
Section 1.1(a)
|
|
Letter of Transmittal
|
|
Section 3.5(c)(i)
|
|
Licensed Intellectual Property
|
|
Section 4.15(a)
|
|
Lien
|
|
Section 1.1(a)
|
|
Maximum Premium
|
|
Section 7.6(c)
|
|
Merger Consideration
|
|
Section 3.1(b)
|
|
Mergers
|
|
Recitals
|
|
MGCL
|
|
Recitals
|
|
Notice of Recommendation Change
|
|
Section 7.4(a)(iv)
|
|
Notice Period
|
|
Section 7.4(a)(iv)
|
|
NYSE
|
|
Section 1.1(a)
|
|
Offering Document
|
|
Section 1.1(a)
|
|
Order
|
|
Section 1.1(a)
|
|
Organizational Documents
|
|
Section 7.6(a)
|
|
Owned Intellectual Property
|
|
Section 4.15(a)
|
|
Outside Date
|
|
Section 9.1(c)
|
|
Owned Real Property
|
|
Section 1.1(a)
|
|
Parent
|
|
Preamble
|
|
Parent Board
|
|
Recitals
|
|
Parent LP
|
|
Preamble
|
|
Parent Material Adverse Effect
|
|
Section 1.1
|
|
Parent Merger
|
|
Recitals
|
|
Parent Merger Effective Time
|
|
Section 2.1(c)
|
|
Parent Parties
|
|
Preamble
|
|
Parent Party
|
|
Preamble
|
|
Parent Subsidiary
|
|
Section 1.1(a)
|
|
Parent Termination Fee
|
|
Section 1.1(a)
|
|
Parent Termination Fee Base Amount
|
|
Section 9.4(a)
|
|
Parties
|
|
Preamble
|
|
Partnership Merger
|
|
Recitals
|
|
Partnership Merger Effective Time
|
|
Section 2.2(c)
|
|
Party
|
|
Preamble
|
|
Paying Agent
|
|
Section 3.5(a)
|
|
Paying Agent Agreement
|
|
Section 3.5(a)
|
|
Payment Fund
|
|
Section 3.5(a)
|
|
Permitted Liens
|
|
Section 1.1(a)
|
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|
|
|
|
Defined Terms
|
|
Location of Definition
|
|
Person
|
|
Section 1.1(a)
|
|
Personal Information
|
|
Section 4.15(f)
|
|
Preferred Book-Entry Share
|
|
Section 3.1(c)
|
|
Preferred Certificate
|
|
Section 3.1(c)
|
|
Preferred Merger Consideration
|
|
Section 3.1(c)
|
|
Privacy Policy
|
|
Section 4.15(f)
|
|
Proxy Statement
|
|
Section 1.1(a)
|
|
Qualifying Income
|
|
Section 9.4(a)
|
|
Qualified REIT Subsidiary
|
|
Section 4.11(b)
|
|
Real Estate Lease Contract
|
|
Section 4.17(b)
|
|
Real Estate Purchase Contract
|
|
Section 4.17(b)
|
|
Real Estate Sales Contract
|
|
Section 4.17(g)
|
|
Real Property Lease
|
|
Section 1.1(a)
|
|
Record Date
|
|
Section 7.1(b)
|
|
REIT
|
|
Section 4.11(b)
|
|
REIT Opinion
|
|
Section 8.2(e)
|
|
Remaining Parent Termination Fee
|
|
Section 9.4(a)
|
|
Representative
|
|
Section 1.1(a)
|
|
Required SPE Covenants
|
|
Section 7.8(ix)
|
|
Residential Lease
|
|
Section 4.17(c)
|
|
Restraints
|
|
Section 8.1(b)
|
|
SDAT
|
|
Section 2.1(b)
|
|
SEC
|
|
Section 1.1(a)
|
|
Securities Act
|
|
Section 1.1(a)
|
|
Stockholders
|
|
Section 1.1(a)
|
|
Superior Proposal
|
|
Section 1.1(a)
|
|
Support Agreement
|
|
Recitals
|
|
Surviving Company
|
|
Section 2.1(a)
|
|
Tax or Taxes
|
|
Section 1.1(a)
|
|
Tax Return
|
|
Section 1.1(a)
|
|
Taxable REIT Subsidiary
|
|
Section 4.11(b)
|
|
Termination Fee
|
|
Section 1.1(a)
|
|
Third Party
|
|
Section 1.1(a)
|
|
Transfer Taxes
|
|
Section 7.13(a)
|
|
TSX
|
|
Section 1.1(a)
|
|
Ultimate Parent
|
|
Preamble
|
|
Ultimate Parent Board
|
|
Recitals
|
|
Uncertificated Unit
|
|
Section 3.2(a)
|
|
WARN Act
|
|
Section 1.1(a)
|
Section 1.2
Interpretation and Rules of Construction.
In this Agreement, except to the extent
otherwise provided or that the context otherwise requires:
(a) when
a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this
Agreement unless otherwise indicated;
(b) the
table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;
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(c) whenever
the words "include," "includes" or "including" are used in this Agreement, they are deemed to be followed by the words "without limitation" unless the context
expressly provides otherwise;
(d) the
words "hereof," "herein" and "hereunder" and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular
provision of this Agreement, except to the extent otherwise specified;
(e) the
phrase "made available" in this Agreement means that the information referred to has been made available, in any form agreed upon by Company and Parent, including
through the electronic data room maintained by Company and its Representatives for "Project Pegasus" at https://pegasus.securevdr.com, to the Party to whom such information is to be made available;
(f) any
pronoun shall include the corresponding masculine, feminine and neuter forms;
(g) all
terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined
therein;
(h) References
to "$" and "dollars" are to the currency of the United States of America; and
(i) the
definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms.
ARTICLE II
THE MERGERS
Section 2.1
The Parent Merger.
(a) Upon
the terms and subject to satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the applicable provisions of the DLLCA and the
MGCL, at the Parent Merger Effective Time, Company shall merge with and into Parent, with Parent continuing as the surviving entity of the Parent Merger (the "
Surviving
Company
"). The Parent Merger will have the effects provided in this Agreement and as set forth in the DLLCA and the MGCL.
(b) The
Parties shall cause the Parent Merger to be consummated as soon as practicable on the Closing Date immediately after the Partnership Merger Effective Time, and shall
file (i) the certificate of merger with the Secretary of State of the State of Delaware in accordance with the DLLCA, in such form as required by, and executed in accordance with the relevant
provisions of, the DLLCA, and (ii) articles of merger with the State Department of Assessments and Taxation of the State of Maryland (the "
SDAT
")
in accordance with the MGCL, in such form as required by, and executed in accordance with the relevant provisions of, the MGCL. The Parties shall make all other filings, recordings or publications, if
any, required under the DLLCA and the MGCL (including with respect to the Parent Merger, Section 3-113(b)(2) of the MGCL) in connection with the Parent Merger.
(c) The
Parent Merger shall become effective upon the later of such time as the certificate of merger has been filed with the Secretary of State of the State of Delaware or
the articles of merger have been accepted for recording by the SDAT, or such later time which the Parties hereto shall have agreed upon and designated in such filings in accordance with the DLLCA and
the MGCL as the effective time of the Parent Merger (the "
Parent Merger Effective Time
"); it being understood and agreed that the Parties shall cause
the Parent Merger Effective Time to occur on the Closing Date as soon as practicable following the Partnership Merger Effective Time.
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Table of Contents
Section 2.2
The Partnership Merger
(a) Upon
the terms and subject to satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the applicable provisions of the DRULPA, at
the Partnership Merger Effective Time, Parent LP shall merge with and into Company LP, with Company LP continuing as the surviving entity. The Partnership Merger shall have the
effects provided in this Agreement and as specified in the DRULPA.
(b) The
Parties shall cause the Partnership Merger to be consummated as soon as practicable on the Closing Date, and shall file the certificate of merger with the Secretary
of State of the State of Delaware in accordance with the DRULPA, in such form as required by, and executed in accordance with the relevant provisions of, the DRULPA. The Parties shall make all other
filings, recordings or publications required, if any, under the DRULPA in connection with the Partnership Merger.
(c) The
Partnership Merger shall become effective upon such time as the certificate of merger has been filed with the Secretary of State of the State of Delaware, or such
later time which the Parties hereto shall have agreed upon and designated in such filings in accordance with the DRULPA as the effective time of the Partnership Merger (the
"
Partnership Merger Effective Time
"); it being understood and agreed that the Parties shall cause the Partnership Merger Effective Time to occur on the
Closing Date immediately prior to the Parent Merger Effective Time.
Section 2.3
Closing.
The closing (the "
Closing
")
of the Mergers will take place at the date and time mutually agreed upon by the
Parties (but in no event later than the third (3rd) Business Day after all the conditions set forth in
Article VIII
(other than those conditions
that by their nature are to be satisfied or waived at the Closing, but subject to the satisfaction or waiver of such conditions) shall have been satisfied or waived by the Party entitled to the
benefit of the same, or at such other date and time to be specified in writing by the Parties (the date on which the Closing occurs, the "
Closing
Date
")). The Closing shall take place at the offices of Orrick, Herrington & Sutcliffe LLP, The Orrick Building, 405 Howard Street, San Francisco, California
94105, or at such other place as agreed to by the Parties.
Section 2.4
Governing Documents.
The limited liability company agreement of Parent as in effect
immediately prior to the Parent Merger Effective Time shall be the limited liability company
agreement of the Surviving Company immediately following the Parent Merger Effective Time, until further amended in accordance with the provisions thereof and applicable Law. The amended and restated
limited partnership agreement of Company LP, as in effect immediately prior to the Partnership Merger Effective Time (such amended and restated limited partnership agreement to be in the form
attached as
Exhibit A
) shall be the limited partnership agreement of Company LP immediately following the Partnership Merger Effective
Time, until thereafter amended in accordance with the provisions thereof and in accordance with applicable Law. Nothing in this
Section 2.4
shall
affect in any way the indemnification or other obligations provided for in
Section 7.6
.
Section 2.5
Directors and Officers.
The directors and officers of Parent immediately prior to
the Parent Merger Effective Time shall be the directors and officers of Parent immediately following the
Parent Merger Effective Time, in each case until their successors are duly elected or appointed in accordance with applicable Law. The general partner of Company LP immediately prior to the
Partnership Merger Effective Time shall be the general partner of Company LP immediately following the Partnership Merger Effective Time, until its successors are duly elected or appointed in
accordance with applicable Law.
Section 2.6
Tax Consequences.
It is intended by the Parties that, for U.S. federal, and
applicable state, income Tax purposes: (i) consistent with Revenue Ruling 69-6, the Parent Merger
will be treated
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as
a taxable sale by Company of all Company's assets to Parent in exchange for the Merger Consideration, the Preferred Merger Consideration and the assumption of all Company's liabilities, followed by
the distribution of such Merger Consideration and Preferred Merger Consideration to the holders of the Company Common Stock and the Company Preferred Stock in liquidation of Company pursuant to
Section 331 and Section 562 of the Code, and that this Agreement be, and is hereby adopted as, a "plan of liquidation" of Company for U.S. federal income tax purposes and (ii) the
Partnership Merger will be treated as a taxable sale of the Company OP Common Units (other than Company OP Common Units held by either Company GP or Company) by the holders of such interests in
exchange for cash.
ARTICLE III
EFFECTS OF THE MERGERS
Section 3.1
Effects on Securities in the Parent Merger.
At the Parent Merger Effective Time and by
virtue of the Parent Merger and without any further action on the part of any Parent Party, Company Party, or the
holders of any securities of Parent or Company:
(a)
Cancellation of Company Common Stock.
(i) Each share of Company Common Stock issued and outstanding
immediately prior to the Parent Merger Effective Time that is held by any Parent Party, any Parent Subsidiary or any wholly owned Company Subsidiary, shall no longer be outstanding and shall
automatically be retired and shall cease to exist, and no payment shall be made with respect thereto and (ii) each share of Company Common Stock held by Company (whether as treasury stock or
otherwise) shall automatically be retired and shall cease to exist and no payment shall be made with respect thereto.
(b)
Conversion of Company Common Stock.
Each share of Company Common Stock issued and outstanding immediately
prior to the Parent Merger Effective Time (other than shares to be cancelled in accordance with
Section 3.1(a)
) shall automatically be converted
into the right to receive an amount in cash equal to twenty one dollars and fifty cents ($21.50), without interest (as the same may be adjusted pursuant to
Section 3.3
and
Section 7.16
, in either case, if applicable, the "
Merger
Consideration
"), subject to any applicable withholding Tax. All shares of Company Common Stock,
when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate (a
"
Certificate
") or book-entry share registered in the transfer books of Company (a "
Book-Entry Share
")
that immediately prior to the Parent Merger Effective Time represented shares of Company Common Stock shall cease to have any rights with respect to such shares of Company Common Stock other than the
right to receive the Merger Consideration in accordance with
Section 3.5
.
(c)
Conversion of Company Preferred Stock.
Each share of Company Preferred Stock issued and outstanding
immediately prior to the Parent Merger Effective Time shall be automatically converted into the right to receive an amount in cash equal to one thousand dollars ($1,000) per share, plus an amount
equal to all dividends accrued and unpaid on such share of Company Preferred Stock immediately prior to the Parent Merger Effective Time, without interest (the "
Preferred
Merger Consideration
"), subject to any applicable withholding Tax. All shares of Company Preferred Stock, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder of a certificate (a "
Preferred Certificate
") or book-entry share
registered in the transfer books of Company (a "
Preferred Book-Entry Share
") that immediately prior to the Parent Merger Effective Time represented
shares of Company Preferred Stock shall cease to have any rights with respect to such shares of Company Preferred Stock other than the right to receive the Preferred Merger Consideration in accordance
with
Section 3.5
.
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(d)
Share Transfer Books.
At the Parent Merger Effective Time, the share transfer books of Company shall be
closed and thereafter there shall be no further registration of transfers of the shares of Company Common Stock or the shares of Company Preferred Stock. From and after the Parent Merger Effective
Time, persons who held shares of Company Common Stock or Company Preferred Stock immediately prior to the Parent Merger Effective Time shall cease to have rights with respect to such shares, except as
otherwise provided for herein. On or after the Parent Merger Effective Time, any Certificates or Book-Entry Shares of Company presented to the Paying Agent, any Parent Party or the transfer agent for
any reason shall be exchanged as provided in this
Article III
with respect to the shares of Company Common Stock and the shares of Company
Preferred Stock formerly represented thereby.
(e)
Parent Membership Units.
At the Parent Merger Effective Time, each outstanding membership unit representing
a membership interest in Parent issued and outstanding immediately prior to the Parent Merger Effective Time shall remain outstanding as a membership unit representing a membership interest in the
Surviving Company and shall not be affected by the Merger.
Section 3.2
Effects on Partnership Interests in the Partnership Merger.
(a) At
the Partnership Merger Effective Time, by virtue of the Partnership Merger and without any further action on the part of any Parent Party, Company Party or the
holders of Company OP Common Units, each Company OP Common Unit issued and outstanding immediately prior to the Partnership Merger Effective Time (other than Company OP Common Units held by either
Company GP or Company) shall automatically be converted into the right to receive an amount in cash (without interest, and subject to deduction for required withholding Tax) equal to the
(i) number of shares of Company Common Stock that would have been received from the Company in exchange for such Company OP Common Unit under the terms of Section 15.1B of the
Company LP Agreement if the Company had issued and delivered Company Common Stock in exchange for such Company OP Common Unit immediately prior to the Partnership Merger Effective Time (as if
such Company OP Common Unit were a "Tendered Unit" pursuant to the Company LP Agreement and the Company GP had elected to cause the Company to acquire such Company OP Common Unit
pursuant to Section 15.1B of the Company LP Agreement),
multiplied by
(ii) the Merger Consideration (such total, the
"
Company OP Unit Consideration
") and each holder of a certificate (a "
Company OP Unit Certificate
") or
uncertificated unit registered in Exhibit A to the Company LP Agreement (a "
Uncertificated Unit
") that immediately prior to the
Partnership Merger Effective Time represented Company OP Common Units shall cease to have any rights with respect to such Company OP Common Units other than the right to receive the Company OP Unit
Consideration in accordance with this
Section 3.2(a)
.
(b) At
the Partnership Merger Effective Time, by virtue of the Partnership Merger and without any further action on the part of any Parent Party, Company Party or the
holders of Company OP Common Units, each Company OP Common Unit issued and outstanding immediately prior to the Partnership Merger Effective Time and held by either Company GP or Company shall
remain outstanding (entitling Company (and following the Parent Merger, the Surviving Company), Parent or an Affiliate of Parent to such rights, duties and obligations as will be more fully set forth
in the amended and restated limited partnership agreement of Company LP as in effect immediately prior to the Partnership Merger Effective Time (such amended and restated limited partnership
agreement to be in the form attached as
Exhibit A
)).
(c) At
the Partnership Merger Effective Time, by virtue of the Partnership Merger and without any further action on the part of any Parent Party, Company Party or the
holders of Company OP Preferred Units, each Company OP Preferred Unit issued and outstanding
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immediately
prior to the Partnership Merger Effective Time shall automatically be retired and shall cease to exist and no payment shall be made with respect thereto.
(d) At
the Partnership Merger Effective Time, by virtue of the Partnership Merger and without any further action on the part of any Parent Party or Company Party, each unit
of Parent LP issued and outstanding immediately prior to the Partnership Merger Effective Time shall automatically be retired and shall cease to exist and no payment shall be made with respect
thereto.
Section 3.3
Adjustments.
Without limiting the other provisions of this Agreement and subject to
Section 6.1(b)(ii)
and
Section 6.1(b)(iii)
, if at any time during the period between the date of this Agreement and the Parent Merger Effective Time, Company should
split, combine or otherwise reclassify the shares of Company Common Stock, or make a dividend or other distribution in shares of Company Common Stock (including any dividend or other distribution of
securities convertible into shares of Company Common Stock), or engage in a reclassification, reorganization, recapitalization or exchange or other like change, then (without limiting any other rights
of the other Parties hereunder), the Merger Consideration and Preferred Merger Consideration shall be equitably adjusted to reflect fully the effect of any such change.
Section 3.4
Company Restricted Stock and Company PSUs.
(a) Parent
will not assume any Company Restricted Stock Awards. At the Parent Merger Effective Time, by virtue of the Parent Merger and without any further action on the
part of any Company Party, Parent Party or any holder of Company Restricted Stock Awards, any and all outstanding issuance and forfeiture conditions, or other restrictions, on any shares of Company
Common Stock subject to Company Restricted Stock Awards shall be deemed satisfied in full, contingent upon the closing of the Parent Merger, as stated in the Company Equity Incentive Plans, and such
shares of Company Common Stock shall be treated as an outstanding share of Company Common Stock and entitled to receive the Merger Consideration pursuant to
Section 3.1(b)
.
(b) Parent
will not assume any Company PSUs. At the Parent Merger Effective Time, by virtue of the Parent Merger and without any further action on the part of any Company
Party, Parent Party or any
holder of Company PSUs, each Company PSU that is outstanding as of immediately prior to the Parent Merger Effective Time shall vest in accordance with the terms thereof, including all DER Stock Units
subject to the same vesting provisions as the Company PSU, and be cancelled and converted into, and will become a right to receive an amount in cash, without interest subject to any applicable
withholding Tax, equal to the product obtained by multiplying (i) the number of shares of Company Common Stock subject to such Company PSU as of immediately prior to the Parent Merger Effective
Time, after taking into account the vesting in connection with the Parent Merger, by (ii) the Merger Consideration. For purposes of the immediately preceding sentence, (a) to the extent
the performance period relating to any such Company PSU has not expired as of the Parent Merger Effective Time and the grant date of the Company PSU occurred less than eighteen (18) months
prior to the Parent Merger Effective Time, the number of shares of Company Common Stock in clause (i) shall be determined as if the applicable "total stockholder return" applicable to such
Company PSU was achieved at the target level of performance; (b) to the extent the performance period relating to any such Company PSU has not expired as of the Parent Merger Effective Time and
the grant date of the Company PSU occurred eighteen (18) months or more prior to the Parent Merger Effective Time, the number of shares of Company Common Stock in clause (i) shall be
determined as if the applicable "total stockholder return" applicable to such Company PSU was achieved at the maximum level of performance; and (c) to the extent the performance period relating
to any such Company PSU has expired as of the Parent Merger Effective Time, the number of shares of Company Common Stock
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in
clause (i) shall be determined based on the actual achievement of all applicable "total stockholder return" targets applicable to such Company PSU through the Parent Merger Effective Time.
Each such Company PSU that vests pursuant to this
Section 3.4(b)
shall, as of immediately prior to the Parent Merger Effective Time, no longer be
subject to any issuance and forfeiture conditions, or other restrictions, and such holders shall be entitled to receive the Merger Consideration pursuant to
Section 3.1(b)
.
(c) As
soon as reasonably practicable after the Closing (but no later than the second payroll date after the Closing Date), the applicable holders of Company Restricted
Stock Awards and Company PSUs will receive a payment from Parent (as the Surviving Company in the Parent Merger), through its payroll system or payroll provider, of all amounts required to be paid to
such holders in respect of Company Restricted Stock Awards and Company PSUs that are cancelled and converted pursuant to
Section 3.4(a)
or
Section 3.4(b)
, as applicable. Notwithstanding the foregoing, if any payment owed to a holder of Company Restricted Stock Awards and Company PSUs
pursuant to
Section 3.4(a)
or
Section 3.4(b)
, as applicable, cannot be made through
Parent's payroll system or payroll provider, then Parent will issue a check for such payment to such holder, which check will be sent by overnight courier to such holder promptly following the Closing
Date (but in no event more than five (5) Business Days thereafter).
(d) Prior
to the Parent Merger Effective Time, Company shall take such actions as are necessary to provide for the treatment of the Company Restricted Stock Awards and
Company PSUs as contemplated by this
Section 3.4
, subject in all cases to the requirements of applicable Law.
Section 3.5
Exchange of Certificates.
(a) The
Parent Parties shall appoint a bank or trust company reasonably satisfactory to Company to act as paying agent (the "
Paying
Agent
") for the payment and delivery of the Merger Consideration, the Preferred Merger Consideration and the Company OP Unit Consideration, as provided in
Section 3.1(b)
and
Section 3.1(c)
and
Section 3.2(a)
. The paying agent agreement pursuant to which the Parent Parties shall appoint the Paying Agent (the
"
Paying Agent Agreement
") will be in a form and substance reasonably satisfactory to Company. At or before the Parent Merger Effective Time, the Parent
Parties shall deposit, or cause to be deposited, with the Paying Agent cash in immediately available funds in an amount sufficient to pay the aggregate Merger Consideration, Preferred Merger
Consideration and Company OP Unit Consideration in accordance with
Section 3.1(b)
,
Section 3.1(c)
and
Section 3.2(a)
(the "
Payment
Fund
"), in each case, for the sole benefit of the holders of shares of Company Common Stock, shares of Company Preferred Stock and Company OP Common Units, as applicable. The
Parent Parties shall cause the Paying Agent to make, and the Paying Agent shall make, delivery of the Merger Consideration, Preferred Merger Consideration and the Company OP Unit Consideration out of
the Payment Fund in accordance with this Agreement. The Payment Fund shall not be used for any purpose other than to fund payments due pursuant to this
Article III
.
(b) The
Payment Fund shall be invested by the Paying Agent in accordance with the Paying Agent Agreement. Interest and other income on the Payment Fund shall be the sole and
exclusive property of the Parent Parties. No investment of the Payment Fund shall relieve the Parent Parties or the Paying Agent from making the payments required by this
Article III
, and,
following any losses from any such investment, the Parent Parties shall promptly provide additional funds to the Paying Agent
to the extent necessary to satisfy the Parent Parties' obligations hereunder for the benefit of the holders of shares of Company Common Stock, Company Preferred Stock and holders of Company OP Common
Units at the Parent Merger Effective Time, which additional funds will be deemed to be part of the Payment Fund.
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(c)
Exchange Procedures.
(i) As
promptly as practicable following the Parent Merger Effective Time (but in no event later than five (5) Business Days thereafter), the Parent Parties shall
cause the Paying Agent to mail (and to make available for collection by hand) to each holder of record of a Certificate or Book-Entry Share, or of a Preferred Certificate or Preferred Book-Entry
Share, or a Company OP Unit Certificate or Uncertificated Unit, as applicable, (A) a letter of transmittal (a "
Letter of Transmittal
") which
shall specify that delivery shall be effected, and risk of loss and title to the Certificates or Book-Entry Shares, the Preferred Certificates or Preferred Book-Entry Shares or the Company OP Unit
Certificates or Uncertificated Units, as applicable, shall pass only upon proper delivery of the Certificates, the Preferred Certificates or the Company OP Unit Certificates (or affidavits of loss in
lieu thereof) or transfer of the Book-Entry Shares, the Preferred Book-Entry Shares or the Uncertificated Units (as evidenced by, as applicable, receipt by the Paying Agent of an "agent's message" in
customary form or other evidence as the Paying Agent may reasonably request), as applicable, to the Paying Agent, which Letter of Transmittal shall be in such form and have such other customary
provisions as the Parent Parties and Company may reasonably mutually agree upon, and (B) instructions for use in effecting the surrender of the Certificates, the Preferred Certificates or the
Company OP Unit Certificate (or affidavits of loss in lieu thereof) or the transfer of Book-Entry Shares, the Preferred Book-Entry Shares or the Uncertificated Units (as evidenced by, as applicable,
receipt by the
Paying Agent of an "agent's message" in customary form or other evidence as the Paying Agent may reasonably request), as applicable, in exchange for the Merger Consideration, Preferred Merger
Consideration or Company OP Unit Consideration, as applicable, into which the number of shares of Company Common Stock previously represented by such Certificate (or affidavit of loss in lieu thereof)
or Book-Entry Share, or, as applicable, the number of shares of Company Preferred Stock previously represented by such Preferred Certificate (or affidavit of loss in lieu thereof) or Preferred
Book-Entry Share, or, as applicable, the number of Company OP Common Units previously represented by such Company OP Unit Certificate (or affidavit of loss in lieu thereof) or Uncertificated Unit
shall have been converted pursuant to this Agreement.
(ii) Upon
surrender of a Certificate, a Preferred Certificate or Company OP Unit Certificate (or an affidavit of loss in lieu thereof) or the transfer of a Book-Entry Share,
Preferred Book-Entry Share or Uncertificated Unit (as evidenced by receipt by, as applicable, the Paying Agent of an "agent's message" in customary form or other evidence as the Paying Agent may
reasonably request), as applicable, to the Paying Agent, together with a Letter of Transmittal duly completed and validly executed in accordance with the instructions thereto, and such other documents
as may reasonably be required by the Paying Agent, the holder of such Certificate (or affidavit of loss in lieu thereof) or Book-Entry Share, or such Preferred Certificate (or affidavit of loss in
lieu thereof) or Preferred Book-Entry Share, or Company OP Unit Certificates (or affidavit of loss in lieu thereof) or Uncertificated Units, as applicable, shall be entitled to receive in exchange
therefor the Merger Consideration for each share of Company Common Stock formerly represented by such Certificate (or affidavit of loss in lieu thereof) or Book-Entry Share, or, as applicable, the
Preferred Merger Consideration for each share of Company Preferred Stock formerly represented by such Preferred Certificate (or affidavit of loss in lieu thereof) or Preferred Book-Entry Share, or, as
applicable, the Company OP Unit Consideration for each Company OP Common Unit formerly represented by such Company OP Unit Certificate (or affidavit of loss in lieu thereof) or Uncertificated Unit, in
each case pursuant to the provisions of this
Article III
, to be mailed or delivered by wire transfer, within five (5) Business Days
following the later to occur of (A) the Parent Merger Effective Time or (B) the Paying Agent's receipt of such Certificate, Preferred Certificate or Company OP Unit Certificate (or
affidavit of loss in lieu thereof) or the transfer
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to
the Paying Agent of such Book-Entry Share, Preferred Book-Entry Share or Uncertificated Unit (as evidenced by receipt by, as applicable, the Paying Agent of an "agent's message" in customary form
or other evidence as the Paying Agent may reasonably request), as applicable, and the Certificate (or affidavit of loss in lieu thereof) or Book-Entry Share, or, as applicable, the Preferred
Certificate (or affidavit of loss in lieu thereof) or Preferred Book-Entry Share, or, as applicable, the Company OP Unit Consideration for each Company OP Common Unit formerly represented by such
Company OP Unit Certificate (or affidavit of loss in lieu thereof) or Uncertificated Unit, so surrendered or transferred shall be forthwith cancelled. Until surrendered or transferred as contemplated
by this
Section 3.5
, each Certificate (or affidavit of loss in lieu thereof) and Book-Entry Share, or, as applicable,
each Preferred Certificate (or affidavit of loss in lieu thereof) and Preferred Book-Entry Share, or, as applicable, each Company OP Unit Certificate (or affidavit of loss in lieu thereof) and
Uncertificated Unit, shall be deemed, at any time after the Parent Merger Effective Time, to represent only the right to receive, upon such surrender or transfer, as applicable, the Merger
Consideration, the Preferred Merger Consideration or the Company OP Unit Consideration, as applicable, as contemplated by this
Article III
. No
interest shall be paid or accrued for the benefit of holders of the Certificates (or affidavits of loss in lieu thereof) or Book-Entry Shares, or the holders of the Preferred Certificates (or
affidavits of loss in lieu thereof) or Preferred Book-Entry Shares, or the holders of Company OP Unit Certificates (or affidavits of loss in lieu thereof) or Uncertificated Units, on the Merger
Consideration, Preferred Merger Consideration or Company OP Unit Consideration, as applicable, payable upon the surrender of the Certificates (or affidavits of loss in lieu thereof), the Preferred
Certificates (or affidavits of loss in lieu thereof) or the Company OP Unit Certificates or the transfer of the Book-Entry Shares, the Preferred Book-Entry Shares or the Uncertificated Units (as
evidenced by receipt by, as applicable, the Paying Agent of an "agent's message" in customary form or other evidence as the Paying Agent may reasonably request), as applicable.
(iii) In
the event of a transfer of ownership of shares of Company Common Stock, Company Preferred Stock or Company OP Common Units that is not registered in the transfer
records of Company, it shall be a condition of payment that any Certificate (or affidavit of loss in lieu thereof) or Book-Entry Share, or, as applicable, any Preferred Certificate (or affidavit of
loss in lieu thereof) or Preferred Book-Entry Share, or, as applicable, any Company OP Unit Certificate (or affidavit of loss in lieu thereof) or Uncertificated Unit, surrendered or transferred, as
applicable, in accordance with the procedures set forth in this
Section 3.5(c)
shall be properly endorsed or shall be otherwise in proper form
for transfer, and that the Person requesting such payment shall have paid any transfer Taxes and other Taxes required by reason of the payment of the Merger Consideration, Preferred Merger
Consideration or Company OP Unit Consideration, as applicable, to a Person other than the registered holder of the Certificate (or affidavit of loss in lieu thereof) or Book-Entry Share, or, as
applicable, the Preferred Certificate (or affidavit of loss in lieu thereof) or Preferred Book-Entry Share, or, as applicable, the Company OP Unit Certificate (or affidavit of loss in lieu thereof) or
Uncertificated Unit, surrendered or transferred, as applicable, shall have established to the reasonable satisfaction of the Parent Parties that such Tax either has been paid or is not applicable.
(d)
Termination of Payment Fund.
Any portion of the Payment Fund which remains undistributed to the holders of
shares of Company Common Stock, Company Preferred Stock or Company OP Common Units, as applicable, for twelve (12) months after the Parent Merger Effective Time shall be delivered to the Parent
Parties, upon demand, and any former holders of shares of Company Common Stock or Company Preferred Stock, or former holders of Company OP Common Units, prior to the Parent Merger who have not
theretofore complied with this
Article III
shall thereafter look only to Parent for payment of the Merger Consideration, Preferred
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Merger
Consideration or Company OP Unit Consideration, as applicable, in accordance with this
Section 3.5
.
(e)
No Liability.
None of the Parent Parties, the Company Parties, the Paying Agent, or any employee, officer,
director, agent or Affiliate thereof, shall be liable to any person in respect of the Merger Consideration, the Preferred Merger Consideration or the Company OP Unit Consideration, as applicable, if
the Payment Fund has been delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any amounts remaining unclaimed by holders of any such shares or units,
as applicable, immediately prior to the time at which such amounts would otherwise escheat to, or become property of, any Governmental Authority shall, to the extent permitted by applicable Law,
become the property of the Parent Parties, free and clear of any claims or interest of such holders or their successors, assigns or personal representatives previously entitled thereto.
Section 3.6
Withholding Rights.
The Parties, their respective Affiliates and the Paying Agent,
as applicable, shall be entitled to deduct and withhold from the Merger Consideration, the
Preferred Merger Consideration and the Company OP Unit Consideration, as applicable (and any other consideration otherwise payable pursuant to this Agreement or deemed paid for Tax purposes), such
amounts as it is required to deduct and withhold with respect to such payments under the Code or any other provision of state, local or foreign Law. Any such amounts so deducted and withheld shall be
paid over to the applicable Governmental Authority in accordance with applicable Law and shall be treated for all purposes of this Agreement as having been paid to the person in respect of which such
deduction and withholding was made.
Section 3.7
Lost Certificates.
If any Certificate, Preferred Certificate or Company OP Unit
Certificate shall have been lost, stolen or destroyed, then upon the making of an affidavit of that
fact by the Person claiming such Certificate, Preferred Certificate or Company OP Unit Certificate to be lost, stolen or destroyed and, if required by the Parent Parties, the posting by such Person of
a bond in such reasonable amount as the Parent Parties may direct, as indemnity against any claim that may be made against it with respect to such Certificate, Preferred Certificate or Company OP Unit
Certificate, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate, Preferred Certificate or Company OP Unit Certificate, as applicable, the Merger Consideration, the
Preferred Merger Consideration and Company OP Unit Consideration and any distributions to which such holder is entitled pursuant to this
Article III
.
Section 3.8
Dissenters' Rights.
No dissenters' or appraisal rights, including rights to fair
value pursuant to Section 3-202 of the MGCL, shall be available under applicable Law with
respect to the Mergers or the other transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES
Except (a) as set forth in the disclosure letter that has been prepared by the Company Parties and delivered by the Company Parties to
the Parent Parties in connection with the execution and delivery of this Agreement (the "
Disclosure Letter
") (it being agreed that (i) disclosure
of any item in any section of the Disclosure Letter with respect to any Section or subsection of
Article IV
of this Agreement shall be deemed
disclosed with respect to any other Section or subsection of
Article IV
of this Agreement to the extent such relationship is reasonably apparent
on its face; provided, that nothing in the Disclosure Letter is intended to broaden the scope of any representation or warranty of the Company Parties made herein and (ii) no reference to or
disclosure of any item or other matter in the Disclosure Letter shall be construed as an admission or indication that (A) such item or other matter is material, (B) such item or other
matter is required to be referred to or disclosed in the Disclosure Letter or (C) any breach or violation of applicable Laws or any contract, agreement, arrangement or
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understanding
to which Company or any of the Company Subsidiaries is a party exists or has actually occurred), or (b) as disclosed in publicly available Company SEC Documents filed with, or
furnished to, as applicable, the SEC on or after January 1, 2014 and prior to the date of this Agreement (excluding any risk factor disclosures contained in such documents under the heading
"Risk Factors" and any disclosure of risks or other matters included in any "forward-looking statements" disclaimer or other statements that are predictive or forward-looking in nature), the Company
Parties hereby jointly and severally represent and warrant to the Parent Parties that:
Section 4.1
Organization and Qualification; Subsidiaries.
(a) Company
is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland and has the requisite corporate power and
authority to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Company is duly qualified or licensed to do business, and is in
good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary,
except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
(b) Company LP
is a limited partnership duly formed, validly existing and in good standing under the Laws of the State of Delaware. Each other Company Subsidiary is a
corporation, partnership, limited liability company or other business entity, as the case may be, duly organized, validly existing and in good standing (to the extent applicable) under the Laws of the
jurisdiction of its incorporation or organization, as the case may be. Each Company Subsidiary has the requisite organizational power and authority to own, lease and, to the extent applicable, operate
its properties and to carry on its business as it is now being conducted, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect.
(c) Except
as set forth in
Section 4.1(c)
of the Disclosure Letter, neither Company nor any Company Subsidiary
directly or indirectly owns any interest or investment (whether equity or debt) in any Person (other than in the Company Subsidiaries and investments in short-term investment securities).
(d)
Section 4.1(d)
of the Disclosure Letter sets forth a complete list of each Company Subsidiary, together with its
jurisdiction of organization or incorporation and the ownership interest (and percentage interest) of Company or a Company Subsidiary and any other Person, as applicable, in such Company Subsidiary.
Section 4.2
Organizational Documents.
There are no current or pending dissolution, liquidation,
forfeiture or revocation proceedings regarding Company or any of the Company Subsidiaries. Company has
made available to Parent complete and correct copies of (i) the Company Charter and Company Bylaws and (ii) the Company LP Agreement and the certificate of limited partnership of
Company LP, in each case as in effect on the date hereof, together with all amendments thereto, and all such organizational documents are in full force and effect, and neither Company nor
Company LP is in violation of any of the material provisions of such documents.
Section 4.3
Capital Structure.
(a) The
authorized capital stock of Company consists of 450,000,000 shares of Company Common Stock and 50,000,000 shares of preferred stock, par value $.01 per share
("
Company Preferred Stock
"), of which 1,000 shares are designated as 10% Cumulative Redeemable Preferred Stock with a liquidation preference of $1,000
per share, plus an amount equal to all dividends accrued and unpaid on such share of Company Preferred Stock. At the close of business on February 24, 2017, (i) 35,322,624 shares of
Company Common Stock were issued and outstanding,
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(ii) 1,000
shares of Company Preferred Stock were issued and outstanding and no other shares of Company Preferred Stock were issued or outstanding, (iii) 149,281 shares of Company Common
Stock have been issued with respect to outstanding Company Restricted Stock Awards granted pursuant to the Company Equity Incentive Plan, (iv) 472, 037 shares of Company Common Stock were
reserved for issuance pursuant to the terms of outstanding Company PSUs and (v) 2,231,511 shares of Company Common Stock were reserved for issuance upon redemption of Company OP Common
Units. All issued and outstanding shares of the capital stock of Company are duly authorized, validly issued, fully paid and non-assessable, and no class of capital stock is entitled to preemptive
rights. There are no outstanding bonds, debentures, notes or other Indebtedness of Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on
any matter on which holders of shares of Company Common Stock may vote.
(b) All
of the outstanding shares of capital stock of each of the Company Subsidiaries that is a corporation are duly authorized, validly issued, fully paid, nonassessable
and free of preemptive rights. All equity interests in each of the Company Subsidiaries that is a partnership or limited liability company are duly authorized, validly issued and free of preemptive
rights. Except as set forth in
Section 4.3(b)
of the Disclosure Letter, Company owns, directly or indirectly, all of the issued and outstanding
capital stock and other ownership interests of each of the Company Subsidiaries owned by Company or a Company Subsidiary, free and clear of all Liens other than transfer and other restrictions under
applicable federal and state securities Laws and restrictions in the organizational documents of Company or any Company Subsidiary, and except as set forth in the Company LP Agreement, there
are no existing options, warrants, calls, subscriptions, convertible securities or other securities, agreements, commitments or obligations of any character relating to the outstanding capital stock
or other securities of any Company Subsidiary owned by Company or a Company Subsidiary or which would require any Company Subsidiary to issue or sell any shares of such Company Subsidiary capital
stock, ownership interests or securities convertible into or exchangeable for shares of such Company Subsidiary capital stock or ownership interests. There are no outstanding bonds, debentures, notes
or other Indebtedness of Company Subsidiaries having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which holders of capital stock
or other equity interests of Company Subsidiaries may vote.
(c) Except
for shares of Company Common Stock subject to Company Restricted Stock Awards or Company PSUs, rights under the Company Equity Incentive Plan or as set forth in
this
Section 4.3
or in
Section 4.3(c)
of the Disclosure Letter, as of the date of this
Agreement, there are no (i) outstanding securities of Company or any Company Subsidiary convertible into or exchangeable for one or more shares of capital stock of, or other equity or voting
interests in, Company or any Company Subsidiary, (ii) options, warrants or other rights or securities issued or granted by Company or any Company Subsidiary relating to or based on the value of
the equity securities of Company or any Company Subsidiary, (iii) calls, rights, commitments, agreements, rights of first refusal, arrangements or undertakings of any kind to which Company or
any Company Subsidiary is a party or by which any of them is bound, obligating Company or any Company Subsidiary to issue, deliver or sell or create, or cause to be issued, delivered or sold or
created, additional shares of Company Common Stock, shares of Company Preferred Stock or other equity securities or (iv) outstanding restricted shares, restricted share units, stock
appreciation rights, performance shares, performance units, deferred stock units, contingent value rights, phantom stock or other contractual rights the value of which is determined in whole or in
part by the value of any equity security of Company or any of the Company Subsidiaries or obligating Company or any Company Subsidiary to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, right of first refusal, arrangement or undertaking. Except as set forth in
Section 4.3(c)
of the
Disclosure Letter, there are no outstanding
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contractual
obligations of Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of Company Common Stock, shares of Company Preferred Stock (including shares of
Company Preferred Stock), or other equity securities of Company or any Company Subsidiary. Other than the Support Agreements, neither Company nor any Company Subsidiary is a party to any agreements or
understandings concerning the voting (including voting trusts and proxies) or transfer of or that provides registration rights in respect of, any shares of capital stock or other voting securities or
equity interests of Company or any Company Subsidiary. Company does not have a shareholder rights plan in place. Except as set forth in
Section 4.3(c)
of the Disclosure Letter, Company has not
exempted any Person from the "Aggregate Stock Ownership Limit" or the "Common Stock
Ownership Limit" or established or increased an "Excepted Holder Limit," as such terms are defined in the Company Charter. None of the Company Subsidiaries owns any Company Shares.
(d)
Section 4.3(d)
of the Disclosure Letter sets forth, by individual, each outstanding award of Company PSUs and
Company Restricted Stock Award, including: (i) the grant date; (ii) the number of shares or units granted (including target and maximum number of shares or units); (iii) the
number of DER Stock Units and (iv) the vesting schedule.
(e) Company GP
is the sole general partner of Company LP and Company GP owns, directly or indirectly, 353,498 Company OP Units in Company LP. As
of the date hereof, Company held 34,969,126 Company OP Common Units and $1,000,000 of Company OP Preferred Units. In addition to the Company OP Common Units held by Company and Company GP, as
of the date hereof, 2,231,511 Company OP Common Units (excluding Company OP Preferred Units) were issued and outstanding, and each such Company OP Common Unit is redeemable in accordance with the
Company LP Agreement. The Company OP Common Units (excluding the Company OP Preferred Units) issued and outstanding comprise a single class of Company OP Common Units. Other than the Company OP
Common Units issued and outstanding and the Company OP Preferred Units held by Company, no other units or equity interests in Company LP are issued and outstanding.
Section 4.3(e)
of the
Disclosure Letter sets forth a list of all other holders of the Company OP Common Units, such holder's most recent address
and the number of such Company OP Common Units held. Except as set forth in
Section 4.3(e)
of the Disclosure Letter or in the Company LP
Agreement, there are no existing options, warrants, calls, subscriptions, convertible securities or other rights, agreements or commitments which obligate Company LP to issue, transfer or sell
any partnership interests of Company LP or any securities convertible into or exchangeable for any partnership interests of Company LP. Except as set forth in
Section 4.3(e)
of the
Disclosure Letter or in the Company LP Agreement, there are no outstanding contractual obligations of
Company LP to issue, repurchase, redeem or otherwise acquire any partnership interests of Company LP or any other securities convertible into or exchangeable for any partnership
interests of Company LP. Except as set forth in
Section 4.3(e)
of the Disclosure Letter or in the Company LP Agreement, the Company
OP Common Units and Company OP Preferred Units that are owned by Company are owned free and clear of any Liens other than any transfer and other restrictions under applicable federal and state
securities Laws.
Section 4.4
Authority.
(a) Company
has the requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to receipt of the
Company Stockholder Approval, to consummate the transactions contemplated by this Agreement to which Company is a party, including the Parent Merger. The execution, delivery and performance of this
Agreement by Company and the consummation by Company of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of Company are necessary to authorize the execution, delivery and performance by Company of this Agreement or the Parent Merger or to consummate
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the
other transactions contemplated by this Agreement, subject, with respect to the Parent Merger, to receipt of the Company Stockholder Approval, and to the filing of the certificate of merger with
the Secretary of State of the State of Delaware and articles of merger with the SDAT. This Agreement has been duly executed and delivered by Company and assuming due authorization, execution and
delivery by each of Company GP, Company LP and the Parent Parties, constitutes a legally valid and binding obligation of Company enforceable against Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors' rights generally and by general principles of
equity (regardless of whether enforceability is considered in a proceeding in equity or at law) (collectively, the "
Enforceability Exceptions
").
(b) The
Company Board, at a duly held meeting, has, by unanimous vote, (i) duly and validly authorized the execution and delivery of this Agreement and declared
advisable the Mergers and the other transactions contemplated by this Agreement, (ii) directed that the Parent Merger and the other transactions contemplated by this Agreement be submitted for
consideration at the Company Stockholder Meeting and (iii) as of the date of this Agreement, resolved to recommend that the Stockholders vote in favor of the approval of the Parent Merger and
the other transactions contemplated by this Agreement (the "
Company Recommendation
"), which resolution, subject to
Section 7.4
, has not been
subsequently rescinded, withdrawn or modified in a manner adverse to Parent as of the date hereof.
(c) Company LP
has the requisite limited partnership power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to
the receipt of the Company Partner Approval, to consummate the transactions contemplated by this Agreement, including the Partnership Merger. The execution, delivery and performance of this Agreement
by Company LP and the consummation by it of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary partnership action, and no other partnership
proceedings on the part of Company LP are necessary to authorize the execution, delivery and performance by Company LP of this Agreement or the Partnership Merger or to consummate the
transactions contemplated by this Agreement, subject, with respect to the Partnership Merger, to the receipt of the Company Partner Approval, and to the filing of the certificate of merger with the
Secretary of State of the State of Delaware. This Agreement has been duly executed and delivered by Company LP, and assuming due authorization, execution and delivery by each of Company,
Company GP and the Parent Parties, constitutes a legally valid and binding obligation of Company LP, enforceable against Company LP in accordance with its terms, except as such
enforceability may be limited by the Enforceability Exceptions.
(d) Company GP
has the requisite limited liability company power and authority to execute and deliver this Agreement, to perform its obligations hereunder and,
subject to the receipt of the Company
Partner Approval, to consummate the transactions contemplated by this Agreement, including the Partnership Merger. The execution, delivery and performance of this Agreement by Company GP and
the consummation by it of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary limited liability company action, and no other corporate proceedings on
the part of Company GP are necessary to authorize the execution, delivery and performance by Company GP of this Agreement or the Partnership Merger or to consummate the transactions
contemplated by this Agreement, subject, with respect to the Partnership Merger, to the receipt of the Company Partner Approval, and to the filing of the certificate of merger with the Secretary of
State of the State of Delaware. This Agreement has been duly executed and delivered by Company GP, and assuming due authorization, execution and delivery by each of Company, Company LP ,
constitutes a legally valid and binding obligation of Company GP, enforceable against Company GP in accordance with its terms, except as such enforceability may be limited by the
Enforceability Exceptions.
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Section 4.5
No Conflict; Required Filings and Consents.
(a) Except
as set forth in
Section 4.5(a)
of the Disclosure Letter, the execution and delivery of this Agreement by
each of Company, Company GP and Company LP does not, and the performance of their respective obligations hereunder will not, (i) assuming receipt of the Company Stockholder
Approval and the Company Partner Approval, conflict with or violate any provision of (A) the Company Charter or Company Bylaws, (B) the certificate of formation or limited liability
company operating agreement of Company GP or (C) the Company LP Agreement or the certificate of limited partnership of Company LP, (ii) assuming that all consents,
approvals, authorizations and permits described in
Section 4.5(b)
have been obtained, all filings and notifications described in
Section 4.5(b)
have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any material Order or Law
applicable to Company or any Company Subsidiary or by which any property or asset of Company or any Company Subsidiary is bound, or (iii) assuming receipt of the Company Stockholder Approval
and the Company Partner Approval, require any consent, notice or approval (except as contemplated by
Section 4.5(b)
) under, result in any breach
of or any loss of any benefit or material increase in any cost or obligation of Company or any Company Subsidiary under, or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of termination, acceleration or cancellation (with or without notice or the lapse of time or both) of, or give rise to any right of purchase,
first offer or forced sale under or result in the creation of a Lien on any property or asset of Company or any Company Subsidiary pursuant to, any Company Material Contract, except, as to
clauses (ii) and (iii), respectively, for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, would not reasonably be expected to
have a Company Material Adverse Effect.
(b) The
execution and delivery of this Agreement by each of Company, Company GP and Company LP does not, and the performance of this Agreement by each of
Company, Company GP and Company LP
will not, require any consent, approval, authorization or permit of, or filing or registration with or notification to, any Governmental Authority, except (i)(A) the filing with the SEC of the Proxy
Statement in preliminary and definitive form, (B) such reports under, and other compliance with, the Exchange Act (and the rules and regulations promulgated thereunder) and the Securities Act
(and the rules and regulations promulgated thereunder) as may be required in connection with this Agreement and the transactions contemplated hereby, and (C) any documents in accordance with
Section 7.10
, (ii) as may be required under the rules and regulations of the NYSE or TSX, (iii) the filing of (A) the
certificate of merger with respect to the Parent Merger with the Secretary of State of the State of Delaware and the articles of merger with the SDAT and (B) appropriate documents with the
relevant authorities of the other jurisdictions in which Company, Ultimate Parent and Parent, and their respective Company Subsidiaries and Parent Subsidiaries, are qualified to do business,
(iv) the filing of the certificate of merger with respect to the Partnership Merger with the Secretary of State of the State of Delaware, respectively, (v) such filings and approvals as
may be required by any applicable state securities or "blue sky" Laws, (vi) such filings as may be required in connection with Transfer Taxes, and (vii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or notifications, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
Section 4.6
Permits; Compliance with Law.
(a) Except
for the authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances that are the subject
of
Section 4.16
or
Section 4.17
, which are addressed solely in those Sections, Company and
each Company Subsidiary is in possession of all authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances of any Governmental
Authority,
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necessary
for Company and each Company Subsidiary to own, lease and, to the extent applicable, operate its properties and assets or to carry on and operate its respective business substantially as it
is being conducted as of the date hereof (the "
Company Permits
"), except failure to be in possession of any Company Permits as would not, individually
or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. All such Company Permits are valid and in full force and effect, except where the failure to be valid or in full
force and effect of any of the Company Permits, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. Neither Company nor any Company Subsidiary
has received any written claim or written notice indicating that Company or any Company Subsidiary is currently not in compliance with the terms of any such Company Permits, or that suspension or
cancellation of any Company Permits is
pending threatened in writing, and no such suspension or cancellation will result from the transactions contemplated by this Agreement, except where the failure to be in compliance with the terms of
any such Company Permits, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
(b) Neither
Company nor any Company Subsidiary is in conflict with, or in default or violation of (i) any Law applicable to Company or any Company Subsidiary or by
which any property or asset of Company or any Company Subsidiary is bound (except for conflicts, defaults and violations of Laws that are addressed in
Section 4.15
,
Section 4.16
, or
Section 4.17
), or (ii) any Company Permits (except for the Company Permits addressed in
Section 4.16
or
Section 4.17
), except in each case for any such conflicts, defaults or
violations that have been cured without any material future liability to Company or any Company Subsidiaries, or, individually or in the aggregate, would not reasonably be expected to have a Company
Material Adverse Effect. No Action by any Governmental Authority with respect to Company or any Company Subsidiary or their operations is pending or threatened in writing, and, to the Knowledge of
Company, no Governmental Authority has indicated an intention to conduct the same.
(c) None
of Company, any Company Subsidiary, any director or officer of Company or of any Company Subsidiary or, to the Knowledge of Company, any employee or agent of
Company or of any Company Subsidiary, has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity,
(ii) unlawfully offered or provided, directly or indirectly, anything of value to (or received anything of value from) any foreign or domestic government employee or official or any other
Person, or (iii) taken any action, directly or indirectly, that would constitute a violation of the Foreign Corrupt Practices Act of 1977, as amended.
(d) None
of Company, any Company Subsidiary, any director or officer of Company or of any Company Subsidiary or, to the Knowledge of Company, any employee or agent of
Company or of any Company Subsidiary is a person on the list of "Specially Designated Nationals and Blocked Persons" or subject to prohibitions or restrictions under any U.S. executive order imposing
sanctions measures or any regulation administered by the U.S. Department of Treasury's Office of Foreign Assets Control. Each of Company, Company LP, the Company Subsidiaries, the directors and
officers of Company and of any Company Subsidiary and, to the Knowledge of Company, the employee and agents of Company or of any Company Subsidiary is in material compliance with the PATRIOT Act, U.S.
executive orders imposing sanctions measures, and regulations administered by the U.S. Department of the Treasury's Office of Foreign Assets Control.
Section 4.7
SEC Documents; Financial Statements.
(a) Company
has filed with or furnished to the SEC all reports, schedules, registration statements, prospectuses, forms, reports, definitive proxy statements and other
documents required to be filed or furnished by Company and Company LP with the SEC under the Exchange Act or Securities Act since January 1, 2014 (the "
Company
SEC Documents
"). As of their respective
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dates
of filing, furnishing or, in the case of registration statements, effectiveness, or, if supplemented, modified or amended since the time of filing, as of the date of the most recent supplement,
modification or amendment, the Company SEC Documents (other than preliminary materials) (i) complied in all material respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations of the SEC thereunder applicable to such Company SEC Documents and (ii) none of the Company SEC Documents, at the time of filing or being
furnished (or effectiveness in the case of registration statements), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were made, not misleading, except to the extent such statements have been modified or superseded by later Company SEC
Documents filed or furnished and publicly available prior to the date of this Agreement and provided that no representation or warranty is made hereunder as to statements made or incorporated by
reference in the Proxy Statement that were not supplied by or on behalf of Company or Company LP. Company has made available to Parent all comment letters and all material correspondence
between the SEC, on the one hand, and Company or Company LP, on the other hand, since January 1, 2014. As of the date hereof, there are no material outstanding or unresolved comments
received from the SEC with respect to any of the Company SEC Documents filed or furnished by Company or Company LP with the SEC and, as of the date hereof, to the Knowledge of Company, none of
the Company SEC Documents is the subject of ongoing SEC review.
(b) Company
and Company LP is in compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002 and any applicable rules and regulations thereunder, as
amended from time to time, and the applicable listing and corporate governance rules of the NYSE, in each case except where the failure to be in compliance, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect.
(c) The
audited consolidated financial statements and unaudited consolidated interim financial statements of Company and Company Subsidiaries included or incorporated by
reference in the Company SEC Documents, including the related notes and schedules, (i) complied in all material respects with the applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) have been prepared in accordance with GAAP (as in effect in the United States on the date of such financial statement) applied on a consistent
basis during the periods involved (except as may be indicated in the notes thereto, or, in the case of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X under the
Exchange Act) and (iii) fairly presented, in all material respects, in accordance with applicable requirements of GAAP and the applicable rules and regulations of the SEC (subject, in the case
of the unaudited statements, to normal, recurring adjustments), the consolidated financial position of Company and the Company Subsidiaries, taken as a whole, as of their respective dates and the
consolidated statements of income and the consolidated cash flows of Company and the Company Subsidiaries for the periods presented therein, in each case, except
to the extent such financial statements have been modified or superseded by later Company SEC Documents filed and publicly available prior to the date of this Agreement.
(d) Company
has designed and maintains a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act)
intended to provide reasonable assurances regarding the reliability of financial reporting for Company and each Company Subsidiary. Company has designed disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to provide reasonable assurance that material information required to be disclosed by Company in the reports that it files or submits under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified
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in
the SEC's rules and forms and is accumulated and communicated to Company's management as appropriate to allow timely decisions regarding required disclosure.
Section 4.8
Absence of Certain Changes or Events.
Except as set forth in
Section 4.8
of the Disclosure Letter, since December 31, 2016 through the
date of this Agreement, (a) Company and each Company Subsidiary has conducted its business in all material respects in the ordinary course of business consistent with past practice,
(b) there has not been any Company Material Adverse Effect or any event, circumstance, change, or effect that, individually or in the aggregate with all other events, circumstances, changes, or
effects, would reasonably be expected to have a Company Material Adverse Effect and (c) except for regular quarterly cash dividends on the Company Common Stock, Company Preferred Stock, Company
OP Common Units and Company OP Preferred Units, there has not been any declaration, setting aside for payment or payment of any dividend or other distribution (whether in cash, stock or property) with
respect to any Company Common Stock, Company Preferred Stock, Company OP Common Units or Company OP Preferred Units.
Section 4.9
No Undisclosed Material Liabilities.
Except as set forth in
Section 4.9
of the Disclosure Letter or as otherwise would not reasonably be
expected to have a Company Material Adverse Effect, there are no liabilities of Company or any of the Company Subsidiaries, other than: (a) liabilities adequately provided for on the balance
sheet of Company dated as of December 31, 2016 (including the notes thereto) as required by GAAP, (b) liabilities incurred in connection with the transactions contemplated by this
Agreement or (c) liabilities incurred in the ordinary course of business consistent with past practice subsequent to December 31, 2016.
Section 4.10
Litigation.
Except as individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect, or as set forth in
Section 4.10
of the Disclosure Letter, (a) there is no Action pending or, to the Knowledge of Company, threatened in
writing by or before
any Governmental Authority against Company or any Company Subsidiary (or any of their properties or assets) and (b) neither Company nor any Company Subsidiary, nor any of Company's or any
Company Subsidiary's respective property or assets, is subject to any outstanding material Order of any Governmental Authority. As of the date of this Agreement, there is no Action to which Company or
any Company Subsidiary is a party pending or, to the Knowledge of Company, threatened in writing seeking to prevent, delay or challenge the Mergers or any of the other transactions contemplated by
this Agreement.
Section 4.11
Taxes.
(a) Company
and each Company Subsidiary has timely filed with the appropriate Governmental Authority all income and other material Tax Returns required to be filed, taking
into account any extensions of time within which to file such Tax Returns, and all such Tax Returns were complete and correct in all material respects. Company and each Company Subsidiary has duly
paid (or there has been paid on their behalf), or made adequate provisions on the financial statements of Company in accordance with GAAP for, all material amounts of Taxes required to be paid by
them, whether or not shown on any Tax return. Company has made available to Parent complete and correct copies of (i) all U.S. federal, state and local income and other material Tax Returns of
Company and the Company Subsidiaries relating to the last three years which have been filed and (ii) any audit report issued within the last five (5) years relating to any Taxes due from
or with respect to Company or any Company Subsidiaries. Neither Company nor any Company Subsidiaries has received a written claim, or to the Knowledge of Company, an unwritten claim, by any authority
in a jurisdiction where any of them does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.
(b) Company
(i) for all taxable years commencing with the taxable year ending December 31, 2012 and through December 31, 2016, has been subject to
taxation as a real estate investment trust within the meaning of Sections 856 and 857 of the Code (a "
REIT
") and has satisfied all
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requirements
for qualification and taxation as a REIT for such years; (ii) has operated since January 1, 2017 and will operate to the Parent Merger Effective Time in a manner consistent
with the requirements for qualification and taxation as a REIT; and (iii) has not taken or omitted to take any action that could reasonably be expected to result in a challenge by the IRS to
its status as a REIT, and to the Knowledge of Company, no such challenge is pending or threatened. No entity in which Company owns an interest is a corporation for U.S. federal income tax purposes,
other than a "qualified REIT subsidiary" within the meaning of Section 856(i) (2) of the Code ("
Qualified REIT Subsidiary
") or a "taxable
REIT subsidiary" within the meaning of Section 856(l) of the Code ("
Taxable REIT Subsidiary
").
Section 4.11(b)
of the Disclosure Letter sets
forth a list of each Qualified REIT Subsidiary and Taxable REIT Subsidiary owned directly or
indirectly by Company, and each Company Subsidiary not set forth in
Section 4.11(b)
of the Disclosure Letter is and has been since its formation
classified as a partnership or entity disregarded as separate from Company or a Company Subsidiary for U.S. federal income tax purposes. Each Company Subsidiary that is a partnership, joint venture or
limited liability company and has not elected to be a Taxable REIT Subsidiary has been since its formation treated for U.S. federal income tax purposes as a partnership or disregarded entity,
as the case may be, and not as a corporation or an association taxable as a corporation. Taking into account all distributions to be made by Company prior to the Parent Merger Effective Time and the
deemed distributions by Company by reason of the deemed sale of assets and liquidation for U.S federal income tax purposes resulting from the Parent Merger, Company will have distributed cash to its
Stockholders in its taxable year ending with the Parent Merger in an amount equal to or in excess of the amount required to be distributed pursuant to Section 857(a) of the Code in respect of
its taxable year ending with the Parent Merger, and Company will not be subject to Tax under Sections 857(b) or 4981 of the Code in respect of its taxable year ending with the Parent
Merger (other than as set forth in
Schedule 4.11(p)
of the Disclosure Letter).
(c) (i)
There are no audits, investigations by any Governmental Authority or other proceedings ongoing or, to the Knowledge of Company, threatened with regard to any Taxes
or Tax Returns of Company or any Company Subsidiary; (ii) no deficiency for Taxes of Company or any Company Subsidiary has been claimed, proposed or assessed in writing or, to the Knowledge of
Company, threatened, by any Governmental Authority, which deficiency has not yet been settled, except for such deficiencies which are being contested in good faith; (iii) neither Company nor
any Company Subsidiary has waived any statute of limitations with respect to the assessment of Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency for any open
tax year or is the beneficiary of an extension of time to file any Tax Return except for any such waivers or extensions relating to an extension of time to file any non-income Tax Return in respect of
a taxable year or period ending in 2016 or 2017; and (iv) neither Company nor any of the Company Subsidiaries has entered into any "closing agreement" as described in Section 7121 of the
Code (or any corresponding or similar provision of state, local or foreign income Tax Law).
(d) Neither
Company nor any Company Subsidiary holds any asset the disposition of which would be subject to (or to rules similar to) Section 1374 of the Code.
(e) Beginning
with its taxable year ended December 31, 2012, (i) Company and the Company Subsidiaries have not incurred any liability for material Taxes under
Sections 856(g)(5)(C), 857(b)(1), 857(b)(4), 857(b)(5), 857(b)(6)(A), 857(b)(7), 860(c) or 4981 of the Code which have not been previously paid and shall not incur any such liability for such
Taxes in the taxable year ending on the Closing Date (other than as set forth in
Schedule 4.11(p)
of the Disclosure Letter), and
(ii) neither Company nor any Company Subsidiary has incurred any material liability for Taxes other than (A) in the ordinary course of business consistent with past practice, or
(B) transfer or similar Taxes arising in connection with a sale, exchange, or other transfer of property. No event has occurred, and no condition or circumstance exists, which presents a
material risk that any
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material
Tax described in the preceding sentence will be imposed upon Company or the Company Subsidiaries.
(f) Company
and the Company Subsidiaries have complied, in all material respects, with all applicable Laws, rules and regulations relating to the payment and withholding of
Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446, 1471 and 3402 of the Code or similar provisions under any state and foreign Laws) and have duly and timely
withheld and, in each case, have paid over to the appropriate Governmental Authority all material amounts required to be so withheld and paid over on or prior to the due date thereof under all
applicable Laws.
(g) There
are no Company Tax Protection Agreements in force at the date of this Agreement, and, as of the date of this Agreement, no person has raised in writing, or to the
Knowledge of Company, threatened to raise a material claim against Company or any Company Subsidiary for any breach of any Company Tax Protection Agreements. As used herein,
"
Company Tax Protection Agreements
" means any written agreement to which Company or any Company Subsidiary is a party (i) pursuant to which any
liability to holders of interests in a Company Subsidiary Partnership relating to Taxes may arise, whether or not as a result of the consummation of the transactions contemplated by this Agreement;
(ii) that was entered into in connection with or related to the deferral of income Taxes of a holder of interests in a Company Subsidiary Partnership, and that requires Company or any Company
Subsidiary (A) to maintain a minimum level of debt, continue a particular debt, or provide rights to guarantee or otherwise assume economic risk of loss with respect to debt, (B) to
retain or not to dispose of assets, or engage in transactions of comparable tax effect, (C) to make or refrain from making a Tax election, (D) only dispose of assets in a particular
manner, (E) operate (or refrain from operating) in a particular
manner, (F) use (or refrain from using) a specified method of taking into account book tax disparities under Section 704(c) of the Code with respect to one or more properties and/or
(G) use (or refrain from using) a particular method for allocating one or more liabilities of such party or any of its direct or indirect subsidiaries under Section 752 of the Code;
(iii) pursuant to which limited partners of a Company Subsidiary Partnership have guaranteed, indemnified or assumed debt of the Company Subsidiary Partnership; or (iv) that would
require the general partner of a Company Subsidiary Partnership to consider separately the interests of any limited partner. As used herein, "
Company Subsidiary
Partnership
" means a Company Subsidiary that is a partnership for U.S. federal income tax purposes.
(h) There
are no Tax Liens upon any property or assets of Company or any Company Subsidiary, except (i) Tax Liens that are
de
minimis
in nature or (ii) Liens for Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings and for which adequate reserves
have been established in accordance with GAAP.
(i) Neither
Company nor any Company Subsidiary has requested or has received any ruling of a Governmental Authority, or has entered into any written agreement with a
Governmental Authority with respect to any Taxes.
(j) There
are no Tax allocation, indemnity or sharing agreements or similar arrangements with respect to which Company or any Company Subsidiary is a party or otherwise has
any liability (other than customary arrangements under commercial contracts or borrowings entered into in the ordinary course of business consistent with past practice and Company Tax Protection
Agreements).
(k) Neither
Company nor any Company Subsidiary (i) has been a member of an affiliated group filing a consolidated U.S. federal income Tax Return or (ii) has
any liability for the Taxes of any Person (other than Company or any Company Subsidiary) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign law),
as a transferee or successor, by contract, or otherwise.
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(l) Neither
Company nor any Company Subsidiary has participated in any "listed transaction" within the meaning of Treasury Regulation Section 1.6011-4(b)(2).
(m) Neither
Company nor any of the Company Subsidiaries has constituted either a "distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (i) in the two (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 transactions contemplated by this Agreement.
(n) Except
as set forth in
Section 4.11(n)
of the Disclosure Letter, no written power of attorney that has been
granted by Company or any of the Company Subsidiaries (other than to Company or a Company Subsidiary) currently is in force with respect to any matter relating to Taxes.
(o) Neither
Company nor any of the Company Subsidiaries (other than Taxable REIT Subsidiaries) has or has had any earnings and profits attributable to such entity or any
other corporation in any non-REIT year within the meaning of Section 857 of the Code.
(p) Except
as set forth in
Section 4.11(p)
of the Disclosure Letter neither Company nor any Company Subsidiaries has
engaged at any time in any "prohibited transactions" within the meaning of Section 857(b)(6) of the Code or engaged in any transaction that would give rise to "redetermined rents, redetermined
deductions, excess interest, and redetermined TRS service income" described in Section 857(b)(7) of the Code.
(q) Except
as set forth in
Section 4.11(q)
of the Disclosure Letter, (i) neither Company nor any Company
Subsidiary has failed to obtain or comply with any assessment or reassessment required with respect to real property under applicable Law or otherwise failed to comply in any material respect with
applicable Laws relating to the reporting, collection and payment of real property Taxes and (ii) to the Knowledge of Company, there are no proposed reassessments of any real property owned by
Company or any Company Subsidiary that would result in a material increase in the amount of any Tax to which Company or any Company Subsidiary would be subject
(r) Neither
Company nor any Company Subsidiary: (i) has agreed to make any material adjustment pursuant to Section 481(a) of the Code, (ii) has any
knowledge that the IRS has proposed, in writing, such an adjustment or a change in accounting method with respect to Company or any Company Subsidiary or (iii) has any application pending with
the IRS or any other Governmental Authority requesting permission for any change in accounting method.
(s) This
Section 4.11
and, to the extent related to Taxes,
Section 4.12
and
Section 4.13
contain the
sole and exclusive representations and
warranties of the Company Parties with respect to Taxes and Tax Matters.
Section 4.12
Pension and Benefit Plans; Employees
.
(a) Company
has made available prior to the date hereof every Employee Benefit Plan sponsored, maintained or contributed to (or with respect to which any obligation to
contribute has been undertaken) by Company or any of its ERISA Affiliates (such Employee Benefit Plans, the "
Company Employee Benefit Plans
". Each such
Company Employee Benefit Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination or opinion letter from the IRS regarding its qualification
thereunder that has not been revoked and, to the Knowledge of Company, no event has occurred and no condition exists that is reasonably expected to result in the revocation of any such determination
or opinion letter.
Section 4.12(a)
of the Disclosure Letter sets forth a complete list of each Company Employee Benefit Plan.
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(b) With
respect to each such Company Employee Benefit Plan, Company has provided, or made available, to Parent (if applicable to such Company Employee Benefit Plan):
(i) all documents embodying or governing such Company Employee Benefit Plan, and any funding medium for the Company Employee Benefit Plan (including, without limitation, trust agreements);
(ii) the most recent IRS determination or opinion letter with respect to such Company Employee Benefit Plan under Section 401(a) of the Code; (iii) the most recently filed IRS
Form 5500 Annual Report and accompanying schedules and audited financial statements; (iv) the most recent actuarial report; (v) the current summary plan description for such
Company Employee Benefit Plan (or other descriptions of such Company Employee Benefit Plan provided to employees) and all summaries of material modifications thereto; (vi) any insurance policy
related to such Company Employee Benefit Plan; and (vii) all material written correspondence received from the IRS, Pension Benefit Guaranty Corporation or the U.S. Department of Labor during
the past three (3) years relating to any government investigation or audit or any submissions under any voluntary compliance or correction policy.
(c) Each
Company Employee Benefit Plan has been administered in accordance with the requirements of applicable law, including, without limitation, ERISA, the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, the Patient Protection and Affordable Care Act, Public Law 111-148 and the Code, except as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect, and is being administered and operated in all material respects in accordance with its terms. No Company Employee Benefit Plan is
subject to Title IV of ERISA, is a multiemployer plan, within the meaning of ERISA Section 3(37), is a "multiple employer welfare arrangement" (as defined in Section 3(40) of ERISA) or
is a "multiple employer plan" (as defined in Section 413 of the Code). Neither Company nor any ERISA Affiliate has ever maintained or contributed to, or had any obligation to contribute to (or
borne any liability with respect to) any such multiemployer plan or multiple employer plan.
(d) Full
payment has been made, or otherwise properly accrued on the books and records of Company and any ERISA Affiliate, of all amounts that Company and any ERISA
Affiliate are required under the terms of the Company Employee Benefit Plans to have paid as contributions to such Company Employee Benefit Plans on or prior to the date hereof (excluding any amounts
not yet due) and the contribution requirements, on a prorated basis, for the current year have been made or otherwise properly accrued on the books and records of Company through the Closing Date.
(e) Neither
Company, an ERISA Affiliate or any person appointed or otherwise designated to act on behalf of Company, or an ERISA Affiliate, nor, to the Knowledge of Company,
any other "disqualified person" or "party in interest" (as defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA, respectively) has engaged in any transactions in
connection with any Company Employee Benefit Plan that is reasonably expected to result in the imposition of a material penalty or pursuant to Section 502(i) of ERISA, material damages pursuant
to Section 409 of ERISA or a material tax pursuant to Section 4975(a) of the Code.
(f) No
material liability, claim, action, audit, investigation, governmental proceeding or litigation has been made, commenced or, to the Knowledge of Company, threatened
with respect to any Company Employee Benefit Plan (other than for benefits payable in the ordinary course of business consistent with past practice).
(g) Except
as set forth in
Section 4.12(g)
of the Disclosure Letter, no Company Employee Benefit Plan provides for
medical, life insurance or other health or welfare benefits (other than under Section 4980B of the Code, Part 6 of Title I of ERISA or other similar applicable Law, or a
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plan
qualified under Section 401(a) of the Code) to any current or future retiree or former employee.
(h) Except
as set forth in
Section 4.12(h)
of the Disclosure Letter, neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will (individually or together with the occurrence of any other event): (i) entitle any employee, trustee, director or consultant of Company
or the Company Subsidiaries to severance pay or any increase in severance pay under any Company Employee Benefit Plan upon any termination of employment on or after the date of this Agreement;
(ii) accelerate the time of payment, vesting or funding or result in any payment of compensation or benefits under, or increase the amount or value of any payment to any employee, officer,
trustee or director of Company or any Company Subsidiary, or could limit the right to amend, merge or terminate any Company Employee Benefit Plan or related trust; (iii) result in payments or
benefits under any Company Employee Benefit Plan or Company employment agreement which would not be deductible under Section 280G of the Code; or (iv) result in a requirement to pay any
tax "gross up" or similar "make whole" payment to any employee, director, consultant or other service provider of Company or any of its ERISA Affiliates.
(i) Each
Company Employee Benefit Plan that constitutes in any part a nonqualified deferred compensation plan within the meaning of Section 409A of the Code
has been operated and maintained in operational and documentary compliance with Section 409A of the Code and applicable guidance thereunder. No payment to be made under any Company Employee
Benefit Plan is, or to the Knowledge of Company, will be, subject to the penalties of Section 409A(a)(1) of the Code.
Section 4.13
Labor and Employment Matters
.
(a)
Section 4.13(a)
of the Disclosure Letter sets forth a complete and correct list of each employee of Company and
any Company Subsidiary, including each such employee's: (i) name, (ii) date of hire, (iii) base salary, (iv) any bonus paid or awarded in or in respect of 2016 (including
the date paid or anticipated to be paid), (v) target bonus opportunity for 2017 and (vi) exempt or non-exempt status.
(b) Neither
Company nor any Company Subsidiary is a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor
union or labor union organization, nor are there any negotiations or discussions currently pending or occurring between Company, or any of the Company Subsidiaries, and any union or employee
association regarding any collective bargaining agreement or any other work rules or polices. There is no unfair labor practice or labor arbitration proceeding pending or, to the Knowledge of Company,
threatened against Company or any of the Company Subsidiaries relating to their business and neither Company nor any Company Subsidiary is subject to any strike, work stoppage, lockout, shutdown,
labor dispute or other concerted interference with normal operations. To the Knowledge of Company, there are no organizational efforts with respect to the formation of a collective bargaining unit
presently being made or threatened involving employees of Company or any of the Company Subsidiaries.
(c) Except
as set forth in
Section 4.13(c)
of the Disclosure Letter, there are no proceedings pending or, to the
Knowledge of Company, threatened against Company or any of the Company Subsidiaries in any forum by or on behalf of any present or former employee of Company or any of the Company Subsidiaries, any
applicant for employment or classes of the foregoing alleging unpaid or overdue wages or compensation due, breach of any express or implied employment contract, violation of any law or regulation
governing employment or the termination thereof, or any other discriminatory, wrongful or tortious conduct on the part of Company of any of the Company Subsidiaries in connection with the employment
relationship.
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(d) Each
individual who renders service to Company or any Company Subsidiary who is classified by Company or such Company Subsidiary, as applicable, as having the status of
an independent contractor or other non-employee status for any purpose (including for purposes of taxation and tax reporting and under any Company Employee Benefit Plans) is properly so classified and
treated in accordance with applicable Laws and for purposes of all Company Employee Benefit Plans and perquisites, except as would not, individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect.
(e) Each
of Company and the Company Subsidiaries is in compliance with all applicable Laws and all applicable contracts and policies relating to labor and labor practices,
employment and employment practices, wages, hours, and terms and conditions of employment, including the obligations of the WARN Act, and all other notification and bargaining obligations arising
under any collective bargaining agreement, by applicable Law or otherwise, except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Neither Company nor any Company Subsidiary has implemented, conducted or experienced a "plant closing" or "mass layoff" as defined in the WARN Act (or any similar group personnel action requiring
advance notice under the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of Company or any Company Subsidiary.
Section 4.14
Information Supplied
.
None of the information supplied or to be supplied by or on behalf of Company, Company GP and Company LP in writing for inclusion or incorporation by reference in the Proxy
Statement will, at the time such Proxy Statement is first mailed to the Stockholders, at the time of the Company Stockholder Meeting or at the time of any amendment or supplement thereof, as
applicable, 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. The Proxy Statement will comply as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act
and the rules and regulations thereunder. No representation or warranty is made hereunder as to statements made or incorporated by reference in the Proxy Statement that were not supplied by or on
behalf of Company, Company GP or Company LP.
Section 4.15
Intellectual Property
.
(a) Except
as individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, or as set forth in
Section 4.15(a)
of the Disclosure Letter, all Intellectual
Property used in the operation of the business of Company and the Company Subsidiaries
is either (i) owned by Company or a Company Subsidiary (the "
Owned Intellectual Property
") or (ii) used pursuant to a valid license
agreement (the "
Licensed Intellectual Property
"), provided, however, that the foregoing representation and warranty in this
Section 4.15(a)
shall not
constitute or be deemed or construed as any representation or warranty with respect to infringement, misappropriation,
or violation of any Intellectual Property rights (which is addressed in
Section 4.15(b)
.
(b) Except
as individually or in the aggregate would not reasonably be expected to have a Company Material Adverse Effect, the conduct of the business of Company and the
Company Subsidiaries does not infringe, misappropriate or otherwise violate the Intellectual Property rights of any third party and there are no pending or, to the Knowledge of Company, threatened
claims that challenge the use or ownership of any of the Owned Intellectual Property and to the Knowledge of Company, no Person is infringing or otherwise violating any Owned Intellectual Property.
(c)
Section 4.15(c)
of the Disclosure Letter sets forth a complete and correct list in all material respects of
(i) all material Owned Intellectual Property that is registered, issued or the
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subject
of a pending application, and (ii) all material unregistered Owned Intellectual Property. Except as individually or in the aggregate, would not reasonably be expected to have a Company
Material Adverse Effect, all of the registrations, issuances and applications set forth on
Section 4.15(c)
of the Disclosure Letter are valid, in
full force and effect and have not expired or been cancelled, abandoned or otherwise terminated and Company and the Company Subsidiaries own and possess all right, title and interest in and to the
Owned Intellectual Property free and clear of all Liens (other than Permitted Liens).
(d) To
the Knowledge of Company, none of the proprietary software owned by Company or any Company Subsidiary incorporates, is combined with or distributed with any open
source, community source, shareware, freeware or other code that would result in such software being covered by the GNU General Public License or any other similar licensing regime, in each case as
would require Company or any Company Subsidiary to disclose and distribute its own source code. To the Knowledge of Company and except as individually or in the aggregate would not reasonably be
expected to have a Company Material Adverse Effect, no software material to the business of Company and the Company Subsidiaries contains any virus, software routine or hardware component designed to
permit unauthorized access or to disable or otherwise harm any computer, systems or software, or any software routine designed to disable a computer program automatically with the passage of time or
under the positive control of a Person other than an authorized licensee or owner of the software.
(e) Company
and each of the Company Subsidiaries have established policies and procedures (and, to the Knowledge of Company, has complied with such policies and procedures)
to provide for the security, continuity and integrity of the services provided by the business and the back-up and recovery of data and information stored or contained or processed by the business
with regard to disaster recovery and business continuity. Except as set forth in
Section 4.15(e)
of the Disclosure Letter, there has not been any
unauthorized access of any of Company's computer systems or IT Assets that has resulted in, or could reasonably be expected to result in, any misappropriation, damage, destruction, loss, corruption,
alteration or misuse of any data or information stored or contained therein or transmitted, accessed or processed thereby.
(f) Company
and the Company Subsidiaries have a privacy policy (the "
Privacy Policy
") regarding the collection and use of
personally identifiable information ("
Personal Information
"), a complete and
correct copy of which has been provided to Parent prior to the date hereof. Except as individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect,
(i) Company and each of the Company Subsidiaries is in material compliance with all applicable Laws regarding the collection, use and protection of Personal Information and with the Privacy
Policy, and no Person has gained unauthorized access to or made any unauthorized use of any such Personal Information maintained by Company or any of the Company Subsidiaries and (ii) Company
and the Company Subsidiaries have adequate security measures in place to protect Personal Information stored in their computer systems from unlawful use by any third party or any other use by a third
party that would violate the Privacy Policy. Except as individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, the execution, delivery and
performance of this Agreement and the consummation of the transactions contemplated by this Agreement do not violate the Privacy Policy as it currently exists or as it existed at any time during which
any Personal Information was collected or obtained by the Company or any of the Company Subsidiaries and, upon Closing, Parent will own all such Personal Information and continue to have the right to
use such Personal Information on identical terms and conditions as the Company and the Company Subsidiaries enjoyed immediately prior to the Closing. Except as individually or in the aggregate, would
not reasonably be expected to have a Company Material Adverse Effect and as set forth on
Section 4.15(f)
of the Disclosure Letter, no
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Actions
are pending or, to the Knowledge of Company, threatened against Company or any of the Company Subsidiaries relating to the collection or use of Personal Information.
(g) This
Section 4.15
and, to the extent related to intellectual property matters,
Section 4.5
,
Section 4.6
and
Section 4.18
contain the sole and exclusive representations and warranties of
the Company Parties with respect to intellectual property matters.
Section 4.16
Environmental Matters
.
(a) Except
as individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, or as set forth in
Section 4.16(a)
of the Disclosure Letter, or in any Phase I
or Phase II report made available to Parent prior to the date hereof:
(i) Company
and each Company Subsidiary are in compliance with and, except for matters that have been fully and finally resolved, have since January 1, 2014 complied
with all Environmental Laws.
(ii) Company
and each Company Subsidiary have all Environmental Permits necessary to own, lease and, to the extent applicable, operate its properties and to conduct their
current operations and are in compliance with their respective Environmental Permits, all such Environmental Permits are valid and in full force and effect and in good standing.
(iii) (A)
Since January 1, 2014, neither Company nor any Company Subsidiary has received any written notice, demand, letter or claim from any Governmental Authority
alleging that Company or any such Company Subsidiary is in violation of, or liable under, any Environmental Law and (B) no judicial, administrative or compliance Order has been issued against
Company or any Company Subsidiary which remains unresolved. There is no Action pending, or, to the Knowledge of Company, threatened against Company and any Company Subsidiary under any Environmental
Law or with respect to Hazardous Substances.
(iv) Neither
Company nor any Company Subsidiary has entered into or agreed to any consent decree or order or is subject to any judgment, decree or judicial, administrative
or compliance order relating to compliance with Environmental Laws, Environmental Permits or the investigation, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Substances
which remains unresolved and no Action is pending or, to the Knowledge of Company, threatened against Company or any Company Subsidiary under any Environmental Law or with respect to Hazardous
Substances.
(v) Neither
Company nor any Company Subsidiary has assumed, by contract or, to the Knowledge of Company, by operation of Law, any liability under any Environmental Law or
relating to any Hazardous Substances.
(vi) To
the Knowledge of Company, neither Company nor any Company Subsidiary has caused any release of a Hazardous Substance that would be reasonably likely to result in a
liability of Company or any Company Subsidiary under any Environmental Law.
(b) This
Section 4.16
and, to the extent related to Environmental Laws, Hazardous Substances or other environmental
matters,
Section 4.5
contain the exclusive representations and warranties of the Company Parties with respect to Environmental Laws, Hazardous
Substances or other environmental matters.
Section 4.17
Properties
.
(a)
Section 4.17(a)
of the Disclosure Letter sets forth a complete and correct list of the common name and address of
each Company Property.
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(b)
Section 4.17(b)
of the Disclosure Letter sets forth a complete and correct list of the common name and address of
each real property which, as of the date of this Agreement, is under contract for purchase by Company or a Company Subsidiary (a "
Real Estate Purchase
Contract
") or which is required under a binding contract to be leased (or subleased or sub-subleased etc.) by Company or a Company Subsidiary from a Company Third Party after
the date of this Agreement (a "
Real Estate Lease Contract
", and each such real property set forth on
Section 4.17(b)
of the Disclosure Letter, a
"
Contract Property
"). Company has made available to
Parent as of the date hereof true, correct and complete copies of each Real Estate Purchase Contract and Real Estate Lease Contract. Except as set forth in
Section 4.17(b)
of the Disclosure Letter,
there are no real properties that Company or any Company Subsidiary is obligated to buy or lease at
some future date.
(c) Except
as individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, or as set forth in
Section 4.17(c)
of the Disclosure Letter, (i) Company or a
Company Subsidiary owns good, valid and marketable fee simple title to or holds
a good and valid leasehold interest in (as applicable) each of the Company Properties, in each case, free and clear of Liens, except for Permitted Liens, (ii) other than residential leases or
subleases entered into in the ordinary course of business (each a "
Residential Lease
"), neither Company nor any Company Subsidiary has leased,
subleased, licensed or otherwise granted any Person the right to use or occupy any Company Property or any portion thereof and (iii) each of the Residential Leases complies in all material
respects with all applicable Law.
(d) Neither
Company nor any Company Subsidiary has received (i) written notice from any Governmental Authority having jurisdiction over any of the Company Properties
that any certificate, permit or license relating to a Company Property is not in full force and effect, except for such failures to be in full force and effect that, individually or in the aggregate,
would not reasonably be expected to have a Company Material Adverse Effect, or of any pending written threat of modification or cancellation of any of same, that would reasonably be expected to have a
Company Material Adverse Effect or (ii) written notice of any uncured violation of any Laws affecting any of the Company Properties which, individually or in the aggregate, would reasonably be
expected to have a Company Material Adverse Effect.
(e) No
certificate, variance, permit or license from any Governmental Authority having jurisdiction over any of the Company Properties is not in full force and effect, and
neither Company nor any Company Subsidiary has received written notice of any outstanding threat of modification, suspension or cancellation of any such certificate, variance, permit or license,
except for any of the foregoing as,
individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
(f) Except
as, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect or as set forth in
Section 4.17(f)
of the Disclosure Letter, there are no
condemnation, eminent domain or similar proceedings pending, or to the Knowledge of
Company, threatened, with respect to any Company Property that would interfere in any material manner with the current use of the Company Property (assuming its continued use in the manner it is
currently used).
(g) Except
as set forth in
Section 4.17(g)
of the Disclosure Letter, (i) there are no unexpired option to
purchase agreements, rights of first refusal or first offer or any other rights to purchase or otherwise acquire from Company or any Company Subsidiary any Company Property or any portion thereof that
would materially adversely affect Company's, or any Company Subsidiary's, ownership, lease or right to use a Company Property, and (ii) there are no other outstanding rights or agreements to
enter into any contract for sale, lease or letter of intent to sell or lease any Company Property or any portion thereof, which, in each case, is in favor of any party other than
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Company
or a Company Subsidiary (a "
Company Third Party
", and any agreement set forth in
Section 4.17(g)
, of the Disclosure Letter, a "
Real Estate Sales Contract
").
(h) Except
pursuant to a Residential Lease, neither Company nor any Company Subsidiary is a party to any agreement pursuant to which Company or any Company Subsidiary
manages, or manages the development of, any real property for any Company Third Party.
(i) Except
as set forth in
Section 4.17(i)
of the Disclosure Letter or as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect, Company and each Company Subsidiary, as applicable, is in possession of title insurance policies or valid marked-up title commitments
evidencing title insurance with respect to each Company Property (each, a "
Company Title Insurance Policy
" and, collectively, the
"
Company Title Insurance Policies
"). Company has made available to Parent as of the date hereof complete and correct copies of each Company Title
Insurance Policy. Except as set forth in
Section 4.17(i)
of the Disclosure Letter, no written claim has been made against any Company Title
Insurance Policy, which remains pending and, which, individually or in the aggregate, would reasonably be expected to have a Company Material Adverse Effect.
(j)
Section 4.17(j)
of the Disclosure Letter lists (i) the parties currently providing third-party property
management services to Company or a Company Subsidiary with respect to a Company Property and the names of the Company Properties currently managed by each such party and (ii) the management
agreement(s) pursuant to which such management services are provided.
(k) The
information in the portfolio data tape, dated January 31, 2017, furnished by Company to Ultimate Parent on February 22, 2017, which is set forth in
Section 4.17(k)
of the Disclosure
Letter (the "
Data Tape
"), was true and correct in all material
respects as of the date thereof.
Section 4.18
Material Contracts
.
(a) Except
for contracts, agreements, arrangements or understandings listed in
Section 4.18(a)
of the Disclosure
Letter or filed as exhibits to the Company SEC Documents, as of the date of this Agreement (or, with respect to Residential Leases, as of the date of the Data Tape), neither Company nor any Company
Subsidiary is a party to or bound by any contract, agreement, arrangement or understanding that, as of the date hereof (or, with respect to Residential Leases, as of the date of the Data Tape):
(i) is
required to be filed as an exhibit to Company's Annual Report on Form 10-K on or after January 1, 2014 pursuant to Item 601(b)(2), (4),
(9) or (10) of Regulation S-K promulgated under the Securities Act, but is not so filed;
(ii) obligates
Company or any Company Subsidiary to make non-contingent aggregate annual expenditures (other than principal and/or interest payments or the deposit of other
reserves with respect to debt obligations) in excess of $250,000 and is not cancelable within ninety days without material penalty to Company or any Company Subsidiary;
(iii) contains
(A) any non-compete or exclusivity provisions with respect to any line of business or geographic area that materially restricts the business of Company
or any Company Subsidiary, or that otherwise materially restricts the lines of business conducted by Company or any Company Subsidiary or the geographic area in which Company or any Company Subsidiary
may conduct business, (B) any covenant granting "most favored nation" status that, following the consummation of the Mergers, would restrict actions in any material respect taken by the
Surviving Company, Company LP and/or any Company Subsidiaries, or (C) a standstill or similar provision pursuant to which Company, Company LP or any Company Subsidiary has agreed
not to acquire assets or securities of any Person;
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(iv) constitutes
a loan agreement, letter of credit, indenture, note, bond, debenture, mortgage, pledge agreement, securities agreement or any other document, agreement or
instrument evidencing a capitalized leased obligation or other Indebtedness of, for the benefit of, Company or any Company Subsidiary with a principal amount as of the date hereof greater than
$100,000;
(v) contains
an option, right of first offer, right of first refusal or otherwise requires Company or any Company Subsidiary to dispose of or acquire assets or properties
with a fair market value in aggregate of greater than $100,000, or involves any pending or contemplated merger, consolidation or similar business combination transaction;
(vi) constitutes
a joint venture, partnership, limited liability company, strategic alliance or any similar agreement;
(vii) other
than the advancements of expenses to directors or officers of Company or any Company Subsidiary in the ordinary course of business consistent with past practice,
constitutes a loan to any Person (other than a Company Subsidiary) by Company or any Company Subsidiary;
(viii) relates
to the settlement (or proposed settlement) of any pending or threatened Action, other than any settlement that provides solely for the payment of less than
$100,000 in cash;
(ix) requires
Company or any Company Subsidiary to make any investment (in each case, in the form of a loan, capital contribution or similar transaction) in any
(A) Company Subsidiary in excess of $500,000 or (B) other Person in excess of $100,000;
(x) contains
a license grant to Company or a Company Subsidiary to use any Licensed Intellectual Property (other than licenses for "off-the-shelf" or other widely available
software licenses on non-discriminatory terms for less than $100,000 on an annual basis) or a grant from Company or any Company Subsidiary to a third party to use any Owned Intellectual Property;
(xi) is
a Real Estate Lease Contract, Residential Lease, Real Estate Purchase Contract, Real Property Lease or Real Estate Sales Contract;
(xii) that
obligates (other than pursuant to the organizational documents of Company or a Company Subsidiary) Company, Company LP or any Company Subsidiary to
indemnify any past or present directors, officers, trustees, employees and agents of Company, Company LP or any Company Subsidiary;
(xiii) is
a collective bargaining agreement or similar agreement with any trade union, works council or other labor organization;
(xiv) is
for the engagement of any person on a full-time, part-time, or consulting basis and providing for annual compensation in excess of $100,000 that is not terminable
at will without notice or liability;
(xv) whereby
the Company, Company LP or a Company Subsidiary provides property management services for any property in which the Company, Company LP or a
Company Subsidiary does not own 100% of the interests in such property;
(xvi) provides
for potential liability on the part of Company, Company LP or any Company Subsidiary in respect of any purchase price adjustment, earn-out or
contingent purchase price that, in each case, could reasonably be expected to result in future payments of more than $500,000;
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(xvii) requires
payment of material commissions (other than leasing commissions incurred in the ordinary course of business) or material tenant improvement costs, allowances
or other concessions; or
(xviii) constitutes
a regulatory agreement or similar agreement that requires that any portion of a property be leased to persons meeting criteria set forth in such
agreement.
(b) Each
such contract, agreement, arrangement or understanding described in clauses
(i)
-
(xviii)
of
Section 4.18(a)
above is
referred to herein as a "
Company Material Contract
". Company has made available to Parent true and complete copies of all Company Material Contracts as
of the date hereof, including amendments, supplements and side letters related thereto.
(c) Except
as, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, each Company Material Contract is a legal,
valid, binding and enforceable agreement of Company and/or each Company Subsidiary that is a party thereto, as applicable and, to the Knowledge of Company, of each other party thereto, and is in full
force and effect, except as may be limited by the Enforceability Exceptions. Except as, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect,
Company and each Company Subsidiary has performed all obligations required to be performed by it prior to the date hereof under each Company Material Contract and, to the Knowledge of Company, each
other party thereto has performed all obligations required to be performed by it under such Company Material Contract prior to the date hereof. None of Company or any Company Subsidiary, nor, to the
Knowledge of Company, any other party thereto, is in breach or default under any Company Material Contract, and, to the Knowledge of Company, no event has occurred that with notice or lapse of time or
both would constitute a violation or breach of, or default under, any Company Material Contract, except where in each case such breach, violation or default would not be reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Neither Company nor any Company Subsidiary has received written notice of any violation of or default under any Company Material
Contract, except as set forth in
Section 4.18(c)
of the Disclosure Letter, and except for violations or defaults that would not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Section 4.19
Opinion of Company Financial Advisor
.
The Company Board has received an oral opinion (to be confirmed by a written opinion) of Goldman, Sachs & Co. ("
GS
") to the
effect that, as of the date of such opinion, and subject to the assumptions and limitations set forth in GS's opinion, the Merger Consideration in the Parent Merger is fair, from a financial point of
view, to the holders of shares of Company Common Stock. Company will promptly make available to Parent, solely for informational purposes, a complete and correct copy of the written opinion upon
receipt thereof from GS.
Section 4.20
Vote Required
.
The affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock (the "
Company Stockholder Approval
")
is the only vote of holders of securities of Company required to approve and consummate the Parent Merger and the other transactions contemplated by this Agreement. The affirmative vote or consent of
Company, as the "Special Limited Partner" pursuant to Section 11.3 of the Company LP Agreement (the "
Company Partner Approval
"), is the
only vote or consent required of the holders of any class or series of Company OP Common Units or other securities of, or equity interests in, Company LP required to approve this Agreement and
to approve and consummate the Partnership Merger and the other transactions contemplated by this Agreement.
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Section 4.21
Brokers
.
Except for the fees and expenses payable to GS, no broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's or other similar fee or commission
in connection with the Mergers or any transactions contemplated by this Agreement. Company has furnished to Parent true and complete copies of all agreements between Company and GS relating to the
transactions contemplated by this Agreement, which agreements disclose all fees payable thereunder.
Section 4.22
Investment Company Act
.
Neither Company nor any Company Subsidiary is required to be registered as an investment company under the Investment Company Act.
Section 4.23
Related Party Transactions
.
Except as set forth in
Section 4.23
of the Disclosure Letter or as permitted by this Agreement, from January 1, 2014 through
the date of this Agreement there have been no transactions, agreements, arrangements or understandings between Company or any Company Subsidiary, on the one hand, and any Affiliates (other than
Company Subsidiaries) of Company or other Persons, on the other hand, that would be required to be disclosed under Item 404 of Regulation S-K promulgated by the SEC.
Section 4.24
Takeover Statutes
.
Company has taken all actions required to be taken by it in order for the requirements or restrictions of any "moratorium", "control share", "fair price", "affiliate transaction",
"business combination" or other takeover Laws and regulations, including in the MGCL (including the Maryland Business Combination Act and Maryland Control Share Acquisition Act) or the DRULPA to not
apply to this Agreement, the Mergers or the other transactions contemplated by this Agreement.
Section 4.25
Insurance
.
Section 4.25
of the Disclosure Letter sets forth, as of the date of this Agreement, a complete and correct list in all material
respects of the material insurance policies held by, or for the benefit of Company or any Company Subsidiaries, including the insurer under such policies and the type of and amount of coverage
thereunder. Except as, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, (a) all material insurance policies maintained by Company
and any Company Subsidiary are in full force and effect, (b) all premiums due and payable thereon have been paid, and (c) neither Company nor any Company Subsidiary is in breach of or
default under any of such insurance policies. From January 1, 2016 until the date hereof, Company has not received written notice of termination or cancellation or denial of coverage with
respect to any material insurance policy, or written notice of failure to renew any such insurance policy or refusal of coverage thereunder or any other notice that such policies are no longer in full
force or effect or that the issuer of any such policy is no longer willing or able to perform its obligations thereunder.
Section 4.26
No Other Representations and Warranties
.
The Company Parties agree that, except for the representations or warranties expressly set forth in
Article V
, no Parent Party nor
any of their Affiliates nor any other person on behalf of any Parent Party has made any representation or warranty, expressed or implied, with respect to any Parent Party, their respective businesses,
operations, assets, liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness
of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or with respect to the accuracy or completeness of any information regarding any Parent Party or any of their
Affiliates, and no Company Party nor any of their Affiliates nor any other person on behalf of any Company Party has relied on any representation or warranty except for those expressly set forth in
Article V
.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARENT PARTIES
The Parent Parties hereby jointly and severally represent and warrant to the Company Parties that:
Section 5.1
Organization and Qualification; Subsidiaries
.
(a) Ultimate
Parent is a corporation duly incorporated, validly existing and in good standing under the Laws of the Province of Ontario and has the requisite corporate power
and authority to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted, (b) Parent is a limited liability company duly
organized, validly existing and in good standing under the Laws of the State of Delaware and has the requisite organizational power and authority to own, lease and, to the extent applicable, operate
its properties and to carry on its business as it is now being conducted and (c) Parent LP is duly organized, validly existing and in good standing under the Laws of Delaware, and has
the requisite organizational power and authority to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted, except in each case for
such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect.
Section 5.2
Authority
.
(a) Ultimate
Parent has the requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by
this Agreement to which Parent is a party. The execution, delivery and performance of this Agreement by Ultimate Parent and the consummation by Ultimate Parent of the transactions contemplated by this
Agreement have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of Ultimate Parent are necessary to authorize the execution, delivery
and performance by Ultimate Parent of this Agreement or to consummate the other transactions contemplated by this Agreement. This Agreement has been duly executed and delivered by Ultimate Parent and
assuming due authorization, execution and delivery by each of Parent, Parent LP and the Company Parties, constitutes a legally valid and binding obligation of Ultimate Parent enforceable
against Ultimate Parent in accordance with its terms, except as such enforceability may be limited by the Enforceability Exceptions.
(b) Parent
has the requisite organizational power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement to which Parent is a party, including the Parent Merger. The execution, delivery and performance of this Agreement by Parent and the consummation by Parent
of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary organizational action, and no other organizational proceedings on the part of Parent are
necessary to authorize the execution, delivery and performance by Parent of this Agreement or the Parent Merger or to consummate the other transactions contemplated by this Agreement, subject, with
respect to the Parent Merger, to the filing of the certificate of merger with the Secretary of State of the State of Delaware and the articles of merger with the SDAT. This Agreement has been duly
executed and delivered by Parent and assuming due authorization, execution and delivery by each of Ultimate Parent, Parent LP and the Company Parties, constitutes a legally valid and binding
obligation of Parent enforceable against Parent in accordance with its terms, except as such enforceability may be limited by the Enforceability Exceptions.
(c) Parent LP
has the requisite organizational power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement to which it is a party, including the Partnership Merger. The
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execution,
delivery and performance of this Agreement by Parent LP and the consummation by it of the transactions contemplated by this Agreement have been duly and validly authorized by all
necessary organizational action, and no other organizational proceedings on the part of Parent LP are necessary to authorize the execution, delivery and performance by Parent LP of this
Agreement or to consummate the transactions contemplated by this Agreement, and to the filing of a certificate of merger with the Secretary of State of the State Delaware. This Agreement has been duly
executed and delivered by Parent LP, and assuming due authorization, execution and delivery by each of Ultimate Parent, Parent and the Company Parties, constitutes a legally valid and binding
obligation of Parent LP, enforceable
against it in accordance with its terms, except as such enforceability may be limited by the Enforceability Exceptions.
Section 5.3
No Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement by each of the Parent Parties does not, and the performance of their respective obligations hereunder will not,
(i) conflict with or violate any provision of (A) the articles of incorporation or bylaws of Ultimate Parent, (B) the limited liability company agreement or the certificate of
formation of Parent or (C) the limited partnership agreement or the certificate of limited partnership of Parent LP (ii) assuming that all consents, approvals, authorizations and
permits described in
Section 5.3(b)
have been obtained, all filings and notifications described in
Section 5.3(b)
have been made and any waiting
periods thereunder have terminated or expired, conflict with or violate any Law applicable to any
Parent Party or any Parent Subsidiary or by which any property or asset of any Parent Party is bound or (iii) require any consent, notice or approval (except as contemplated by
Section 5.3(b)
)
under, result in any breach of, or any loss of any benefit or material increase in any cost or obligation of any Parent Party
under, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, acceleration or cancellation (with or
without notice or the lapse of time or both) of, or give rise to any right of purchase, first offer or forced sale under or result in the creation of a Lien on any property or asset of any Parent
Party pursuant to, any contract of any Parent Party, except, as to clauses (ii) and (iii), respectively, for any such conflicts, violations, breaches, defaults or other occurrences which,
individually or in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect.
(b) The
execution and delivery of this Agreement by each of Parent and Parent LP does not, and the performance of this Agreement by each of the Parent Parties will
not, require any consent, approval, authorization or permit of, or filing or registration with or notification to, any Governmental Authority, except (i) such reports under, and other
compliance with, the Exchange Act (and the rules and regulations promulgated thereunder) and the Securities Act (and the rules and regulations promulgated thereunder) as may be required in connection
with this Agreement and the transactions contemplated hereby, (ii) as may be required under the rules and regulations of the NYSE or TSX, (iii) the filing of (A) the certificate
of merger with respect to the Parent Merger with the Secretary of State of the State of Delaware and articles of merger with the SDAT and (B) appropriate documents with the relevant authorities
of the other jurisdictions in which Ultimate Parent, Parent and Company and their respective Parent Subsidiaries and Company Subsidiaries are qualified to do business, (iv) the filing of the
certificate of merger with respect to the Partnership Merger with the Secretary of State of the State of Delaware, (v) such filings and approvals as may be required by any applicable state or
provincial securities or "blue sky" Laws, (vi) such filings as may be required in connection with Transfer Taxes and (vii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, individually or in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect.
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Section 5.4
Information Supplied.
None of the information supplied or to be supplied by or on
behalf of any Parent Party in writing for inclusion or incorporation by reference in the Proxy
Statement will, at the time such Proxy Statement is first mailed to the Stockholders, at the time of the Company Stockholder Meeting or at the time of any amendment or supplement thereof, as
applicable, 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. No representation or warranty is made hereunder as to statements made or incorporated by reference in the Proxy Statement that were not
supplied by or on behalf of any Parent Party.
Section 5.5
Litigation
.
Except as individually or in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect, as of the date of this Agreement, (a) there is no Action
pending or, to the Knowledge of Parent, threatened in writing by or before any Governmental Authority against any Parent Party and (b) no Parent Party, nor any of their respective property, is
subject to any outstanding Order of any Governmental Authority. As of the date of this Agreement, there is no Action to which any Parent Party is a party pending or, to the Knowledge of Parent,
threatened in writing seeking to prevent, hinder, modify, delay or challenge the Mergers or any of the other transactions contemplated by this Agreement.
Section 5.6
No Vote of Ultimate Parent Stockholders
.
(a) No
vote of the stockholders of Ultimate Parent or the holders of any other securities of Ultimate Parent (equity or otherwise), is required by any applicable Law, the
articles of incorporation or bylaws of Ultimate Parent or the applicable rules of any exchange on which securities of Ultimate Parent or its Affiliates are traded, in order for the applicable Parent
Parties to consummate the Mergers and the other transactions contemplated hereby.
(b) The
Ultimate Parent Board and Parent Board have each duly and validly authorized the execution and delivery of, and adopted, this Agreement and declared advisable the
consummation of the Mergers and the other transactions contemplated by this Agreement.
Section 5.7
Solvency
.
As of the Parent Merger Effective Time, assuming (a) satisfaction of the conditions to the Parent Parties' obligation to consummate the Parent Merger and the Partnership Merger,
respectively, or waiver of such conditions and (b) the representations and warranties of the Company Parties set forth in
Article IV
are
true and correct, then, after giving effect to the transactions contemplated by this Agreement, including the funding of the Financing, and the payment of the aggregate Merger Consideration, Preferred
Merger Consideration and all other amounts required to be paid in connection with the consummation of the transactions hereby (including all Expenses of Parent), any other repayment or refinancing of
existing indebtedness contemplated by this Agreement or the Debt Financing Commitments, Ultimate Parent will be Solvent at and immediately following the Parent Merger Effective Time. For purposes of
this
Section 5.7
, "
Solvent
" with respect to Ultimate Parent means that, as of any date of
determination, (i) the amount of the "present fair saleable value" of the assets of Ultimate Parent taken as a whole, exceeds, as of such date, the value of all of Ultimate Parent's
"liabilities, including a reasonable estimate of contingent and other liabilities", as such quoted terms are generally determined in accordance with the applicable federal Laws governing
determinations of the insolvency of debtors; (ii) Ultimate Parent, Parent and the Parent Subsidiaries will collectively not have, as of such date, an unreasonably small amount of capital for
the operation of the business in which it is engaged or proposed to be engaged; and (iii) Ultimate Parent, Parent and the Parent Subsidiaries will collectively be able to pay their liabilities,
including contingent and other liabilities, as they mature. For purposes of this definition, "not have an unreasonably small amount of capital for the operation of the businesses in which it is
engaged" and "able to pay their liabilities (including contingent liabilities) as they mature" mean that such Person will be able to generate enough
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cash
from operations, asset dispositions, existing financing or refinancing, or a combination thereof, to meet its obligations as they become due.
Section 5.8
Ownership of Company Common Shares
.
As of the date hereof, none of the Parent Parties or their respective controlled Affiliates owns (directly or indirectly, beneficially or of record) any shares of Company Common Stock
and none of the Parent Parties or their respective controlled Affiliates holds any rights to acquire or vote any Company Common Stock except pursuant to this Agreement or the Support Agreement. None
of the Parent Parties or any of their respective "affiliates" or "associates" is or has been, within five years of the date hereof, an "interested stockholder" of Company, as those terms are defined
in the Maryland Business Combination Act. There are no contracts between the Parent Parties, on the one hand, and any member of Company's management or directors, on the other hand, as of the date
hereof that relate in any way to Company, this Agreement, the Parent Merger or any other transaction contemplated hereby.
Section 5.9
Financing
.
(a) Parent
has delivered to Company true and complete copies of (a) (i) executed commitment letter(s) dated as of the date hereof (as the same may be amended pursuant
to this
Section 5.9
, the "
Debt Financing Commitments
"), pursuant to which the Debt Financing
Sources have agreed, subject to the terms and conditions thereof, to provide or cause to be provided the debt amounts set forth therein (the "
Debt
Financing
") and (ii) the "bought deal" letter dated as of the date hereof (the "
BD Financing Commitment
", and together
with the Debt Financing Commitments, the "
Financing Commitments
"), pursuant to which the Person(s) investing thereunder have committed (the
"
BD Investors
", and together with the Debt Financing Sources, the "
Financing Sources
"), subject to the
terms and conditions thereof, to invest the amount(s) set forth therein (the "
BD Financing
", and together with the Debt Financing, the
"
Financing
"). A true and complete copy of each fee letter and engagement letter related to the Financing Commitments has been provided to Company,
except that the numerical fees and other commercially sensitive numerical information therein (including provisions in such fee letter related solely to fees, "flex terms" and economic terms) may have
been redacted; provided, however, that no redacted term provides that the aggregate amount of the Financing set forth in the unredacted portion of the Financing Commitments could be reduced or adds
any conditions, contingencies or affects the availability of all or any portion of the Financing. Except for any fee letter referred to in the Financing Commitments (a copy of which has been provided
to Company in accordance with the foregoing, which may be redacted as permitted herein), as of the date hereof, there are no side letters or other contracts, arrangements or understandings related to
the funding or investing, as applicable, of the Financing.
(b) As
of the date of this Agreement, none of the Financing Commitments has been amended, modified, withdrawn, terminated or rescinded in any material respect and the
respective commitments contained in the Financing Commitments have not been withdrawn or rescinded. As of the date of this Agreement, the Financing Commitments are in full force and effect and
constitute the legal, valid and binding obligation of each of the Parent Parties and, to the knowledge of the Parent, the other parties thereto, except as such enforceability may be limited by the
Enforceability Exceptions. There are no conditions precedent related to the funding of the full amount of the Financing other than as set forth in or contemplated by the Financing Commitments. As of
the date of this Agreement, and subject to the satisfaction of the conditions contained in
Section 8.1
and
Section 8.2
, no event has occurred
that (with or without notice or lapse of time, or both) would constitute a breach or default under the
Financing Commitments by the Parent Parties, or to the Knowledge of Parent, the other parties thereto. As of the date of this Agreement, assuming the accuracy of the Company Parties' representations
and warranties set forth in
Article IV
and assuming compliance by the Company Parties with the covenants set forth in
Section 7.8
(to the
standards set forth therein) and assuming the satisfaction of the conditions
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contained
in
Sections 8.1
and
8.2
, to the Knowledge of Parent, there is no reason to believe that
the Parent Parties will not be able to satisfy on a timely basis any term or condition to be satisfied by it and contained in the Financing Commitments. The Parent Parties have fully paid any and all
commitment fees or other fees required by the terms of the Financing Commitments to be paid on or before the date of this Agreement.
(c) Subject
to the terms and conditions of the Financing Commitments and subject to the satisfaction of the conditions contained in
Sections 8.1
and
8.2
, assuming
the accuracy of the Company Parties' representations and
warranties set forth in
Article IV
and assuming compliance by the Company Parties with the covenants set forth in
Section 7.8
, the aggregate
proceeds contemplated by the Financing Commitments, together with other immediately available financial resources of
the Parent Parties, will be sufficient for the Parent Parties to consummate the Mergers and all other transactions upon the terms contemplated by this Agreement and pay all related consideration, fees
and expenses pursuant to this Agreement, including the Merger Consideration or Preferred Merger Consideration.
Section 5.10
Brokers
.
Except for the fees and expenses payable to RBC Dominion Securities Inc., no broker, investment banker, financial advisor or other Person is entitled to any broker's,
finder's or other similar fee or commission in connection with the Mergers or any transactions contemplated by this Agreement.
Section 5.11
No Other Representations and Warranties
.
The Parent Parties agree that, except for the representations or warranties expressly set forth in
Article IV
, no Company Party nor
any of their Affiliates nor any other person on behalf of any Company Party has made any representation or warranty, expressed or implied, with respect to the Company Parties their respective
businesses, operations, assets, liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the
reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or with respect to the accuracy or completeness of any information regarding any Company Party,
and no Parent Party nor any of their Affiliates nor any other person on behalf of any Parent Party has relied on any representation or warranty except for those expressly set forth in this
Article IV
.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 6.1
Conduct of Business by Company
.
(a) Each
Company Party covenants and agrees that, between the date of this Agreement and the earlier to occur of the Parent Merger Effective Time and the date, if any, on
which this Agreement is terminated pursuant to
Section 9.1
(the "
Interim Period
"), except to the
extent required by Law, as may be consented to in writing by Parent (which consent shall not be unreasonably withheld, delayed or conditioned), as may be expressly required or permitted pursuant to
this Agreement, or as set forth in
Section 6.1(a)
of the Disclosure Letter or
Section 6.1(b)
, the Company Parties shall, and shall cause each of
the other Company Subsidiaries to, (i) conduct its business in all
material respects in the ordinary course of business consistent with past practice and (ii) use its commercially reasonable efforts to (A) maintain its assets and properties in their
current condition in all material respects (normal wear and tear excepted), (B) maintain and preserve intact in all material respects its current business organization, business records
(including records relating to the ownership, leasing and financing of each Company Property), goodwill, ongoing businesses and significant business relationships (including its goodwill and
relationships with tenants), (C) subject to
Section 6.1(b)(ix)
, keep available the services of its present officers and key employees,
(D) maintain the status of Company as a REIT, (E) maintain in full force and effect the existing insurance policies in all material respects or replace such
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insurance
policies in all material respects with comparable insurance policies covering Company or any Company Subsidiary and their respective properties, assets and businesses (including the Company
Properties), (F) screen or conduct background checks in all material respects consistent with past practice prior to entering into any lease with any Person with respect to any Company Property
or any portion thereof, (G) collect rents when due from any Person with respect to any Company Property or any portion thereof, (H) as necessary and consistent with past practice,
commence eviction proceedings with respect to any Persons using or occupying Company Property or any portion thereof and (I) remain in compliance in all material respects with the terms,
covenants and provisions of any Existing Company Indebtedness.
(b) Without
limiting the foregoing, each Company Party covenants and agrees that, during the Interim Period, except to the extent required by Law, as may be consented to in
writing by Parent (which consent shall not be unreasonably withheld, delayed or conditioned), as may be contemplated, required or permitted (including as otherwise permitted by this
Section 6.1(b)
)
pursuant to this Agreement, or as set forth in
Section 6.1(b)
of the
Disclosure Letter, the Company Parties shall not, and shall not cause or permit any other Company Subsidiary to, do any of the following:
(i) amend
or propose to amend (A) the Company Charter or Company Bylaws, (B) the certificate of formation or limited liability company operating agreement of
Company GP, (C) the Company LP Agreement or certificate of limited partnership of Company LP or (D) or similar organizational documents of any Company Subsidiary;
(ii) split,
combine, reclassify or subdivide any shares of stock or other equity securities or ownership interests of Company or Company LP;
(iii) authorize,
declare, set aside or pay any dividend on or make any other distributions with respect to shares of capital stock of Company or any Company Subsidiary or
other equity securities or ownership interests in Company or any Company Subsidiary, except for (A) the declaration and payment by Company of dividends in accordance with
Section 7.16
,
(B) the declaration and payment by Company of regular quarterly dividends in accordance with past practice at a rate not to
exceed $0.13 quarterly per share of Company Common Stock, (C) the regular distributions that are required to be made in respect of the Company Preferred Stock, and any regular distributions
that are required to be made in respect of the Company OP Common Units or the Company OP Preferred Units in connection with any dividends paid on the Company Common Stock or Company Preferred Stock,
respectively, and (D) the declaration, set-aside or payment of dividends or other distributions by any Company Subsidiary (other than Company LP) to Company or any other Company
Subsidiary;
(iv) redeem,
repurchase or otherwise acquire, directly or indirectly, any shares of its capital stock or other equity interests of Company or a Company Subsidiary, other
than, (A) the withholding of Company Common Stock to satisfy Tax withholding obligations with respect to outstanding equity awards granted pursuant to the Company Equity Incentive Plans,
(B) Company OP Common Units under the Company LP Agreement, (C) in connection with the vesting of, or lapse of restrictions on outstanding Company Restricted Stock Awards or
Company PSU in order to satisfy Tax withholding or exercise price obligations or (D) in connection with the redemption or repurchase by a Company Subsidiary of its own securities (but solely to
the extent such securities or equity equivalents are owned by Company or a Company Subsidiary);
(v) except
for (A) transactions among Company and one or more Company Subsidiaries or among one or more Company Subsidiaries, (B) issuances of equity or equity
based awards pursuant to the Company Equity Incentive Plan to the extent required under the terms of the Company Equity Incentive Plan as in effect as of the date of this Agreement or
(C) exchanges
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of
Company OP Common Units for shares of Company Common Stock, in accordance with the Company LP Agreement, issue, sell, pledge, dispose, encumber or grant any shares of Company's or any of the
Company Subsidiaries' capital stock, or any options, warrants, convertible securities or other rights of any kind to acquire, convert into or exchange for any shares of Company's or any of the Company
Subsidiaries' capital stock or other equity interests;
(vi) incur,
create, assume, refinance, replace or prepay any Indebtedness for borrowed money or issue or amend the terms of any Indebtedness or debt securities of Company or
any of the Company Subsidiaries, or assume, guarantee or endorse, or otherwise become responsible for the Indebtedness of any other Person (other than a Company Subsidiary), except (A) to seek
any waiver (coupled with any required payment in connection therewith) from the lender(s) under Company's existing revolving credit facility with respect to any potential cash-trap provisions therein
that may reasonably be expected to be triggered; (B) any additional Indebtedness in an amount that, in the aggregate, does not exceed $5,000,000, (D) as set forth on
Section 6.1(b)(vi)
of
the Disclosure Letter and (E) inter-company Indebtedness among Company and any Company Subsidiaries (and for the
avoidance of doubt, nothing in the preceding clause (vi) shall prohibit Company or any of the Company Subsidiaries from paying any required amount of Indebtedness when due in accordance with
the terms thereof);
(vii) waive,
release or assign any material rights or material claims or make any payment, direct or indirect, of any material liability of Company or any Company Subsidiary
before the same comes due in accordance with its terms, other than in the ordinary course of business consistent with past practice or as otherwise permitted by this
Section 6.1(b)
;
(viii) waive,
release, assign, settle or compromise any Action, other than (A) waivers, releases, assignments, settlements or compromises solely with respect to the
payment of monetary damages that do not exceed $500,000 in the aggregate or (B) settlements or compromises with respect to Residential Leases in the ordinary course of business consistent with
past practice that do not (1) impair in any material respect the related Company Property or (2) involve the payment of monetary damages in excess of $50,000 individually or $500,000 in
the aggregate;
(ix) except
as required by applicable Law or as set forth on
Section 6.1(b)(ix)
of the Disclosure Letter,
(A) hire any officer of Company or promote or appoint any Person to a position of officer of Company, (B) increase in any material manner the amount, rate or terms of compensation or
benefits of any of Company's directors, officers or employees not required by any plan or arrangement as in effect on the date hereof, (C) enter into, adopt, amend or terminate any employment,
bonus, severance or retirement contract or other compensation or Employee Benefit Plan or Company Employee Benefit Plan, as applicable, (D) accelerate the vesting or payment of any award under
the Company Equity Incentive Plans or of any other compensation or benefits, (E) grant any awards under the Company Equity Incentive Plans or any bonus, incentive, performance or other
compensation plan or arrangement; or (F) add any individual as a participant in the Change in Control Severance Plan or enter into any severance and change in control agreements;
(x) make,
change or rescind any material election relating to Taxes, change a method of Tax accounting, amend any income or other material Tax Return, settle or compromise
any material federal, state, local or foreign Tax liability, audit, claim or assessment, enter into any closing agreement related to Taxes, request any ruling with respect to Taxes from a Governmental
Authority, or surrender any right to claim any Tax refund, except, in each case, (A) to the extent required by Law or (B) to the extent necessary (x) to preserve Company's
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qualification
as a REIT under the Code or (y) to qualify or preserve the status of any Company Subsidiary as a disregarded entity or partnership for U.S. federal income tax purposes or as a
Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;
(xi) adopt
a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation,
restructuring, recapitalization or bankruptcy reorganization;
(xii) take
any action, or fail to take any action, which action or failure would reasonably be expected to cause Company to (i) fail to qualify as a REIT, or any
Company Subsidiary to cease to be treated as a disregarded entity or partnership for U.S. federal income Tax purposes or as a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the
applicable provisions of Section 856 of the Code, as the case may be; or (ii) become liable for U.S. federal income Tax under Section 857(b), 860(c) or 4981 of the Code;
(xiii) create
or suffer to exist any material Lien (other than Permitted Liens) on shares of stock, partnership interests or other equity interests of any Company
Subsidiary;
(xiv) make
any loans, advances or capital contributions to, or investments in any other Person (other than any Company Subsidiary) in excess of $100,000;
(xv) except
pursuant to an existing agreement set forth in
Section 6.1(b)(xv)
of the Disclosure Letter, acquire
(including by merger, consolidation or acquisition of stock or assets) any interest in any Person (or equity interests thereof) or any assets, real property, personal property, equipment, business or
other rights (whether by merger, stock purchase, asset purchase or otherwise), other than acquisitions of (A) personal property, equipment and other assets (other than real property) in the
ordinary course of business consistent with past practice or (B) real property in the ordinary course of business consistent with past practice that do not individually or in the aggregate
exceed $500,000;
(xvi) except
pursuant to an existing agreement set forth in
Section 6.1(b)(xvi)
of the Disclosure Letter, sell,
pledge, dispose of, transfer, lease, license or encumber (other than Permitted Liens) any real property, personal property, equipment or other assets of Company or any Company Subsidiary, other than
(A) leases of real property at market rates (other than concessions granted in the ordinary course of business consistent with past practice) pursuant to lease agreements entered in the
ordinary course of business consistent with past practice, (B) pledges or encumbrances on assets acquired in compliance with
Section 6.1(b)(xv)
that are granted in the ordinary course of
business consistent with past practice or (C) sales, dispositions or other
transfers of (1) any personal property, equipment or other assets (other than real property) of Company or any Company Subsidiary in the ordinary course of business consistent with past
practice that do not individually or in the aggregate exceed $500,000 or (2) any real property of Company or any Company Subsidiary in the ordinary course of business consistent with past
practice that do not individually or in the aggregate exceed $500,000;
(xvii) amend,
assign, extend, renew or terminate or waive compliance with the terms of, or breaches under, any Company Material Contract (other than, with respect to Company
Material Contracts described in clauses (ii), (xi) or (xviii) of
Section 4.18(a)
, in the ordinary course of business
consistent with past practice) or enter into any agreement that, if entered into prior to the date of this Agreement, would have been required to be listed in
Section 4.18(a
) of the Disclosure
Letter as a Company Material Contract;
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(xviii) except
as may be required as a result of a change in Law or in GAAP after the date of this Agreement (of which Company shall promptly notify Parent), make any
material change in any accounting principles or accounting practices;
(xix) enter
into any new line of business; or
(xx) authorize,
or enter into any contract, agreement, commitment or arrangement to do any of the foregoing.
(c) Notwithstanding
anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit (i) Company from taking any action after giving
written notice to Parent, at any time or from time to time, that in the reasonable judgment of the Company Board, and upon advice of legal counsel to Company, is necessary for Company to avoid or to
continue to avoid incurring entity-level income or excise Taxes under the Code or to maintain its qualification as a REIT under the Code for any period or portion thereof ending on or prior to the
Parent Merger Effective Time, including making dividend or other distribution payments in accordance with
Section 7.16
to the Stockholders of
Company in accordance with this Agreement or otherwise, or to qualify or preserve the status of any Company Subsidiary as a disregarded entity or partnership for U.S. federal income tax purposes or as
a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be; and (ii) Company LP from taking any action
after giving written notice to Parent, at any time or from time to time, as Company LP determines to be necessary to: (A) be in compliance at all times with all of its obligations under
any Company Tax Protection Agreement, and (B) avoid liability for any indemnification or other payment under any Company Tax Protection Agreement.
Section 6.2
No Control of Other Party's Business
.
Nothing contained in this Agreement shall give the Parent Parties, directly or indirectly, the right to control or direct Company's or any Company Subsidiary's operations prior to the
Parent Merger Effective Time. Prior to the Parent Merger Effective Time, Company shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its
and the Company Subsidiaries' respective operations.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1
Preparation of Proxy Statement; Stockholders' Meeting.
(a) As
promptly as practicable after the date of this Agreement, Company shall, with the assistance and reasonable cooperation of the Parent, prepare and file the Proxy
Statement with the SEC in preliminary form as required by the Exchange Act. Each of the Parent Parties and the Company Parties shall furnish all information concerning itself and its Affiliates that
is required to be included in the Proxy Statement. Neither the Proxy Statement, nor any amendment or supplement thereto, or any other materials used in connection with the Company Stockholder Meeting,
shall be filed or disseminated without providing Parent a reasonable opportunity to review and comment thereon, which comments Company shall consider in good faith. If at any time prior to the Company
Stockholder Meeting, any information relating to any of the Parent Parties and the Company Parties or any of their respective Affiliates, directors or officers should be discovered by any Company
Party or any Parent Party which should be set forth in an amendment or supplement to the Proxy Statement, so that such document 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 are made, not misleading, the Party which discovers such information shall promptly notify
the other Party and Company shall promptly file with the SEC an appropriate amendment or supplement describing such information and, to the extent required by applicable Law, disseminate such
amendment or supplement to the
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Stockholders.
Company shall promptly provide Parent with any comments or requests that may be received from the SEC or its staff with respect to the Proxy Statement, the Mergers or any of the other
transactions contemplated by this Agreement. Company will provide Parent with a reasonable opportunity to review and comment on any response thereto, which comments Company shall consider in good
faith. Company shall respond promptly to any such comments or requests made by the SEC or its staff with respect to the Proxy Statement, the Mergers or any of the other transactions contemplated by
this Agreement. All documents that Company is responsible for filing with the SEC in connection
with the Mergers will comply as to form and substance in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder.
(b) As
promptly as practicable after the date of this Agreement and, thereafter, upon Parent's written request (though not more frequently than weekly), Company shall run a
broker search for a deemed record date 20 Business Days after the date of such search. Subject to
Section 7.4
, Company shall, not later than the
earlier of (x) the SEC's clearance of the Proxy Statement for mailing the Stockholders and (y) receiving notification that the SEC is not reviewing the preliminary Proxy Statement, take
all commercially reasonable actions in accordance with applicable Law, the Company Charter and Company Bylaws and the rules of the NYSE to (i) establish the earliest reasonably practicable
record date for a meeting of the Stockholders (the "
Record Date
"), (ii) duly call, give notice of, convene and hold a special meeting of the
Stockholders on the earliest reasonably practicable date (including any adjournment or postponement thereof, the "
Company Stockholder Meeting
") for the
purpose of obtaining the Company Stockholder Approval and (iii) file with the SEC, and mail to the Stockholders as of the Record Date, the definitive Proxy Statement. Without the prior written
consent of Parent, the approval of the Parent Merger and the other transactions contemplated by this Agreement shall be the only matter (other than matters of procedure and matters required by
applicable Law to be voted on by the Stockholders in connection with the approval of the Parent Merger and the other transactions contemplated by this Agreement) that Company shall propose to be acted
on by the Stockholders at the Company Stockholder Meeting. Company shall solicit from the Stockholders proxies in favor of the approval of the Parent Merger and the other transactions contemplated by
this Agreement in accordance with applicable Law and, unless the Company Board has effected a Change in Company Recommendation as permitted by
Section 7.4
, the Proxy Statement shall include the
Company Recommendation and Company shall use its commercially reasonable efforts to secure the
Company Stockholder Approval at the Company Stockholder Meeting. Company shall cooperate with and keep Parent reasonably informed on a reasonably current basis regarding its solicitation efforts and
voting results following dissemination of the definitive Proxy Statement. Company may adjourn or postpone the Company Stockholder Meeting after consultation with Parent (i) to the extent
necessary to ensure that any supplement or amendment to the Proxy Statement required pursuant to
Section 7.1(a)
is provided to the Stockholders
in compliance with applicable Law, (ii) if as of the time for which the Company Stockholder Meeting is originally scheduled (as set forth in the Proxy Statement) there are insufficient shares
of Company Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Company Stockholder Meeting or (iii) for a single period not
to exceed ten (10) Business Days, to solicit additional proxies if necessary to obtain the Company Stockholder Approval; provided, however, that in no event shall all such adjournments or
postponements be for more than the later of 30 days in the aggregate or three (3) Business Days prior to the Outside Date and, unless (and only to the extent) required by applicable Law,
the Record Date may not be changed without Parent's prior written consent.
(c) Notwithstanding
any Change in Company Recommendation, Company shall nonetheless submit the Parent Merger and the other transactions contemplated by this Agreement to the
Stockholders for approval at the Company Stockholders Meeting unless this Agreement is terminated in accordance with
Article IX
prior to the
Company Stockholder Meeting.
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(d) The
Parent Parties shall vote, or cause to be voted, all of the shares of Company Common Stock then beneficially owned as of the Record Date by it, any Parent Party or
any of their respective Affiliates in favor of the adoption of this Agreement.
Section 7.2
Access to Information.
During the Interim Period, and to the extent
permitted by applicable Law, Company shall, and shall cause each of the Company Subsidiaries, respectively, to,
afford to each Parent Party and to their respective Representatives reasonable access during normal business hours and upon reasonable advance notice to all of its respective properties, offices,
books, contracts, personnel and books and records and, during such period, Company shall, and shall cause each of the Company Subsidiaries to, (i) furnish as promptly as practicable to the
Parent Parties a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of U.S. federal or state securities Laws and
(ii) furnish as promptly as practicable all other information (financial or otherwise) concerning its business, properties and personnel as Parent may reasonably request. No representation or
warranty as to the accuracy of information provided pursuant to this
Section 7.2
by any Company Party, or their respective Affiliates and
Representatives, is made and no Parent Party may rely on the accuracy of such information except to the extent expressly set forth in the representations and warranties included in
Article IV
.
Notwithstanding the foregoing, Company shall not be required by this
Section 7.2
to provide any Parent Party or its Representatives with access to, or to disclose, information (A) that is
subject to the
terms of a confidentiality agreement with a third party entered into prior to the date of this Agreement or entered into after the date of this Agreement in the ordinary course of business consistent
with past practice (if Company has used commercially reasonable efforts to obtain permission or consent of such third party to such disclosure), (B) the disclosure of which would violate any
Law or legal or contractual duty of any Company Party or any of their respective Representatives, (C) that is subject to any attorney-client, attorney work product or other legal privilege or
(D) if it reasonably determines in good faith that any such access is reasonably likely to materially impair such Company Party's business or operations; provided, that that Company shall use
commercially reasonable efforts to allow for the fullest access or disclosure possible in a manner that does not result in triggering any of the prohibitions set out in clauses (A) through (D).
For the avoidance of doubt, with respect to clause (D), "commercially reasonable efforts" of Company shall include, as is reasonably practicable, designating any such materials that are
reasonably likely to materially impair such Company Party's business or operations as "outside counsel only" or "outside accounting firm only." Such materials and the information contained therein
shall be given only to Parent's outside counsel or accounting firm, as the case may be, and will not be disclosed by such outside counsel or accounting firm to employees, officers, or directors of
Parent without the prior written consent of Company. Prior to the Parent Merger Effective Time, each of the Parent Parties shall not, and shall cause their respective Representatives and Affiliates
not to, contact or otherwise communicate with parties with which any Company Party has a business relationship regarding the business of such Company Party or this Agreement and the transactions
contemplated hereby without giving prior notice to Company.
Section 7.3
Commercially Reasonable Efforts.
(a) Subject
to the terms and conditions of this Agreement, each of the Parties hereto shall use its respective commercially reasonable efforts (subject to, and in accordance
with, applicable Law) to take, or cause to be taken, all actions and to do promptly, or cause to be done promptly, and to assist and cooperate with each other in doing, all things necessary, proper or
advisable under applicable Law to consummate and make effective, as promptly as practicable, the Mergers and the other transactions contemplated by this Agreement, including preparing and filing as
promptly as practicable all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of
information, applications and other documents necessary to consummate the Mergers and the other transactions contemplated by this Agreement. In furtherance and not in limitation of the foregoing,
subject to the terms and conditions of this
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Agreement,
each of the Parties hereto agrees to use its commercially reasonable efforts to (i) cooperate with the other Party in determining which filings are required to be made prior to the
Closing with, and which consents, clearances, approvals, permits or authorizations are required to be obtained prior to the Closing from, any Governmental Authority in connection with the execution
and delivery of this Agreement and the consummation of the Mergers and the other transactions contemplated hereby and in timely making all such filings, (ii) promptly furnish the other Party,
subject, in appropriate cases, to appropriate confidentiality agreements to limit disclosure to outside lawyers and consultants, with such information and reasonable assistance as such other Party and
its Affiliates may reasonably request in connection with their preparation of necessary filings, registrations and submissions of information to any Governmental Authority with respect to this
Agreement or the transactions contemplated hereby, (iii) supply as promptly as practicable and to the extent necessary any additional information and documentary material that may be requested
pursuant to any applicable Laws by any Governmental Authority and (iv) take or cause to be taken all other actions necessary, proper or advisable to obtain applicable clearances, consents,
authorizations, approvals or waivers and cause the expiration or termination of the applicable waiting periods with respect to the Mergers under any applicable Laws as promptly as practicable and, in
any event, no later than the Outside Date.
(b) Subject
to the terms and conditions of this Agreement, each of the Parties hereto shall, in connection with the efforts referenced in
Section 7.3(a)
, use its commercially reasonable efforts to:
(i) cooperate in all respects with each other in connection with any
investigation or other inquiry, including any proceeding initiated by a private party with respect to this Agreement or the transactions contemplated hereby; (ii) promptly notify the other
Party of any communication concerning this Agreement or any of the transactions contemplated hereby to that Party from or with any Governmental Authority and consider in good faith the views of the
other Party and keep the other Party reasonably informed of the status of matters related to the transactions contemplated by this Agreement, including furnishing as promptly as practicable the other
Party with copies of any written notices or other communications received by such Party from, or given by such Party to, any Governmental Authority and of any communication received or given in
connection with any proceeding by a private party, in each case regarding any of the transactions contemplated hereby; and (iii) permit the other Party to review in draft any proposed written
communication to be submitted by it to any Governmental Authority with reasonable time and opportunity to comment, and consult with each other in advance of any in- person or telephonic meeting or
conference with any Governmental Authority or, in connection with any proceeding by a private party with respect to this Agreement or the transactions contemplated hereby, with any other Person, and,
to the extent permitted by the applicable Governmental Authority or Person, not agree to participate in any meeting or discussion with any Governmental Authority relating to any filings or
investigations concerning this Agreement or
any of the transactions contemplated hereby unless it consults with the other Party and its Representatives in advance and invites the other Party's Representatives to attend in accordance with
applicable Laws. The Parties may, as advised by outside counsel, designate competitively sensitive information provided to the other under this
Section 7.3
as "outside counsel only." Such materials
and the information contained therein shall be given only to outside counsel of the
recipient and will not be disclosed by such outside counsel to employees, officers, or directors of the recipient without the advance written consent of the Party providing such materials.
(c) In
furtherance and not in limitation of the foregoing, subject to the terms and conditions of this Agreement, each of the Parties hereto shall (i) use its
commercially reasonable efforts to resolve objections, if any, as may be asserted with respect to the transactions contemplated by this Agreement under any Laws, including defending any lawsuits or
other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby (including seeking to have any stay, temporary
restraining order or
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preliminary
injunction entered by any court or other Governmental Authority vacated or reversed), and (ii) take, or cause to be taken, all such further commercially reasonable actions as may be
necessary to resolve such objections, if any, as any Governmental Authority or any other Person may assert under any Law with respect to the Mergers and the other transactions contemplated hereby, and
to avoid or eliminate each and every impediment under any Law so as to enable the Closing to occur as promptly as reasonably practicable and, in any event, no later than the Outside Date.
(d) Each
of the Parties shall, if any takeover statute becomes applicable to this Agreement, the Mergers, or any other transactions contemplated hereby or thereby, grant
approvals and use all commercially reasonable efforts to ensure that the Mergers and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms
contemplated hereby or thereby and otherwise to minimize the effect of such takeover statute on this Agreement, the Mergers and the other transactions contemplated hereby.
Section 7.4
Acquisition Proposals; Changes in Recommendation.
(a) Company
agrees that it shall not, nor shall it permit any of the Company Subsidiaries to, authorize or permit any of its officers, directors or employees to, and shall
use its commercially reasonable efforts to cause its and the Company Subsidiaries' other Representatives not to, directly or indirectly, (i) initiate, solicit or knowingly encourage or
knowingly facilitate any inquiries or the making of any proposal or offer by or with a Third Party with respect to any Acquisition Proposal, (ii) engage in any discussions or negotiations
concerning, or provide any non-public information to any Third Party in connection with, or for the purpose of, encouraging or facilitating any Acquisition Proposal or the making of any proposal or
offer that could reasonably be expected to lead to any Acquisition Proposal or (iii) enter into any letter of intent, agreement in principle, merger agreement, asset purchase or share exchange
agreement, option agreement or other similar agreement with any Third Party providing for any Acquisition Proposal (each, an "
Acquisition Agreement
").
(i) Notwithstanding
anything in this Agreement to the contrary, Company and its Representatives shall be permitted to take the following actions, prior to receipt of the
Company Stockholder Approval, in response to an unsolicited bona fide written Acquisition Proposal by any Person made after the date of this Agreement (provided that the Acquisition Proposal by such
Person did not result from a breach of this
Section 7.4
): (A) contact such Person or group of Persons solely to clarify the terms and
conditions thereof and (B) if the Company Board concludes in good faith (after consultation with its outside legal counsel and financial advisors) that such Acquisition Proposal either
constitutes or would be reasonably likely to lead to a Superior Proposal, (I) engage in or otherwise participate in discussions and negotiations with such Person and its Representatives
regarding such Acquisition Proposal and (II) provide any information or data (including non-public information or data) to the Person who made such Acquisition Proposal, but only after entering
into an Acceptable Confidentiality Agreement with such Third Party. Company shall promptly (and in any event within forty-eight (48) hours) provide Parent with a copy of any nonpublic
information or data provided to a Third Party pursuant to the prior sentence to the extent such nonpublic information or data has not been previously provided to Parent.
(ii) Company
will (A) advise Parent in writing of the receipt of any Acquisition Proposal, the material terms and conditions thereof (including, if applicable,
providing copies of any written Acquisition Proposal and drafts of proposed agreements related thereto) and the identity of any person making such Acquisition Proposal on a prompt basis (and in any
event within forty-eight (48) hours) and (B) promptly (and in any event within forty-eight (48) hours thereafter) notify Parent of any changes to the financial and other material
terms and
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conditions
of any Acquisition Proposal and otherwise keep Parent reasonably informed of any material changes to the status of any such Acquisition Proposal, including by providing copies of all
proposals, offers and drafts of proposed agreements related thereto.
(iii) Except
as provided in
Section 7.4(b)(iv)
or
Section 7.4(b)(v)
, the Company Board shall not (A) withhold, withdraw, qualify or modify in any manner
adverse to Parent, or propose
publicly to withhold, withdraw, qualify or modify in any manner adverse to Parent, the Company Recommendation, (B) adopt, authorize, approve or recommend (or publicly propose or announce its
intention to adopt, authorize, approve or recommend) any Acquisition Proposal, (C) fail to include the Company Recommendation in the Proxy Statement (any action set forth in the foregoing
clauses (A) through (C), a "
Change in Company Recommendation
") or (D) authorize, cause or permit Company or any Company Subsidiary to
enter into any letter of intent, agreement in principle, merger agreement or any other agreement with respect to any Acquisition Proposal (other than an Acceptable Confidentiality Agreement) or
requiring Company or Company LP to abandon, terminate or fail to consummate the transactions contemplated by this Agreement.
(iv) Notwithstanding
anything in this Agreement to the contrary, with respect to an Acquisition Proposal, the Company Board may, prior to receipt of the Company Stockholder
Approval, make in writing a Change in Company Recommendation (and in the event that the Company Board determines such Acquisition Proposal to be a Superior Proposal, in accordance with this
Section 7.4, terminate this Agreement in writing pursuant to
Section 9.1
), if and only if (A) an unsolicited bona fide written
Acquisition Proposal (provided that the Acquisition Proposal did not result from a breach of this
Section 7.4
) is made to Company and is not
withdrawn, (B) the Company Board has concluded in good faith (after consultation with its outside legal counsel and financial advisors) that such Acquisition Proposal constitutes a Superior
Proposal, (C) the Company Board has concluded in good faith (after consultation with its outside legal counsel) that failure to do so would reasonably be expected to be inconsistent with their
fiduciary duties under applicable Law, (D) three (3) Business Days (the "
Notice Period
") shall have elapsed since Company has given
written notice to Parent advising it that Company intends to take such action and specifying in reasonable detail the reasons therefor, including the identity of the person making such Acquisition
Proposal, material terms and conditions of any such Superior Proposal that is the basis of the proposed action, including, if applicable, copies of any written proposals or offers and any proposed
agreements related thereto (a "
Notice of Recommendation Change
"), which Notice of Recommendation Change or intention shall not be deemed a Change in
Company Recommendation for any purpose of this Agreement, (E) during such Notice Period, Company has considered and, at the reasonable request of Parent, engaged in good faith discussions with
Parent regarding any adjustment or modification of the terms of this Agreement proposed by Parent, and (F) the Company Board, following such Notice Period, again concludes in good faith (after
consultation with its outside legal counsel and taking into account any adjustment or modification of the terms of this Agreement proposed by Parent) that the failure to do so would reasonably be
expected to be inconsistent with their fiduciary duties under applicable Law and that such Acquisition Proposal continues to constitute a Superior Proposal; provided, however, that if, during the
Notice Period, any material revisions are made to the Superior Proposal by such Third Party, Company, shall promptly give a new written notice to Parent and shall comply in all respects with the
requirements of this
Section 7.4(a)(iv)
, which shall apply anew, with respect to such new written notice (provided, however, that in this
instance the Notice Period shall be two (2) Business Days instead of three (3) Business Days).
(v) Notwithstanding
anything in this Agreement to the contrary, in circumstances not involving or relating to an Acquisition Proposal, the Company Board may, prior to
receipt of
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the
Company Stockholder Approval, make a Change in Company Recommendation if and only if (A) an Intervening Event has occurred or arisen, (B) the Company Board has first reasonably
determined in good faith (after consultation with outside legal counsel) that failure to do so would be inconsistent with their fiduciary duties under applicable Law, (C) three
(3) Business Days (the "
Intervening Event Notice Period
") shall have elapsed since Company has given a Notice of Recommendation Change (which
Notice of Recommendation Change or intention shall not be deemed a Change in Company Recommendation for any purpose of this Agreement) to Parent advising that Company intends to take such action and
specifying in reasonable detail the reasons therefor, (D) during such Intervening Event Notice Period, Company has considered and, at the reasonable request of Parent, engaged in good faith
discussions with Parent regarding any adjustment or modification of the terms of this Agreement proposed by Parent and (E) the Company Board proposing to take such action, following such
Intervening Event Notice Period, again reasonably determine in good faith (after consultation with its outside legal counsel, and taking into account any adjustment or modification of the terms of
this Agreement proposed by Parent) that failure to do so would reasonably be expected to be inconsistent with their fiduciary duties under applicable Law.
(vi) Nothing
contained in this
Section 7.4
shall prohibit the Company Board, directly or indirectly, from
(A) taking and disclosing to its Stockholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act (or any similar communication to its stockholders in connection
with the making or amendment of a tender offer or exchange offer) or from making a statement contemplated by Item 1012(a) of Regulation M-A or Rule 14d-9 promulgated under the
Exchange Act, (B) making any other disclosure to its Stockholders with regard to the transactions contemplated by this Agreement or an Acquisition Proposal that the Company Board determines
(after consultation with its outside legal counsel) is reasonably required by applicable Law or (C) issuing a "stop, look and listen" statement pending disclosure of its position thereunder;
provided, however, that, in each case, no such action or disclosure that would constitute a Change in Company Recommendation shall be permitted, made or taken other than in compliance with
Section 7.4(b)(iv)
or
Section 7.4(b)(v)
.
(b) Company
agrees that (i) it will and will cause the Company Subsidiaries, and its and their Representatives to, cease immediately and terminate any and all
existing activities, discussions or negotiations with any Third Parties conducted heretofore with respect to any Acquisition Proposal and cause such Third Party to return to Company any nonpublic
information or data provided to it and (ii) it will not release any Third Party from, or terminate, waive, amend or modify any provisions of, any confidentiality or standstill agreement to
which it or any Company Subsidiary is a party with respect to any Acquisition Proposal; provided, however, that the Company Board may, to the extent the Company Board concludes in good faith (after
consultation with its outside legal counsel) that the failure to do so would reasonably be expected to be inconsistent with their fiduciary duties under applicable Law, release any Third Party from
its standstill obligations solely for purposes of enabling such Third Party to confidentially submit to the Company Board an Acquisition Proposal.
(c) References
in this
Section 7.4
to the Company Board shall mean the board of directors of Company or any duly
authorized committee thereof.
Section 7.5
Public Announcements.
Except with respect to any Change in Company Recommendation or
any action taken by Company or the Company Board pursuant to and in accordance with
Section 7.4
, so long as this Agreement is an effect, the Parties hereto shall consult with each other before
issuing any press release or
otherwise making any public statements or filings with respect to this Agreement or any of the transactions contemplated by this Agreement, and none of the Parties shall issue any such press release
or make any such public statement or filing prior to obtaining
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the
other Parties' consent (which consent shall not be unreasonably withheld, conditioned or delayed); provided, however, that a Party may, without obtaining the other Parties' consent,
(a) issue such press release or make such public statement or filing as may be required by Law, Order or the applicable rules of any stock exchange if for any reason it is not reasonably
practicable to consult with the other Party before making any press release, public statement or filing with respect to this Agreement or any of the transactions contemplated by this Agreement and
(b) issue press releases or make public statements to the extent that the substance of such press release or public statements was previously publicly disclosed and subject to the foregoing
requirements.
Section 7.6
Indemnification; Directors' and Officers' Insurance.
(a) Without
limiting any additional rights that any manager, director, officer, trustee, employee, agent, or fiduciary may have under any employment or indemnification or
similar agreement, or under the Company Charter, the Company Bylaws, the Company LP Agreement or, if applicable, similar organizational documents (including any limited liability company
agreement or partnership agreement) or agreements of any Company Subsidiary (including any successor entities) (collectively, the "
Organizational
Documents
") or this Agreement, from and after the Parent Merger Effective Time, the Surviving Company (the "
Indemnifying Party
")
shall, and Ultimate Parent shall cause the Indemnifying Party to, for a period of six (6) years from the Parent Merger Effective Time: (i) indemnify and hold harmless each person who is
at the date hereof, was previously, or is during any of the period from the date hereof through the date of the Parent Merger Effective Time, serving as a manager, director or officer of Company or
any of the Company Subsidiaries and acting in such capacity (collectively, the "
Indemnified Parties
") to the fullest extent authorized or not prohibited
by applicable Law, as now or hereafter in effect, in connection with any Claim and any losses, damages, liabilities, costs, Claim Expenses, judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments
and other charges paid or payable in connection with or in respect of any thereof) relating to or resulting from such Claim; and (ii) promptly (in any event within ten (10) Business Days
after any request for payment or advancement, as applicable) pay on behalf of, or advance to, each of the Indemnified Parties, to the fullest extent authorized and not prohibited by applicable Law, as
now or hereafter in effect, any documented Claim Expenses reasonably incurred in defending, serving as a witness with respect to or otherwise participating with respect to any Claim in advance of the
final disposition of such Claim, including, upon request by the Indemnified Party, payment on behalf of or advancement to the Indemnified Party of reasonable Claim Expenses incurred by such
Indemnified Party in connection with enforcing any rights with respect to such Claim, in each case without the requirement of any bond or other security, but subject to Parent's receipt of an
undertaking by or on behalf of such Indemnified Party to repay all such amounts if it is ultimately determined under applicable Laws or any of the Organizational Documents that such Indemnified Party
is not entitled to be indemnified; provided, that (x) the Indemnifying Party shall not be liable for any settlement effected without its prior written consent (which consent shall not be
unreasonably withheld, conditioned or delayed); and (y) except for legal counsel engaged for one or more Indemnified Parties on the date hereof, the Indemnifying Party shall not be obligated
under this
Section 7.6(a)
to pay the fees and expenses of more than one legal counsel (selected by a plurality of the applicable Indemnified
Parties) for all Indemnified Parties in any jurisdiction with respect to any single Claim except to the extent that, on the advice of any such Indemnified Party's counsel, two or more of such
Indemnified Parties shall have conflicting interests in the outcome of such action. The indemnification and advancement obligations of the Indemnifying Party pursuant to this
Section 7.6(a)
shall
extend to acts or omissions occurring at or before the Parent Merger Effective Time and any Claim relating thereto
(including with respect to any acts or omissions occurring in connection with the approval of this Agreement, the Mergers and the consummation of the other transactions contemplated by this Agreement,
including the consideration and approval thereof and the process undertaken in connection therewith and any Claim relating
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thereto),
and all rights to indemnification and advancement conferred hereunder shall continue as to a person who has ceased to be a manager, director or officer of Company or any of the Company
Subsidiaries after the date hereof and shall inure to the benefit of such person's heirs, executors and personal and legal representatives. As used in this
Section 7.6(a)
: (A) the term
"
Claim
" means any threatened, asserted, pending or completed
Action or inquiry, whether civil, criminal, administrative, investigative or otherwise, including any arbitration or other alternative dispute resolution mechanism, and whether instituted by any Party
hereto, any Governmental Authority or any other Person arising out of or pertaining to matters that relate to such Indemnified Party's duties (including with respect to any acts or omissions occurring
in connection with the approval of this Agreement, the Mergers and the consummation of the other transactions contemplated by this Agreement, including the consideration and approval thereof and the
process undertaken in connection therewith and any Claim relating thereto) or service as a manager, director or officer of Company or, any of the Company Subsidiaries; and (B) the term
"
Claim Expenses
" means reasonable documented attorneys' fees and all other reasonable costs, expenses and obligations (including experts' fees, travel
expenses, court costs, retainers, transcript fees, duplicating, printing and binding costs, as well as telecommunications, postage
and courier charges) paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to investigate, defend, be a witness in or
participate in, any Claim, including any Action relating to a claim for indemnification or advancement brought by an Indemnified Party as contemplated in this
Section 7.6
.
(b) Without
limiting the foregoing, the Parent Parties agree that all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior
to the Partnership Merger Effective Time now existing in favor of the current or former manager, directors or officers of Company or any of the Company Subsidiaries as provided in the Organizational
Documents and indemnification or similar agreements of Company shall survive the Parent Merger and shall continue in full force and effect in accordance with their terms. Subject to any limitations
imposed by applicable Law, for a period of six (6) years from the Parent Merger Effective Time, (i) the Parent Parties shall cause the Surviving Company and the Company Subsidiaries to
honor and fulfill in all respects the obligations of the Surviving Company and the Company Subsidiaries to the Indemnified Parties under the Organizational Documents and any indemnification or similar
agreement of Company or any Company Subsidiary entered into prior to the Parent Merger Effective Time and (ii) the charter and bylaws and the limited partnership agreement or other
organizational documents (including any limited liability company agreement or partnership agreement) of the Parent Parties and the Parent Subsidiaries (including any successor entities) and the
organizational documents of any applicable Company Subsidiary (including any limited liability company agreement or limited partnership agreement) shall contain provisions no less favorable to the
Indemnified Parties with respect to indemnification, advancement of expenses and limitations on liability of directors and officers than are set forth in the Organizational Documents, which provisions
shall not be amended, repealed or otherwise modified for a period of six (6) years from the Parent Merger Effective Time in any manner that would affect adversely the rights thereunder of
individuals who, at or prior to the Parent Merger Effective Time, were Indemnified Parties, unless required by applicable Law and then only to the minimum extent required by applicable Law.
(c) Prior
to the Parent Merger Effective Time, Company shall obtain and fully pay the premium for, and the Parent Parties shall cause to be maintained in full force and
effect (and the obligations under to be honored), during the six (6) year period beginning on the date of the Parent Merger Effective Time, a "tail" prepaid insurance policy or policies (which
policy or policies by their respective express terms shall survive the Mergers) from Company's current insurance carrier or an insurance carrier with the same or better credit rating as Company's
current insurance carrier, of at least the same coverage and amounts and containing terms and
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conditions,
retentions and limits of liability that are no less favorable in the aggregate to the managers, directors and officers of Company or any of the Company Subsidiaries as Company's and the
Company
Subsidiaries' existing policy or policies, for the benefit of the current and former managers, directors and officers of Company and each Company Subsidiary with a claims reporting or discovery period
of six (6) years from the Parent Merger Effective Time with respect to directors' and officers' liability insurance for Claims arising from facts or events that occurred on or prior to the
Parent Merger Effective Time; provided, however, that in no event shall the aggregate premium payable for such "tail" insurance policy for its entire period exceed an amount equal to 300% of the
current annual premium paid by Company for such insurance (such amount being the "
Maximum Premium
"). If Company is unable to obtain the "tail" insurance
described in the first sentence of this
Section 7.6(c)
for an amount equal to or less than the Maximum Premium, Company shall be entitled to
obtain as much comparable "tail" insurance as possible for an amount equal to the Maximum Premium. If Company is unable to, or does not, obtain and fully pay the premium for such "tail" insurance
contemplated in the two preceding sentences, the Parent Parties shall obtain and fully pay the premium for and maintain in full force and effect (and honor the obligations under), during the six
(6) year period beginning on the date of the Parent Merger Effective Time, a "tail" insurance policy or policies (which policy or policies by their respective express terms shall survive the
Mergers) from Company's current insurance carrier or an insurance carrier with the same or better credit rating as Company's current insurance carrier, of at least the same coverage and amounts and
containing terms and conditions, retentions and limits of liability that are no less favorable in the aggregate to managers, directors and officers of Company or any of the Company Subsidiaries as
Company or any of the Company Subsidiaries' existing policy or policies for the benefit of the current and former directors and officers of Company or any Company Subsidiary with a claims reporting or
discovery period of six (6) years from the Parent Merger Effective Time; provided, however, that in no event shall the Parent Parties be required to pay more than the Maximum Premium as the
aggregate premium for such "tail" insurance policies for its entire period, in which case the Parent Parties will obtain as much comparable "tail" insurance as possible for an amount equal to the
Maximum Premium.
(d) If
any of the Parent Parties or any of their respective successors or assigns (i) consolidates with or merges with or into any other Person and shall not be the
continuing or surviving company, partnership or other entity of such consolidation or merger or (ii) liquidates, dissolves or winds-up, or transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of Ultimate Parent, Parent or Parent LP, as applicable, shall
assume the obligations set forth in this
Section 7.6
.
(e) The
Parent Parties shall pay all reasonable expenses, including reasonable attorneys' fees, that may be incurred by any Indemnified Party in enforcing the indemnity and
other obligations provided in this
Section 7.6
; provided, however, that such Indemnified Party provides an undertaking to repay such expenses if
it is determined by a final and non-appealable judgment of a court of competent jurisdiction that such Person is not legally entitled to indemnification under Law.
(f) The
provisions of this
Section 7.6
are intended to be for the express benefit of, and shall be enforceable by,
each Indemnified Party and other Person referred to in this
Section 7.6
(who are intended to be third party beneficiaries of this
Section 7.6
),
his or her heirs and his or her personal representatives, shall be binding on all successors and assigns of the Parent Parties and
the Company Parties, and shall not be amended in a manner that is adverse to the Indemnified Party (including his or her successors, assigns and heirs) without the prior written consent of the
Indemnified Party (including the successors, assigns and heirs) affected thereby. The agreements and covenants provided for by this
Section 7.6
,
including with respect to indemnification,
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exculpation
and insurance, shall be in addition to, and not in substitution for or in exclusion of, any other rights to indemnification, exculpation or insurance which an Indemnified Party and other
Person referred to in this
Section 7.6
is entitled, whether pursuant to applicable Law, contract or otherwise. Nothing in this Agreement is
intended to, shall be construed to or shall release, waive or impair any rights to directors' and officers' insurance claims under any policy that is or has been in existence with respect to Company
or the Company Subsidiaries or their respective directors, officers and other employees, it being understood and agreed that the indemnification provided for in this
Section 7.6
is not prior to, or
in substitution for, any such claims under any such policies.
Section 7.7
Financing.
(a) Subject
to the terms and conditions of this Agreement, the Parent Parties shall use their respective reasonable best efforts to (i) obtain the Financing on the
terms and conditions described in the Financing Commitments, (ii) maintain in effect the Financing Commitments until the Mergers and other transactions contemplated by this Agreement are
consummated (or, with respect to the BD Financing Commitment, until the earlier consummation of the BD Financing), (iii) satisfy, or cause to be satisfied, on a timely basis all conditions to
the closing of, and funding under, the Financing Commitments applicable to the Parent Parties that are within their respective control, and (iv) draw upon and consummate the Financing
substantially concurrently with, at or prior to the Parent Merger Effective Time. None of the Parent Parties shall agree to, or permit any amendments or modifications to, or grant any waivers of, any
condition or other provision under the Financing Commitments or the Alternative Financing Agreements (as defined below), as applicable, without the prior written consent of Company (which consent
shall not be unreasonably withheld, conditioned or delayed), except where such amendments, modifications or waivers would not reasonably be expected to (i) result in the aggregate proceeds of
the Financing (as amended or modified) being insufficient for the Parent Parties to pay (1) the Merger Consideration, Preferred Merger Consideration and Company OP Unit Consideration and
(2) any other amounts required to be paid in connection with the consummation of the transactions upon the terms and conditions contemplated by this Agreement or (ii) (1) prevent
or materially delay the ability of the Parent Parties to consummate the Mergers or the other transactions contemplated hereby or (2) adversely impact in any material respect the ability of the
Parent Parties to enforce their respective rights against the other parties to the Financing Commitments or the Alternative Financing Documents, as applicable. Without limiting the generality of the
foregoing, neither of the Parent Parties shall release or consent to the termination of the obligations of the Debt Financing Source(s) under the Debt Financing Commitments, the BD Investors under the
BD Financing Commitments, or the comparable parties under the Alternative Financing Agreements, as applicable, except as expressly contemplated hereby. In the event any portion of the Financing
becomes unavailable on the terms and conditions contemplated in the Financing Commitments, Parent shall
promptly so notify Company and shall use its reasonable best efforts to amend or modify the Financing Commitments and/or arrange and obtain as promptly as practicable following the occurrence of such
event alternative financing on terms and conditions no less favorable, in the aggregate, to the Parent Parties, than those contained in the Financing Commitments ("
Alternative
Financing
" which upon being entered into shall be deemed the "Debt Financing") from alternative sources ("
Alternative Financing
Source
" which upon the entering into of the Alternative Financing shall be deemed "Debt Financing Sources"), so long as the aggregate proceeds of the Financing and, if
applicable, the Alternative Financing are sufficient to pay such amounts as are required to consummate the transactions upon the terms and conditions herein. Parent shall deliver to Company true and
complete copies of all contracts or other arrangements pursuant to which any Alternative Financing Source shall have committed to provide the Alternative Financing (the
"
Alternative Financing Agreements
" which upon being entered into shall be deemed the "Debt Financing Commitments") as promptly as practicable after
execution. To the extent the Alternative Financing has been arranged, and subject to the terms and conditions of this Agreement, each of the Parent
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Parties
shall use its reasonable best efforts to (i) obtain such financing on the terms and conditions described in the Alternative Financing Agreements, (ii) maintain in effect the
Alternative Financing Agreements until the Mergers and other transactions contemplated by this Agreement are consummated; (iii) satisfy, or cause to be satisfied, on a timely basis all
conditions to the closing and funding of the Alternative Financing Agreements as applicable to the Parent Parties that are within their control, and (iv) draw upon and consummate the
Alternative Financing at or prior to the Parent Merger Effective Time.
(b) Parent
shall (i) prior to the Parent Merger Effective Time, give Company prompt written notice (A) upon becoming aware of any material breach of any
provision of, or termination by any party to, the Financing Commitments or, as applicable, any Alternative Financing Agreements, or (B) upon the receipt of any written notice or other written
communication from any Person with respect to any threatened breach or threatened termination by any party to the Financing Commitments or Alternative Financing Agreements, as applicable, and
(ii) prior to the Parent Merger Effective Time, otherwise keep Company reasonably informed of the status of the Parent Parties' efforts to arrange and maintain the Financing or any Alternative
Financing.
(c) The
Parent Parties shall, and shall cause their Parent Subsidiaries to, at all times after consummation of the BD Financing and prior to the Parent Merger Effective
Time, maintain cash on hand and/or unused revolving availability under their existing revolving credit facility of no less than $75,000,000 in the aggregate.
(d) Each
of the Parent Parties acknowledges and agrees that the obtaining of the Financing (including any Debt Financing, BD Financing or Alternative Financing) is not a
condition to the Closing, and reaffirms its obligation to consummate the Mergers and other transactions contemplated hereby irrespective and independent of the availability of the Financing, subject
to the applicable conditions set forth in
Article VIII
.
Section 7.8
Financing Cooperation.
(a) Prior
to the Parent Merger Effective Time, Company shall use reasonable best efforts to provide to the Parent Parties, and shall cause each of the Company Subsidiaries
to use reasonable best efforts to and shall use reasonable best efforts to cause its Representatives to provide to the Parent Parties (in each case at the sole cost and expense of the Parent Parties),
all cooperation reasonably requested by the Parent Parties, or their Representatives, in connection with the arrangement of the Financing, or, if applicable, the Alternative Financing (provided that
such requested cooperation does not unreasonably interfere with the ongoing operations of Company and the Company Subsidiaries), which cooperation shall include, at the request of any Parent Party,
Debt Financing Source or, if applicable, BD Investors or Alternative Financing Source, the following:
(i) entering
into, or assisting any Parent Party in connection with its entering into, any customary agreements to pledge, guarantee, grant security interests in, and
otherwise grant Liens on, the assets of Company or the Company Subsidiaries and delivering such officer's and other certificates (except for any certificate with respect to the eligibility of any
Company Properties to be included for any purposes (including as security)) as reasonably required by the Financing Sources, or, if applicable, the Alternative Financing Source, including customary
authorization letters, in each case, on terms reasonably satisfactory to Parent and the Debt Financing Sources or, if applicable, the Alternative Financing Sources (provided that no such definitive
documents shall be effective until the Parent Merger Effective Time);
(ii) causing
each bank or other financial institution having a deposit or other similar account of any Company or a Company Subsidiary, and each existing lender under the
Existing Company Indebtedness that is party to any deposit account control agreement or
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other
similar agreement related to such account, to negotiate and execute documentation to (a) assign, transfer or close any such account (and, in connection with any such assignment or
transfer, causing the appropriate individuals of the applicable Parent Party to be added as authorized signatories with respect to such account), (b) amend, restate, assign, terminate or
replace any such deposit account control agreement or similar agreement, and/or (c) if necessary, to place into effect new payment direction for any applicable tenants, in each case, as
directed by the Parent Parties (provided that no such action, documentation or direction, as applicable, shall be effective until the Parent Merger Effective Time);
(iii) causing
new deposit accounts with respect to the Company Properties to be opened, deposit account control agreements with respect thereto to be entered into by the
appropriate parties, and, as applicable, new payment direction letters to be delivered to the applicable tenants in connection therewith (provided that no such action, documentation or direction shall
be effective, and no such delivery shall be made, until the Parent Merger Effective Time);
(iv) providing
the Parent Parties and their Financing Sources as promptly as practicable with financial, operational, legal, and other pertinent information with respect to
Company, the Company Subsidiaries and the Company Properties as reasonably required by the Parent Parties and the Financing Sources, or, if applicable, the Alternative Financing Source, in connection
with the Financing (including with respect to the BD Financing, in connection with Ultimate Parent's response to any inquiries or comments received from the Ontario Securities Commission in connection
with the filing of the Offering Document), or, if applicable, the Alternative Financing;
(v) making
Company's and Company Subsidiaries' executive officers, other senior employees and Representatives reasonably available to assist the Financing Sources, or, if
applicable, the Alternative Financing Sources, in connection with providing the Financing, or, if applicable, the Alternative Financing, including making available Company's and the Company
Subsidiaries insurance brokers and causing Company's and the Company Subsidiaries' auditors to participate in oral due diligence sessions to take place in connection with the BD Financing, in each
case upon reasonable advance written notice from Parent and except as may reasonably interfere with such officers or employees performance of their customary employment duties;
(vi) cooperating
with Ultimate Parent in connection with obtaining customary deliverables which may be reasonably necessary in connection with the BD Financing, including to
cause its auditors to deliver a "long form" comfort letter dated the date of the Offering Document (and brought forward to the closing of the BD Financing) addressed to Ultimate Parent and the
underwriters of the BD Financing, as well as a consent letter to the applicable regulatory authorities for the inclusion of Company's
audited consolidated financial statements as at and for the year ended December 31, 2016 in the Offering Document, in a form and substance as is customarily given to underwriters and such
regulatory authorities, as the case may be, in an underwritten public offering in Canada;
(vii) providing
to the Debt Financing Source(s) or, if applicable, the BD Investors or Alternative Financing Source, promptly and, in any event, at least ten
(10) Business Days' prior to the Closing Date (or, the case of the BD Financing, the closing date of the BD Financing), with all documentation and other information which Financing Sources have
determined is required under applicable "know your customer" and/or anti-money laundering rules and regulations applicable to it;
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(viii) causing
the delivery to the Parent Parties (or, at the direction of the Parent Parties, the Debt Financing Source(s) or, if applicable, the BD Investors or
Alternative Financing Source) of (A) customary unconditional payoff letters, (B) original promissory notes evidencing the Company Indebtedness and original certificates evidencing
ownership interests in any Company Subsidiary (whether pledged or unpledged), (C) UCC-3 termination statements with respect to all UCC financing statements and (D) executed terminations
of any and all mortgages, deeds of trust and collateral assignments of leases and rents and any other collateral assignments or pledge agreements, in each case, related to the Existing Company
Indebtedness, and (E) any terminations of security interests or Lien releases that, in the reasonable discretion of the Parent Parties, are necessary to evidence and effect the termination or
release of security interests and Liens encumbering the Company Properties, the assets of and/or the interests in Company and/or the Company Subsidiaries related to the Existing Company Indebtedness
(provided that in the cases of clauses (B), (C), (D) and (E) above, no such delivery will be made and no such termination documents will be effective, filed or recorded, as
applicable, until the Parent Merger Effective Time);
(ix) forming
one or more entities (if necessary, as a Company Subsidiary prior to the Closing Date), which shall satisfy the special purpose entity restrictions required by
the Debt Financing Sources (the "
Required SPE Covenants
"), for the purpose of transferring one or more of the Company Properties to such entity(ies), or
amending the existing operating agreement of any Company Subsidiary to include the
Required SPE Covenants (provided that no such transfer or amendment shall be effective until the Parent Merger Effective Time);
(x) conveying
certain of the Company Properties to one or more newly formed entities, the operating agreements of which contain the Required SPE Covenants, and, in
connection therewith, executing and, if necessary, recording deeds, assignments, affidavits or other documentation as may be reasonably required to effect any such conveyance (provided that no such
action shall be effective until the Parent Merger Effective Time);
(xi) in
connection with the acquisition of any real property permitted to be acquired by Company or any Company Subsidiary during the Interim Period, causing such
acquisition to be made by a newly formed Company Subsidiary the operating agreement of which contains the Required SPE Covenants;
(xii) providing
one or more certificates executed by authorized representatives of each Company Subsidiary that owns or leases real property in respect of the Existing
Company Indebtedness, or owns the ownership interests in such property owning or leasing entities, to the Parent Parties with respect to customary "recycled special purpose entity" provisions (it
being understood that certification of compliance with separateness covenants shall be consistent with the covenants set forth in the Existing Company Indebtedness);
(xiii) cooperating
with the Parent Parties to rectify any defects or deficiencies in the title of any Company Property, any lease thereof, or any other due diligence
materials related to any Company Property, including any such materials delivered to or obtained by any Debt Financing Source; and
(xiv) otherwise
cooperating with the Parent Parties to satisfy the conditions precedent to the Financing to the extent within the control of Company and/or the Company
Subsidiaries;
provided, that, in each case, (1) Company shall not be required to pay any commitment or other similar fee or incur any other liability or expense in connection with the
Financing, or, if applicable, the Alternative Financing, prior to the Parent Merger Effective Time, (2) the pre-Closing Company Board and the directors, managers and general partners of the
Company Subsidiaries shall not be required to adopt resolutions approving the agreements, documents and instruments pursuant to which the
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Financing
is obtained, (3) none of Company or any Company Subsidiaries shall be required to execute any definitive financing documents that would become effective at any time prior to the
Parent Merger Effective Time and does not terminate without liability to the Company or any Company Subsidiary upon termination of this Agreement, including any credit or other agreements, pledge
documents or security documents in connection with the Financing, (4) neither Company nor any Company Subsidiary shall be required to take any action that would (I) unreasonably
interfere with the ongoing operations of Company and the Company Subsidiaries, (II) cause any representation or warranty in this Agreement to be breached, (III) cause any director,
officer or employee of Company or any of the Company Subsidiaries to incur any personal liability, (IV) conflict with the organizational documents of Company or any Company Subsidiary or any
Laws or (V) result in the contravention of, or that could reasonably be expected to result in a violation or breach of, or a default under, any contract to which Company or any Company
Subsidiary is a party (including the financing documentation for the Existing Company Indebtedness) and (5) none of Company or any Company Subsidiaries shall be required to provide, and the
Parent Parties shall be solely responsible for, (A) the assumptions underlying the pro forma adjustments to be made in the preparation of pro forma financial statements, (B) projections,
risk factors or other forward-looking statements relating to any component of the Financing, (C) subsidiary financial statements or any other information of the type required by
Rule 3-09, Rule 3-10 or Rule 3-16 of Regulation S-X, and (D) Compensation Disclosure and Analysis required by Item 402(b) of Regulation S-K. The Parent
Parties shall promptly, upon the termination of this Agreement, reimburse Company for all reasonable and documented out-of-pocket costs and expenses (including reasonable attorneys' fees) incurred by
Company or any of Company Subsidiaries in connection with the cooperation of Company and the Company Subsidiaries contemplated by this
Section 7.8
and shall indemnify and hold harmless Company, the
Company Subsidiaries and their respective Representatives from and against any and
all liabilities or losses suffered or incurred by any of them in connection with the arrangement of the Financing and any information used in connection therewith (except with respect to any
information provided by or on behalf of Company or any Company Subsidiaries), except in the event such liabilities or losses arise out of, or result from, the willful misconduct of Company, the
Company Subsidiaries or any of their respective Representatives.
(b) Prior
to the Parent Merger Effective Time, Company shall, and shall cause each of the Company Subsidiaries and shall use commercially reasonable efforts to cause its
Representatives to supplement the information provided by or on behalf of Company or any Company Subsidiary in connection with the Financing or, if applicable, the Alternative Financing, on a
reasonably current basis to the extent that any such information, to the Knowledge of Company, contains any untrue statements of material fact or omits to state any material facts 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.
Section 7.9
Notification of Certain Matters
.
(a) The
Company Parties shall give prompt notice to the Parent Parties, and the Parent Parties shall give prompt notice to the Company Parties, of any notice or other
communication received by such
Party from any Person alleging that the consent of such Person is or may be required in connection with the Mergers or the other transactions contemplated by this Agreement.
(b) The
Company Parties shall give prompt notice to the Parent Parties, and the Parent Parties shall give prompt notice to the Company Parties, if (i) any
representation or warranty made by it contained in this Agreement becomes untrue or inaccurate such that, if uncured, would reasonably be expected to result in any of the applicable closing conditions
set forth in
Article VIII
not being capable of being satisfied prior to the Outside Date or (ii) it fails to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement such that, if uncured, would result in any of the applicable
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closing
conditions set forth in
Article VIII
not to be satisfied; provided, however, 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. Without limiting the foregoing, the Company Parties shall give prompt
notice to the Parent Parties, and the Parent Parties shall give prompt notice to the Company Parties, if, to the Knowledge of such Party, the occurrence of any state of facts, change, development,
event or condition would cause, or would reasonably be expected to cause, any of the conditions to Closing set forth in
Article VIII
not to be
satisfied or satisfaction to be reasonably delayed.
(c) Notwithstanding
anything to the contrary in this Agreement, the failure by the Company Parties or the Parent Parties to provide notice under
Section 7.9(a)
or
Section 7.9(b)
shall not constitute a breach of covenant for purposes of
Section 8.2(b)
or
Section 8.3(b)
.
Section 7.10
Section 16 Matters
.
Prior to the Parent Merger Effective Time, Company shall take all such steps as may be necessary to cause any dispositions of Company Common Stock (including derivative securities with
respect to Company Common Stock) resulting from the transactions contemplated by this Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange
Act with respect to Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 7.11
Delisting
.
Each of the Parties agrees to cooperate with the other Parties in taking, or causing to be taken, all actions necessary to delist the Company Common Stock from the NYSE and terminate
their registration under the Exchange Act; provided, that such delisting and termination shall not be effective until after the Parent Merger Effective Time.
Section 7.12
Director and Officer Resignations
.
Company shall use commercially reasonable efforts to obtain and cause to be delivered to Parent, in form reasonably satisfactory to Parent, resignations effective as of the Parent Merger
Effective Time executed by each director and officer of Company and the Company Subsidiaries in office immediately prior to the Parent Merger Effective Time.
Section 7.13
Certain Tax Matters
.
(a) The
Parties 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. Subject to
Section 3.5(c)(iii)
, from and after the Parent Merger Effective Time, the
Parent Parties shall pay or cause to be paid, without deduction or withholding from any consideration or amounts payable pursuant to
Article III
,
including to holders of Company Common Stock, Company Preferred Stock or Company OP Common Units, all Transfer Taxes.
(b) During
the Interim Period, Company shall accommodate all reasonable requests of Parent with respect to maintenance of its REIT status. Parent and Company shall, upon
written request, use commercially reasonable efforts to obtain any certificate or other document from any Governmental Authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including with respect to the transactions contemplated in this Agreement).
(c)
FIRPTA
. Company shall provide to Parent an affidavit of nonforeign status that complies with the Treasury
Regulations under Section 1445 of the Code. Company LP shall use its commercially reasonable efforts to obtain and deliver to Parent at or prior to Closing an affidavit of nonforeign
status that complies with the Treasury Regulations under Section 1445 of the Code
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from
each Person that constitutes and is treated as a partner (and is not a "disregarded entity") for United States federal income tax purposes of Company LP (other than Company or a Company
Subsidiary).
(d)
Other Transactions
. Parent may request, upon reasonable notice to Company, and Company shall reasonably
consider and cooperate with any such request (but, for the avoidance of doubt, shall not be obligated to undertake), that Company, immediately prior to the Closing, engage in one or more
restructurings, asset dispositions or any other transactions on terms and in the manner requested by Parent; provided, however, that, for the avoidance of doubt, (i) neither Company nor any of
the Company Subsidiaries shall be required to take any action in contravention of (A) any organizational document of Company or any of the Company Subsidiaries, (B) any Company Material
Contract, (C) any determination by the Company Board in good faith that such action is reasonably likely to materially impair the business or operations of the Company Parties or
(D) applicable Law, (ii) any such actions or transactions shall be contingent upon all of the conditions set forth in
Article VIII
having been satisfied (or, with respect to
Section 8.2
, waived) and receipt by Company of a written notice from Parent to such effect and that
the Parent Parties are prepared to proceed immediately with the Closing and any other evidence reasonably requested by Company that the Closing will occur (it being understood that in any event any
requested restructurings, asset dispositions or other requested transactions will be deemed to have occurred prior to the Closing), (iii) such actions (or the inability to complete such
actions) shall not affect or modify in any respect the obligations of the Parent Parties under this Agreement, including the amount of or timing of payment of the Merger Consideration and Preferred
Merger Consideration, (iv) neither Company nor any of the Company Subsidiaries shall be required to take any such action that could adversely affect the classification of Company as a REIT or
could subject Company to any "prohibited transactions" taxes or other material Taxes under Code Sections 857(b), 860(c) or 4981 and (v) neither Company nor any Company Subsidiary shall
be required to take any such action that could result in any unreimbursed United States federal, state or local income Tax being imposed on any Company Party. Without limiting the foregoing, none of
the representations, warranties or covenants of Company or any of the Company Subsidiaries shall be deemed to apply to, or deemed breached or violated by, any actions taken pursuant to this
Section 7.13(d)
. The Parent Parties shall, promptly upon request by Company, reimburse Company for all reasonable out-of-pocket costs and Taxes
incurred by Company or the Company Subsidiaries in taking any action agreed to be taken pursuant to this
Section 7.13(d)
, and Parent shall
indemnify Company and the Company Subsidiaries for any and all liabilities, losses, damages, claims, costs, expenses (including reasonable attorneys' fees), Taxes, interest, awards, judgments and
penalties suffered or incurred by Company or any of the Company Subsidiaries arising therefrom (and in the event the Mergers and the other transactions contemplated by this Agreement are not
consummated, the Parent Parties shall promptly reimburse Company for any reasonable out-of-pocket costs (including reasonable attorneys' fees) and Taxes incurred by Company or any of the Company
Subsidiaries not previously reimbursed).
Section 7.14
Termination of Company Equity Incentive Plans
.
(a) Prior
to the Parent Merger Effective Time, the Company Board shall adopt such resolutions or take such other actions as may be required by the Company Equity Incentive
Plan no later than immediately prior to the Parent Merger Effective Time to effect the intent of
Article III
hereof. Company shall deliver copies
of such resolutions or other actions to Parent no later than fifteen (15) Business Days prior to the Parent Merger Effective Time for Parent's prior review and consent, such consent not to be
unreasonably withheld.
(b) If
requested by Parent, Company shall (or shall cause each applicable Company Subsidiary to) terminate each Company Employee Benefit Plan intended to be qualified within
the meaning of Section 401(a) of the Code as of the day prior to the Closing Date (but contingent
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upon
the occurrence of the Mergers) and adopt all required compliance amendments pursuant to written resolutions, the form and substance of which shall be reasonable satisfactory to Parent.
Section 7.15
Accrued Dividends
.
In the event that a distribution with respect to the Company Common Stock or the Company Preferred Stock permitted under the terms of this Agreement has (i) a record date prior to
the Partnership Merger Effective Time and (ii) has not been paid as of the Partnership Merger Effective Time, (A) the holders of shares of Company Common Stock and the holders of Company
OP Common Units entitled to receive such distribution shall be entitled to receive such distribution from Company (or Company LP, as applicable) and (B) the holders of the shares of
Company Preferred Stock entitled to receive such distribution shall be entitled to receive such distribution from Company, in each case, immediately prior to the time such shares or units are
exchanged pursuant to
Article III
of this Agreement for the consideration set forth therein.
Section 7.16
Dividends
.
Notwithstanding anything else to the contrary in this Agreement (including
Section 6.1(b)(iii)
), Company shall be permitted to
declare and pay a dividend to its Stockholders, the record date and payment date for which shall be the close of business on the last Business Day prior to the Closing Date, distributing any amounts
determined by Company (in consultation with Parent) to be the minimum dividend required to be distributed in order for Company to qualify as a REIT and to avoid to the extent reasonably possible the
incurrence of income or excise Tax. Except for such dividends permitted to be distributed pursuant to
Section 6.1(b)(iii)(B)
, if Company declares
a dividend pursuant to this
Section 7.16
, the Merger Consideration shall be decreased by an amount equal to the per share amount of such
dividend.
Section 7.17
Employment Matters
.
(a) During
the period commencing on the Closing and ending on the date that is twelve (12) months after the Closing (or if earlier, the date of the employee's
termination of employment with Ultimate Parent, Parent and the Parent Subsidiaries), the Parent Parties shall, and shall cause each Parent Subsidiary, as applicable, to, provide each individual who is
an employee of Company or any Company Subsidiary immediately prior to the Closing and who remains employed by the Surviving Company, any Company Subsidiary, Ultimate Parent or any Parent Subsidiary
immediately following the Closing (each a "
Continuing Employee
" and collectively, the "
Continuing
Employees
") with (i) compensation (base salary and bonus opportunity) that taken as a whole, are not less favorable in the aggregate than the compensation (base salary
and cash bonus opportunity) provided to each Continuing Employee immediately prior to the Closing and (ii) benefits, that are, in the aggregate, no less favorable than those provided to, at
Parent's election, either similarly situated employees of (A) Company or any Company Subsidiary immediately prior to the Closing or (B) Ultimate Parent, Parent or the Parent Subsidiary,
as applicable, immediately following the Closing. During the period commencing on the Closing and ending on the date that is twelve (12) months after the Closing, the Parent Parties shall, and
shall cause each Parent Subsidiary to, provide each Continuing Employee, to the extent their employment is severed during such period, with severance payments and benefits equal to the severance
payments and benefits provided by Company and the Company Subsidiaries as of the date of this Agreement as further set forth on
Section 7.17(a)
of the Disclosure Letter.
(b) The
Parent Parties shall, and shall cause the Parent Subsidiaries to, provide credit for each Continuing Employee's length of service with Company and the Company
Subsidiaries (as well as service with any predecessor employer of Company or any Company Subsidiary) for all purposes (including eligibility, vesting and benefit level, but not for purposes of any
benefit accrual) under each plan, program, policy, agreement or arrangement of Ultimate Parent, Parent or the Parent Subsidiaries (including vacation and paid time-off) to the same extent that such
service was recognized under a similar plan, program, policy, agreement or arrangement of Company or any Company Subsidiary, except that no such prior service credit will be required or
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provided
to the extent that (i) it results in a duplication of benefits, or (ii) such service was not recognized under the corresponding Company Employee Benefit Plan.
(c) To
the extent permitted by applicable Law, the Parent Parties shall use commercially reasonable efforts to cause each Employee Benefit Plan of Ultimate Parent, Parent
and the Parent Subsidiaries in which any Continuing Employee participates that provides health or welfare benefits to (i) waive all limitations as to preexisting conditions, exclusions, waiting
periods and service conditions with respect to participation and coverage requirements applicable to Continuing Employees, other than limitations applicable under the corresponding Company Employee
Benefit Plan or to the extent that such pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods would not have been satisfied or waived under the comparable
Company Employee Benefit Plan and (ii) honor any payments, charges and expenses of Continuing Employees (and their eligible dependents) that were applied toward the deductible and out-of-pocket
maximums under the corresponding Company Employee Benefit Plan in satisfying any applicable deductibles, out-of-pocket maximums or co-payments under a corresponding Company Employee Benefit Plan
during the calendar year in which the Closing occurs.
(d) Any
vacation or paid time off accrued but unused by a Continuing Employee as of immediately prior to the Parent Merger Effective Time will be credited to such Continuing
Employee following the Parent Merger Effective Time.
(e) Nothing
in this
Section 7.17
shall (i) confer any rights upon any Person, including any Continuing Employee
or former employee of Company or the Company Subsidiaries, other than the Parties to this Agreement and their respective successors and permitted assigns, (ii) constitute or create an
employment agreement or create any right in any Continuing Employee or any other Person to any continued employment or service with or for Company, the Company Subsidiaries, Ultimate Parent, Parent or
the Parent Subsidiaries, or to any compensation or benefits of any nature or kind whatsoever, (iii) constitute or be treated as an amendment, modification, adoption, suspension or termination
of any employee benefit plan, program, policy, agreement or arrangement of Company, the Company Subsidiaries, Ultimate Parent, Parent, or the Parent Subsidiaries, or (iv) alter or limit the
ability of Company, the Company Subsidiaries, Ultimate Parent, Parent or the Parent Subsidiaries to amend, modify or terminate any benefit plan, program, policy, agreement or arrangement at any time
assumed, established, sponsored or maintained by any of them.
Section 7.18
Integration Planning
.
As promptly as practicable after the date of this Agreement, Parent and Company shall use their respective commercially reasonable efforts to establish a mechanism, subject to applicable
Law, reasonably acceptable to both Parties by which the Parties will confer on a regular and continued basis (subject to reasonable advance written notice of any such meeting being provided to each
Party) regarding the general status of the ongoing operations and administration of Company and the Company Subsidiaries (including with respect to the ongoing debt and equity capitalization of
Company and Company Subsidiaries) and integration planning matters and communicate and consult with, and use their respective commercially reasonable efforts to cooperate with, each other and the
specific persons to be identified by each Party with respect to the foregoing.
Section 7.19
Company Capitalization
.
Company shall make available to Parent, at least three (3) Business Days prior to the anticipated Closing Date, an updated list of the information set forth in the second sentence
of
Section 4.3(a)
as of the most recent practicable date prior to the anticipated Closing Date.
Section 7.20
Updated Portfolio Data Tape
.
Company shall make available to Parent, (a) within ten (10) Business Days after the end of each calendar month and (b) at least three (3) Business Days prior
to the anticipated Closing Date, an update of the Data Tape, as of (x) in respect of clause (a), the end of the preceding calendar month and (y) in respect of clause (b),
the most recent practicable date prior to the anticipated Closing Date.
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Section 7.21
Use of Company Cash
.
At the prior written direction of Parent and subject to any applicable limitations or restrictions imposed by applicable Law or pursuant to any contractual agreement to which Company or
any Company Subsidiary is a party immediately prior to the Closing, Company shall, in connection with the Closing, use the existing unrestricted cash of Company and the Company Subsidiaries to, at
Parent's election, either contribute to (a) repayment of the Existing Company Indebtedness and/or (b) the Payment Fund for purposes of paying the Merger Consideration, Preferred Merger
Consideration and Company OP Unit Consideration.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1
Conditions to Each Party's Obligation to Effect the Mergers
.
The respective obligations of the Parties to this Agreement to effect the Mergers and to consummate the other transactions contemplated by this Agreement on the Closing Date are subject
to the satisfaction or (to the extent permitted by Law) waiver in writing by each of the Parties at or prior to the Closing of the following conditions:
(a)
Stockholder Approvals
. The Company Stockholder Approval shall have been obtained.
(b)
No Injunctions or Restraints
. (i) No Order entered, enacted, promulgated, enforced or issued by any
Governmental Authority of competent jurisdiction preventing, prohibiting, enjoining or making illegal the consummation of the Mergers shall be in effect, (ii) no Action shall have been brought
by any Governmental Authority, and remain pending, that seeks an Order that would prevent, prohibit, enjoin or make illegal the consummation of the Mergers (clauses (i) and (ii), collectively
"
Restraints
"), and (iii) no Law shall have been enacted or be in effect preventing, prohibiting, enjoining or making illegal the consummation of
the Mergers.
Section 8.2
Conditions to Obligations of the Parent Parties
.
The obligations of the Parent Parties to effect the Mergers and to consummate the other transactions contemplated by this Agreement on the Closing Date are subject to the satisfaction or
(to the extent permitted by Law) waiver in writing by Parent, at or prior to the Closing, of the following additional conditions:
(a)
Representations and Warranties
. The (i) representations and warranties set forth in
Section 4.4
(Authority),
Section 4.8(b)
(Absence of Certain Changes or Events) and
Section 4.20
(Vote Required) shall be true and correct in all respects as of the date
of this Agreement and as of the Closing Date, as though
made as of the Closing Date, (ii) the representations and warranties set forth in
Section 4.3(b)
-
(e)
(Capital Structure) shall be true and
correct in all material respects
(without giving effect to any materiality or "Company Material Adverse Effect" qualifications set forth therein) as of the date of this Agreement and as of the Closing Date, as though made as of the
Closing Date, (iii) the representations and warranties set forth in
Section 4.3(a)
(Capital Structure) shall be true and correct in all
respects as of the date of this Agreement and as of the Closing Date, as though made as of the Closing Date, except for
de minimis
inaccuracies thereof
and (iv) each of the other representations and
warranties of the Company Parties contained in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date, as though made as of the Closing Date, except
(A) in each case of clauses (i), (ii), (iii) and (iv), representations and warranties that are made as of a specific date shall be true and correct only on and as of such date and
(B) in the case of clause (iv), where the failure of such representations or warranties to be true and correct (without giving effect to any materiality or "Company Material Adverse
Effect" qualifications set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
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(b)
Performance of Covenants and Obligations of the Company Parties
. The Company Parties
shall have performed in all material respects all obligations, and complied in all material respects with all agreements and covenants, required to be performed by the Company Parties under this
Agreement on or prior to the Closing Date.
(c)
Delivery of Certificates
. Company shall have delivered to Parent a certificate, dated the Closing Date and
signed by its chief executive officer or chief financial officer on behalf of the Company Parties, certifying to the effect that the conditions set forth in
Section 8.2(a)
,
Section 8.2(b)
and
Section 8.2(d)
have been satisfied.
(d)
Material Adverse Change.
On the Closing Date, there shall not exist any event, circumstance, change, or
effect arising after the date of this Agreement that, individually, or in the aggregate, constitutes a Company Material Adverse Effect.
(e)
REIT Opinion.
Parent shall have received a tax opinion of Orrick, Herrington & Sutcliffe LLP,
outside tax counsel to Company (or such other outside tax counsel being nationally recognized and experienced with respect to REIT matters and reasonably satisfactory to Parent), dated as of the
Closing Date (the "
REIT Opinion
"), which opinion concludes (subject to customary assumptions, qualifications and representations, including
representations made by Company and the Company Subsidiaries) that Company has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code
for all taxable periods commencing with Company's taxable year ended December 31, 2012 through and including the Parent Merger Effective Time.
Section 8.3
Conditions to Obligations of the Company Parties.
The obligations of the Company
Parties to effect the Mergers and to consummate the other transactions contemplated by this Agreement on the Closing Date are
subject to the satisfaction or (to the extent permitted by Law) waiver in writing by Company, at or prior to the Closing Date, of the following additional conditions:
(a)
Representations and Warranties.
The representations and warranties of the Parent Parties contained in this
Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date, as though made as of the Closing Date, except (A) in each case, representations and warranties
that are made as of a specific date shall be true and correct only on and as of such date and (B) where the failure of such representations or warranties to be true and correct (without giving
effect to any materiality or "Parent Material Adverse Effect" qualifications set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
(b)
Performance of Covenants or Obligations of the Parent Parties.
The Parent Parties shall have performed in
all material respects all obligations, and complied in all material respects with all agreements and covenants, required to be performed by the Parent Parties under this Agreement on or prior to the
Closing Date.
(c)
Delivery of Certificates.
Ultimate Parent shall have delivered to Company a certificate, dated the Closing
Date and signed by its chief executive officer or chief financial officer on behalf of the Parent Parties, certifying to the effect that the conditions set forth in
Section 8.3(a)
and
Section 8.3(b)
have been satisfied.
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ARTICLE IX
TERMINATION AND AMENDMENT
Section 9.1
Termination.
This Agreement may be terminated at any time prior to the Parent Merger
Effective Time, by action taken or authorized by the Parent Board or Company Board, as
applicable, as follows:
(a) by
mutual consent of Parent and Company in a written instrument;
(b) by
either Parent or Company, upon written notice to the other Party, if any Governmental Authority of competent jurisdiction shall have issued an Order permanently
enjoining or otherwise prohibiting the Mergers, and such Order has become final and non-appealable; provided, however, that the right to terminate this Agreement under this
Section 9.1(b)
shall not
be available to any Party whose failure to comply with any provision of this Agreement has been the cause of, or
resulted in, such Order;
(c) by
either Parent or Company, upon written notice to the other Party, if the Mergers shall not have been consummated on or before 5:00 p.m. (New York time) on
July 27, 2017 (such date and time referred to as the "
Outside Date
"); provided, however, that the right to terminate this Agreement under this
Section 9.1(c)
shall not be available to any Party whose failure to comply with any provision of this Agreement has been the cause of, or
resulted in, the failure of the Mergers to occur on or before such date;
(d) by
either Parent or Company, upon written notice to the other Party, if there shall have been a breach by the other Party of any of the covenants or agreements, or any
of the representations or warranties, set forth in this Agreement on the part of such other Party, which breach, either individually or in the aggregate, would result in, if occurring or continuing on
the Closing Date, the failure to be satisfied of a condition set forth in
Section 8.2(a)
or
Section 8.2(b)
or
Section 8.3(a)
or
Section 8.3(b)
, as the case may be, unless such breach is reasonably capable of being cured, and the other Party shall continue to use its
commercially reasonable efforts to cure such breach, prior to the Outside Date; provided, that a Party shall not have the right to terminate this Agreement pursuant to this
Section 9.1(d)
if such
Party is then in breach of any of its own respective representations, warranties, covenants or agreements set forth in
this Agreement such that the conditions set forth in
Section 8.2(a)
or
Section 8.2(b)
or
Section 8.3(a)
or
Section 8.3(b)
, as the case may be, would not be satisfied;
(e) by
either Parent or Company, upon written notice to the other Party, if the Company Stockholder Approval shall not have been obtained upon a vote taken thereon at the
duly convened Company Stockholder Meeting (including after taking into account any adjournment, postponement or recess thereof);
(f) by
Company, by written notice to Parent, if (i) all of the conditions set forth in
Sections 8.1
and
8.2
(other than conditions that are to be
satisfied by actions taken at the Closing; provided that such conditions to be satisfied at the Closing would
be satisfied as of the date of the notice referenced in clause (ii) of this
Section 9.1(f)
if the Closing were to occur on the date of
such notice) have been satisfied, (ii) on or after the date the Closing should have occurred pursuant to
Section 2.3
, Company has
delivered written notice to Parent that the Company Parties are prepared to consummate the Closing and (iii) the Parent Parties fail to consummate the Closing on or before the third (3rd)
Business Day after delivery of the notice referenced in clause (ii) of this
Section 9.1(f)
, and the Company Parties were prepared to
consummate the Closing during such three (3) Business Day period;
(g) by
Parent, by written notice to Company, if (i) the Company Board shall have made a Change in Company Recommendation (provided that it is understood and agreed
that neither a
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Notice
of Recommendation Change nor the intention underlying such Notice of Recommendation Change that is not publicly made shall in and of itself be considered a Change in Company Recommendation),
(ii) the Company Board shall have failed to publicly recommend against any tender offer or exchange offer that constitutes an Acquisition Proposal (including, for these purposes, by taking no
position with respect to the acceptance of such tender offer or exchange offer by the Company's stockholders) within ten (10) Business Days after the commencement of such tender offer or
exchange offer; (iii) the Company Board shall have failed to publicly reaffirm the Company Recommendation within ten (10) Business Days after the date an Acquisition Proposal shall have
been publicly announced (or if the Company Stockholder Meeting is scheduled to be held within ten (10) Business Days from the date an Acquisition Proposal is publicly announced or disclosed,
promptly and in any event prior to the date on which the Company Stockholder Meeting is scheduled to be held) or (iv) Company (or its officers, directors or employees) commits a material,
willful breach of its obligations in
Section 7.4
; or
(h) by
Company, by written notice to Parent, at any time prior to the receipt of the Company Stockholder Approval, in order to enter into an Acquisition Agreement with
respect to a Superior Proposal in accordance with
Section 7.4
; provided that such termination shall not be effective unless and until the
Termination Fee is paid in accordance with
Section 9.3(a)(iv)
.
Section 9.2
Effect of Termination.
In the event that this Agreement is terminated pursuant to
Section 9.1
, written notice thereof shall be
given to the other Party or Parties, specifying the provisions hereof pursuant to which such termination is made and describing the basis therefor in reasonable detail, and subject to compliance with
Section 9.3
, this Agreement shall forthwith become null and void and of no further force or effect whatsoever without liability on the part of
any Party hereto, and all rights and obligations of any Party hereto shall cease; provided, however, that, notwithstanding anything in the foregoing to the contrary (a) subject to
Section 9.3(b)
, no such termination shall relieve any Party hereto of any liability or damages resulting from or arising out of any Party's
willful breach of this Agreement prior to its termination, or for fraud; and (b) the Confidentiality Agreement,
Section 7.5
, the
indemnification and reimbursement obligations of
Section 7.8
, this
Section 9.2
,
Section 9.3
,
Article X
(other than
Section 10.1
) and the definitions of all defined terms appearing in such sections shall survive any termination of this
Agreement pursuant to
Section 9.1
. For purposes of this Agreement, "willful breach" means a breach that is a consequence of an act knowingly undertaken by the
breaching party with either the intent of causing a breach of this Agreement or the knowledge that such act constitutes a breach of this Agreement. If this Agreement is terminated as provided herein,
all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable and permitted by applicable Law, shall be withdrawn from the Governmental Authority or other
Person to which they were made. If a Delaware Court awards damages to any Parent Party as a result of a willful breach by a Company Party of this Agreement prior to its termination or fraud by a
Company Party, the Parties agree that any such damages shall be paid to Ultimate Parent.
Section 9.3
Termination Fees.
(a) If,
but only if, this Agreement is terminated:
(i) by
either Parent or Company pursuant to
Section 9.1(c)
or
Section 9.1(e)
or by Parent pursuant to
Section 9.1(d)
(other than as a result of a breach
of
Section 7.4
) and (A) prior to such date, (1) in the case of a termination pursuant to
Section 9.1(c)
or
Section 9.1(d)
(other than as a result of a breach of
Section 7.4
), an Acquisition Proposal has been announced, disclosed or otherwise communicated (whether
confidentially or publicly) to the Company
Board or the Stockholders or (2) in the case of a termination pursuant to
Section 9.1(e)
, an Acquisition Proposal has been publicly
announced, disclosed or otherwise communicated to the Stockholders and (B)(1) Company enters into an Acquisition Agreement with respect to any Acquisition Proposal (which need not be the same
Acquisition Proposal) within
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twelve (12) months
of the termination of this Agreement, which Acquisition Proposal is subsequently consummated or (2) an Acquisition Proposal (which need not be the same
Acquisition Proposal) is consummated within twelve (12) months of the termination of this Agreement, then Company shall pay, or cause to be paid, to Ultimate Parent the Termination Fee,
by wire transfer of same day funds to an account designated by Ultimate Parent, not later than three (3) Business Days after the consummation of such Acquisition Proposal; provided,
however, that for purposes of this
Section 9.3(a)(i)
, the references to "ten percent (10%)" in the definition of Acquisition Proposal shall be
deemed to be references to "fifty percent (50%)";
(ii) by
Parent pursuant to
Section 9.1(g)
(or by Company pursuant to
Section 9.1(c)
or
Section 9.1(e)
and, at or prior to the time of such termination, Parent
was entitled to terminate this Agreement pursuant to
Section 9.1(g)
), then Company shall pay, or cause to be paid, to Ultimate Parent the
Termination Fee, by wire transfer of same day funds to an account designated by Ultimate Parent, not later than three (3) Business Days after receipt by Company or Parent, as applicable, of
written notice of termination of this Agreement pursuant to
Section 9.1(g)
or, where Parent was entitled to terminate this Agreement pursuant to
Section 9.1(g)
,
Section 9.1(c)
or
Section 9.1(e)
;
(iii) by
Company pursuant to
Section 9.1(d)
or
Section 9.1(f)
,
then the Parent Parties shall pay, or cause to be paid, to Company the Parent Termination Fee, by wire transfer of same day funds to an account designated by Company, not later than three
(3) Business Days after receipt by Parent of written notice from Company of termination of this Agreement pursuant to
Section 9.1(d)
or
Section 9.1(f)
, as applicable; or
(iv) by
Company pursuant
Section 9.1(h)
, then Company shall pay, or cause to be paid, to Ultimate Parent the
Termination Fee, by wire transfer of same day funds to an account designated by Ultimate Parent prior to or concurrently with termination of this Agreement by Company pursuant to
Section 9.1(h)
.
(b) Notwithstanding
anything to the contrary set forth in this Agreement, the Parties agree that payment of the Termination Fee by Company to Ultimate Parent, or the Parent
Termination Fee by the Parent Parties to Company, will in each case constitute liquidated damages for any and all losses and liabilities of any kind suffered by the Parent Parties and their
Affiliates, on the one hand, and the Company Parties and their Affiliates, on the other hand, and from and after such termination as described in
Section 9.1
and payment of the Termination Fee or
the Parent Termination Fee, as applicable, in accordance with
Section 9.3(a)
, neither the Company Parties, nor the Parent Parties will have any further liability of any kind for any reason (and the
Parent
Parties shall not be entitled to bring or maintain any other Action against any Company Party or their respective Affiliates and the Company
Parties shall not be entitled to bring or maintain any other Action against any Parent Party or their respective Affiliates) in connection with this Agreement or the transactions contemplated hereby,
or any termination contemplated in
Section 9.1
, except as provided under
Section 9.3(a)
,
this
Section 9.3(b)
and
Section 9.3(c)
(including any Action to enforce any Party's right
to payment of the Termination Fee or Parent Termination Fee, as applicable). Notwithstanding anything in this Agreement to the contrary and without limitation of the preceding sentence, under no
circumstances will any Parent Party or Company Party be entitled to (i) monetary damages or other monetary remedies for any loss or other liability of any kind suffered as a result of or
related to this Agreement, including any breach of any representation, warranty, covenant or agreement in this Agreement or the failure of the Mergers or any other transactions contemplated hereby to
be consummated, in excess of the Termination Fee or Parent Termination Fee, as applicable, together in each case with any amounts due pursuant to
Section 9.3(c)
(it being understood that in the
case of liability as provided in
Section 9.3(a)
, any prior payment of the Termination Fee or the Parent Termination Fee, as applicable, shall be taken
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into
account when determining any remedies), or (ii) both a grant of specific performance to consummate the Closing (to the extent permitted under
Section 10.8
) and any monetary damages or other
monetary remedies, including all or any portion of the Termination Fee or Parent Termination Fee,
as applicable. In no event will the Parent Parties be entitled to the Termination Fee, or the Company Parties entitled to the Parent Termination Fee, in each case on more than one occasion.
(c) Each
of the Parties hereto acknowledges that (i) the agreements contained in this
Section 9.3
are an
integral part of the transactions contemplated by this Agreement, (ii) neither the Termination Fee or Parent Termination Fee is a penalty, and (iii) without these agreements, the Parent
Parties and Company Parties would not enter into this Agreement; accordingly, if the Parent Parties or Company Parties fail to timely pay any amount due pursuant to this
Section 9.3
on the date
specified and in order to obtain such payment either the Parent Parties or Company Parties, as applicable, commences any
Action that results in a judgment against the Parent Parties or Company Parties, as applicable, for the payment of any amount set forth in this
Section 9.3
, then either the Parent Parties or
Company Parties, as applicable, shall pay the other Party its costs and expenses in connection
with such suit, together with interest on such amount at the annual rate of the prime rate set forth in the
Wall Street Journal
(in effect on the date
of payment) for the period from the date such payment was required to be made through the date such payment was actually received, or such lesser rate as is the maximum permitted by applicable Law.
(d) Except
as set forth in
Section 7.8
,
Section 7.13(d)
, this
Section 9.3
or as otherwise expressly set
forth in this Agreement, all Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Party incurring such Expenses whether or not the Mergers are consummated.
(e) The
Parties agree that the Termination Fee, payable pursuant to
Section 9.3(a)
, shall not be subject to
withholding Taxes of any kind, and Company shall not reduce any amounts payable to Ultimate Parent pursuant to
Section 9.3(a)
on account of any
Tax.
Section 9.4
Payment of Parent Termination Fee.
(a) In
the event that the Parent Parties are obligated to pay the Parent Termination Fee pursuant to
Section 9.3(a)
(the "
Parent Termination Fee Base Amount
"), the Parent Parties shall actually pay, or cause to be paid, to Company from the applicable Parent
Termination Fee Base Amount, an amount equal to the lesser of (i) the Parent Termination Fee Base Amount and (ii) the maximum amount that can be paid to Company without causing Company
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) or
856(c)(3) of the Code ("
Qualifying Income
"), as determined by Company; provided that in the event either (1) Company has received a ruling from
the IRS described in
Section 9.4(b)(ii)
or (2) an opinion from Company's outside counsel as described in
Section 9.4(b)(ii)
, Company may
elect to receive payment of the entire Parent Termination Fee Base Amount. Company shall give reasonable advance
notice to Parent in writing of the amount that may be paid to it under the preceding sentence. The Parent Parties shall be obligated to deposit any unpaid balance of the Parent Termination Fee Base
Amount (the "
Remaining Parent Termination Fee
") into escrow to secure the Parent Parties' obligations to pay the Remaining Parent Termination Fee (with
such escrow agent selected by Company and on such terms (subject to
Section 9.4(b)
) as shall be mutually agreed upon by Company, Parent and the
escrow agent as reflected in an escrow agreement among such parties, provided that the payment or deposit into escrow shall be at Company's option). The deposit into escrow of the Remaining Parent
Termination Fee pursuant to this
Section 9.4(a)
shall be made at the time the Parent Parties would otherwise be obligated to pay, or cause to be
paid,
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Company
the Parent Termination Fee pursuant to
Section 9.3(a)
by wire transfer of same day funds.
(b) The
escrow agreement shall provide that the Remaining Parent Termination Fee held in escrow or any portion thereof shall not be released to Company unless the escrow
agent receives any one or combination of the following: (i) a letter from Company indicating the maximum amount that can be paid by the escrow agent to Company without causing Company to fail
to meet the requirements of
Sections 856(c)(2) and (3) of the Code in a particular year determined as if the payment of such amount did not constitute Qualifying Income or a subsequent letter from Company revising
that amount, in which case the escrow agent shall release such amount to Company, or (ii) a letter from Company's counsel indicating that Company received a ruling from the IRS holding that the
receipt by Company of the Remaining Parent Termination Fee would either constitute Qualifying Income or would be excluded from gross income within the meaning of Sections 856(c)(2) and
(3) of the Code (or alternatively, Company's outside counsel has rendered a legal opinion to the effect that the receipt by Company of the Remaining Parent Termination Fee would either
constitute Qualifying Income or would be excluded from gross income within the meaning of Sections 856(c)(2) and (3) of the Code), in which case the escrow agent shall release the entire
unpaid Remaining Parent Termination Fee to Company. The Parent Parties agree to amend this
Section 9.4
at the reasonable request of Company in
order to (x) maximize the portion of the Parent Termination Fee Base Amount that may be distributed to Company hereunder without causing Company to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code, (y) improve Company's chances of securing a favorable ruling described in this
Section 9.4(b)
or (z) assist Company in obtaining a
favorable legal opinion from its outside counsel as described in this
Section 9.4
. The Parent Parties shall be deemed to have satisfied their obligations pursuant to
Section 9.3(a)
and this
Section 9.4
so long as the Parent Parties make all of the cash
payments to Company and deposits into escrow in accordance with this
Section 9.4
, and the Parent Parties shall thereafter have no further
liability with respect to payment of the Parent Termination Fee Base Amount. The portion of the Remaining Parent Termination Fee that remains unpaid as of the end of a taxable year shall be paid as
soon as possible during the following taxable year, subject to the foregoing limitations of this
Section 9.4
. Company shall fully indemnify the
Parent Parties from and against any liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred by it resulting directly or indirectly from
the escrow arrangements contemplated by this
Section 9.4
.
Section 9.5
Amendment.
To the extent permitted by applicable Law and subject to the second
sentence of this
Section 9.5
, this
Agreement may be amended by the Parties hereto, by action taken or authorized by the Company Board or the Ultimate Parent Board, as applicable, at any time before or after the Company Stockholder
Approval of the applicable matters presented in connection with the Mergers, but, after any such approval, no amendment shall be made which by Law requires further approval by the Stockholders without
such further approval by such Stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the Parties hereto and, with respect to this
Section 9.5
,
Sections 10.4(e)
,
10.7
,
10.8(c)
,
10.9
and
10.11
, to the extent such amendment is
material and adverse to the interests of the Financing Sources, taken as a whole, the consent of the Financing Sources.
Section 9.6
Extension; Waiver.
At any time prior to the Parent Merger Effective Time, the Parties
hereto, by action taken or authorized by the Company Board or the Ultimate Parent Board and
Parent Board, as applicable, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other Party hereto, (b) waive any
inaccuracies in the representations and warranties of the other Party contained herein or in any document delivered pursuant hereto, and (c) 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
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forth
in a written instrument signed on behalf of such Party. The failure of a Party to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. No
single or partial exercise of any right, remedy, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. Any
waiver shall be effective only in the specific instance and for the specific purpose for which given and shall not constitute a waiver to any subsequent or other exercise of any right, remedy, power
or privilege hereunder.
ARTICLE X
GENERAL PROVISIONS
Section 10.1
Survival of Representations, Warranties and Agreements.
None of the representations,
warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement, including any
rights arising out of any breach of such representations, warranties, covenants, and agreements, shall survive the Parent Merger Effective Time, except for those covenants and agreements contained
herein and therein that by their terms apply or are to be performed in whole or in part after the Parent Merger Effective Time. The Confidentiality Agreements will survive termination of this
Agreement in accordance with its terms.
Section 10.2
Notices.
All notices, requests, claims, consents, demands and other communications
hereunder shall be in writing and shall be delivered personally, by telecopy, e-mail or
telefacsimile, by a recognized courier service, or by registered or certified mail, return receipt requested, postage prepaid, and in each case shall be deemed duly given on the date of actual
delivery, upon confirmation of receipt. 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, and a copy of each notice shall also be sent via e-mail.
(a) if
to the Parent Parties, to:
Tricon
Capital Group, Inc.
1067 Yonge Street
Toronto, Ontario, Canada M4W 2L2
Telephone: (416) 323-2482
Facsimile: (426) 925-7964
Attention: David Veneziano
E-mail: dveneziano@triconcapital.com
with copies to:
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
Attention: Matthew W. Abbott
Facsimile: (212) 492-0402
E-mail: mabbott@paulweiss.com
and
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
Facsimile: (212) 492-0075
E-mail: rfieldstone@paulweiss.com
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(b) if
to the Company Parties, to:
Silver
Bay Realty Trust Corp.
3300 Fernbrook Lane North, Suite 210
Plymouth, MN 55447
Telephone: (952) 358-4402
Facsimile: (952) 487-3404
Attention: Dan Buechler
E-mail: dbuechler@silverbaymgmt.com
with copies to:
Orrick, Herrington & Sutcliffe LLP
The Orrick Building
405 Howard Street
San Francisco, California 94105
Attention: Karen Dempsey
Facsimile No.: (415) 773-5759
E-mail: kdempsey@orrick.com
and
Orrick, Herrington & Sutcliffe LLP
1000 Marsh Road
Menlo Park, California 94025
Attention: Richard V. Smith
Facsimile No.: (650) 614-7401
E-mail: rsmith@orrick.com
Section 10.3
Counterparts.
This Agreement may be executed in counterparts, all of which shall be
considered one and the same agreement and shall become effective when counterparts have been
signed by each of the Parties and delivered to each other Party (including by means of electronic delivery), it being understood that the Parties need not sign the same counterpart. Signatures to this
Agreement transmitted by facsimile transmission, by electronic mail in "portable document format" (".pdf"), or by any other electronic means intended to preserve the original graphic and pictorial
appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signature.
Section 10.4
Entire Agreement; No Third-Party Beneficiaries.
This Agreement (including the
schedules, documents and the instruments referred to herein) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the Parties with respect to the subject matter hereof, other than the Confidentiality Agreement, which shall survive the execution and delivery of
this Agreement. Nothing in this Agreement, express or implied, is intended to or shall confer upon any person (other than the Parties hereto) any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement except for (a) the rights, benefits and remedies granted to the Indemnified Parties under
Section 7.6
, (b) after the Partnership Merger Effective Time,
the rights of the holders of Company OP Common Units to receive the
consideration set forth in
Article III
in accordance with the provisions of this Agreement, (c) after the Parent Merger Effective Time,
the rights of the holders of Company Common Stock to receive the Merger Consideration, the rights of the holders of Company Preferred Stock to receive the Preferred Merger Consideration, and the
rights of holders of Company Restricted Stock Awards and Company PSUs to receive the consideration specified in
Article III
in accordance with
the provisions of this Agreement, (d) the right of Company, on behalf of its Stockholders, to pursue claims for damages and other relief, including equitable relief, for any breach of this
Agreement by the Parent Parties, to the extent
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recovery
is otherwise permitted under
Section 9.2
and
Section 9.3
and (e) the
rights of the Financing Sources under this
Section 10.4
and
Sections 9.5
,
10.7
,
10.8(c)
,
10.9
and
10.11
, and such Financing Sources are hereby made express third party beneficiaries of such Sections.
The representations and warranties in this
Agreement may represent an allocation among the Parties of risks associated with particular matters regardless of the knowledge of any of the Parties. Accordingly, Persons other than the Parties may
not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.
Section 10.5
Severability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective only to the extent of
such invalidity or unenforceability and, unless the effect of such invalidity or unenforceability would prevent the Parties from realizing the major portion of the economic benefits of the Mergers
that they currently anticipate obtaining therefrom, shall not render invalid or unenforceable the remaining terms and provisions of this Agreement or affect the validity or enforceability of any of
the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Section 10.6
Assignment.
Neither this Agreement nor any of the rights, interests or obligations
of the Parties hereunder shall be assigned by any of the Parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other Parties, and any attempt to make any such assignment without such consent shall be null and void; provided,
however
, that
the Parent Parties may assign their rights and benefits hereunder, in whole or in part, without the prior written consent of the Company
Parties (i) to any Financing Source as collateral security or (ii) to any of its Affiliates, provided that no such assignment will relieve any Parent Party from its obligations under
this Agreement. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns.
Section 10.7
Governing Law.
This Agreement and all claims or causes of actions (whether at Law,
in contract or in tort) that may be based upon, arise out of or related to this Agreement or
the negotiation, execution or performance of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements entered into and performed
entirely therein by residents thereof, without regard to any provisions relating to choice of laws among different jurisdictions, except that (i) the provisions of the DLLCA and the MGCL
applicable to the authorization, effectiveness and effects of the Parent Merger and the provisions of the DRULPA applicable to the authorization, effectiveness and effects of the Partnership Merger
will apply to the Parent Merger and the Partnership Merger and (ii) the applicable Law of the State of Maryland shall apply to the discharge of the fiduciary duties of the Company Board (or any
committees thereof) in connection with the Merger Agreement.
Section 10.8
Specific Performance; Venue.
(a) The
Parties agree that irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with their specific terms or were
otherwise breached, including if the Parties hereto fail to take any action required of them hereunder to consummate the transactions contemplated by this Agreement (and, more specifically, that
irreparable damage would occur if the Mergers were not consummated, including the Parties' obligations to consummate the Mergers and the obligation of the Parent Parties to pay, and the right of the
holders of Company Common Stock and the holders of Company Preferred Stock right to receive, the aggregate Merger Consideration and the Preferred Merger Consideration, as applicable, pursuant to the
Mergers, subject in each case to the terms and conditions of this Agreement), and that monetary damages, even if available, would not be an adequate remedy therefor. It is accordingly agreed that,
subject to
Section 10.8(b)
, prior to the termination of this Agreement pursuant to
Article IX
, the Parties sole and exclusive remedy shall be an
injunction or
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injunctions,
specific performance or other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, without proof of damages or
otherwise (including the Parties' obligations to consummate the Mergers and the obligation of the Parent Parties to pay, and the right of the holders of Company Common Stock and the holders of Company
Preferred Stock right to receive, the aggregate Merger Consideration and the Preferred Merger Consideration, as applicable, pursuant to the Mergers, subject in each case to the terms and conditions of
this Agreement) in the Court of Chancery of the State of Delaware and any appellate court therefrom, unless such court shall decline to accept jurisdiction over a particular matter, in which case, in
the Superior Court of the State of Delaware (in the Complex Commercial Litigation Division thereof if permitted by the applicable rules of the Superior Court) and any appellate court therefrom or, if
the Superior Court of the State of Delaware declines to accept jurisdiction over a particular matter, any federal court located in the State of Delaware and any federal appellate court therefrom
(collectively, the "
Delaware Courts
"), and each Party hereto hereby waives any requirement for the securing or posting of any bond in connection with
such remedy, this being in addition to any other remedy to which they are entitled at Law or in equity. Each Party agrees that the right of specific performance and other equitable relief is an
integral part of the transactions contemplated by this Agreement and without that right neither the Company Parties nor the Parent Parties would have entered into this Agreement. The Parties agree not
to assert that a remedy of specific performance or other equitable relief is unenforceable, invalid, contrary to law or inequitable for any reason, and not to assert that a remedy of monetary damages
would provide an adequate remedy or that the parties otherwise have an adequate remedy at law. If, prior to the Outside Date, any party brings an action to enforce specifically
the performance of the terms and provisions of this Agreement by another party, the Outside Date shall automatically be extended by (i) the amount of time during which such action is pending,
plus twenty (20) Business Days, or (ii) such other time period established by the court presiding over such action.
(b) Notwithstanding
the foregoing, it is explicitly agreed that the Company Parties shall each be entitled to seek specific performance of Parent's obligation to consummate
the Closing if and only if (i) all of the conditions to the obligations of the Parent Parties to consummate the transactions contemplated by this Agreement set forth in
Section 8.1
and
Section 8.2
have been satisfied or waived in writing as of or prior to the
date the Closing should have been consummated pursuant to Section 2.3 and the other terms of this Agreement (other than those conditions that by their terms are to be satisfied by actions taken
at the Closing, and subject to such conditions being capable of being satisfied), (ii) the Company Parties have irrevocably confirmed to Parent in writing that, if specific performance is
granted and the BD Financing and Debt Financing are funded, the Company Parties are ready, willing and able to (and shall) perform their respective obligations in connection with effectuating the
Closing, subject to the satisfaction of those conditions to Company Parties' obligation to consummate the Closing that by their terms are to be satisfied by actions taken at the Closing,
(iii) the BD Financing has been funded, (iv) the Debt Financing (and/or, if applicable, the Alternative Debt Financing) has been funded or the financing sources thereunder have indicated
that the Debt Financing (and/or, if applicable, the Alternative Debt Financing) will be funded at the Closing, and (v) Parent fails to consummate the Closing within three (3) Business
Days following the date of the notice described in clause (ii).
(c) Each
of the Parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement, the Financing or the Financing Sources
(including with respect to any claim or cause of action whether at Law, in equity, in contract or tort and with respect to any claim or cause of action relating to the negotiation, execution or
performance of this Agreement) brought by any other Party, its Affiliates or its successors or assigns shall be brought and determined in the Delaware Courts (subject to the order of preference of
each of the Delaware Courts set forth in
Section 10.8(a)
), and each of the Parties hereby irrevocably submits to the
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exclusive
jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to
this Agreement and the transactions contemplated hereby. Each of the Parties agrees not to commence, permit any of their respective Affiliates to commence or support any other Person in commencing any
action, suit or proceeding relating thereto except in the Delaware Courts.
(d) Each
of the Parties further agrees that notice as provided herein shall constitute sufficient service of process and the Parties further waive any argument that such
service is insufficient. Each of the Parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or
proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (i) any claim that it is not personally subject to the jurisdiction of the Delaware Courts as
described herein for any reason, (ii) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in the Delaware Courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (iii) that (A) the suit, action or proceeding in any
such court is brought in an inconvenient forum, (B) the venue of such suit, action or proceeding is improper, or (C) this Agreement, or the subject matter hereof, may not be enforced in
or by such courts.
(e) EACH
PARTY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY AGREEING TO THE CHOICE OF DELAWARE LAW TO GOVERN THIS AGREEMENT AND TO THE JURISDICTION OF DELAWARE COURTS
IN CONNECTION WITH PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY. THE PARTIES INTEND THIS TO BE AN EFFECTIVE CHOICE OF DELAWARE LAW AND AN EFFECTIVE
CONSENT TO JURISDICTION AND SERVICE OF PROCESS UNDER 6 DEL. C. § 2708, INCLUDING THAT THIS AGREEMENT INVOLVES OVER $100,000 FOR PURPOSES OF THE APPLICATION OF 6 DEL. C.
§ 2708.
Section 10.9
WAIVER OF JURY TRIAL.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT,
ACTION OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, THE FINANCING, THE TRANSACTIONS
CONTEMPLATED THEREBY OR THE FINANCING SOURCES. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, BY,
AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS
SECTION 10.9
.
Section 10.10
Authorship.
The Parties agree that the terms and language of this Agreement are
the result of negotiations between the Parties and their respective advisors and, as a result,
there shall be no presumption that any ambiguities in this Agreement shall be resolved against any Party. Any controversy over construction of this Agreement shall be decided without regard to events
of authorship or negotiation.
Section 10.11
Financing Sources.
Notwithstanding anything to the contrary contained in this
Agreement, (a) the Company Parties, the Company Subsidiaries and their respective Affiliates,
directors, officers, employees, agents, partners, managers, members or stockholders shall not have any rights or claims against any Financing Source in any way relating to this Agreement or any of the
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transactions
contemplated by this Agreement, or in respect of any oral representations made or alleged to have been made in connection herewith or therewith, including any dispute arising out of or
relating in any way to the Financing, whether at Law or equity, in contract, in tort or otherwise and (b) no Financing Source shall have any liability (whether in contract, in tort or
otherwise) to the Company Parties, the Company Subsidiaries and their respective Affiliates, directors, officers, employees, agents, partners, managers, members or stockholders for any obligations or
liabilities of any party hereto under this Agreement or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby or in respect of any oral representations made or
alleged to have been made in connection herewith or therewith, including any dispute arising out of or relating in any way to the Financing whether at Law or equity, in contract, in tort or otherwise.
Notwithstanding the foregoing provisions of this
Section 10.11
, following the consummation of the transactions contemplated by this Agreement,
the foregoing provisions will not limit the rights of the parties to the Financing under the definitive agreements in respect of the Financing.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, Ultimate Parent, Parent, Parent LP, Company, Company GP and Company LP have caused this Agreement to be signed by their
respective officers thereunto duly authorized, all as of the date first set forth above.
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TRICON CAPITAL GROUP INC.
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By:
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/s/ DAVID VENEZIANO
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Name:
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David Veneziano
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Title:
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Vice President, General Counsel and Secretary
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Address:
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1067 Yonge Street
Toronto, Ontario, Canada M4W 2L2
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TAH ACQUISITION HOLDINGS LLC
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By:
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/s/ DAVID VENEZIANO
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Name:
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David Veneziano
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Title:
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Vice President, General Counsel and Secretary
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Address:
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1067 Yonge Street
Toronto, Ontario, Canada M4W 2L2
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TAH ACQUISITION LP
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By:
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/s/ DAVID VENEZIANO
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Name:
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David Venenziano
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Title:
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Vice President, General Counsel and Secretary
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Address:
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1067 Yonge Street
Toronto, Ontario, Canada M4W 2L2
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[Signature
Page to the Merger Agreement]
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SILVER BAY REALTY TRUST CORP.
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By:
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/s/ THOMAS W. BROCK
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Name:
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Thomas W. Brock
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Title:
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Chief Executive Officer
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Address:
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3300 Fernbrook Lane North, Suite 210
Plymouth, Minnesota 55447
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SILVER BAY MANAGEMENT LLC
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By:
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/s/ THOMAS W. BROCK
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Name:
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Thomas W. Brock
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Title:
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Chief Executive Officer
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Address:
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3300 Fernbrook Lane North, Suite 210
Plymouth, Minnesota 55447
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SILVER BAY OPERATING PARTNERSHIP L.P.
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By:
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/s/ THOMAS W. BROCK
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Name:
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Thomas W. Brock
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Title:
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Chief Executive Officer
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Address:
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3300 Fernbrook Lane North, Suite 210
Plymouth, Minnesota 55447
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[Signature
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Annex B
PERSONAL AND CONFIDENTIAL
February 27,
2017
Board of Directors
Silver Bay Realty Trust Corp.
3300 Fernbrook Lane North, Suite 210
Plymouth, Minnesota 55447
Ladies
and Gentlemen:
You
have requested our opinion as to the fairness from a financial point of view to the holders (other than Tricon Capital Group Inc. ("Parent") and its affiliates) of the
outstanding shares of common stock, par value $0.01 per share (the "Shares"), of the Company (as defined below) of the $21.50 in cash per Share, to be paid to such holders pursuant to the Agreement
and Plan of Merger, dated as of February 27, 2017 (the "Agreement"), by and among Parent, TAH Acquisition Holdings LLC and TAH Acquisition LP (together with Parent, the "Parent
Parties"), Silver Bay Realty Trust Corp. (the "Company"), Silver Bay Management LLC and Silver Bay Operating Partnership L.P.
Goldman,
Sachs & Co. and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and
other financial and non-financial activities and services for various persons and entities. Goldman, Sachs & Co. and its affiliates and employees, and funds or other entities they manage
or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives,
loans, commodities, currencies, credit default swaps and other financial instruments of the Company, the Parent Parties, any of their respective affiliates and third parties or any currency or
commodity that may be involved in the transactions contemplated by the Agreement (the "Transaction"). We have acted as financial advisor to the Company in connection with, and have participated in
certain of the negotiations leading to, the Transaction. We expect to receive fees for our services in connection with the Transaction, the principal portion of which is contingent upon consummation
of the Transaction, and the Company has agreed to reimburse certain of our expenses arising, and indemnify us against certain liabilities that may arise, out of our engagement. We have provided
certain financial advisory and/or underwriting services to the Company and/or its affiliates from time to time. We may also in the future provide financial advisory and/or underwriting services to the
Company, Parent, and their respective affiliates for which our Investment Banking Division may receive compensation. Affiliates of Goldman, Sachs & Co. also may have co-invested with
Parent and its affiliates from time to time and may have invested in limited partnership units of affiliates of Parent from time to time and may do so in the future.
In
connection with this opinion, we have reviewed, among other things, the Agreement; annual reports to stockholders and Annual Reports on Form 10-K of the Company for the four
fiscal years ended December 31, 2015; a draft Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 2016 provided to us and approved for our use by the
Company, certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company; certain other communications from the Company to its stockholders; certain publicly available
research analyst reports for the Company; and certain internal financial analyses and forecasts for the Company prepared by its management and approved for our use by the Company (the "Forecasts"). We
have also held discussions with members
of the senior management of the Company regarding their assessment of the past and current business operations, financial condition and future prospects of the Company; reviewed the reported price and
trading activity for the Shares; compared certain financial and stock market information for the Company with similar information for certain other companies the securities of which are publicly
traded; reviewed the acquisition premia of certain recent business
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combinations
in the U.S. real estate investment trust industry; and performed such other studies and analyses, and considered such other factors, as we deemed appropriate.
For
purposes of rendering this opinion, we have, with your consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and
other information provided to, discussed with or reviewed by, us, without assuming any responsibility for independent verification thereof. In that regard, we have assumed with your consent that the
Forecasts have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company. We have not made an independent evaluation or
appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of the Company or any of its subsidiaries and we have not been
furnished with any such evaluation or appraisal. We have assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained
without any adverse effect on the Company or on the expected benefits of the Transaction in any way meaningful to our analysis. We have assumed that the Transaction will be consummated on the terms
set forth in the Agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to our analysis.
Our
opinion does not address the underlying business decision of the Company to engage in the Transaction, or the relative merits of the Transaction as compared to any strategic
alternatives that may be available to the Company; nor does it address any legal, regulatory, tax or accounting matters. Since January 1, 2016, we were not requested to solicit, and did not
solicit, interest from other parties with respect to an acquisition of, or other business combination with, the Company or any other alternative transaction. This opinion addresses only the fairness
from a financial point of view to the holders (other than Parent and its affiliates) of Shares, as of the date hereof, of the $21.50 in cash per Share to be paid to such holders pursuant to the
Agreement. We do not express any view on, and our opinion does not address, any other term or aspect of the Agreement or Transaction or any term or aspect of any other agreement or instrument
contemplated by the Agreement or entered into or amended in connection with the Transaction, including the merger of TAH Acquisition LP with and into Silver Bay Operating
Partnership L.P. or any other term or aspect of such merger, the fairness of the Transaction to, or any consideration received in connection therewith by, the holders of any other class of
securities of the Company, including the 10% Cumulative Redeemable Preferred Shares of the Company, any class of securities of Silver Bay Operating Partnership L.P. or Silver Bay
Management LLC, including the limited partnership interests in Silver Bay Operating Partnership L.P. designated as a "Partnership Common Unit" under its limited partnership agreement and
the limited partnership interest in Silver Bay Operating Partnership L.P. designated as a "10% Cumulative Redeemable Preferred Unit" under its
limited partnership agreement, any equity interests in Silver Bay Management LLC, or any other person, creditors, or other constituencies of the Company, Silver Bay Operating
Partnership L.P. or Silver Bay Management LLC; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of
the Company, or class of such persons, in connection with the Transaction, whether relative to the $21.50 in cash per Share to be paid to the holders (other than Parent and its affiliates) of Shares
pursuant to the Agreement or otherwise. We are not expressing any opinion as to the impact of the Transaction on the solvency or viability of the Parent Parties, the Company or any of its subsidiaries
or the ability of the Parent Parties, the Company or any of its subsidiaries to pay their respective obligations when they come due. Our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as of, the date hereof and we assume no responsibility for updating, revising or reaffirming this opinion based on
circumstances, developments or events occurring after the date hereof. Our advisory services and the opinion expressed herein are provided for the information and assistance of the Board of Directors
of the Company in connection with its consideration of the Transaction and such opinion does not constitute a recommendation as to how any holder of Shares
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should
vote with respect to such Transaction or any other matter. This opinion has been approved by a fairness committee of Goldman, Sachs & Co.
Based
upon and subject to the foregoing, it is our opinion that, as of the date hereof, the $21.50 in cash per Share to be paid to the holders (other than Parent and its affiliates) of
Shares pursuant to the Agreement is fair from a financial point of view to such holders.
Very
truly yours,
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/s/ Goldman, Sachs & Co.
(GOLDMAN, SACHS & CO.)
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ANNEX C
FORM OF SUPPORT AGREEMENT
SUPPORT AGREEMENT
, dated as of February 27, 2017 (this
"
Agreement
"), among Tricon Capital Group Inc., a company incorporated under the laws of the Province of Ontario
("
Ultimate Parent
") and each of the Persons listed as a "Holder" on the signature pages hereto (collectively, the
"
Holders
"). Capitalized terms used herein without definition shall have the respective meanings specified in the Merger Agreement (as defined below).
WHEREAS,
each Holder is, as of the date hereof, the record and Beneficial Owner (as defined in
Section 5.11
below) of issued and outstanding shares of common stock,
par value $0.01 per share, of the Company (the
"
Company Shares
") and/or issued and outstanding limited partnership interests in Silver
Bay Operating Partnership L.P., a Delaware limited partnership ("
Company LP
"), designated as a "Partnership Common Unit" under the
Company LP Agreement (as defined in the Merger Agreement) (the "
Company OP Common Units
"); and
WHEREAS,
as a condition and inducement to Ultimate Parent's willingness to enter into an Agreement and Plan of Merger, dated as of the
date hereof (the "
Merger Agreement
"), by and among Ultimate Parent, TAH Acquisition Holdings LLC, a Delaware limited liability company
("
Parent
"), TAH Acquisition LP, a Delaware limited partnership ("
Parent LP
"), Silver Bay
Realty Trust Corp., a Maryland corporation (the "
Company
"), Silver Bay Management LLC, a Delaware limited liability company and
Company LP, Ultimate Parent has requested each Holder, and each Holder has agreed, to enter into this Agreement with respect to all of the Company Shares and the Company OP Common Units that
such Holder Beneficially Owns at any time during the Support Period (as defined in
Section 5.11
below).
NOW, THEREFORE,
the parties hereto agree as follows:
SECTION 1 VOTING AGREEMENT; GRANT OF PROXY
1.1 Voting Agreement
. Each Holder hereby agrees that, during the Support Period, such Holder shall, at every
meeting of the stockholders of the Company or partners of the Company LP, however called, including the Company Stockholder Meeting, and at every adjournment or postponement thereof (or in any
other circumstances upon which a vote, consent or approval is sought, including by written consent), appear at each such meeting or otherwise cause the Company Shares or Company OP Common Units, as
applicable, as to which such Holder controls the right to vote to be counted as present thereat for purposes of calculating a quorum, and vote (or cause to be voted) all Company Shares and Company OP
Common Units Beneficially Owned by such Holder (a) in favor of the adoption of the Merger Agreement and the approval of the Mergers and the other transactions contemplated by the Merger
Agreement, and (b) against any (i) Acquisition Proposal or any other proposal made in opposition to the Merger Agreement, (ii) reorganization, recapitalization, dissolution,
liquidation or winding-up of the Company or the Company LP or any other extraordinary transaction involving the Company or the Company LP, in each case other than the Mergers or any of
the other transactions contemplated by the Merger Agreement, (iii) change in Persons who constitute the Company Board or (iv) corporate action (including any amendment of the
organizational documents of the Company or Company LP) the consummation of which would or could reasonably be expected to frustrate, prevent, or delay the consummation of any of the
transactions contemplated by the Merger Agreement or that would result or could reasonably be expect to result in a breach, in any material respect, by any of the Company Parties of the Merger
Agreement. Each Holder shall ensure that, during the Support Period, any other Person having voting power with respect to any Company Shares or Company OP Common Units Beneficially Owned by such
Holder will vote any such Company Shares and/or Company OP Common Units in favor of the matters described in clause (a) of the
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sentence, and will vote against any of the matters described in clauses (b)(i) through (iv) of the preceding sentence.
1.2 Irrevocable Proxy
. By entering into this Agreement, each Holder hereby irrevocably constitutes and appoints
Ultimate Parent, its Chief Executive Officer, its General Counsel or any other of its designees as such Holder's sole and exclusive attorney-in-fact and proxy, with full power of substitution and
re-substitution, for and in such Holder's name, to vote or act by written consent, express consent or dissent, or otherwise to utilize such voting power in the manner contemplated by
Section 1.1
above as Ultimate Parent, its Chief Executive Officer, its General Counsel or any other of its designees or its proxy or substitute
shall, in such person's sole discretion, deem proper with respect to the Company Shares or the Company OP Common Units Beneficially Owned by such Holder. The proxy and power of attorney granted by
each Holder pursuant to this
Section 1.2
is irrevocable and is granted in consideration of Ultimate Parent entering into this Agreement and the
Merger Agreement and incurring certain related fees and expenses and is given to secure the performance of the duties of each Holder under this Agreement. Each Holder shall take such further action or
execute such other instruments as may be reasonably necessary to effectuate the intent of this proxy. The proxy and power of attorney granted by each Holder shall not be exercised to vote, consent or
act on any matter except as contemplated by
Section 1.1
above. The proxy and power of attorney granted by each Holder shall be revoked,
terminated and of no further force or effect, automatically and without further action, upon termination of this Agreement in accordance with
Section 5.3
hereof. The power of attorney granted
herein by each Holder is a durable power of attorney and shall survive the dissolution,
bankruptcy, death or incapacity of such Holder. Each Holder hereby revokes (and agrees to cause to be revoked) any and all previous proxies granted with respect to the Company Shares or the Company OP
Common Units Beneficially Owned by such Holder with respect to any of the matters contemplated by
Section 1.1
above. Each Holder agrees not to
grant any proxy (whether revocable or irrevocable) to any Person that conflicts with the proxy granted by such Holder pursuant to this
Section 1.2
, and any attempt to do so shall be null and void
ab initio
and of no force or effect.
SECTION 2 REPRESENTATIONS AND WARRANTIES OF EACH HOLDER
Each Holder hereby represents and warrants to Ultimate Parent that:
2.1 Authorization
. The execution and delivery of this Agreement by such Holder and the consummation by such
Holder of the transactions contemplated hereby are within the power of such Holder and, if
applicable, have been duly authorized by all necessary corporate or other action on the part of such Holder, and no other corporate proceedings on the part of such Holder are necessary to authorize
this Agreement. This Agreement has been duly executed and delivered by such Holder, and, assuming the due authorization, execution and delivery by Ultimate Parent, constitutes the valid and binding
obligation of such Holder, enforceable against such Holder in accordance with its terms, subject to the Enforceability Exceptions. If this Agreement is being executed in a representative or fiduciary
capacity, the Person signing this Agreement has full power and authority to enter into and perform this Agreement.
2.2 Non-Contravention
. The execution and delivery by such Holder of this Agreement and the performance of the
covenants and obligations contemplated hereby do not, and will not, (i) violate or cause a violation of any of the provisions of the organizational documents of such Holder, if any,
(ii) conflict with, violate or cause a violation of any Law or Order applicable to such Holder, (iii) conflict with or violate or cause a default (with or without notice or lapse of time
or both) under, or give rise to any right of termination, cancellation or acceleration, or to a loss of any benefit to which such Holder is entitled, under any provision of any contract binding on
such Holder or any of such Holder's properties or assets, including the Company Shares and/or the Company OP Common Units Beneficially Owned by such Holder or (iv) result in the imposition of
any Encumbrance on any asset of such Holder, except (i) as set forth in this Agreement or (ii) as would not prevent or materially impair
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the
performance by such Holder of its covenants and obligations hereunder. The execution and delivery of this Agreement by such Holder, and the performance by such Holder of its obligations under this
Agreement and the consummation by it of the transactions contemplated by this Agreement will not, require such Holder to obtain any consent, approval, authorization or permit of any Governmental
Authority, other than compliance with the applicable requirements, if any, of the Exchange Act.
2.3 Ownership of Company Shares and Company OP Common Units
. Each Holder is the respective Beneficial Owner of,
and has sole voting and dispositive power with respect to, the Company Shares and the Company OP Common Units, as applicable, held by such Holder, free and clear of any Liens (including any
restriction on the right to vote or otherwise dispose of the Company Shares or the Company OP Common Units Beneficially Owned by such Holder), except for any applicable restrictions on transfer under
the Securities Act or Exchange Act and the rules and regulations promulgated thereunder that would not in any event prevent such Holder from complying with such Holder's obligations under this
Agreement. None of such Company Shares or the Company OP Common Units is subject to any voting trust or other contract with respect to the voting of such Company Shares or the Company OP Common Units,
except as set forth in this Agreement.
2.4 Waiver of Community Property Rights
. If such Holder is married and the Company Shares or the Company OP
Common Units Beneficially Owned by such Holder constitute community property, such Holder's spouse shall not assert or enforce, and does hereby waive, any rights granted under any
community property statute with respect to the Company Shares and the Company OP Common Units Beneficially Owned by such Holder applicable to such spouse that would adversely affect the covenants and
obligations of such Holder under this Agreement.
2.5 Acknowledgements
. Such Holder understands and acknowledges that Ultimate Parent is entering into the Merger
Agreement in reliance upon such Holder's execution and delivery of this Agreement and the representations and warranties of such Holder herein.
SECTION 3 REPRESENTATIONS AND WARRANTIES OF ULTIMATE PARENT
Ultimate Parent hereby represent and warrant to each Holder:
3.1 Authorization
. The execution and delivery by Ultimate Parent of this Agreement and the consummation by
Ultimate Parent of the transactions contemplated hereby are within the corporate power of Ultimate Parent and have been duly authorized by all necessary corporate or other action. This Agreement has
been duly executed and delivered by Ultimate Parent, and, assuming the due authorization, execution and delivery by each other Holder, constitutes the valid and binding obligation of Ultimate Parent,
enforceable against Ultimate Parent accordance with its terms, subject to the Enforceability Exceptions
3.2 Non-Contravention
. The execution and delivery by Ultimate Parent of this Agreement and the consummation of
the transactions contemplated hereby do not and will not (i) violate or cause a violation of any of the provisions of the organizational documents of Ultimate Parent, (ii) contravene or
conflict with, violate or cause a violation of any Law or Order applicable to Ultimate Parent, (iii) conflict with or violate or cause a default (with or without notice or lapse of time or
both) under, or give rise to any right of termination, cancellation or acceleration, or to a loss of any benefit to which Ultimate Parent is entitled under, any provision of any contract binding on
Ultimate Parent or any of Ultimate Parent's properties or assets or (iv) result in the imposition of any Encumbrance on any asset of Ultimate Parent, except (i) as set forth in this
Agreement or (ii) as would not prevent or materially delay the consummation by Ultimate Parent of the transactions contemplated hereby or the performance by Ultimate Parent of its covenants and
obligations hereunder.
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SECTION 4 COVENANTS OF HOLDERS
4.1 No Proxies for, Encumbrances on or Disposition of Company Shares, Non Solicit
.
(a) During
the Support Period, except pursuant to the terms of this Agreement or in connection with the Merger, each Holder shall not, without the prior written consent of
Ultimate Parent, directly or indirectly, (i) grant any proxies, or enter into any voting trust or other contract, with respect to the voting of any Company Shares, or the Company OP Common
Units, Beneficially Owned by such Holder with respect to any matter contemplated by
Section 1.1
above or otherwise in any manner inconsistent
with this Agreement, (ii) sell, assign, transfer, tender, encumber or otherwise dispose of, or enter into any contract with respect to the direct or indirect sale, assignment, transfer, tender,
encumbrance or other disposition of, any such Company Shares or the Company OP Common Units (except, in the case of the Company OP Common Units, a transfer to the Company or Company LP of such
Company OP Common Units in accordance with the terms and conditions of the redemption rights prescribed in Section 15.1 of the Company LP Agreement on a Specified Redemption Date (as
defined in the Company LP Agreement) occurring prior to the Partnership Merger Effective Time) or (iii) take any other action that would make any representation or warranty of such
Holder contained in
Section 2
of this Agreement untrue or incorrect in any material respect or in any way restrict, limit or interfere in any
material respect with the performance of such Holder's covenants or obligations hereunder, or seek to do or solicit any of the foregoing actions, or cause or permit any other Person to take any of the
foregoing actions.
(b) Notwithstanding
the foregoing clause (a), each Holder may transfer Company Shares or Company OP Common Units held by such Holder to any of the other Holders party
to this Agreement with Ultimate Parent or to any member of such Holder's immediate family (or to any trust established solely for the benefit of one or more members of such Holder's immediate family);
provided that a transfer referred to in this sentence shall be permitted only if, as a precondition to such transfer, the transferee agrees in a writing, reasonably satisfactory in form and substance
to Ultimate Parent, to be bound by all of the terms of this Agreement. Any Transfer in violation of the foregoing
Section 4.1
shall be null and
void
ab initio
and of no force or effect.
4.2 Publicity
. Each Holder, and each of such Holder's subsidiaries or other Affiliates, if any, shall not, and
shall cause their respective Representatives, if any, not to, directly or indirectly, make any press release, public announcement or other public communication with respect to this Agreement or the
Merger Agreement or any of the transactions contemplated hereby and thereby, without the prior written consent of Ultimate Parent. Each Holder hereby (a) consents to and authorizes the
publication and disclosure by Ultimate Parent and the Company (including in the Proxy Statement and any other publicly filed documents relating to the Mergers or any other transaction contemplated by
the Merger
Agreement) of: (i) such Holder's identity; (ii) such Holder's Beneficial Ownership of Company Shares and/or the Company OP Common Units; and (iii) the nature of such Holder's
commitments, arrangements and understandings under this Agreement and (b) agrees as promptly as practicable to notify Ultimate Parent and the Company of any required corrections with respect to
any written information supplied by such Holder specifically for use in any such Proxy Statement or other disclosure document. Notwithstanding the foregoing, nothing herein shall limit or affect any
actions taken by such Holder (or any of such Holder's Representatives) who is an officer or member of the Company Board, solely in their capacity as such, in each case only as permitted by the Merger
Agreement.
4.3 Additional Shares; Changes to Shares; Stop-Transfer Order
.
(a) In
the event that any Holder acquires Beneficial Ownership of, or the power to dispose of or vote or direct the disposition or voting of, any additional Company Shares,
Company OP Common Units or other interests in or with respect to the Company or the Company LP, such
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Company
Shares, Company OP Common Units or other interests shall, without further action of the parties, be subject to the provisions of this Agreement, and the term "
Company
Shares
" or "
Company OP Common Units
" shall be deemed to refer to and include such additional Company Shares, Company OP Common
Units or other interests in or with respect to the Company or the Company LP. Each Holder shall promptly notify Ultimate Parent of any such event.
(b) In
case of a stock or partnership interest dividend or distribution, or any change in the Company Shares or the Company OP Common Units by reason of any stock or
partnership interest dividend or distribution, split-up, recapitalization, combination, exchange of shares or interests or the like, the term "
Company
Shares
" or "
Company OP Common Units
" shall be deemed to refer to and include the Company Shares or the Company OP Common Units
as well as all such stock or other partnership interest dividends and distributions and any securities into which, or for which, any or all of the Company Shares or Company OP Common Units may be
changed or exchanged or which are received in such transaction.
4.4 Actions
. Each Holder hereby agrees not to commence or participate in, and to take all actions necessary to
opt out of any class in any class action with respect to, any Action, against any of the Parent Parties or their Affiliates, any of the Company Parties or their Affiliates or any of their
respective successors, directors, officers or other employees relating to the negotiation, execution or delivery of this Agreement or the Merger Agreement or consummation of the Mergers, including any
Action (x) challenging the validity of, or seeking to enjoin or delay the operation or consummation of, any provision of this Agreement or the Merger Agreement (including any claim seeking to
enjoin or delay the consummation of the Closing) or (y) alleging a breach of any fiduciary duty of the Company Board in connection with the Merger Agreement or the transactions contemplated
thereby. Each Holder agrees to provide prompt written notice to Ultimate Parent upon obtaining knowledge of the commencement, or the threat of commencement, of any such claims set forth in the
foregoing clause (ii).
4.5 Company OP Common Units
. In connection with the Mergers and the transactions contemplated by the Merger
Agreement, each Holder who Beneficially Owns any Company OP Common Units on the date hereof hereby acknowledges and agrees that the cash consideration payable for the Company OP Common Units still
Beneficially Owned by such Holder at the Partnership Merger Effective Time pursuant to Section 3.2(a) of the Merger Agreement (once paid in accordance with the terms thereof) shall represent
full consideration in exchange for such Company OP Common Units and that all of such Company OP Common Units shall be retired and shall cease to exist at the Partnership Merger Effective Time. In the
event of a transfer to the Company or the Company LP of a Holder's Company OP Common Units in accordance with the terms of the redemption rights prescribed in Section 15.1 of the
Company LP Agreement on a Specified Redemption Date (as defined in the Company LP Agreement) occurring prior to the Partnership Merger Effective Time, any Company Shares received by such
Holder upon such transfer shall, for the avoidance of doubt, be subject in all respects to the terms and conditions hereof applicable to Holders of Company Shares.
SECTION 5 MISCELLANEOUS
5.1 Other Definitional and Interpretative Provisions
.
Unless specified otherwise, in
this Agreement the obligations of any party hereto consisting of more than one Person are several and not joint. For purposes of this Agreement, whenever the context requires: (i) the singular
number shall include the plural, and vice versa; and (ii) the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders;
and the neuter gender shall include masculine and feminine genders. As used in this Agreement, the words "include" and "including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without limitation." Except as otherwise indicated, all references in this Agreement to "Sections," "Exhibits," "Annexes" and
"Schedules" are intended to refer to
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Sections
of this Agreement and Exhibits, Annexes and Schedules to this Agreement. The words "hereof," "herein" and "hereunder" and words of like import used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All references in this Agreement to "$" are intended to refer to U.S. dollars. The parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement. References to any Person include
the successors and permitted assigns of that Person.
5.2 Further Assurances
. Ultimate Parent and each Holder (in their respective capacity as such) will each execute
and deliver, or cause to be executed and delivered, all further documents and instruments as the other may reasonably request to consummate and make effective the transactions contemplated by this
Agreement.
5.3 Amendments; Termination
. Any provision of this Agreement may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement or in the case of a waiver, by the party against whom the waiver is to be effective. This
Agreement shall terminate automatically with respect to each Holder upon the earliest of (i) the Parent Merger Effective Time (in the case of the Company Shares) or the Partnership Merger
Effective Time (in the case of the Company OP Common Units), as the case may be, (ii) the valid termination of the Merger Agreement in accordance with its terms or (iii) the mutual
written consent of Ultimate Parent and such Holder; provided, however, that no termination of this Agreement shall relieve any party hereto from any liability for any willful material breach of any
provision of this Agreement prior to such termination and this Article 5 shall survive any termination of this Agreement.
5.4 Expenses
. Whether or not any of the transactions contemplated by the Merger Agreement or this Agreement are
consummated, each party hereto shall pay its own expenses incident to preparing for, entering into and carrying out this Agreement and the transactions contemplated hereby.
5.5 Successors and Assigns
. This Agreement shall be binding upon, and shall be enforceable by and inure to the
benefit of, the parties hereto and their respective successors and permitted assigns. Except in accordance with the terms hereof, this Agreement shall not be assignable by any Holder without the
express written consent of Ultimate Parent.
5.6 Third Party Beneficiaries
. Nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person, other than the parties hereto and their respective permitted successors and assigns, any right, benefit or remedy of any nature.
5.7 Counterparts.
This Agreement may be executed and delivered (including by facsimile or other form of
electronic transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
5.8 Entire Agreement
. This Agreement constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among or between any of the parties with respect to the subject matter hereof.
5.9 Severability
. If any term, provision, covenant or restriction of this Agreement is held by any Governmental
Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon such a
determination, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties hereto as closely as possible in an acceptable manner in
order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
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5.10 Specific Performance
. Each of the parties hereto agrees that irreparable damage would occur to Ultimate
Parent 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, in addition to
any other remedy that Ultimate Parent may have under Law or in equity, in the event of any breach or threatened breach by each Holder of any covenant or obligation of such Holder contained in this
Agreement, Ultimate Parent shall be entitled to (a) a decree or order of specific performance to enforce the observance and performance of such covenant; and (b) an injunction
restraining such breach or threatened breach. Each Holder hereby waives (x) any defenses based on the adequacy of any other remedy, whether at law or in equity, that might be asserted as a bar
to the remedy of specific performance of any of the terms or provisions hereof or injunctive relief in any action brought therefor by Ultimate Parent and (y) any requirement for the posting of
any bond or other security.
5.11 Defined Terms
. For the purposes of this Agreement:
(a) Capitalized
terms used but not defined herein shall have the respective meanings set forth in the Merger Agreement.
(b) Each
Holder shall be deemed to "
Beneficially Own
" or to have acquired "
Beneficial
Ownership
" of a security if such Holder (a) is the record owner of such security; or (b) is the "beneficial owner" with respect to the investment authority of
such security (within the meaning of Rule 13d-3 under the Exchange Act).
(c) "
Support Period
" shall mean the period from the date of this Agreement through the date upon which this Agreement
terminates in accordance with
Section 5.3
hereof.
5.12 Action in the Holders' Capacity Only
. Each Holder, if a director, officer or other employee of the Company,
does not make any agreement or understanding herein as a director, officer or other employee of the Company. Each Holder signs this Agreement solely in his, her or its capacity as a Beneficial Owner
of the Company Shares or the Company OP Common Units, and, except as set forth in
Section 4.1(c)
, nothing herein shall limit or affect any
actions taken in a Holder's capacity as an director, officer or other employee of the Company, including complying with or exercising such Holder's fiduciary duties as a member of the Company Board.
5.13 Notices
. All notices, requests, claims, consents, demands and other communications hereunder shall be in
writing and shall be delivered personally, by telecopy, e-mail or telefacsimile, by a recognized courier service, or by registered or certified mail, return receipt requested, postage prepaid, and in
each case shall be deemed duly given on the date of actual delivery, upon confirmation of receipt. 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, and a copy of each notice shall also be sent via e-mail.
if to Ultimate Parent, to
:
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with a copy to
:
Paul,
Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
Attention: Matthew W. Abbott
Facsimile: (212) 492-0402
E-mail: mabbott@paulweiss.com
and
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
Attention: Ross A. Fieldston
Facsimile: (212) 492-0075
E-mail: rfieldston@paulweiss.com
if to a Holder, to:
Silver
Bay Realty Trust Corp.
3300 Fernbrook Lane North, Suite 210
Plymouth, MN 55447
Telephone: (952) 358-4402
Facsimile: (952) 487-3404
Attention: Dan Buechler
E-mail: dbuechler@silverbaymgmt.com
with a copy to:
Orrick,
Herrington & Sutcliffe LLP
405 Howard Street
San Francisco, CA 94105-2669
Attn: Karen Dempsey
Facsimile: (415) 773-5759
email: kdempsey@orrick.com
and
Orrick, Herrington & Sutcliffe LLP
1000 Marsh Road
Menlo Park, CA 94025-1015
Attn: Richard V. Smith
Facsimile: (650) 614-7401
email: rsmith@orrick.com
5.14 Governing Law and Submission to Jurisdiction
. This agreement is made under, and shall be construed and
enforced in accordance with, the Laws of the State of Delaware applicable to agreements made and to be performed solely therein, without giving effect to any principles of conflicts of law that would
cause the applicability of any laws other than the Laws of the State of Delaware. Each of the parties hereto (a) consents to and submits to the exclusive personal jurisdiction of the Court of
Chancery of the State of Delaware, New Castle County, or, if that court does not have jurisdiction, a federal court sitting in Wilmington, Delaware in any action or proceeding arising out of or
relating to this Agreement or any of the transactions contemplated by this Agreement, (b) agrees that all claims in respect of such action or proceeding shall be heard and determined in any
such court, (c) shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave
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from
any such court and (d) shall not bring any action or proceeding arising out of or relating to this Agreement or any of the transactions contemplated by this Agreement in any other court.
Each of the parties hereto waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of
any other Person with respect thereto.
5.15 Waiver of Jury Trial
. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
5.16 Rules of Construction
. The parties hereto agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the application of any Law, holding or rule of construction providing that ambiguities in an agreement or other document will be
construed against the party drafting such agreement or document.
5.17 Waiver
. No failure on the part of any party to exercise any power, right, privilege or remedy under this
Agreement, and no delay on the part of any party in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. No party shall be
deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on behalf of such party; and any such waiver shall not be applicable or have any effect except in the specific instance in which
it is given.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.
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TRICON CAPITAL GROUP INC.
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By:
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Name:
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David Veneziano
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Title:
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Vice President, General Counsel and Secretary
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[HOLDER]
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By:
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Name:
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Title:
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