UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 23, 2023
Global Net Lease, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Maryland | 001-37390 | 45-2771978 | ||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
| 650 Fifth Avenue, 30th Floor | |
| New York, New York | 10019 |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (212) 415-6500
(Former name or former address, if changed since last report): N/A
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| x | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to section 12(b) of the Act:
| Title of each class | Trading Symbols |
Name of each exchange on which registered | ||
| Common Stock, $0.01 par value per share | GNL | New York Stock Exchange | ||
| 7.25% Series A Cumulative Redeemable Preferred Stock, $0.01 par value share | GNL PR A | New York Stock Exchange | ||
| 6.875% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share | GNL PR B | New York Stock Exchange | ||
| Preferred Stock Purchase Rights | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 1.01 | Entry into a Material Definitive Agreement. |
Agreement and Plan of Merger
On May 23, 2023, Global Net Lease, Inc., a Maryland corporation (“GNL” or the “Company”), Global Net Lease Operating Partnership, L.P., a Delaware limited partnership (“GNL OP”), The Necessity Retail REIT, Inc., a Maryland corporation (“RTL”), The Necessity Retail REIT Operating Partnership, L.P., a Delaware limited partnership (“RTL OP”), Osmosis Sub I, LLC, a Maryland limited liability company and wholly-owned subsidiary of GNL (“REIT Merger Sub”), and Osmosis Sub II, LLC, a Delaware limited liability company and wholly-owned subsidiary of GNL OP (“OP Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). Subject to the terms and conditions of the Merger Agreement, at the effective time of the merger (the “REIT Merger Effective Time”), RTL will merge with and into REIT Merger Sub, with REIT Merger Sub continuing as the surviving entity and a wholly-owned subsidiary of GNL (the “REIT Merger”), and OP Merger Sub will merge with and into RTL OP, with RTL OP continuing as the surviving entity (the “OP Merger” and, together with the REIT Merger, the “Merger”). The Company also entered into an agreement to internalize the advisory and property management functions of the combined companies through a series of mergers with the advisors and property managers for each of GNL and RTL known as an “Internalization.”
The Merger Agreement, including the Exchange Ratio (as defined below), resulted from negotiations between a special committee (the “GNL Special Committee”) of independent members of the Board of Directors of GNL (the “GNL Board”) and a special committee (the “RTL Special Committee”) of independent members of the Board of Directors of RTL (the “RTL Board”), with the assistance of separate and independent financial and legal advisors. On May 23, 2023, the GNL Special Committee unanimously recommended, and the GNL Board (with the unanimous vote of the independent directors) on behalf of GNL approved, the Merger Agreement, the Merger, the Internalization Agreement (as defined below), the Internalization and the other transactions contemplated by each agreement, except that Governor Edward G. Rendell, a Class I Director on the GNL Board, recused himself from voting. On May 23, 2023, the RTL Special Committee unanimously recommended, and the RTL Board (with the unanimous vote of the independent directors) on behalf of RTL approved, the Merger Agreement, the Merger, the Internalization Agreement, the Internalization and the other transactions contemplated by each agreement, except that Governor Edward G. Rendell, a Class I Director on the RTL Board, recused himself from voting.
Upon the closing of the Merger, GNL will increase the size of the GNL Board by three directors. Three independent directors of RTL will be appointed to the GNL Board, and those appointees will be placed into the directorship classes of GNL that correspond to their respective classes on the RTL Board so that the composition of the GNL Board as of the REIT Merger Effective Time is intended to be James L. Nelson, Edward M. Weil, and Lisa Kabnick, who will be in the final year of their terms as directors and whose terms will expire at the first GNL annual meeting of stockholders after the REIT Merger Effective Time; Edward G. Rendell, Stanley Perla, M. Therese Antone, and Abby M. Wenzel, whose terms expire at the 2024 GNL annual meeting of stockholders; and P. Sue Perrotty, and Leslie Michelson, whose terms expire at the 2025 GNL annual meeting of stockholders.
Pursuant to the Registration Rights and Stockholder Agreement (as defined and discussed below) that GNL and AR Global Investments, LLC, a Delaware limited liability company (the “Advisor Parent”) intend to enter into at the closing of the Merger, Advisor Parent, as a stockholder of GNL, will have certain board designation rights, subject to certain ownership requirements.
The Merger
At the REIT Merger Effective Time, each issued and outstanding share of RTL’s Class A Common Stock, par value $0.01 per share (“RTL Class A Common Stock”) (or fraction thereof), will be converted into the right to receive 0.670 shares (the “Exchange Ratio”) of validly issued, fully paid and nonassessable shares of GNL’s Common Stock, par value $0.01 per share (“GNL Common Stock”). From and after the REIT Merger Effective Time, all shares of RTL Class A Common Stock will no longer be outstanding and will automatically be cancelled and cease to exist, and each holder of a share of RTL Class A Common Stock will cease to have any rights with respect thereto, except for the right to receive the consideration as provided in the Merger Agreement.
At the REIT Merger Effective Time, each issued and outstanding share of RTL’s 7.50% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share (“RTL Series A Preferred Stock”) and each issued and outstanding share of RTL’s 7.375% Series C Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share (“RTL Series C Preferred Stock”), will automatically be converted into the right to receive from GNL one share of newly created 7.50% Series D Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share, and one share of newly created 7.375% Series E Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share, respectively, which will have substantially identical powers, preferences, privileges, and rights as the RTL Series A Preferred Stock and the RTL Series C Preferred Stock, respectively. From and after the REIT Merger Effective Time, all shares of RTL Series A Preferred Stock and RTL Series C Preferred Stock will no longer be outstanding and will automatically be cancelled and cease to exist, and each holder of a share of RTL Series A Preferred Stock and RTL Series C Preferred Stock will cease to have any rights with respect thereto, except for the right to receive the consideration as provided in the Merger Agreement.
Following the REIT Merger Effective Time and prior to the OP Merger, REIT Merger Sub will distribute its general partnership interests in RTL OP to GNL. GNL, in turn, will contribute such general partnership interest to GNL OP and, in turn, GNL OP will contribute onward such general partnership interests to a newly formed limited liability company that will be wholly owned by GNL OP (“Newco GP, LLC”). At the effective time of the OP Merger (the “OP Merger Effective Time”), by virtue of the OP Merger and without any further action on the part of GNL OP, (i) Newco GP, LLC will be the sole general partner of the surviving company with respect to the OP Merger; (ii) all the preferred units of RTL OP (the “RTL OP Preferred Units”) held by REIT Merger Sub immediately after the REIT Merger Effective Time will be cancelled and no payment will be made with respect thereto; (iii) GNL OP will continue as the sole limited partner of RTL OP; and (iv) each GNL OP Unit held by a limited partner of RTL OP other than RTL or any subsidiary of RTL issued and outstanding immediately prior to the OP Merger Effective Time will automatically be converted into New GNL OP Units in an amount equal to (x) one (1), multiplied by (y) the Exchange Ratio, and each holder of New GNL OP Units will be admitted as a limited partner of GNL OP in accordance with the terms of the partnership agreement of GNL OP. Immediately after the OP Merger Effective Time, Newco GP, LLC will be the general partner and GNL OP will be the limited partner of RTL OP.
Following the closing of the Merger, based on the Exchange Ratio, and subject to certain assumptions regarding the outstanding LTIPs (as defined herein) and noted below, current GNL stockholders would own approximately 45% of GNL post-closing, current RTL stockholders would own approximately 39% of GNL post-closing, and the owner of Advisor Parent and its affiliates may own up to 17% of GNL post-closing, assuming all outstanding LTIPs (as defined below) held by Advisor Parent and its affiliates are earned. In addition, at or prior to the closing of the Merger, GNL will have granted a waiver to Advisor Parent and certain owners thereof to own more than GNL’s Revised Beneficial Ownership Limit (as defined below).
RTL Restricted Shares and RTL LTIP Units
As of one business day immediately prior to the REIT Merger Effective Time, all restricted shares of RTL (the “RTL Restricted Shares”) granted to a member of the RTL Board under the 2018 Omnibus Incentive Compensation Plan of RTL (f/k/a American Finance Trust Inc.) (the “RTL 2018 Omnibus Incentive Compensation Plan”) that are outstanding as of immediately prior to the REIT Merger Effective Time (whether or not then vested) will automatically become fully vested, and all restrictions with respect thereto will lapse, except as set forth in the Company Disclosure Letter (as defined in the Merger Agreement). Each share of RTL Class A Common Stock resulting from the vesting of the RTL Restricted Shares will be treated as a share of RTL Class A Common Stock issued and outstanding immediately prior to the REIT Merger Effective Time and will be converted into the right to receive GNL Common Stock in accordance with the terms of the Merger Agreement.
Also as of one business day immediately prior to the REIT Merger Effective Time, all other outstanding RTL Restricted Shares (other than RTL Restricted Shares granted to a member of the RTL Board) as of immediately prior to the REIT Merger Effective time will cease to relate to or represent any right to receive RTL Class A Common Stock and will be assumed by GNL and automatically converted, at the REIT Merger Effective Time, into an award of restricted stock relating to GNL Common Stock (the “GNL Restricted Stock”) with respect to a number of shares of GNL Common Stock equal to the product of (x) the number of shares of RTL Class A Common Stock underlying the applicable award of RTL Restricted Shares as of immediately prior to such conversion, multiplied by (y) the Exchange Ratio, with each such award of RTL Restricted Shares so converted into GNL Restricted Stock otherwise subject to the same terms and conditions as were applicable to the corresponding award of RTL Restricted Shares, including any applicable vesting, acceleration, and payment timing provisions, except as expressly adjusted by the Merger Agreement and other than accelerated vesting of certain RTL Restricted Shares that the Board (or authorized committee thereof) is expressly permitted to effect in its sole discretion under the terms of the Company Disclosure Letter (as defined in the Merger Agreement).
In connection with the Internalization Agreement (as defined below), prior to the effective time of the Internalization (the “Internalization Effective Time”), RTL Advisor will distribute the 8,528,885 long-term incentive units of RTL (the “GNL LTIP Units”) that are outstanding under the terms of the RTL Advisor Multi-Year Outplacement Performance Award (the “RTL 2021 Award”) to RTL SLP (as defined below). Further, RTL Advisor and RTL OP will modify the RTL LTIP Units so that the award may be converted, upon the election of RTL Advisor, into 8,528,885 restricted shares of RTL (the “Converted RTL Restricted Shares”). Upon RTL Advisor exercising such election, RTL will immediately issue RTL SLP the Converted RTL Restricted Shares, subject to an award agreement which is substantially identical to the RTL 2021 Award, except as modified by the terms of the Internalization Agreement. Whether or not such election is made, allvesting conditions, whether based on time or performance, will remain in full effect except as modified by the Internalization Agreement as described herein, and will be evaluated at the closing of the Internalization. Each of the earned RTL LTIP Units will be entitled to a priority catch-up distribution in cash (the “RTL Catch Up”). RTL OP will pay the RTL Catch Up in cash as a result of any earned RTL LTIP Units to RTL SLP at the Internalization Effective Time. If RTL Advisor elects to convert RTL LTIP Units into Converted RTL Restricted Shares, other than with respect to the RTL Catch Up, any dividend or distribution which would otherwise be paid or provided with respect to RTL LTIP Units will instead be made with respect to the Converted RTL Restricted Shares in accordance with the provisions of the RTL 2021 Award. Upon the Internalization Effective Time, all Converted RTL Restricted Shares (or, if not converted, the RTL LTIP Units) will vest and may be earned based on the achievement of performance as calculated at the Internalization Effective Time and any such vested and earned Converted RTL Restricted Shares will be released from all restrictions and registered pursuant to an effective registration statement under the Securities Act.
“GNL LTIP Units”) that are outstanding under the terms of the RTL Advisor Multi-Year Outplacement Performance Award (the “RTL 2021 Award”) to RTL SLP (as defined below). Further, RTL Advisor and RTL OP will modify the RTL LTIP Units so that the award may be converted, upon the election of RTL Advisor, into 8,528,885 restricted shares of RTL (the “Converted RTL Restricted Shares”). Upon RTL Advisor exercising such election, RTL will immediately issue RTL SLP the Converted RTL Restricted Shares, subject to an award agreement which is substantially identical to the RTL 2021 Award, except as modified by the terms of the Internalization Agreement. Whether or not such election is made, allvesting conditions, whether based on time or performance, will remain in full effect except as modified by the Internalization Agreement as described herein, and will be evaluated at the closing of the Internalization. Each of the earned RTL LTIP Units will be entitled to a priority catch-up distribution in cash (the “RTL Catch Up”). RTL OP will pay the RTL Catch Up in cash as a result of any earned RTL LTIP Units to RTL SLP at the Internalization Effective Time. If RTL Advisor elects to convert RTL LTIP Units into Converted RTL Restricted Shares, other than with respect to the RTL Catch Up, any dividend or distribution which would otherwise be paid or provided with respect to RTL LTIP Units will instead be made with respect to the Converted RTL Restricted Shares in accordance with the provisions of the RTL 2021 Award. Upon the Internalization Effective Time, all Converted RTL Restricted Shares (or, if not converted, the RTL LTIP Units) will vest based on the achievement of performance as calculated at the Internalization Effective Time and any such vested Converted RTL Restricted Shares will be released from all restrictions and registered pursuant to an effective registration statement under the Securities Act.
Additionally, as of the REIT Merger Effective Time, (i) the RTL Advisor Multi-Year Outperformance Award Agreement, dated as of July 21, 2021, will be terminated, and no further awards will be granted thereunder, and (ii) GNL will assume the RTL 2018 Advisor Omnibus Incentive Compensation Plan and the RTL 2018 Omnibus Incentive Compensation Plan.
GNL LTIP Units
In connection with the Internalization Agreement (as defined below), prior to the Internalization Effective Time, GNL Advisor will distribute the 2,500,000 long-term incentive units of GNL (the “GNL LTIP Units”) that are outstanding under the terms of the GNL Advisor Multi-Year Outplacement Performance Award (the “GNL 2021 Award”) to GNL SLP (as defined below). Further, GNL Advisor and GNL OP will modify the GNL LTIP Units so that the award may be converted, upon the election of GNL Advisor, into 2,500,000 restricted shares of GNL (the “GNL Restricted Shares”). Upon GNL Advisor exercising such election, GNL will immediately issue GNL SLP the GNL Restricted Shares, subject to an award agreement which is substantially identical to the GNL 2021 Award, except as modified by the terms of the Internalization Agreement. Whether or not such election is made, all vesting conditions, whether based on time or performance, will remain in full effect except as modified by the Internalization Agreement. Each of the earned 2,500,000 GNL LTIP Units is entitled to a priority catch-up distribution in cash (the “GNL Catch Up”). GNL OP will pay the GNL Catch Up in cash to GNL SLP at the Internalization Effective Time. If GNL Advisor elects to convert GNL LTIP Units into GNL Restricted Shares, other than with respect to the GNL Catch Up, any dividend or distribution which would otherwise be paid or provided with respect to GNL LTIP Units will instead be made with respect to GNL Restricted Shares in accordance with the provisions of the GNL 2021 Award. Upon the Internalization Effective Time, all GNL Restricted Shares (or, if not converted, the GNL LTIP Units) will vest and may be earned based on the achievement of performance as calculated at the Internalization Effective Time and any such vested and earned GNL Restricted Shares will be released from all restrictions and registered pursuant to an effective registration statement under the Securities Act.
RTL and GNL Loan and Financing Agreements
In connection with the Merger, (i) GNL has agreed that at the REIT Merger Effective Time it will assume the outstanding notes under RTL’s Indenture, dated as of October 7, 2021, among American Finance Trust, Inc. (now known as RTL), American Finance Operating Partnership, L.P. (now known as RTL OP), the guarantors party thereto and U.S. Bank National Association (now known as U.S. Bank Trust Company, National Association), as trustee, as supplemented to date (the “RTL Indenture”), pursuant to a supplemental indenture to GNL’s Indenture, dated as of December 16, 2020, among GNL, GNL OP, the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee, as supplemented to date, (ii) RTL intends to terminate its Amended and Restated Credit Agreement, dated as of October 1, 2021, by and among RTL OP, RTL and the other guarantors party thereto, BMO Harris Bank N.A., as administrative agent, and the other lender parties thereto (as amended to date, the “RTL Credit Facility”), (iii) GNL intends to either amend or refinance its Second Amended and Restated Credit Agreement, dated as of April 8, 2022, by and among GNL OP, as borrower, GNL and the other guarantors party thereto, KeyBank National Association, as agent, and the other lender parties thereto (as amended to date, the “GNL Credit Facility”) in order to repay the outstanding obligations under the RTL Credit Facility at the REIT Merger Effective Time, (iv) RTL intends to seek and obtain lender consents to the extent necessary or desirable, with respect to the applicable terms of the following agreements: (A) the Loan Agreement, dated as of December 8, 2017, among Société Générale and UBS AG, as lenders, and certain subsidiaries of RTL OP, as borrowers, as amended to date (the “RTL SocGen and UBS Loan Agreement”), and (B) the Loan Agreement, dated as of July 24, 2020, by and among the entities listed on Schedule I thereto, as borrowers, and Column Financial, Inc., as lender, as amended to date (the “RTL Column Loan Agreement” and, together with the RTL SocGen and UBS Loan Agreement, the “RTL CMBS”), and (v) GNL intends to seek and obtain lender consents to the extent necessary or desirable, with respect to the applicable terms of the following agreements: (A) the Loan Agreement, dated as of October 27, 2017, by and among the wholly-owned subsidiaries of GNL OP listed on Schedule I attached thereto, as borrowers, and Column Financial, Inc. and Citi Real Estate Funding, Inc., as lenders, as amended to date (the “GNL Column Citi Loan Agreement”), (B) the Loan Agreement, dated as of April 12, 2019, by and among the borrowers party thereto, and Column Financial Inc. and Société Générale Financial Corporation, as lenders, as amended to date (the “GNL Column SocGen Loan Agreement”), and (C) the Loan Agreement, dated as of September 12, 2019, by and among the borrowers party thereto, and KeyBank National Association, as lender, as amended to date (the “GNL KeyBank Loan Agreement” and, together with the GNL Column Citi Loan Agreement and GNL Column SocGen Loan Agreement, the “GNL CMBS”).
Merger Agreement Covenants
The Merger Agreement contains customary covenants, including, among other things, for RTL and GNL to operate in the ordinary course of business between signing and closing, call special meetings to seek stockholder approval of the transaction, prepare a registration statement on Form S-4 and Joint Proxy Statement/Prospectus to be included in the Form S-4, adhere to certain statements on confidentiality requirements, and use “reasonable best efforts” to complete the transaction. RTL’s and GNL’s interim operating covenants are generally intended to restrict each party from making material changes to its respective capitalization, business, and assets without the other party’s prior consent.
The Merger Agreement also contains covenants prohibiting RTL and its representatives from soliciting, providing information or entering into discussions concerning proposals relating to alternative business combination transactions, subject to certain limited exceptions. However, for a period of 30 days following the execution of the Merger Agreement (the “go-shop” period), RTL and its representatives are permitted to solicit, provide information or enter into discussions concerning proposals relating to alternative business combination transactions, subject to certain limited exceptions. At the end of the go-shop period, restrictions on RTL will not apply to third parties that, during the go-shop period, made a proposal for a competing transaction that the RTL Special Committee determines has resulted in, or would be reasonably expected to result in, a Superior Proposal (as defined in the Merger Agreement). RTL will promptly notify GNL of any such third party’s identity and competing proposal’s material terms. If the RTL Special Committee recommends entering into a Superior Proposal, RTL must provide GNL with at least five business days’ prior notice of its intention to take such action and an opportunity to revise the terms of the Merger Agreement such that the competing proposal is no longer a Superior Proposal.
The Merger Agreement prohibits GNL or RTL from making a change in recommendation to their respective stockholders with regards to the Merger that would be adverse to the other party except where (i) the board of directors of GNL or RTL, as applicable, has determined in good faith that failure to do so would be inconsistent with its duties to the stockholders of GNL or RTL, as applicable, under applicable law; (ii) GNL or RTL, as applicable, notifies the other party in writing that its board of directors intends to make such a change in recommendation; and (iii) during the five business days following the receipt of such notice of intent to make a change in recommendation, GNL or RTL, as applicable, has offered to negotiate with the other party in good faith in making adjustments to the terms and conditions of the Merger Agreement.
The Merger Agreement may be terminated under certain circumstances, including, but not limited to, by mutual written agreement of each of GNL and RTL, or by either RTL or GNL (in each case, with the prior approval of their respective special committees) (i) if the Merger has not been consummated on or before June 1, 2024 (the “Outside Date”), (ii) if a final and non-appealable order is entered that permanently restrains or otherwise prohibits the Merger, (iii) if the approval of the stockholders of RTL or GNL (each, a “Stockholder Approval”) of the Merger and the transactions contemplated in the Merger Agreement in the case of RTL or the issuance of shares of GNL Common Stock in connection with the Merger and the Internalization in the case of GNL has not been obtained or (iv) upon an uncured breach of the Merger Agreement by the other party that would cause any of the closing conditions in the Merger Agreement not to be satisfied. Additionally, the Merger Agreement may be terminated by RTL (with the prior approval of the RTL Special Committee) if, among other things, the RTL Board (based on the recommendation of the RTL Special Committee) approves and authorizes RTL to enter into a definitive agreement providing for the implementation of a Superior Proposal in accordance with the terms of the Merger Agreement, provided, however, that a termination fee will be paid by RTL to GNL in the event of such termination, or if the GNL Board or the GNL Special Committee, for any reason, will have effected a change in recommendation as described in the Merger Agreement. The Merger Agreement may be terminated by GNL if, among other things, RTL materially breaches its obligations regarding the solicitation of competing acquisitions under the terms of the Merger Agreement.
RTL must pay GNL a termination fee of $40 million if (i) the Merger Agreement is terminated by GNL due to a change in, modification or withdrawal of recommendation of the RTL Board that is adverse to GNL or the RTL Board fails to recommend that RTL stockholders vote in favor of approval of the REIT Merger or fails to make such a recommendation in the Joint Proxy Statement or approves, endorses or recommends any Acquisition Proposal, in each case prior to RTL obtaining approval from its stockholders; (ii) the Merger Agreement is terminated by RTL to accept a Superior Proposal in accordance with the terms of the Merger Agreement; (iii) the Merger Agreement is terminated by GNL because, at any time prior to stockholder approval by the stockholders of RTL, (A) the RTL Board will have approved, adopted, publicly endorsed or recommended any Acquisition Proposal (as defined in the Merger Agreement), (B) RTL enters into a contract or agreement (other than a confidentiality agreement entered into in compliance with the Merger Agreement) relating to an Acquisition Proposal, (C) a tender offer or exchange offer for any shares of RTL Class A Common Stock that constitutes an Acquisition Proposal (other than by GNL or its affiliates) is commenced and the RTL Board fails to recommend against acceptance of such tender offer or exchange offer by the stockholders of RTL and to publicly reaffirm its recommendation for the Merger within ten business days of being requested to do so by GNL, (D) the RTL Board fails to include its recommendation for the Merger in the Joint Proxy Statement (as defined in the Merger Agreement), or (E) RTL will have materially violated any of the go-shop provisions set forth in the Merger Agreement; (iv) the Merger Agreement is terminated by RTL or GNL due to (x) a failure of RTL to obtain approval from its stockholders to enter into the Merger and an Acquisition Proposal was made to the RTL Board, the RTL Special Committee or directly to RTL’s stockholders and not publicly withdrawn prior to RTL’s stockholder meeting or (y) a material breach by RTL of the terms of the Merger Agreement giving rise to termination and an Acquisition Proposal was made to the RTL Board, the RTL Special Committee or directly to RTL’s stockholders and was publicly announced to RTL’s stockholders and within 12 months following the termination date, RTL consummates an Acquisition Proposal. In addition, RTL agrees that, in the event that (1) RTL accepts, prior to obtaining its stockholders’ approval, a Superior Proposal, (2) GNL terminates the agreement pursuant to clauses (i) or (iii) of this paragraph, in each case in connection with RTL entering into or recommending a Superior Proposal with a go shop bidder on or before the date that is 15 days following the end of go-shop period provided for by the Merger Agreement, RTL will pay to GNL a termination fee of $16 million.
The Merger Agreement contains indemnification provisions pursuant to which any right to exculpation, indemnification, and advancement of expenses now existing in favor of Indemnitees (as defined in the Merger Agreement) as provided in RTL’s charter or bylaws or any of RTL’s subsidiaries’ respective articles or certificates of incorporation or bylaws (or comparable organizational or governing documents) or in any indemnification agreement of RTL for acts or omissions occurring at or prior to the REIT Merger Effective Time with respect to the Indemnitees will survive the Merger and continue in full force and effect in accordance with the terms under which they are created. In addition, as of the REIT Merger Effective Time and ending on the sixth anniversary of the REIT Merger Effective Time, GNL and REIT Merger Sub will (i) indemnify and hold harmless each Indemnitee against and from any costs or expenses, (including attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, to the extent such claim, action, suit, proceeding or investigation arises out of or pertains to (x) any action or omission or alleged action or omission in such Indemnitee’s capacity as a director, officer, partner, manager, member, trustee, employee or agent of GNL or any of subsidiary of GNL, or (y) the Merger Agreement or any of the transactions contemplated thereby, including the Mergers; and (ii) pay in advance of the final disposition of any such action the expenses (including attorneys’ fees and any expenses incurred by any Indemnitee in connection with enforcing any rights with respect to indemnification) of any Indemnitee upon receipt of an undertaking by or on behalf of such Indemnitee to repay such amount if it will ultimately be determined that such Indemnitee is not entitled to be indemnified.
The Merger Agreement contains certain representations and warranties made by the parties thereto. The representations and warranties of the parties contained in the Merger Agreement are subject to contractual standards of materiality that may be different from what may be viewed as material to stockholders, as well as certain qualifications and limitations set forth in confidential disclosure letters delivered by each of the Company and RTL.
The obligation of each party to consummate the Merger is subject to certain conditions, including receipt of the Stockholder Approvals, the reduction by GNL of the Aggregate Share Ownership Limit (as defined in GNL’s Articles of Restatement) to 8.9% in value of the aggregate of the outstanding shares of stock of GNL and 8.9% (in value or in number of shares, whichever is more restrictive) of any class or series of stock of GNL, the termination of the RTL Credit Facility by RTL, the amendment or refinancing of the GNL Credit Facility by and between GNL and the agents and requisite lenders party thereto, the requisite consents to the RTL CMBS and the GNL CMBS, the assumption of the outstanding notes under the RTL Indenture by GNL, delivery of certain documents, certificates and opinions, including customary REIT opinions and opinions issued by the counsel of each of GNL and RTL that the REIT Merger will qualify as a reorganization under Section 368(a) of the Internal Revenue Code of 1986, the truth and correctness of the representations and warranties of the parties (subject to contractual standards of materiality), the effectiveness of a registration statement on Form S-4 to be filed by the Company to register the shares of the GNL Common Stock to be issued as consideration in the Merger, the absence of injunctions or legal orders restraining the transaction, the absence of a material adverse effect with respect to either the Company or RTL, and the conditions to consummating the Internalization have been satisfied.
Amendments to GNL’s Governing Documents
In connection with the Merger, at the REIT Merger Effective Time, the Amended and Restated Bylaws of GNL (the “GNL Bylaws”) will be amended to, among other things, remove the requirement that the GNL Board be comprised of two “managing directors” and all related requirements.
In addition, on May 23, 2023, in connection with signing the Merger Agreement, pursuant to Section 5.7(ii)(h) of Article V of the Articles of Restatement of GNL (the “GNL Articles of Restatement”), the GNL Board adopted resolutions decreasing the Aggregate Share Ownership Limit (as defined in the Articles of Restatement) from 9.8% to 8.9% in value of the aggregate of the outstanding shares of stock of GNL and 8.9% (in value or in number of shares, whichever is more restrictive) of any class or series of stock of GNL (the “Revised Beneficial Ownership Limit”). GNL will file with the State Department of Assessments and Taxation of Maryland a Certificate of Notice reflecting the decrease in the Aggregate Share Ownership Limit described above (the “Certificate of Notice”).
At the REIT Merger Effective Time, the Shareholder Rights Plan including the Rights Agreement, dated April 9, 2020, by and between GNL and American Stock Transfer and Trust Company, LLC, as amended by the Amendment to Rights Agreement dated as of February 26, 2021, will be terminated.
In connection with the closing of the Merger, GNL will elect to no longer be subject to Section 3-803 of the Maryland General Corporation Law (the “MGCL”) and will prohibit itself from electing to be subject to Section 3-803 of the MGCL unless the repeal of such prohibition is approved by the stockholders of GNL by the affirmative vote of at least a majority of the votes cast on the matter by stockholders entitled to vote generally in the election of directors (the “Declassification Election”). Following the Declassification Election and beginning at the 2023 annual meeting of GNL stockholders (if held after the closing of the Merger), as the terms of the directors in each class expire, the successors to the directors in that class will be elected without classification, so that by the 2025 annual meeting of GNL stockholders, there will be no more classified directors on the GNL Board. Thereafter, all of the directors of GNL will be elected to serve one-year terms and until the following annual meeting of GNL stockholders and until their respective successors are duly elected and qualify.
Internalization Agreement
Concurrently with the execution of the Merger Agreement, on May 23, 2023, the Company entered into a merger agreement for a transaction known as an “Internalization” (the “Internalization Agreement”) with GNL Advisor Merger Sub LLC, a Delaware limited liability company, GNL PM Merger Sub LLC, a Delaware limited liability company, RTL Advisor Merger Sub LLC, a Delaware limited liability company, RTL PM Merger Sub LLC, a Delaware limited liability company, GNL OP, RTL, and RTL OP on the one hand, and Advisor Parent, Global Net Lease Special Limited Partnership, LLC, a Delaware limited liability company (“GNL SLP”), Necessity Retail Space Limited Partner, LLC, (“RTL SLP”) a Delaware limited company, Global Net Lease Advisors, LLC, a Delaware limited liability company (“GNL Advisor”), Necessity Retail Advisors, LLC, a Delaware limited liability company (“RTL Advisor”), Global Net Lease Properties, LLC, a Delaware limited liability company (“GNL Property Manager”), and Necessity Retail Properties, LLC, a Delaware limited liability company (“RTL Property Manager”), on the other hand.
Consummation of the transactions contemplated by the Internalization Agreement will result in the internalization of the management of the combined company immediately following consummation of the Merger, including by terminating (i) the Company’s existing arrangement for advisory management services provided by GNL Advisor pursuant to the Fourth Amended and Restated Advisory Agreement, dated as of June 2, 2015, among GNL, GNL OP and GNL Advisor (as amended pursuant to First Amendment, dated as of August 14, 2018, Second Amendment, dated as of November 6, 2018, Third Amendment, dated as of May 6, 2020, and Fourth Amendment, dated as of May 6, 2021, the “GNL Advisory Agreement”), (ii) GNL’s existing arrangement for property management services provided by GNL Property Manager pursuant to the Property Management and Leasing Agreement, dated as of April 20, 2012, by and among GNL, GNL OP and GNL Property Manager (as amended pursuant to First Amendment, dated as of October 27, 2017, Second Amendment, dated as of February 27, 2018, and Third Amendment, dated as of February 27, 2019, the “GNL Property Management Agreement”), (iii) RTL’s existing arrangement for advisory management services provided by RTL Advisor pursuant to the Third Amended and Restated Advisory Agreement, dated as of September 6, 2016, by and among RTL, RTL OP and American Finance Advisors LLC (now known as RTL Advisor) (as amended pursuant to Amendment No. 1, dated as of July 19, 2018, Amendment No. 2, dated as of March 18, 2019, Amendment No. 3, dated as of March 30, 2020, and Amendment No. 4, dated as of January 13, 2021, the “RTL Advisory Agreement”), and (iv) RTL’s existing arrangement for property management services provided by RTL Property Manager pursuant to the Amended and Restated Property Management and Leasing Agreement, dated as of September 6, 2016, by and among RTL, RTL OP and American Finance Properties, LLC (now known as RTL Property Manager) (as amended pursuant to First Amendment, dated as of December 8, 2017, and Second Amendment, dated November 4, 2020, the “RTL Property Management Agreement”). All assets and contracts (including leases) necessary or desirable in the judgment of GNL and RTL to conduct the business of GNL and RTL and all desired employees will be placed into subsidiaries of Advisor Parent that will be merged with subsidiaries of GNL upon the effective time of the Internalization.
As consideration for the transactions contemplated by the Internalization Agreement, GNL will issue 29,614,825 shares of GNL Common Stock valued in the aggregate at $325.0 million to Advisor Parent (the “Advisor Shares”) and cash in an amount equal to $50.0 million. The number of Advisor Shares issued in respect of the Internalization was valued based on GNL’s 5-day volume-weighted average price as of market close on May 11, 2023. Pursuant to the terms of a Registration Rights and Stockholder Agreement (as defined below) to be entered into in connection with the closing of the Internalization, Advisor Parent will not be permitted to sell, transfer or pledge any of the Advisor Shares for a period of six months following completion of the Internalization. Notwithstanding the foregoing, beginning on the date that is 30 days following the Internalization Effective Time, Advisor Parent will be permitted to transfer up to $85.0 million of the Advisor Shares provided that, during any three month period, the amount of shares sold will not exceed the greater of one percent of the then outstanding shares of GNL Common Stock or the average weekly reported trading volume of the GNL Common Stock during the four weeks preceding the date of such sale. The Company intends to agree, pursuant to the Registration Rights and Stockholder Agreement, to register the Advisor Shares for resale under the Securities Act, pursuant to the terms and conditions (including limitations) thereof. Following the completion of the Internalization, the GNL Advisory Agreement, GNL Property Management Agreement, RTL Advisory Agreement and RTL Property Management Agreement will be terminated.
The Internalization Agreement contains customary indemnification provisions, including, among other things, for breach of any representation or warranty or failure to perform any covenant or agreement. Pursuant to the Internalization Agreement, GNL has agreed to indemnify Advisor Parent and its subsidiaries, and Advisor Parent has agreed to indemnify GNL and its subsidiaries, for losses incurred relating to any Shared Contract (as defined in the Internalization Agreement). Additionally, Advisor Parent has agreed to indemnify GNL and each Surviving Entity (as defined in the Internalization Agreement) from losses incurred relating to certain tax matters in connection with the Internalization and from any Advisor Closing Amount (as defined in the Internalization Agreement) not factored into the amounts paid pursuant to the Internalization Agreement, among other tax-related matters. GNL has agreed to indemnify Advisor Parent and its affiliates and its and their respective officers, directors, stockholders, partners, managers, and members and their respective heirs, legatees, devisees, executors, administrators, trustees, personal representatives, successors and assigns from losses incurred relating to, among other things, any GNL Closing Amount (as defined in the Internalization Agreement) not factored into the amounts paid pursuant to the Internalization Agreement. GNL will not be entitled to indemnification under the terms of the Internalization Agreement unless the losses incurred exceed $3,750,000 in the aggregate (the “Deductible”), in which case the indemnified party will be entitled to indemnification only to the extent the aggregate losses exceed the Deductible, provided, however, that the Deductible will not apply to losses with respect to the breach of any Advisor Fundamental Representations (as defined in the Internalization Agreement).
The Internalization Agreement may be terminated, subject to certain limitations set forth in the Internalization Agreement, (i) by mutual written agreement by the parties thereto, (ii) by any party if a final and non-appealable order is entered that permanently restrains or otherwise prohibits the Internalization, (iii) by any party should the Effective Time (as defined in the Internalization Agreement) not have occurred on or before June 1, 2024, or (iv) by any party if the Merger Agreement is terminated pursuant to the terms thereof, among other reasons set forth in the Internalization Agreement.
The obligation of each party to consummate the Internalization is subject to certain conditions, including, among other conditions, the consummation of the REIT Merger, receipt of the stockholder approval from GNL’s stockholders, delivery of certain documents and certificates, the truth and correctness of the representations and warranties of the parties (subject to contractual standards of materiality), the absence of injunctions or legal orders restraining the transaction, the absence of a material adverse effect and the receipt of certain requisite consents under the GNL Credit Agreement, the RTL CMBS and the GNL CMBS.
Registration Rights and Stockholder Agreement
In connection with the Internalization Agreement, and as a condition to the closing of the Internalization, GNL will enter into a Registration Rights and Stockholder Agreement with Advisor Parent, providing Advisor Parent with certain registration rights whereby, following the closing of the Internalization and the expiration of any related lock-up period, Advisor Parent can require GNL to register under the Securities Act the shares of GNL Common stock received by the Advisor Parent in connection with the Internalization. In addition, the Registration Rights and Stockholder Agreement will provide Advisor Parent with certain piggyback registration rights as well as certain board designation rights, subject to certain ownership threshold requirements.
Non-Competition Agreement
On May 23, 2023, in connection with the execution of the Internalization Agreement, the Company entered into confidentiality, non-competition and non-solicitation agreements (the “Non-Competition Agreements”) with certain equity owners of Advisor Parent (the “Restricted Persons”) that will become effective at the Merger Effective Time. Pursuant to the terms of the Non-Competition Agreements, the Restricted Persons agreed to abide by certain confidentiality provisions except where disclosure of Confidential Information (as defined in the Non-Competition Agreement) is necessary to excise the Restricted Person’s rights under the Non-Competition Agreement or the Merger Agreement or related transaction documents, to the extent necessary in connection with such Restricted Person’s employment with GNL or any of GNL’s affiliates, and certain other customary exceptions. Additionally, the Non-Competition Agreement prevents the Restricted Persons and their affiliates, for a period of five years from the Merger Effective Time (the “Restricted Period”), from, among other actions, (i) managing, operating, advising, or consulting for any Restricted Business (as defined in the Non-Competition Agreements) in the territories listed in the Non-Competition Agreements, subject to certain carveouts enumerated in the Non-Competition Agreements; (ii) hiring or soliciting for employment any employee of GNL or its affiliates, subject to certain exceptions; (iii) soliciting or encouraging any customer or supplier of GNL or its affiliates to terminate or adversely modify its relationship with GNL; or (iv) making any negative, derogatory, disparaging, or untrue comments, communications, or statements, whether written or oral, about the merger subsidiaries formed in connection with the Internalization and party to the Internalization Agreement or any of their respective affiliates, or any officer, director, shareholder, manager or member thereof (collectively, the “GNL Protected Persons”) or the business, management, operations, or strategies of the GNL Protected Persons. The Restricted Persons may also be prohibited from employing, hiring, or entering into a consulting arrangement with either of Edward M. Weil, Jr. or James L. Nelson during the term of such individual’s employment agreement with GNL. GNL is also restricted from making any negative, derogatory, disparaging, or untrue comments, communications, or statements, whether written or oral, about the Restricted Persons or any of their respective officers, directors, shareholders, managers or members (collectively, the “Restricted Persons Protected Persons”), or the business, management, operations, or strategies of the Restricted Persons Protected Persons, effective at the Merger Effective Time.
Employment Agreement of Edward M. Weil, Jr.
On May 23, 2023, the Company entered into an Employment Agreement with Edward M. Weil, Jr., to be effective at the Merger Effective Time, setting forth the terms upon which Mr. Weil will serve as GNL’s Co-Chief Executive Officer from and after the closing date of the Merger until April 14, 2024. Pursuant to the agreement, commencing on the earlier of (i) April 14, 2024 or (ii) such date that James L. Nelson, GNL’s other Co-Chief Executive Officer (as described in more detail below), is no longer serving as Co-Chief Executive Officer, Mr. Weil will be the sole Chief Executive Officer of the Company. The agreement will continue in full force and effect until April 30, 2025 and will automatically renew for additional one-year periods thereafter, unless either GNL or Mr. Weil, at least 60 days prior to the scheduled expiration date, provides written notice of its or his intent not to renew or unless terminated earlier in accordance with the terms thereof. The Company has agreed to use its reasonable best efforts to cause the Company to nominate Mr. Weil as a director of GNL’s board of directors and will continue to nominate him during the term of the agreement.
Pursuant to the employment agreement, Mr. Weil is entitled to, among other things:
| · | a base salary at an annual rate of $2,000,000; |
| · | an annual bonus opportunity for each completed calendar year with a guaranteed minimum bonus of 50% of his annual base salary; provided that such annual bonus may be increased (but not decreased) and the GNL Board will engage a national compensation consulting firm reasonably promptly after May 23, 2023 to recommend to the Board prior to the closing date of the Merger if there should be an increase to the annual bonus (based on the consulting recommendation based on analysis of peer employers in the industry and which may be based on the performance of the Company and additional targets) and the GNL Board will consider such recommendation acting in good faith to increase such annual bonus; provided further that the annual bonus will be paid 50% in cash and 50% in equity and to the extent that such equity is not fully vested on grant will vest in equal monthly installments with 100% fully vested by April 30, 2025; provided further that except as set forth in the agreement, Mr. Weil must be employed by the Company or an affiliate of the Company on the date the annual bonus is paid to be eligible to receive the annual bonus for such year; and |
| · | employee benefits including, among other things, indemnification rights from the Company, expense reimbursement rights for all reasonable and documented business expenses (provided that Mr. Weil will also be entitled to reimbursement for first class travel and payment of Mr. Weil’s costs of maintaining professional licenses (including the costs of complying with any applicable continuing education requirements)) and a $12,500 per month ($150,000 annually) allowance for travel. |
Upon certain terminations of Mr. Weil’s employment, in addition to payment of accrued but unpaid base salary and monthly travel allowance, Mr. Weil (or his estate, as applicable) would be entitled to the following severance pay and benefits, subject to execution of a release of claims:
| · | if the termination is by reason of death or disability, payment of any accrued but unpaid annual bonus for a previously completed fiscal year; continued payment of Mr. Weil’s base salary through the later of April 30, 2025 or the end of the then-applicable renewal term; accelerated vesting of all then-outstanding equity or equity-based awards; and a pro-rated annual bonus for the year in which such termination occurs; |
| · | if the termination is by the combined company without “cause” (including because of the combined company’s decision not to renew the Weil Employment Agreement), or by Mr. Weil for “good reason,” payment of any accrued but unpaid annual bonus for a previously completed fiscal year; accelerated vesting of all then-outstanding equity or equity-based awards; a pro-rated annual bonus for the year in which such termination occurs; and continued payment of Mr. Weil’s base salary, monthly travel allowance, and the combined company’s contributions to Mr. Weil’s healthcare benefits through the longer of the end of the remaining CEO Term or 12 months following the date of Mr. Weil’s termination; and |
| · | if the termination is by Mr. Weil without “good reason,” a pro-rated annual bonus for the year in which such termination occurs. |
The agreement also contains intellectual property and post-termination cooperation covenants from Mr. Weil. As described above, Mr. Weil has also executed a Non-Competition Agreement simultaneously with execution of the agreement.
Employment of James L. Nelson
Pursuant to the terms of the Merger Agreement and at the closing of the Merger, and pursuant to the Internalization Agreement, Advisor Parent will assign that certain Employment Agreement, dated July 10, 2017, between Advisor Parent and James L. Nelson, as amended by the Amendment to Employment Agreement dated March 24, 2022, to GNL. Mr. Nelson will serve as Co-CEO of GNL under the terms of his agreement, which ends on April 14, 2024. However, the combined company will have the right to extend the term for a period ending not later than June 14, 2024 (the period of any such extension, the “Extension Term”).
Pursuant to the terms of his agreement, Mr. Nelson is entitled to, among other things:
| · | a base salary of $5,250,000 per year (but, during the Extension Term, if applicable, the base salary will be at a weekly rate of $105,769.23); and |
| · | employee benefits including, among other things, indemnification rights from GNL, paid vacation, sick and personal days, participation in GNL’s employee benefit plans, expense reimbursement rights for all reasonable and documented business expenses (provided that Mr. Nelson will also be entitled to reimbursement for first class domestic travel and international business travel, and payment of Mr. Nelson’s costs of maintaining professional licenses (including the costs of complying with any applicable continuing education requirements)). |
Upon certain terminations of Mr. Nelson’s employment, in addition to payment of accrued but unpaid base salary and reimbursable expenses, Mr. Nelson would be entitled to the following severance pay and benefits, subject to execution of a release of claims:
| · | if the termination is by the combined company without “cause,” a severance package consisting of continued base salary for the remainder of the term of the Nelson Employment Agreement (assuming there is no Extension Term). |
Mr. Nelson’s agreement contains intellectual property and post-termination cooperation covenants from Mr. Nelson, as well as a non-compete and non-solicit of clients of investors that each survive during the term of the agreement plus a 12-month period thereafter; a prohibition on soliciting employees and independent contractors (including a no-hire) that survives during the term of the agreement plus an 18-month period thereafter; and a reciprocal non-disparagement covenant.
Each of the foregoing descriptions of the Merger Agreement, the Internalization Agreement, the Non-Competition Agreement with Edward J. Weil, Jr., the Non-Competition Agreement with Nicholas Schorsch, and the employment agreement with Edward J. Weil, Jr. (collectively, the “Agreements”) is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, the Internalization Agreement, the Non-Competition Agreement with Edward. J. Weil, Jr., the Non-Competition Agreement with Nicholas Schorsch, and the employment agreement with Edward J. Weil, Jr., as applicable, which are filed as Exhibits 2.1, 2.2, 10.1, 10.2, and 10.3, respectively, and are incorporated herein by reference. A copy of each Agreement has been included to provide stockholders with information regarding its terms and is not intended to provide any factual information about the parties to the Agreements. The representations, warranties and covenants contained in each Agreement have been made solely for the benefit of the parties thereto and are not intended as statements of fact to be relied upon by the Company’s stockholders, but rather, as a way of allocating the risk between the parties thereto in the event that the statements therein prove to be inaccurate. Statements made in the Merger Agreement have been modified or qualified by certain confidential disclosures that were made between the parties in connection with the negotiation of the Merger Agreement, which disclosures are not reflected in the Merger Agreement attached hereto. Moreover, such statements may no longer be true as of a given date and may apply standards of materiality in a way that is different from what may be viewed as material by stockholders. Accordingly, stockholders should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties to the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Agreements, which subsequent information may or may not be fully reflected in the Company’s public disclosures. The Company acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Current Report on Form 8-K not misleading.
| Item 3.03 | Material Modification to the Rights of Security Holders. |
The information set forth in Item 1.01 of this Current Report on Form 8-K with respect to the Certificate of Notice is incorporated by reference into this Item 3.03.
The summary of the material terms of the Certificate of Notice described above does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Certificate of Notice which is attached as Exhibit 4.1 to this Current Report on Form 8-K and incorporated herein by reference.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
The information set forth in Item 1.01 of this Current Report on Form 8-K with respect to the RTL Restricted Shares, the GNL Restricted Shares, the RTL LTIP Units (and Converted RTL Restricted Shares), and GNL LTIP Units (and GNL Restricted Shares), the increase in size of the GNL Board by three directors and other changes to the RTL Board, the Weil Employment Agreement and the Nelson Employment Agreement, each to be effective at the REIT Merger Effective Time, is incorporated by reference into this Item 5.02.
About Global Net Lease, Inc.
Global Net Lease, Inc. (NYSE: GNL) is a publicly traded real estate investment trust listed on the New York Stock Exchange focused on acquiring a diversified global portfolio of commercial properties, with an emphasis on sale-leaseback transactions involving single tenant, mission critical income producing net-leased assets across the United States, Western and Northern Europe. Additional information about GNL can be found on its website at www.globalnetlease.com.
Forward-Looking Statements
The statements in this communication that are not historical facts may be forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to be materially different. In addition, words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” expects,” “plans,” “intends,” “would,” or similar expressions indicate a forward-looking statement, although not all forward-looking statements contain these identifying words. Any statements referring to the future value of an investment in GNL, including the adjustments giving effect to the Merger and the Internalization as described in this communication, as well as the potential success that GNL may have in executing the Merger and Internalization, are also forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause GNL’s actual results, or GNL’s actual results after making adjustments to give effect to the Merger and the Internalization, to differ materially from those contemplated by such forward-looking statements, including but not limited to: (i) GNL’s and RTL’s ability to complete the proposed Merger and Internalization on the proposed terms or on the anticipated timeline, or at all, including risks and uncertainties related to securing the necessary stockholder approvals and satisfaction of other closing conditions to consummate the proposed transaction, (ii) the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement relating to the proposed transactions, (iii) ability of GNL to obtain lender consent to amend its Second Amended and Restated Credit Facility or any other GNL loan agreement (including any RTL debt obligations assumed in connection with the Merger), if at all, or on terms favorable to GNL, (iv) risks related to the potential repeal of GNL’s Shareholder’s Rights Plan; (v) risks related to the decrease in the beneficial ownership requirements of GNL’s applicable classes and series of stock; (vi) risks related to diverting the attention of GNL’s and RTL’s management from ongoing business operations, (vii) failure to realize the expected benefits of the proposed transactions, (viii) significant transaction costs or unknown or inestimable liabilities, (ix) the risk of shareholder litigation in connection with the proposed transaction, including resulting expense or delay, (x) the risk that RTL’s business will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected, (xi) risks related to future opportunities and plans for the GNL Post-closing, including the uncertainty of expected future financial performance and results of GNL Post-closing following completion of the proposed Transactions, (xii) the effect of the announcement of the proposed transaction on the ability of GNL and RTL to operate their respective businesses and retain and hire key personnel and to maintain favorable business relationships, (xiii) the effect of any downgrade of the GNL’s or RTL’s corporate rating or to any of their respective debt or equity securities including the outstanding notes under the RTL Indenture; (xiv) risks related to the market value of RTL’s common stock and to GNL’s common stock prior to the closing of the Merger, including the risks related to the market value of GNL’s common stock to be issued in the proposed transactions; (xv) other risks related to the completion of the proposed transactions, (xvi) potential adverse effects of the ongoing global COVID-19 pandemic, including actions taken to contain or treat the COVID-19, on GNL, GNL’s tenants and the global economy and financial market, as well as the additional risks, uncertainties and other important factors set forth in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of GNL’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2023, and all other filings with the SEC after that date, as such risks, uncertainties and other important factors may be updated from time to time in GNL’s subsequent reports. Further, forward-looking statements speak only as of the date they are made, and GNL undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, except as required by law.
Additional Information and Where to Find It
In connection with the proposed transactions, GNL intends to file with the SEC a registration statement on Form S-4, which will include a document that serves as a prospectus of GNL and a joint proxy statement of GNL and RTL (the “joint proxy statement/prospectus”). Each party also plans to file other relevant documents with the SEC regarding the proposed transactions. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS. A definitive joint proxy statement/prospectus will be sent to GNL’s stockholders and RTL’s stockholders. Investors and securityholders may obtain a free copy of the joint proxy statement/prospectus (if and when it becomes available) and other relevant documents filed by GNL and RTL with the SEC at the SEC’s website at www.sec.gov. Copies of the documents filed by GNL with the SEC will be available free of charge on GNL’s website at www.globalnetlease.com or by contacting GNL’s Investor Relations at investorrelations@globalnetlease.com. Copies of the documents filed by RTL with the SEC will be available free of charge on RTL’s website at www.necessityretailreit.com or by contacting RTL’s Investor Relations at ir@rtlreit.com.
Participants in the Proxy Solicitation
GNL, RTL, GNL OP, RTL OP, Advisor Parent, GNL Advisor and RTL Advisor, and their respective directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transactions. Information about directors and executive officers of GNL is available in the GNL proxy statement for its 2023 Annual Meeting, which was filed with the SEC on April 10, 2023. Information about directors and executive officers of RTL is available in the RTL proxy statement for its 2023 Annual Meeting, which was filed with the SEC on April 10, 2023. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials filed with the SEC regarding the proposed transactions when they become available. Investors should read the joint proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions. Investors may obtain free copies of these documents from GNL and RTL as indicated above.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
___________________________
* The Company has omitted certain schedules and exhibits pursuant to Item 601(b)(2) of Regulation S-K and shall furnish supplementally to the SEC copies of any of the omitted schedules and exhibits upon request by the SEC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| GLOBAL NET LEASE, INC. | ||
| Date: May 25, 2023 | By: | /s/ James L. Nelson |
| Name: | James L. Nelson | |
| Title: | Chief Executive Officer and President | |
Exhibit 2.1
Execution Version
AGREEMENT AND PLAN OF MERGER
by and among
GLOBAL NET LEASE, INC.
GLOBAL NET LEASE OPERATING PARTNERSHIP, L.P.
OSMOSIS SUB I, LLC
OSMOSIS SUB II, LLC
THE NECESSITY RETAIL REIT, INC.
and
THE NECESSITY RETAIL REIT OPERATING PARTNERSHIP, L.P.
Dated as of May 23, 2023
TABLE OF CONTENTS
| Article I. Definitions | 3 | |
| Section 1.1 | Definitions | 3 |
| Article II. The Mergers | 15 | |
| Section 2.1 | The Mergers | 15 |
| Section 2.2 | Closing | 15 |
| Section 2.3 | Effective Time | 15 |
| Section 2.4 | Organizational Documents | 16 |
| Section 2.5 | Tax Consequences | 16 |
| Section 2.6 | Subsequent Actions | 17 |
| Article III. EFFECT OF THE MERGERS | 17 | |
| Section 3.1 | Effect on Shares | 17 |
| Section 3.2 | Effect on Company Partnership Units | 18 |
| Section 3.3 | Company Restricted Stock | 19 |
| Section 3.4 | Adjustments | 20 |
| Section 3.5 | Exchange Fund; Exchange Agent | 20 |
| Section 3.6 | Withholding Rights | 24 |
| Section 3.7 | Lost Certificates | 24 |
| Section 3.8 | No Rights of Objection or Appraisal | 24 |
| Section 3.9 | Fractional Shares and Units | 24 |
| Article IV. Representations and Warranties of the Company and Company Operating Partnership | 25 | |
| Section 4.1 | Organization and Qualification; Subsidiaries | 25 |
| Section 4.2 | Organizational Documents | 26 |
| Section 4.3 | Capital Structure | 26 |
| Section 4.4 | Authority | 28 |
| Section 4.5 | No Conflict; Required Filings and Consents | 29 |
| Section 4.6 | Permits; Compliance with Law | 30 |
| Section 4.7 | SEC Filings; Company Financial Statements | 31 |
| Section 4.8 | Disclosure Documents | 33 |
| Section 4.9 | Absence of Certain Changes or Events | 34 |
| Section 4.10 | Employee Benefit Plans and Service Providers | 35 |
| Section 4.11 | Labor and Employment Matters | 36 |
| Section 4.12 | Material Contracts | 36 |
| Section 4.13 | Litigation | 37 |
| Section 4.14 | Environmental Matters | 38 |
| Section 4.15 | Intellectual Property | 38 |
| Section 4.16 | Properties | 39 |
| Section 4.17 | Taxes | 43 |
| Section 4.18 | Insurance | 45 |
| Section 4.19 | Opinion of Financial Advisor | 45 |
| Section 4.20 | Takeover Statutes | 46 |
| Section 4.21 | Vote Required | 46 |
| Section 4.22 | Company Rights Plan | 46 |
| Section 4.23 | Brokers | 46 |
| Section 4.24 | Investment Company Act | 46 |
| Section 4.25 | Ownership of Parent Common Shares | 46 |
| Section 4.26 | Affiliate Transactions | 46 |
| Section 4.27 | [Reserved] | 47 |
| Section 4.28 | No Other Representations or Warranties | 47 |
| Article V. Representations and Warranties of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub | 47 | |
| Section 5.1 | Organization and Qualification; Subsidiaries | 47 |
| Section 5.2 | Organizational Documents | 48 |
| Section 5.3 | Capital Structure | 49 |
| Section 5.4 | Authority | 50 |
| Section 5.5 | No Conflict; Required Filings and Consents | 51 |
| Section 5.6 | Permits; Compliance with Law | 52 |
| Section 5.7 | SEC Filings; Financial Statements | 54 |
| Section 5.8 | Disclosure Documents | 56 |
| Section 5.9 | Absence of Certain Changes or Events | 56 |
| Section 5.10 | Employee Benefit Plans and Service Providers | 57 |
| Section 5.11 | Labor and Other Employment Matters | 58 |
| Section 5.12 | Material Contracts | 58 |
| Section 5.13 | Litigation | 60 |
| Section 5.14 | Environmental Matters | 60 |
| Section 5.15 | Intellectual Property | 61 |
| Section 5.16 | Properties | 61 |
| Section 5.17 | Taxes | 65 |
| Section 5.18 | Insurance | 67 |
| Section 5.19 | Opinion of Financial Advisor | 68 |
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| Section 5.20 | Vote Required | 68 |
| Section 5.21 | Brokers | 68 |
| Section 5.22 | Investment Company Act | 68 |
| Section 5.23 | Ownership of REIT Merger Sub and Partnership Merger Sub; No Prior Activities | 68 |
| Section 5.24 | Ownership of Company Common Stock | 69 |
| Section 5.25 | Takeover Statutes | 69 |
| Section 5.26 | Parent Rights Plan | 69 |
| Section 5.27 | Affiliate Transactions | 69 |
| Section 5.28 | [Reserved] | 69 |
| Section 5.29 | No Other Representations or Warranties | 69 |
| Article VI. Covenants and Agreements | 70 | |
| Section 6.1 | Conduct of Business by the Company | 70 |
| Section 6.2 | Conduct of Business by Parent | 75 |
| Section 6.3 | Preparation of Form S-4, Joint Proxy Statement and NYSE Listing; Stockholder Meetings | 81 |
| Section 6.4 | Access to Information; Confidentiality | 83 |
| Section 6.5 | Company Acquisition Proposals | 84 |
| Section 6.6 | Parent Change in Recommendation | 89 |
| Section 6.7 | Appropriate Action; Consents; Filings | 89 |
| Section 6.8 | Notification of Certain Matters; Transaction Litigation | 91 |
| Section 6.9 | Public Announcements | 91 |
| Section 6.10 | Directors’ and Officers’ Indemnification and Insurance | 92 |
| Section 6.11 | Certain Tax Matters | 95 |
| Section 6.12 | Control of Operations | 95 |
| Section 6.13 | Dividends | 95 |
| Section 6.14 | Section 16 Matters | 96 |
| Section 6.15 | Voting of Securities | 97 |
| Section 6.16 | Parent Preferred Shares | 97 |
| Section 6.17 | Board of Directors of Parent | 97 |
| Section 6.18 | Corporate Governance | 97 |
| Section 6.19 | Internalization | 97 |
| Article VII. Conditions | 97 | |
| Section 7.1 | Conditions to the Obligations of Each Party | 97 |
| Section 7.2 | Conditions to the Obligations of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub | 98 |
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| Section 7.3 | Conditions to the Obligations of the Company and Company Operating Partnership | 99 |
| Article VIII. Termination, Amendment and Waiver | 100 | |
| Section 8.1 | Termination | 100 |
| Section 8.2 | Effect of Termination | 102 |
| Section 8.3 | Termination Fees and Expenses | 103 |
| Section 8.4 | Amendment | 105 |
| Section 8.5 | Waiver | 105 |
| Section 8.6 | Fees and Expenses | 106 |
| Article IX. General Provisions | 106 | |
| Section 9.1 | Non-Survival of Representations and Warranties | 106 |
| Section 9.2 | Notices | 106 |
| Section 9.3 | Interpretation; Certain Definitions | 107 |
| Section 9.4 | Severability | 108 |
| Section 9.5 | Assignment; Delegation | 108 |
| Section 9.6 | Entire Agreement | 108 |
| Section 9.7 | No Third-Party Beneficiaries | 108 |
| Section 9.8 | Specific Performance | 108 |
| Section 9.9 | Counterparts | 109 |
| Section 9.10 | Governing Law | 109 |
| Section 9.11 | Consent to Jurisdiction | 109 |
| Section 9.12 | WAIVER OF JURY TRIAL | 109 |
EXHIBITS
| Exhibit A | — | Form of “Internalization” Agreement and Plan of Merger | ||
| Exhibit B | — | Form of Articles Supplementary Designating Parent Preferred Shares | ||
| Exhibit C | — | Form of Articles Supplementary Opting out of MUTA | ||
| Exhibit D | — | Form of Second Amended and Restated Bylaws | ||
| Exhibit E | — | Form of Second Amendment of Rights Agreement | ||
| Exhibit F | — | Form of Company REIT Opinion | ||
| Exhibit G | — | Form of Parent Section 368 Opinion | ||
| Exhibit H | — | Form of Parent REIT Opinion | ||
| Exhibit I | — | Form of Company Section 368 Opinion |
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 23, 2023 (this “Agreement”), is made by and among Global Net Lease, Inc., a Maryland corporation (“Parent”), Global Net Lease Operating Partnership, L.P., a Delaware limited partnership (“Parent Operating Partnership”), Osmosis Sub I, LLC, a Maryland limited liability company and a wholly owned subsidiary of Parent (“REIT Merger Sub”), Osmosis Sub II, LLC, a Delaware limited liability company and a wholly owned subsidiary of Parent Operating Partnership (“Partnership Merger Sub”), The Necessity Retail REIT, Inc., a Maryland corporation (the “Company”), and The Necessity Retail REIT Operating Partnership, L.P., a Delaware limited partnership (“Company Operating Partnership”). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in Section 1.1.
W I T N E S E T H:
WHEREAS, the Company is a Maryland corporation operating as a real estate investment trust for U.S. federal income tax purposes that holds interests in properties through the Company Operating Partnership and is the sole general partner of the Company Operating Partnership;
WHEREAS, Parent is a Maryland corporation operating as a real estate investment trust for U.S. federal income tax purposes that holds interests in properties through the Parent Operating Partnership and is the sole general partner of the Parent Operating Partnership;
WHEREAS, the parties hereto wish to effect a business combination transaction in which the Company shall merge with and into REIT Merger Sub, with the REIT Merger Sub being the surviving entity (the “REIT Merger”), and each outstanding share of Company Common Stock will be converted into the right to receive from Parent the applicable REIT Common Merger Consideration and each outstanding share of Company Preferred Stock will be converted into the right to receive from Parent the applicable REIT Preferred Merger Consideration, upon the terms and subject to the conditions set forth in this Agreement and in accordance with the MGCL and the MD LLC Act;
WHEREAS, immediately after the REIT Merger, Partnership Merger Sub shall merge with and into Company Operating Partnership, with Company Operating Partnership continuing as the surviving entity and a wholly owned subsidiary of Parent Operating Partnership (such merger transaction, the “Partnership Merger” and, together with the REIT Merger, the “Mergers”), and outstanding Company Partnership Units will be converted into the right to receive partnership interests in Parent Operating Partnership, upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DRULPA and the DLLCA;
WHEREAS, the board of directors of Parent (the “Parent Board”), based on the unanimous recommendation of the Parent Special Committee, has determined that the Mergers are in the best interests of Parent and its stockholders, approved this Agreement and the Mergers and the other transactions contemplated by this Agreement, including the issuance of Parent Common Shares (the “REIT Share Issuance”) and the New Parent Preferred Shares, directed that the issuance of Parent Common Shares in connection with the REIT Merger be submitted for consideration at a meeting of Parent’s stockholders and resolved to recommend that Parent’s stockholders vote to approve this issuance of Parent Common Shares;
WHEREAS, the Parent Board, based on the unanimous recommendation of the Parent Special Committee, has determined that certain corporate governance changes are in the best interests of Parent and its stockholders and, in furtherance of those changes, has approved an amendment to Parent’s bylaws removing a certain director qualification, the termination of Parent’s stockholder rights plan, and, as will be set forth in Articles Supplementary, adopted a resolution opting out of the provisions of Subtitle 8 of Title 3 of the MGCL (“MUTA”) and providing that such prohibition may not be repealed without the approval of the stockholders by the affirmative vote of at least a majority of the votes cast on the matter by stockholders entitled to vote generally in the election of directors;
WHEREAS, the board of directors of the Company (the “Company Board”), based on the unanimous recommendation of the Company Special Committee, has determined that the Mergers are in the best interests of the Company and its stockholders, approved this Agreement and the Mergers and the other transactions contemplated by this Agreement, directed that the REIT Merger and the other transactions contemplated by this Agreement be submitted for consideration at a meeting of the Company’s stockholders and resolved to recommend that the Company’s stockholders vote to approve the REIT Merger and the other transactions contemplated by this Agreement;
WHEREAS, each of (i) Parent, in its capacity as the sole member of REIT Merger Sub and the sole general partner of Parent Operating Partnership, (ii) Company, in its capacity as the sole general partner of Company Operating Partnership, and (iii) Parent Operating Partnership, as the sole member of Partnership Merger Sub, has taken all actions required for the execution of this Agreement by Parent Operating Partnership, Company Operating Partnership, REIT Merger Sub, Partnership Merger Sub, respectively, and to adopt and approve this Agreement and to approve the consummation by REIT Merger Sub, Company Operating Partnership, and Partnership Merger Sub, as applicable, of the REIT Merger and the Partnership Merger, as applicable, and the other transactions contemplated by this Agreement;
WHEREAS, for U.S. federal income tax purposes (and, where applicable, state and local income tax purposes), the parties intend that (i) the REIT Merger shall constitute a “reorganization” within the meaning of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and the U.S. Department of Treasury regulations promulgated thereunder (the “Treasury Regulations”), (ii) this Agreement shall constitute a “plan of reorganization” within the meaning of Section 368 of the Code and the Treasury Regulations promulgated thereunder, and (iii) to the extent the limited partners of Company Operating Partnership receive New Parent LP Common Units, the Partnership Merger shall be treated as contributions by those limited partners of their Company LP Common Units to Parent Operating Partnership in exchange for the New Parent LP Common Units pursuant to Section 721(a) of the Code (the “Intended Tax Treatment”);
WHEREAS, the Parent Board, upon the unanimous recommendation of the Parent Special Committee, has determined that an internalization of Parent’s management and advisory functions and, in furtherance of such internalization, entry into an agreement and plan of merger by and among the Parent, Parent Operating Partnership, Company, Company Operating Partnership, AR Global Investments, LLC (“AR Global”), Parent Advisor, Global Net Lease Properties, LLC (“Parent Property Manager”), Company Advisor, and Necessity Retail Properties, LLC, substantially in the form attached hereto as Exhibit A (the “Internalization Merger Agreement”) (the transactions contemplated in the Internalization Merger Agreement, the “Internalization Merger”) are in the best interests of Parent and its stockholders, and has approved such Internalization Merger Agreement and Internalization Merger, and directed that the issuance of Parent Common Shares in connection with the Internalization Merger (such issuance, together with the REIT Share Issuance, the “Parent Share Issuances”) be submitted for consideration at a meeting of Parent’s stockholders and resolved to recommend that Parent’s stockholders vote to approve this issuance of Parent Common Shares;
WHEREAS, the Company Board, upon the unanimous recommendation of the Company Special Committee, has determined that the Internalization Merger and entry into the Internalization Merger Agreement are in the best interests of the Company and its stockholders, and approved such Internalization Merger Agreement and Internalization Merger;
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WHEREAS, each of the Company, Company Operating Partnership, Parent, Parent Operating Partnership, Partnership Merger Sub and REIT Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with the Mergers, and also to prescribe various conditions to the Mergers.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties and covenants and subject to the conditions herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
Article I.
Definitions
Section 1.1 Definitions. For purposes of this Agreement:
“Acceptable Confidentiality Agreement” shall mean a confidentiality agreement with such terms at least as favorable in the aggregate to the Company Parties as the Confidentiality Agreement; provided that such confidentiality agreement shall permit compliance with Section 6.5 or any other provision of this Agreement and need not contain any standstill or similar provision restricting or prohibiting the making or modification of any Acquisition Proposal.
“Action” shall mean any claim, action, suit, proceeding, arbitration, mediation or other investigation.
“Affiliate” of a specified Person shall mean a Person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.
“Anti-Corruption Laws” shall mean (i) the U.S. Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations promulgated thereunder, and (ii) any anti-bribery, anti-corruption or similar applicable Law of any other jurisdiction.
“Benefit Plans” of a specified Person shall mean each “employee benefit plan” (within the meaning of Section 3(3) of ERISA), and all employment, severance, change in control, bonus, equity-based compensation, bonus, incentive and vacation plan, program, policy or agreement sponsored or maintained by such Person, in which employees of such Person participate.
“Business Day” shall mean any day other than a Saturday, Sunday or a day on which all banking institutions in New York, New York are authorized or obligated by Law or executive order to close.
“Company 2018 Equity Plan” shall mean, collectively, (i) the 2018 Advisor Omnibus Incentive Compensation Plan of the Company and (ii) the 2018 Omnibus Incentive Compensation Plan of the Company.
“Company 2021 OP Plan” shall mean that certain Advisor Multi-Year Outperformance Award Agreement, dated as of July 21, 2021, by and among the Company, Company Operating Partnership and American Finance Advisors, LLC.
“Company Advisor” shall mean Necessity Retail Advisors, LLC, a Delaware limited liability company.
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“Company Bylaws” shall mean the Fifth Amended and Restated Bylaws of the Company restated through February 10, 2022, as it may be amended from time to time.
“Company Charter” shall mean the Articles of Restatement of the Company, dated February 24, 2021, with any articles of amendment or articles supplementary thereto, as it may be further amended and supplemented from time to time.
“Company Common Stock” shall mean the Class A Common Stock, par value $0.01 per share, of the Company.
“Company Equity Plans” shall mean the Company 2018 Equity Plan and the Company 2021 OP Plan.
“Company LP Common Unit” shall mean a limited partnership interest in Company Operating Partnership designated as a “Common Unit” under the Company Partnership Agreement, including, for the avoidance of doubt, Class A Units, Class B Units and LTIP Units (each as defined in the Company Partnership Agreement).
“Company LP Preferred Unit” shall mean a limited partnership interest in Company Operating Partnership designated as a “Series A Preferred Unit” or a “Series C Preferred Unit” under the Company Partnership Agreement.
“Company Management Agreements” shall mean, collectively, that certain Third Amended and Restated Advisory Agreement, dated as of September 6, 2016, by and among the Company, Company Operating Partnership, and Company Advisor, as amended by that certain Amendment No. 1, dated July 19, 2018, Amendment No. 2, dated March 18, 2019, Amendment No. 3, dated March 30, 2020, and Amendment No. 4, dated January 13, 2021, and that certain Amended and Restated Property Management Agreement, dated as of September 6, 2016, by and between the Company and American Finance Properties, LLC, as amended by that certain First Amendment to Amended and Restated Property Management Agreement, dated December 8, 2017 and Second Amendment, dated November 4, 2020.
“Company Material Adverse Effect” shall mean any event, circumstance, change or effect (a) that is material and adverse to the business, assets, properties, liabilities, condition (financial or otherwise) or results of operations of the Company and the Company Subsidiaries, taken as a whole or (b) that prevents or materially impairs the ability of the Company or Company Operating Partnership to consummate the Mergers before the Outside Date; 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 the Company to meet any projections or forecasts or any decrease in the market price of the Company Common Stock (it being understood and agreed that, subject to the other clauses of this proviso, any event, circumstance, change or effect giving rise to such failure or decrease shall be taken into account in determining whether there has been a Company Material Adverse Effect), (ii) any events, circumstances, changes or effects that affect the commercial real estate REIT industry or the retail industry generally, (iii) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates or changes in global, national or regional political conditions, (iv) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage, (v) the negotiation, execution or announcement of this Agreement, or the consummation or anticipation of the Mergers or other transactions contemplated hereby, including the impact of any of the foregoing on relationships, contractual or otherwise, with tenants, customers, franchisors, managers, suppliers, lenders, investors, future partners or employees, (vi) the taking of any action expressly required by, or the failure to take any action expressly prohibited by, this Agreement, or the taking of any action at the written request or with the prior written consent of Parent or the Parent Special Committee, (vii) earthquakes, hurricanes or other natural disasters or epidemic, pandemic, including the COVID-19 pandemic, and any future resurgence, or evolutions or mutations of COVID-19 or other disease outbreaks, epidemics or pandemics, or any escalation or worsening thereof, (viii) changes in Law or GAAP or interpretations or enforcement thereof or (ix) any stockholder or derivative litigation arising from allegations of a breach or violation of applicable Law relating to this Agreement or transactions contemplated thereby, which in the case of each of clauses (ii), (iii), (iv) and (viii) do not disproportionately affect the Company and the Company Subsidiaries, taken as a whole, relative to other participants in the commercial real estate REIT industry or the retail industry in the United States, and in the case of clause (vii) do not disproportionately affect the Company and the Company Subsidiaries, taken as a whole, relative to other participants in such industries in the geographic regions in which the Company and the Company Subsidiaries operate or own or lease properties.
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“Company Partnership Agreement” shall mean that certain Second Amended and Restated Agreement of Limited Partnership of the Company Operating Partnership, dated as of July 19, 2018, as amended by that certain First Amendment, dated as of November 6, 2018, as further amended by that certain Second Amendment, dated as of March 22, 2019, as further amended by that certain Third Amendment, dated as of May 8, 2019, as further amended by that certain Fourth Amendment, dated as of September 6, 2019, as further amended by that certain Fifth Amendment, dated as of October 4, 2019, as further amended by that certain Sixth Amendment, dated as of December 16, 2020, as further amended by that certain Seventh Amendment, dated as of January 13, 2021, as further amended by that certain Eighth Amendment, dated as of July 21, 2021, as it may be further amended from time to time.
“Company Partnership Certificate” shall mean the certificate of limited partnership of the Company Operating Partnership, as it may be amended from time to time.
“Company Partnership Unit” shall mean a “Partnership Unit,” as defined in the Company Partnership Agreement, and shall include a Company LP Common Unit and a Company LP Preferred Unit.
“Company Preferred Stock” shall mean shares of preferred stock, par value $0.01 per share, of the Company, of any series or type as may be designated by the Company Board.
“Company Restricted Stock” shall mean any restricted shares of Company Common Stock granted pursuant to the Company Equity Plans.
“Company Rights Agreement” shall mean that certain Rights Agreement, dated April 13, 2020, between the Company and Computershare Trust Company, N.A., as Rights Agent, as amended by that certain Amendment to Rights Agreement, dated February 25, 2021.
“Company Series A Preferred Stock” shall mean the Series A Preferred Stock, par value $0.01 per share, of the Company.
“Company Series C Preferred Stock” shall mean the Series C Cumulative Preferred Stock, par value $0.01 per share, of the Company.
“Company Special Committee” shall mean the special committee of independent directors that was established by the Company Board.
“Company Stockholder Meeting” shall mean the meeting (including any postponement and adjournment thereof) of the holders of shares of Company Common Stock for the purpose of seeking Company Stockholder Approval.
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“Company Subsidiary” shall mean a Subsidiary of the Company. A Company Subsidiary that is directly or indirectly wholly owned by the Company or Company Operating Partnership shall be deemed a wholly owned Company Subsidiary.
“Company Title Insurance Policy” shall mean each policy of title insurance insuring the Company’s or the applicable Company Subsidiary’s (or the applicable predecessor’s) title to or leasehold interest in Company Properties, subject to the matters and printed exceptions set forth in the Company Title Insurance Policies.
“Confidentiality Agreement” shall mean the letter agreement, dated April 3, 2023, as amended from time to time, between Parent and the Company.
“control” (including the terms “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.
“COVID-19” shall mean SARS-CoV-2 or any disease or infections resulting therefrom, including COVID-19 and any mutations thereof or related or associated epidemics, pandemics or disease outbreaks.
“Delaware Secretary” shall mean the Secretary of State of the State of Delaware.
“DLLCA” means the Delaware Limited Liability Company Act, as amended.
“DRULPA” shall mean the Delaware Revised Uniform Limited Partnership Act, as amended.
“Environmental Law” shall mean any Law relating to the pollution or protection of the indoor or outdoor environment (including air, surface water, groundwater, land surface or subsurface land), or human health or safety (as such matters relate to Hazardous Materials), including Laws relating to the use, handling, presence, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.
“Environmental Permit” shall mean any Permit required under any applicable Environmental Law.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” of a specified Person shall mean any corporation or other entity that is included in a controlled group of corporations at any relevant time within which such Person is also included, as provided in Section 414(b) of the Code; or which is a trade or business under common control with such Person, as provided in Section 414(c) of the Code; or which constitutes a member of an affiliated service group within which such Person is also included, as provided in Section 414(m) of the Code.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Expenses” shall mean all expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its Affiliates) reasonably and actually 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, and filing of the Form S-4, the preparation, printing, filing and mailing of the Joint Proxy Statement and all SEC and other regulatory filing fees incurred in connection with the Form S-4 and the Joint Proxy Statement, the solicitation of stockholder approvals, engaging the services of the Exchange 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.
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“GAAP” shall mean the United States generally accepted accounting principles.
“Governmental Authority” shall mean any United States (federal, state or local) or foreign government, court, arbitration panel, or any governmental or quasi-governmental, regulatory, judicial or administrative authority, board, bureau, agency, commission or self-regulatory organization.
“Hazardous Materials” shall mean (i) those substances listed in, defined in or regulated under any Environmental Law, including the following federal statutes and their state counterparts, as each may be amended from time to time, and all regulations thereunder: the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Toxic Substances Control Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act and the Clean Air Act; (ii) petroleum and petroleum products, including crude oil and any fractions thereof; (iii) polychlorinated biphenyls, methane, asbestos, and radon; and (iv) mold that would reasonably be expected to have a material adverse effect on human health or property.
“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, convertible or not convertible, (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 issued, undertaken or assumed as the deferred purchase price for any property or assets (including any potential future earn-out, purchase price adjustment or release of “holdback” or similar payment, (iv) all obligations under leases required to be capitalized under GAAP, (v) all obligations in respect of bankers acceptances or letters of credit, (vi) all obligations under interest rate cap, swap, collar or similar transaction or currency hedging transactions (valued at the termination value thereof), (vii) any guarantee of any of the foregoing, whether or not evidenced by a note, mortgage, bond, indenture or similar instrument and (viii) any agreement to provide any of the foregoing.
“Indemnitee” shall mean any individual who, on or prior to the REIT Merger Effective Time, was an officer, director, partner, member, trustee or employee of the Company or served on behalf of the Company as an officer, director, manager, partner, member, trustee or employee of any of the Company Subsidiaries.
“Intellectual Property” shall mean all United States and foreign (i) patents, patent applications, invention disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions and extensions thereof, (ii) registered and unregistered 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 and copyrights, (iv) confidential and proprietary information, including trade secrets, know-how, ideas, formulae, models and methodologies, (v) all rights in the foregoing and in other similar intangible assets, and (vi) all applications and registrations for the foregoing.
“Internalization” shall mean the internalization by Parent (resulting from the transactions contemplated by the Internalization Merger Agreement) of certain of the advisory and property management services, including personnel, provided by (i) Parent Advisor, Parent Property Manager, and their respective Subsidiaries pursuant to the Parent Management Agreements and (ii) Company Advisor, Necessity Retail Properties, LLC, and their respective Subsidiaries pursuant to the Company Management Agreements.
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“Investment Company Act” shall mean the Investment Company Act of 1940, as amended.
“IRS” shall mean the United States Internal Revenue Service.
“knowledge” shall mean the actual knowledge as of the date hereof, with respect to the Company or Parent, of the Persons listed on Section 1.1 of the Company Disclosure Letter and Section 1.1 of the Parent Disclosure Letter, respectively.
“Law” shall mean any and all domestic (federal, state or local) or foreign laws, rules, regulations, orders, judgments or decrees promulgated by any Governmental Authority.
“Lien” shall mean with respect to any asset (including any security), any mortgage, deed of trust, claim, condition, covenant, lien, pledge, charge, security interest, preferential arrangement, option or other third-party right (including right of first refusal or first offer), restriction, right of way, easement, or title defect or encumbrance of any kind in respect of such asset, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.
“Maryland SDAT” shall mean the Maryland State Department of Assessments and Taxation.
“MD LLC Act” shall mean the Maryland Limited Liability Company Act, as amended.
“MGCL” shall mean the Maryland General Corporation Law, as amended.
“NASDAQ” shall mean the Nasdaq Global Select Market.
“NYSE” shall mean the New York Stock Exchange.
“Order” shall mean a judgment, order, writ, injunction, or decree of a Governmental Authority, at law or in equity.
“Parent 2021 Equity Plan” shall mean, collectively, (i) the 2021 Advisor Omnibus Incentive Compensation Plan of Parent and (ii) the 2021 Omnibus Incentive Compensation Plan of 2021.
“Parent 2021 OP Plan” shall mean that certain 2021 Advisor Multi-Year Outperformance Award Agreement, dated as of June 3, 2021, by and among Parent, Parent Operating Partnership and Parent Advisor.
“Parent Advisor” shall mean Global Net Lease Advisors, LLC, a Delaware limited liability company.
“Parent Bylaws” shall mean the Amended and Restated Bylaws of Parent, dated as of April 9, 2016, as it may be amended from time to time.
“Parent Charter” shall mean the Articles of Restatement of the Company, dated February 24, 2021, with any articles of amendment or articles supplementary thereto, as it may be further amended and supplemented from time to time.
“Parent Common Shares” shall mean Common Stock, par value $0.01 per share, of Parent.
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“Parent Equity Plans” shall mean the Parent 2021 Equity Plan, as it may be amended from time to time, and the Parent 2021 OP Plan, as it may be amended from time to time.
“Parent Lease” shall mean each lease and sublease that is in effect as of the date hereof and to which Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or the other Parent Subsidiaries are parties as lessors or sublessors with respect to each of the applicable Parent Properties.
“Parent LP Common Unit” shall mean a limited partnership interest in Parent Operating Partnership designated as a “Common Unit” under the Parent Partnership Agreement, including, for the avoidance of doubt, OP Units, Class B Units and LTIP Units (each as defined in the Parent Partnership Agreement).
“Parent Management Agreements” shall mean, collectively, that certain Fourth Amended and Restated Advisory Agreement, dated as of June 2, 2015, among Parent, Parent Operating Partnership and Parent Advisor, as amended by that certain First Amendment, dated August 14, 2018, Second Amendment, dated November 6, 2018, Third Amendment, dated Mary 6, 2020 and Fourth Amendment, dated May 6, 2021 and as further amended from time to time and that certain Property Management and Leasing Agreement, dated as of April 20, 2012, among Parent, Parent Operating Partnership, and Parent Property Manager, as amended by that certain First Amendment, dated October 27, 2017, Second Amendment, dated February 27, 2018, and Third Amendment, dated February 27, 2019.
“Parent Material Adverse Effect” shall mean any event, circumstance, change or effect (a) that is material and adverse to the business, assets, properties, liabilities, condition (financial or otherwise) or results of operations of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub and the other Parent Subsidiaries, taken as a whole or (b) that prevents or materially impairs the ability of Parent, Parent Operating Partnership, REIT Merger Sub or Partnership Merger Sub to consummate the Mergers before the Outside Date; provided, however, that for purposes of clause (a) “Parent 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 Parent to meet any projections or forecasts or any decrease in the market price of the Parent Common Shares (it being understood and agreed that, subject to the other clauses of this proviso, any event, circumstance, change or effect giving rise to such failure or decrease shall be taken into account in determining whether there has been a Parent Material Adverse Effect), (ii) any events, circumstances, changes or effects that affect the commercial real estate REIT industry or the retail industry generally, (iii) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates or changes in global, national or regional political conditions, (iv) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage, (v) the negotiation, execution or announcement of this Agreement, or the consummation or anticipation of the Mergers or other transactions contemplated hereby, including the impact of any of the foregoing on relationships, contractual or otherwise, with tenants, customers, franchisors, managers, suppliers, lenders, investors, future partners or employees, (vi) the taking of any action expressly required by, or the failure to take any action expressly prohibited by, this Agreement, or the taking of any action at the written request or with the prior written consent of the Company or Company Special Committee, (vii) earthquakes, hurricanes or other natural disasters or epidemic, pandemic, including the COVID-19 pandemic, and any future resurgence, or evolutions or mutations of COVID-19 or other disease outbreaks, epidemics or pandemics, or any escalation or worsening thereof, (viii) changes in Law or GAAP or interpretations or enforcement thereof or (ix) any stockholder or derivative litigation arising from allegations of a breach or violation of applicable Law relating to this Agreement or transactions contemplated thereby, which in the case of each of clauses (ii), (iii), (iv) and (viii) do not disproportionately affect Parent and the Parent Subsidiaries, taken as a whole, relative to other participants in the commercial real estate industry or the retail industry in the United States, and in the case of clause (vii) do not disproportionately affect Parent and the Parent Subsidiaries, taken as a whole, relative to other participants in such industries in the geographic regions in which Parent and the Parent Subsidiaries operate or own or lease properties.
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“Parent Partnership Agreement” shall mean that certain Second Amended and Restated Agreement of Limited Partnership of Parent Operating Partnership, dated June 2, 2015, between Parent and Global Net Lease Special Limited Partner, LLC, as amended by that certain First Amendment, dated as of February 28, 2017, as further amended by that certain Second Amendment, dated as of September 11, 2017, as further amended by that certain Third Amendment, dated as of December 15, 2017, as further amended by that certain Fourth Amendment, dated as of March 23, 2018, as further amended by that certain Fifth Amendment, dated as of July 19, 2018, as further amended by that certain Sixth Amendment, dated as of November 22, 2019, as further amended by that certain Seventh Amendment, dated as of December 13, 2019, as further amended by that certain Eighth Amendment, dated as of June 3, 2021, as further amended by that certain Ninth Amendment, dated as of August 6, 2021, as it may be further amended from time to time.
“Parent Partnership Certificate” shall mean the certificate of limited partnership of Parent Operating Partnership, as it may be amended from time to time.
“Parent Partnership Unit” shall mean a “Partnership Unit,” as defined in the Parent Partnership Agreement, and shall include a Parent LP Common Unit.
“Parent Preferred Stock” shall mean the preferred stock, par value $0.01 per share, of Parent, of any series or type as may be designated by the Parent Board.
“Parent Rights Agreement” shall mean that certain Rights Agreement, dated April 9, 2020, between Parent and Computershare Trust Company, N.A., as Rights Agent, as amended by that certain Amendment to Rights Agreement, dated February 24, 2021.
“Parent Series A Preferred Stock” shall mean the Series A Preferred Stock, par value $0.01 per share, of Parent.
“Parent Series B Preferred Stock” shall mean the Series B Preferred Stock, par value $0.01 per share, of Parent.
“Parent Series C Preferred Stock” shall mean the Series C Preferred Stock, par value $0.01 per share, of Parent.
“Parent Special Committee” shall mean the special committee of independent directors established by the Parent Board.
“Parent Stockholder Meeting” shall mean the meeting (including any postponement and adjournment thereof) of the holders of Parent Common Shares for the purpose of seeking the Parent Stockholder Approval.
“Parent Subsidiary” shall mean a Subsidiary of Parent, including, for the avoidance of doubt, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub.
“Parent Title Insurance Policy” shall mean each policy of title insurance insuring Parent’s or the applicable Parent Subsidiary’s (or the applicable predecessor’s) title to or leasehold interest in Parent Properties, subject to the matters and printed exceptions set forth in the Parent Title Insurance Policies.
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“Permit” shall mean any authorization, license, permit, certificate, approval, variance, exemption, order, franchise, certification or clearance of any Governmental Authority or non-governmental accreditation and certification agency, body or other organization.
“Permitted Liens” shall mean any of the following: (i) statutory or other Liens for Taxes or assessments which are not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves are being maintained in accordance with GAAP; (ii) Liens that are carriers’, warehouseman’s, mechanics, materialmen’s, repairmen’s or other similar Liens arising in the ordinary course of business; and (iii) with respect to any real property, Liens that are zoning regulations, entitlements or other land use or environmental regulations by any Governmental Authority that do not materially impact the intended use of the real property.
“Person” shall mean 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 government or a political subdivision, agency or instrumentality of a government.
“Personal Information” shall mean (a) information related to an identified or identifiable individual (e.g., name, address telephone number, email address, financial account number, government-issued identifier), (b) any other data used or intended to be used or which allows one to identify, contact, or precisely locate an individual, including any internet protocol address or other persistent identifier, (c) any other, similar information or data regulated by Privacy/Data Security Laws, and (d) any information that is covered by the Payment Card Industry Data Security Standard.
“Privacy/Data Security Laws” shall mean all Laws governing the receipt, collection, use, storage, processing, sharing, security, disclosure, or transfer of Personal Information and any applicable Laws concerning requirements for website and mobile application privacy policies and practices, call or electronic monitoring or recording or any outbound communications.
“Public Health Measures” shall mean any quarantine, “shelter in place,” “stay at home,” social distancing, shut down, closure, sequester or any other Law, order, directive, guideline or recommendation by any Governmental Authority, the World Health Organization or any industry group in connection with or in response to COVID-19 or any other epidemic, pandemic or outbreak of disease, or in connection with or in response to any other public health conditions, in each case, whether such Law, order, directive, guideline or recommendation, or such measures, are in place currently or adopted or modified hereafter.
“Qualified REIT Subsidiary” shall mean a “qualified REIT subsidiary” within the meaning of Section 856(i)(2) of the Code.
“Registered Intellectual Property” shall mean all Intellectual Property subject to any issuance, registration, or application or filing by, to, or with any Governmental Authority or domain registrar in any jurisdiction.
“REIT” shall mean a “real estate investment trust” within the meaning of Sections 856 through 860 of the Code.
“Representative” shall mean, with respect to any Person, any of such Person’s trustees, directors, managers, officers, employees, consultants, advisors (including attorneys, accountants, consultants, investment bankers, and financial advisors), agents and other representatives.
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“Sarbanes-Oxley Act” shall mean the Sarbanes-Oxley Act of 2002, as amended.
“SEC” shall mean the United States Securities and Exchange Commission (including the staff thereof).
“Securities Act” shall mean the Securities Act of 1933, as amended.
“Surviving Entity” shall mean, (x) with respect to the Partnership Merger, Company Operating Partnership, and (y) with respect to the REIT Merger, the REIT Merger Sub.
“Subsidiary” shall mean, with respect to any Person (a) any corporation of which at least fifty percent (50%) of the outstanding voting securities is directly or indirectly owned (b) any partnership, limited liability company, joint venture or other entity of which at least fifty percent (50%) of the total equity interest is directly or indirectly owned by such Person or of which such Person or any of its Subsidiaries is a general partner, manager, managing member or the equivalent.
“Tax” or “Taxes” shall mean any federal, state, local or foreign or other taxes of any kind, together with any interest, penalties and additions to tax, imposed by any Governmental Authority, including taxes on or with respect to income, franchises, gross receipts, property, sales, transfer, use, capital stock, escheat, payroll, employment, unemployment, alternative or add on minimum, estimated and net worth, and taxes in the nature of excise, withholding (including backup withholding), and value added taxes.
“Tax Return” shall mean any return, report or similar statement, together with any attached schedule, that is required to be provided to a Governmental Authority with respect to Taxes, including information returns, refunds claims, amended returns and declarations of estimated Tax.
“Taxable REIT Subsidiary” shall mean a “taxable REIT subsidiary” within the meaning of Section 856(1) of the Code.
“Termination Date” means the date of termination of this Agreement.
“Third Party” shall mean (i) in the case of the Company, Company Operating Partnership or a Company Subsidiary, any Person or group of Persons other than Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub and their respective Affiliates or (ii) in the case of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or a Parent Subsidiary, any Person or group of Persons other than the Company, Company Operating Partnership and their respective Affiliates.
The following terms shall have the respective meanings set forth in the Section set forth below opposite such term:
| Acquisition Proposal | Section 6.5(h)(i) | |
| Aggregate REIT Merger Consideration | Section 3.5(a) | |
| Agreement | Preamble | |
| AR Global | Recitals | |
| Book-Entry Share | Section 3.1(b)(i) | |
| Certificate | Section 3.1(b)(i) | |
| Claim | Section 4.13 | |
| Closing | Section 2.2 | |
| Closing Date | Section 2.2 | |
| Closing Dividend Date | Section 6.13(a) |
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| Code | Recitals | |
| Common Exchange Ratio | Section 3.1(b)(i) | |
| Company | Preamble | |
| Company Board | Recitals | |
| Company Change in Recommendation | Section 6.5(b) | |
| Company Change Notice | Section 6.5(e) | |
| Company Common Quarterly Dividend | Section 6.1(c)(iii) | |
| Company Disclosure Letter | Article IV | |
| Company Financial Advisor | Section 4.19 | |
| Company Insurance Policies | Section 4.18 | |
| Company Intervening Event | Section 6.5(h) | |
| Company Leases | Section 4.16(h) | |
| Company Material Contract | Section 4.12(a) | |
| Company Material Leases | Section 4.16(i) | |
| Company Operating Partnership | Preamble | |
| Company Permits | Section 4.6(a) | |
| Company Permitted Liens | Section 4.16(b) | |
| Company Properties | Section 4.16(a) | |
| Company Property | Section 4.16(a) | |
| Company Recommendation | Section 4.4(a) | |
| Company Rights Plan | Section 4.3(a) | |
| Company SEC Filings | Section 4.7(a) | |
| Company Special Committee | Section 1.1 | |
| Company Stockholder Approval | Section 4.21 | |
| Company Subsidiary Partnership | Section 4.17(h) | |
| Company Tax Letter | Section 6.11(c) | |
| Company Tax Protection Agreements | Section 4.17(h) | |
| D&O Insurance | Section 6.10(c) | |
| Exchange Agent | Section 3.5(a) | |
| Exchange Fund | Section 3.5(a) | |
| Existing Indemnification Right | Section 6.10(e) | |
| Fee Recipient | Section 8.3(f) | |
| Form S-4 | Section 4.5(b) | |
| Go Shop Bidder | Section 6.5(a) | |
| Go Shop Period End Time | Section 6.5(a) | |
| Go Shop Termination Fee | Section 8.3(d)(i) | |
| Intended Tax Treatment | Recitals | |
| Interim Period | Section 6.1(a) | |
| Internalization Merger | Recitals | |
| Internalization Merger Agreement | Recitals | |
| Joint Proxy Statement | Section 4.5(b) | |
| JV Agreement | Section 4.12(a)(ix) | |
| Letter of Transmittal | Section 3.5(c)(i)(A) | |
| Mergers | Recitals | |
| Minority Limited Partner | Section 3.2 | |
| MUTA | Recitals | |
| New Company GP, LLC | Section 2.1(a) | |
| New Parent Preferred Shares | Section 3.1(b)(iii) | |
| New Parent LP Common Units | Section 3.2 |
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| New Parent Series D Preferred Stock | Section 3.1(b)(i) | |
| New Parent Series E Preferred Stock | Section 3.1(b)(iii) | |
| Outside Date | Section 8.1(b)(i) | |
| Parent | Preamble | |
| Parent Board | Recitals | |
| Parent Change in Recommendation | Section 6.6(a) | |
| Parent Change Notice | Section 6.6(b)(ii) | |
| Parent Common Quarterly Dividend | Section 6.2(c)(iii) | |
| Parent Common Shares | Section 1.1 | |
| Parent Disclosure Letter | Article V | |
| Parent Financial Advisor | Section 5.19 | |
| Parent Insurance Policies | Section 5.18 | |
| Parent Operating Partnership | Preamble | |
| Parent Material Contract | Section 5.12(a) | |
| Parent Material Leases | Section 5.16(h) | |
| Parent Operating Partnership | Preamble | |
| Parent Permits | Section 5.6(a) | |
| Parent Permitted Liens | Section 5.16(a) | |
| Parent Properties | Section 5.16(a) | |
| Parent Property | Section 5.16(a) | |
| Parent Property Manager | Recitals | |
| Parent Recommendation | Section 5.4(a) | |
| Parent Restricted Stock | Section 3.3(b) | |
| Parent Rights Plan | Section 5.3(a) | |
| Parent SEC Filings | Section 5.7(a) | |
| Parent Share Issuances | Recitals | |
| Parent Special Committee | Section 1.1 | |
| Parent Stockholder Approval | Section 5.20(a) | |
| Parent Subsidiary Partnership | Section 5.17(h) | |
| Parent Tax Letter | Section 6.11(b) | |
| Parent Tax Protection Agreements | Section 5.17(h) | |
| Partnership Merger | Recitals | |
| Partnership Merger Certificate of Merger | Section 2.3(b) | |
| Partnership Merger Effective Time | Section 2.3(b) | |
| Partnership Merger Sub | Preamble | |
| Paying Party | Section 8.3(f) | |
| Qualifying Income | Section 8.3(f) | |
| REIT Common Merger Consideration | Section 3.1(b)(i) | |
| REIT Merger | Recitals | |
| REIT Merger Articles of Merger | Section 2.3(a) | |
| REIT Merger Effective Time | Section 2.3(a) | |
| REIT Merger Sub | Preamble | |
| REIT Preferred Merger Consideration | Section 3.1(b)(iii) | |
| REIT Series A Preferred Merger Consideration | Section 3.1(b)(ii) | |
| REIT Series C Preferred Merger Consideration | Section 3.1(b)(iii) | |
| REIT Share Issuance | Recitals | |
| Superior Proposal | Section 6.5(h)(iii) | |
| Termination Fee | Section 8.3(d)(ii) | |
| Transfer Taxes | Section 6.11(a) | |
| Treasury Regulations | Recitals |
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Article II.
The Mergers
Section 2.1 The Mergers
(a) REIT Merger. Upon the terms and subject to the conditions of this Agreement, and in accordance with the MGCL and the MD LLC Act, at the REIT Merger Effective Time, the Company shall be merged with and into REIT Merger Sub, whereupon the separate existence of the Company shall cease, and REIT Merger Sub shall continue under the name “Osmosis Sub I, LLC” as the Surviving Entity in the REIT Merger. The REIT Merger shall have the effects provided in this Agreement and as specified in the MGCL and the MD LLC Act. Upon the REIT Merger Effective Time, REIT Merger Sub will be the general partner in Company Operating Partnership. Following the REIT Merger Effective Time and prior to the Partnership Merger, REIT Merger Sub shall distribute its general partnership interests in Company Operating Partnership to Parent. Parent, in turn, shall contribute such general partnership interest to Parent Operating Partnership and, in turn, Parent Operating Partnership shall contribute onward such general partnership interests to a newly formed limited liability company that shall be wholly owned by Parent Operating Partnership (“New Company GP, LLC”).
(b) Partnership Merger. Upon the terms and subject to the conditions of this Agreement and in accordance with the DRULPA and the DLLCA, at the Partnership Merger Effective Time, Partnership Merger Sub shall merge with and into Company Operating Partnership, whereupon the separate existence of Partnership Merger Sub shall cease, and Company Operating Partnership shall continue under its name as the Surviving Entity in the Partnership Merger. The Partnership Merger shall have the effects provided in this Agreement and as specified in the DRULPA and the DLLCA.
Section 2.2 Closing. The closing of the Mergers (the “Closing”) shall occur as promptly as practicable (but in no event later than the second (2nd) Business Day) after all of the conditions set forth in Article VII (other than those conditions that by their terms are required 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 and, subject to the foregoing, shall take place at such time and on a date to be specified by the parties (the “Closing Date”). The Closing shall take place at the offices of Proskauer Rose LLP, Eleven Times Square, New York, N.Y., or at such other place as agreed by the parties hereto.
Section 2.3 Effective Time.
(a) REIT Merger Effective Time. At Closing, the Company, Parent, and REIT Merger Sub shall (i) cause articles of merger with respect to the REIT Merger (the “REIT Merger Articles of Merger”) to be duly executed and filed with the Maryland SDAT as provided under the MGCL and the MD LLC Act and (ii) make any other filings, recordings or publications required to be made by the Company or REIT Merger Sub under the MGCL or the MD LLC Act in connection with the REIT Merger. The REIT Merger shall become effective upon such time as the REIT Merger Articles of Merger have been accepted for record by the Maryland SDAT, or such later time which the parties hereto shall have agreed upon and designated in the REIT Merger Articles of Merger in accordance with the MGCL and the MD LLC Act as the effective time of the REIT Merger (the “REIT Merger Effective Time”).
(b) Partnership Merger Effective Time. At the Closing, Company Operating Partnership, Parent Operating Partnership, and Partnership Merger Sub shall cause the Partnership Merger to be consummated as soon as practicable on the Closing Date immediately after the REIT Merger Effective Time, and shall (i) cause the certificate of merger with respect to the Partnership Merger (the “Partnership Merger Certificate of Merger”) to be duly executed and filed with the Delaware Secretary as provided under the DRULPA and (ii) make any other filings, recordings or publications required to be made by Company Operating Partnership or Partnership Merger Sub under the DRULPA in connection with the Partnership Merger. The Partnership Merger shall become effective upon such time as the Partnership Merger Certificate of Merger has been filed with the Delaware Secretary, or such later time that the parties hereto shall have agreed upon and designated in the Partnership Merger Certificate of Merger in accordance with the DRULPA and DLLCA 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 as soon as practicable following the REIT Merger Effective Time.
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(c) The REIT Merger shall have the effects set forth in the MGCL, the MD LLC Act and this Agreement. Without limiting the generality of the foregoing, and subject thereto, from and after the REIT Merger Effective Time, the Surviving Entity of the REIT Merger shall possess all properties, rights, privileges, powers and franchises of the Company and REIT Merger Sub, and all of the claims, obligations, liabilities, debts and duties of the Company shall become the claims, obligations, liabilities, debts and duties of the Surviving Entity of the REIT Merger.
(d) The Partnership Merger shall have the effects set forth in the DRULPA, the DLLCA and this Agreement. Without limiting the generality of the foregoing, and subject thereto, from and after the Partnership Merger Effective Time, the Surviving Entity of the Partnership Merger shall possess all properties, rights, privileges, powers and franchises of Company Operating Partnership and Partnership Merger Sub, and all of the claims, obligations, liabilities, debts and duties of Company Operating Partnership and Partnership Merger Sub shall become the claims, obligations, liabilities, debts and duties of the Surviving Entity of the Partnership Merger.
Section 2.4 Organizational Documents.
(a) The limited liability company agreement of REIT Merger Sub as in effect immediately prior to the REIT Merger Effective Time, except for such changes as may be necessary to reflect any change of name of the Surviving Entity of the REIT Merger, shall be the limited liability company agreement of the Surviving Entity of the REIT Merger immediately following the REIT Merger Effective Time, until thereafter amended in accordance with the applicable provisions thereof and in accordance with applicable Law.
(b) The agreement of limited partnership of Company Operating Partnership as in effect immediately prior to the Partnership Merger Effective Time, except for such changes as may be necessary to reflect any change of name of the Surviving Entity of the Partnership Merger, shall be the agreement of limited partnership of the Surviving Entity of the Partnership Merger immediately following the Partnership Merger Effective Time, until thereafter amended in accordance with the applicable provisions thereof and in accordance with applicable Law.
Section 2.5 Tax Consequences The parties hereto intend that the Mergers shall qualify for the Intended Tax Treatment. None of the parties or their respective Affiliates shall take or cause to be taken, or fail to take or cause to be failed to be taken, any action that would reasonably be expected to prevent qualification for such Intended Tax Treatment. Each party shall, unless otherwise required by a change in applicable Law after the date hereof, a “determination” within the meaning of Section 1313(a) of the Code, or based on a change in the facts and circumstances underlying the Mergers from the terms described in this Agreement that are necessary for the qualification of the Mergers for the Intended Tax Treatment, cause all Tax Returns to be filed in a manner consistent therewith. Each of the parties agrees to use reasonable best efforts to promptly notify all other parties of any challenge to the Intended Tax Treatment by any Governmental Authority. The parties hereto hereby adopt this Agreement as a “plan of reorganization” within the meaning of Section 368 of the Code and the Treasury Regulation promulgated thereunder.
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Section 2.6 Subsequent Actions.
(a) If at any time after the REIT Merger Effective Time the Surviving Entity of the REIT Merger shall determine, in its sole and absolute discretion, that any actions are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Entity its right, title or interest in, to or under any of the rights or properties of the Company acquired or to be acquired by the Surviving Entity as a result of, or in connection with, the REIT Merger or otherwise to carry out this Agreement, then the members, officers and managers of the Surviving Entity shall be authorized to take all such actions as may be necessary or desirable to vest all right, title or interest in, to or under such rights or properties in the Surviving Entity or otherwise to carry out this Agreement.
(b) If at any time after the Partnership Merger Effective Time the Surviving Entity of the Partnership Merger shall determine, in its sole and absolute discretion, that any actions are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Entity its right, title or interest in, to or under any of the rights or properties of the Company Operating Partnership acquired or to be acquired by the Surviving Entity as a result of, or in connection with, the Partnership Merger or otherwise to carry out this Agreement, then the general partner(s) of the Surviving Entity shall be authorized to take all such actions as may be necessary or desirable to vest all right, title or interest in, to or under such rights or properties in the Surviving Entity or otherwise to carry out this Agreement.
Article III.
EFFECT OF THE MERGERS
Section 3.1 Effect on Shares. At the REIT Merger Effective Time, by virtue of the REIT Merger and without any action on the part of the Company, Parent, REIT Merger Sub or the holders of any securities of the Company, Parent or REIT Merger Sub:
(a) Cancellation of Company Securities. Each share of Company Common Stock or Company Preferred Stock issued and outstanding immediately prior to the REIT Merger Effective Time that is held by any wholly owned Company Subsidiary, by Parent or by any Parent Subsidiary shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and no payment shall be made with respect thereto.
(b) Conversion of Company Securities.
(i) Company Common Stock. Each share of Company Common Stock issued and outstanding immediately prior to the REIT 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 0.670 Parent Common Shares (the “Common Exchange Ratio”), subject to adjustment as provided in Section 3.4 and treatment of fractional shares as provided in Section 3.9(a) (the “REIT Common Merger Consideration”). 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 the Company (a “Book-Entry Share”) with respect to such Company Common Stock that immediately prior to the REIT Merger Effective Time represented shares of Company Common Stock shall cease to have any rights with respect to such Company Common Stock, other than the right to receive the REIT Common Merger Consideration and any dividends or other distributions to which such holder may be entitled, in accordance with Section 3.5.
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(ii) Company Series A Preferred Stock. Each share of Company Series A Preferred Stock issued and outstanding immediately prior to the REIT Merger Effective Time shall automatically be converted into the right to receive from Parent one (1) share (the “REIT Series A Preferred Merger Consideration”) of a newly created series of preferred stock of Parent with substantially identical powers, preferences, privileges and rights as the Company Series A Preferred Stock (all interests of each such newly created series, collectively, the “New Parent Series D Preferred Stock”). All shares of Company Series A 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 or Book-Entry Share with respect to such Company Series A Preferred Stock that immediately prior to the REIT Merger Effective Time represented shares of Company Series A Preferred Stock shall cease to have any rights with respect to such Company Series A Preferred Stock, other than the right to receive the REIT Series A Preferred Merger Consideration and any dividends or other distributions to which such holder may be entitled, in accordance with Section 3.5.
(iii) Company Series C Preferred Stock. Each share of Company Series C Preferred Stock issued and outstanding immediately prior to the REIT Merger Effective Time shall automatically be converted into the right to receive from Parent one (1) share (the “REIT Series C Preferred Merger Consideration”, and together with the REIT Series A Preferred Merger Consideration, the “REIT Preferred Merger Consideration”) of a newly created series of preferred stock of Parent with substantially identical powers, preferences, privileges and rights as the Company Series C Preferred Stock (all interests of each such newly created series, collectively, the “New Parent Series E Preferred Stock”, and together with the New Parent Series D Preferred Stock, the “New Parent Preferred Shares”). All shares of Company Series C 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 or Book-Entry Share with respect to such Company Series C Preferred Stock that immediately prior to the REIT Merger Effective Time represented shares of Company Series C Preferred Stock shall cease to have any rights with respect to such Company Series C Preferred Stock, other than the right to receive the REIT Series C Preferred Merger Consideration and any dividends or other distributions to which such holder may be entitled, in accordance with Section 3.5.
(c) REIT Merger Sub Membership Interests. All membership interests of REIT Merger Sub issued and outstanding immediately prior to the REIT Merger Effective Time shall remain issued and outstanding following the REIT Merger Effective Time and shall constitute the only issued and outstanding Membership Interests of REIT Merger Sub so that thereafter Parent will be the sole member of the Surviving Company with respect to the REIT Merger.
Section 3.2 Effect on Company Partnership Units. At the Partnership Merger Effective Time, by virtue of the Partnership Merger and without any further action on the part of Parent Operating Partnership, Partnership Merger Sub, Company Operating Partnership or the holders of Company LP Common Units, Parent LP Common Units or any limited liability company interests in the Partnership Merger Sub, (i) the general partner interests in Company Operating Partnership held by REIT Merger Sub immediately after the REIT Merger Effective Time shall remain issued and outstanding following the Partnership Merger Effective Time and shall constitute the only issued and outstanding general partnership interests so that thereafter New Company GP, LLC will be the sole general partner of Company Operating Partnership; (ii) all of the Company LP Preferred Units held by REIT Merger Sub immediately after the REIT Merger Effective Time shall be cancelled and no payment shall be made with respect thereto; (iii) all of the Company LP Common Units held by REIT Merger Sub immediately after the REIT Merger Effective Time shall automatically be converted into ninety-nine (99) New Parent LP Common Units, and Parent Operating Partnership shall continue as the sole limited partner of the Company Operating Partnership; and (iv) each Company LP Common Unit held by a limited partner of Company Operating Partnership other than the Company or any other Company Subsidiary (each a “Minority Limited Partner”) and issued and outstanding immediately prior to the Partnership Merger Effective Time shall automatically be converted into validly issued Parent LP Common Units in Parent Operating Partnership (“New Parent LP Common Units”) in an amount equal to (x) one (1), multiplied by (y) the Common Exchange Ratio, subject to the treatment of fractional units as provided in Section 3.9, and each holder of New Parent LP Common Units shall be admitted as a limited partner of Parent Operating Partnership in accordance with the terms of the Parent Partnership Agreement. After giving effect to the transactions as described in this Section 3.2, New Company GP, LLC will be the general partner and Parent Operating Partnership will be the limited partner of Company Operating Partnership.
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Section 3.3 Company Restricted Stock. All of the provisions of this Section 3.3 shall be effectuated without any action on the part of the holder of any Company Restricted Stock.
(a) Treatment of Company Restricted Stock Granted to Company Directors. Except as set forth on Section 3.3 of the Company Disclosure Letter, as of the Business Day immediately preceding the REIT Merger Effective Time, each share of Company Restricted Stock granted to a member of the Company Board and outstanding as of immediately prior to the REIT Merger Effective Time (whether or not then vested) shall automatically become fully vested, and all restrictions with respect thereto shall lapse. Each share of Company Common Stock resulting from the vesting of the shares of Company Restricted Stock in accordance with the preceding sentence shall be treated as a share of Company Common Stock issued and outstanding immediately prior to the REIT Merger Effective Time and shall be converted into the right to receive the REIT Common Merger Consideration in accordance with Section 3.1(b)(i). As of the REIT Merger Effective Time, each member of the Company Board and holder of shares of Company Restricted Stock shall cease to have any rights with respect thereto, except the right to receive the REIT Common Merger Consideration in accordance with this Agreement.
(b) Treatment of Company Restricted Stock Granted to Non-Directors. As of the Business Day immediately preceding the REIT Merger Effective Time, all other then-outstanding shares of Company Restricted Stock (other than shares of Company Restricted Stock granted to a member of the Company Board) as of immediately prior to the REIT Merger Effective Time shall cease to relate to or represent any right to receive Company Common Stock and shall be assumed by Parent and automatically converted, at the REIT Merger Effective Time, into an award of restricted stock relating to Parent Common Shares (the “Parent Restricted Stock”) with respect to a number of Parent Common Shares equal to the product of (x) the number of shares of Company Common Stock underlying the applicable award of Company Restricted Stock as of immediately prior to such conversion, multiplied by (y) the Common Exchange Ratio with each such award of Company Restricted Stock so converted into Parent Restricted Stock otherwise subject to the same terms and conditions as were applicable to the corresponding award of Company Restricted Stock, including any applicable vesting, acceleration, and payment timing provisions, except (I) as expressly adjusted hereby, or (II) as set forth on Section 3.3(b) of the Company Disclosure Letter.
(c) Termination of Company Equity Plans. As of the REIT Merger Effective Time, (i) the Company 2021 OP Plan shall be terminated, and no further awards with respect to the Company Common Stock shall be granted thereunder, and (ii) Parent shall assume the Company 2018 Equity Plan (it being understood that new awards with respect to Parent Common Shares may only be made under the assumed Company 2018 Equity Plan following the REIT Merger Effective Time to the extent that the available share reserve under the Company 2018 Equity Plan may be utilized for such purpose under Section 303A.08 of the NYSE Listed Company Manual, and with such share reserve adjusted by multiplying (x) the number of shares of Company Common Stock that remained available for grants under the Company 2018 Equity Plan as of immediately prior to the REIT Merger Effective Time, by (y) the Common Exchange Ratio).
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(d) Manner of Effecting. Prior to the REIT Merger Effective Time, the Company and Parent Operating Partnership agree that the Company shall, and shall be permitted under this Agreement to, take all corporate action necessary to effectuate the provisions of this Section 3.3. Parent, the Company, and Parent Operating Partnership shall mutually cooperate in good faith to take all actions necessary to effectuate the provisions of this Section 3.3.
Section 3.4 Adjustments. Without limiting the other provisions of this Agreement and subject to Section 6.1(c)(ii) and Section 6.1(c)(iii), if at any time during the period between the date of this Agreement and the REIT Merger Effective Time, the Company should split, combine or otherwise reclassify the Company Common Stock or Company Preferred Stock or make a distribution in Company Common Stock or Company Preferred Stock (or securities convertible or exchangeable into or for Company Common Stock or Company Preferred Stock), or otherwise change the Company Common Stock or Company Preferred Stock into any other securities (including any dividend or other distribution of securities convertible into Company Common Stock or Company Preferred Stock), or engage in a reclassification, reorganization, recapitalization or exchange or other like change, then (without limiting any other rights of Parent hereunder), the Common Exchange Ratio or the REIT Preferred Merger Consideration, as applicable, shall be ratably adjusted to reflect fully the effect of any such change. Without limiting the other provisions of this Agreement and subject to Section 6.2(c)(ii) and Section 6.2(c)(iii), if at any time during the period between the date of this Agreement and the REIT Merger Effective Time, Parent should split, combine or otherwise reclassify the Parent Common Shares, or make a distribution in Parent Common Shares, or otherwise change the Parent Common Shares into other securities (including any dividend or other distribution of securities convertible into Parent Common Shares), or engage in a reclassification, reorganization, recapitalization or exchange or other like change, then the Common Exchange Ratio shall be ratably adjusted to reflect any such change.
Section 3.5 Exchange Fund; Exchange Agent.
(a) Prior to the REIT Merger Effective Time, Parent shall appoint a bank or trust company reasonably satisfactory to the Company to act as exchange agent (the “Exchange Agent”) for the payment and delivery of the REIT Common Merger Consideration and the REIT Preferred Merger Consideration, as provided in Section 3.1(b) and Section 3.4. On or before the REIT Merger Effective Time, Parent shall deposit, or cause to be deposited, with the Exchange Agent evidence of book-entry Parent Common Shares and Parent Preferred Shares sufficient to pay the REIT Common Merger Consideration and the REIT Preferred Merger Consideration, respectively (such evidence of book-entry Parent Common Shares and book-entry Parent Preferred Shares, the “Aggregate REIT Merger Consideration” and such Aggregate REIT Merger Consideration as deposited with the Exchange Agent, the “Exchange Fund”), in each case, for the benefit of the holders of shares of Company Common Stock, shares of Company Series A Preferred Stock, shares of Company Series C Preferred Stock and shares of Company Restricted Stock. Parent shall cause the Exchange Agent to make, and the Exchange Agent shall make, payments of the REIT Common Merger Consideration and the REIT Preferred Merger Consideration and any amounts payable in respect of dividends or distributions on Parent Common Shares and/or Parent Preferred Stock in accordance with Section 3.5(d) out of the Exchange Fund in accordance with this Agreement and the REIT Merger Articles of Merger. The Exchange Fund shall not be used for any other purpose. Any and all interest earned on cash deposited in the Exchange Fund shall be paid to the Surviving Entity of the REIT Merger.
(b) Share Transfer Books. At the REIT Merger Effective Time, the share transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers of shares of Company Common Stock or Company Preferred Stock. From and after the REIT Merger Effective Time, Persons who held shares of Company Common Stock or Company Preferred Stock immediately prior to the REIT Merger Effective Time shall cease to have rights with respect to such shares, except as otherwise provided for herein. On or after the REIT Merger Effective Time, any Certificates presented to the Exchange Agent or the Surviving Entity of the REIT Merger for any reason shall be exchanged for the REIT Common Merger Consideration or REIT Preferred Merger Consideration with respect to the shares of Company Common Stock or Company Preferred Stock, respectively, formerly represented thereby.
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(c) Exchange Procedures.
(i) As promptly as practicable following the REIT Merger Effective Time (but in no event later than two (2) Business Days thereafter), the Surviving Entity of the REIT Merger shall cause the Exchange Agent to mail (and to make available for collection by hand):
(A) to each holder of record of one or more Certificates evidencing Company Common Stock, (x) a letter of transmittal (a “Letter of Transmittal”), which shall specify that delivery shall be effected, and risk of loss and title to such Certificates shall pass only upon proper delivery of such Certificates (or affidavits of loss in lieu thereof) to the Exchange Agent, and which Letter of Transmittal shall be in such form and have such other provisions as the Surviving Entity of the REIT Merger may reasonably specify, and (y) instructions for use in effecting the surrender of such Certificates in exchange for the REIT Common Merger Consideration into which the number of shares of Company Common Stock previously represented by such Certificates shall have been converted pursuant to this Agreement, together with any amounts payable in respect of dividends or distributions on Parent Common Shares in accordance with Section 3.5(d) (which instructions shall provide that, at the election of the surrendering holder, (i) such Certificates may be surrendered by hand delivery or otherwise or (ii) the REIT Common Merger Consideration in exchange therefor, together with any amounts payable in respect of dividends or distributions on Parent Common Shares in accordance with Section 3.5(d), may be collected by hand by the surrendering holder or by check or wire transfer to the surrendering holder);
(B) to each holder of record of one or more Certificates evidencing Company Preferred Stock, (x) a Letter of Transmittal, which shall specify that delivery shall be effected, and risk of loss and title to such Certificates shall pass only upon proper delivery of such Certificates (or affidavits of loss in lieu thereof) to the Exchange Agent, and which Letter of Transmittal shall be in such form and have such other provisions as the Surviving Entity of the REIT Merger may reasonably specify, and (y) instructions for use in effecting the surrender of such Certificates in exchange for the applicable REIT Preferred Merger Consideration into which the number of shares of Company Series A Preferred Stock or Company Series C Preferred Stock, as applicable, previously represented by such Certificates shall have been converted pursuant to this Agreement, together with any amounts payable in respect of dividends or distributions on Company Series A Preferred Stock or Company Series C Preferred Stock, as applicable, in accordance with Section 3.5(d) (which instructions shall provide that, at the election of the surrendering holder, (i) such Certificates may be surrendered by hand delivery or otherwise or (ii) the REIT Preferred Merger Consideration in exchange therefor, together with any amounts payable in respect of dividends or distributions on Parent Common Shares in accordance with Section 3.5(d), may be collected by hand by the surrendering holder or by check or wire transfer to the surrendering holder), and
(C) to each holder of a share of Company Restricted Stock, a certificate or, at Parent’s option, evidence of book-entry Parent Common Shares representing the REIT Common Merger Consideration into which the number of shares of Company Common Stock previously represented by such award shall have been converted pursuant to this Agreement.
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(ii) Upon surrender of a Certificate of Company Common Stock or Company Preferred Stock (or affidavit of loss in lieu thereof) for cancellation to the Exchange 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 Exchange Agent, the holder of such Certificate shall be entitled to receive in exchange therefor a certificate or, at Parent’s option, evidence of book-entry Parent Common Shares representing the REIT Common Merger Consideration for each share of Company Common Stock or a certificate representing the applicable REIT Preferred Merger Consideration for each share of Company Preferred Stock, as applicable, formerly represented by such Certificate pursuant to the provisions of this Article III, plus any amounts that such holder has the right to receive in respect of dividends or distributions on Parent Common Shares or Parent Preferred Shares, as applicable, in accordance with Section 3.5(d), to be mailed, made available for collection by hand or delivered by wire transfer, within two (2) Business Days following the later to occur of (A) the REIT Merger Effective Time or (B) the Exchange Agent’s receipt of such Certificate (or affidavit of loss in lieu thereof), and the Certificate or Company Common Stock or Company Preferred Stock (or affidavit of loss in lieu thereof) so surrendered shall be forthwith cancelled. The Exchange Agent shall accept such Certificates (or affidavits of loss in lieu thereof) upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. Until surrendered as contemplated by this Section 3.5, each Certificate of Company Common Stock or Company Preferred Stock shall be deemed, at any time after the REIT Merger Effective Time, to represent only the right to receive, upon such surrender, the REIT Common Merger Consideration or the applicable REIT Preferred Merger Consideration, as applicable, as contemplated by this Article III, and any amounts payable in respect of dividends or distributions on Parent Common Shares in accordance with Section 3.5(d). No interest shall be paid or accrued for the benefit of holders of such Certificates on the REIT Common Merger Consideration or the REIT Preferred Merger Consideration payable upon the surrender of such Certificates.
(iii) As promptly as practicable following the REIT Merger Effective Time (but in no event later than two (2) Business Days thereafter), the Surviving Entity shall cause the Exchange Agent (A) to issue to each holder of Book-Entry Shares with respect to Company Common Stock or Common Preferred Stock, as applicable, that whole number of uncertificated Parent Common Shares or Parent Preferred Shares, as applicable, that such holder is entitled to receive pursuant to Section 3.1(b) in respect of such Book-Entry Shares, and (B) to issue and deliver to each holder of Book-Entry Shares a check or wire transfer for any amounts payable in respect of dividends or distributions on Parent Common Shares or Parent Preferred Shares in accordance with Section 3.5(d) in each case, without such holder being required to deliver a Certificate or an executed Letter of Transmittal to the Exchange Agent, and such Book-Entry Shares shall then be cancelled. In lieu of a Letter of Transmittal, each holder of Book-Entry Shares shall deliver to the Exchange Agent an “agent’s message” in customary form (or such other evidence of transfer or surrender as the Exchange Agent may reasonably request). No interest shall be paid or accrued for the benefit of holders of Book-Entry Shares on the REIT Common Merger Consideration or REIT Preferred Merger Consideration, as applicable, payable in respect of the Book-Entry Shares.
(iv) In the event of a transfer of ownership of shares of Company Common Stock or Company Preferred Stock that is not registered in the transfer records of the Company, it shall be a condition of payment that any Certificate representing Company Common Stock or Company Preferred Stock surrendered 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, or any Book-Entry Share shall be properly transferred, and that the Person requesting such payment shall have paid any Transfer Taxes and other Taxes required by reason of the payment of the REIT Common Merger Consideration or the REIT Preferred Merger Consideration, as applicable, to a Person other than the registered holder of the Certificate or Book-Entry Share surrendered or shall have established to the satisfaction of Parent that such Tax either has been paid or is not applicable.
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(d) Dividends with Respect to Parent Common Shares and Parent Preferred Shares. No dividends or other distributions with respect to Parent Common Shares or Parent Preferred Shares with a record date after the REIT Merger Effective Time shall be paid to the holder of any unsurrendered Certificate representing Company Common Stock or Company Preferred Stock with respect to the Parent Common Shares or the Parent Preferred Shares, as applicable, issuable hereunder, and all such dividends and other distributions shall be paid by Parent to the Exchange Agent and shall be included in the Exchange Fund, in each case until the surrender of such Certificate (or delivery of an affidavit of loss in lieu thereof) in accordance with this Agreement. Subject to applicable Law, following surrender of any such Certificate (or delivery of an affidavit of loss in lieu thereof) there shall be paid to the holder thereof, in addition to any other amounts payable hereunder, without interest, (i) the amount of dividends or other distributions with a record date after the REIT Merger Effective Time theretofore paid with respect to whole Parent Common Shares or applicable Parent Preferred Shares, as the case may be, to which such holder is entitled pursuant to this Agreement and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the REIT Merger Effective Time but prior to such surrender and with a payment date subsequent to such surrender that are payable with respect to such whole Parent Common Shares or applicable Parent Preferred Shares.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund (including any interest and other income received with respect thereto) which remains undistributed to the former holders of shares of Company Common Stock and/or Company Preferred Stock on the first (1st) anniversary of the REIT Merger Effective Time shall be delivered to Parent, upon demand, and any former holders of shares of Company Common Stock and Company Preferred Stock who have not theretofore received any REIT Common Merger Consideration or REIT Preferred Merger Consideration, as the case may be, to which they are entitled under this Article III shall thereafter look only to the Surviving Entity of the REIT Merger for payment of such REIT Common Merger Consideration or REIT Preferred Merger Consideration.
(f) No Liability. None of Parent, Parent Operating Partnership, the Company, Company Operating Partnership, the Surviving Entity of the REIT Merger, or the Exchange Agent, or any employee, officer, director, manager, agent or Affiliate of any of them, shall be liable to any holder of shares of Company Common Stock or Company Preferred Stock or Minority Limited Partner in respect of any part of the REIT Common Merger Consideration, REIT Preferred Merger Consideration or New Parent LP Common Units, as applicable, 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 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 Surviving Entity of the REIT Merger, free and clear of any claims or interest of any such holders or their successors, assigns or personal representatives previously entitled thereto.
(g) Investment of Exchange Fund. The Exchange Agent shall invest any cash included in the Exchange Fund as directed by Parent or, after the REIT Merger Effective Time, the Surviving Entity of the REIT Merger; provided, however, that (i) no such investment shall relieve Parent Operating Partnership or the Exchange Agent from making the payments required by this Article III and, to the extent that there are losses with respect to such investments, or the Exchange Fund diminishes for other reasons below the level required to make prompt payments of the Aggregate REIT Merger Consideration or deliver any amounts payable in respect of dividends or distributions on Parent Common Shares and/or Parent Preferred Stock in accordance with Section 3.5(d), as contemplated hereby, Parent Operating Partnership shall promptly replace or restore the portion of the Exchange Fund lost through investments or other events so as to ensure that the Exchange Fund is, at all times, maintained at a level sufficient to make such payments, (ii) no such investment shall have maturities that could prevent or delay payments to be made pursuant to this Agreement, and (iii) such investments shall be in short-term obligations of the United States of America with maturities of no more than thirty (30) days or guaranteed by the United States of America and backed by the full faith and credit of the United States of America. Any net profit resulting from, or interest or income produced by, such investments, shall be property of, and paid to, the Surviving Entity of the REIT Merger.
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Section 3.6 Withholding Rights. Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub (and any Affiliate of the foregoing), any Surviving Entity and the Exchange Agent, as applicable, shall be entitled to deduct and withhold from the REIT Common Merger Consideration, the REIT Preferred Merger Consideration and any amounts otherwise payable or distributable to any Person pursuant to this Agreement such amounts as Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub (and any such Affiliate of the foregoing), any such Surviving Entity and the Exchange Agent is required to deduct and withhold with respect to the making of such payment under the Code, and the rules and regulations promulgated thereunder, or any provision of applicable Law. To the extent that amounts are so deducted or withheld and paid over to the appropriate Governmental Authority pursuant to this Section 3.6, such withheld amounts 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 shall have been lost, stolen or destroyed, then upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Entity of the REIT Merger, the posting by such Person of a bond in such reasonable amount as the Surviving Entity of the REIT Merger may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the REIT Common Merger Consideration or REIT Preferred Merger Consideration, as the case may be, to which the holder thereof is entitled pursuant to this Article III.
Section 3.8 No Rights of Objection or Appraisal. No appraisal rights, dissenters’ rights or any other rights of an objecting stockholder shall be available with respect to the Mergers or the other transactions contemplated by this Agreement.
Section 3.9 Fractional Shares and Units.
(a) Fractional Common Shares. No certificate or scrip representing fractional Parent Common Shares of less than 1/1,000th of a Parent Common Share shall be issued upon the surrender for exchange of Certificates or with respect to Book-Entry Shares, in each case of Company Common Stock, and, in lieu thereof, such fractional Parent Common Shares a Person would otherwise be entitled to receive pursuant to this Agreement, but for this Section 3.9(a), shall be aggregated and rounded up to the nearest 1/1,000th of a Parent Common Share.
(b) Fractional Preferred Shares. No certificate or scrip representing fractional Parent Preferred Shares of less than 1/1,000th of a Parent Preferred Share shall be issued upon the surrender for exchange of Certificates or with respect to Book-Entry Shares, in each case of Company Preferred Stock, and, in lieu thereof, such fractional Parent Preferred Shares a Person would otherwise be entitled to receive pursuant to this Agreement, but for this Section 3.9(b), shall be, as to each applicable series of Parent Preferred Shares held by such Person, aggregated and rounded up to the nearest 1/1,000th of a Parent Preferred Share.
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(c) Fractional Units. No certificate or scrip representing fractional New Parent LP Common Units of less than 1/1,000th of a New Parent LP Common Units shall be issued upon the exchange of Company LP Common Units, and, in lieu thereof, such fractional New Parent LP Common Units, a Person would otherwise be entitled to receive pursuant to this Agreement, but for this Section 3.9(c), shall be aggregated and rounded up to the nearest 1/1,000th of a New Parent LP Common Unit.
Article IV.
Representations and Warranties
of the Company and Company Operating Partnership
Except (a) as set forth in the corresponding sections of the disclosure letter that has been prepared by the Company and delivered by the Company to Parent immediately prior to the execution and delivery of this Agreement (the “Company Disclosure Letter”), it being agreed that disclosure of any item in any Section of the Company 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 the relevance of such item is reasonably apparent from the face of such disclosure (provided, however, that nothing in the Company Disclosure Letter is intended to broaden the scope of any representation or warranty of the Company made herein or be construed as an admission or indication that (i) such item or other matter is material, (ii) such item or other matter is required to be referred to in the Company Disclosure Letter or (iii) any breach or violation of applicable Laws or any contract, agreement or arrangement to which the Company, Company Operating Partnership or their respective Subsidiaries is a party exists or has occurred), or (b) as disclosed in publicly available Company SEC Filings filed with, or furnished to, as applicable, the SEC on or after January 1, 2022 and at least two (2) Business Days prior to the date of this Agreement (excluding any documents incorporated by reference therein or files as exhibits thereto, and excluding any disclosure set forth in any section of a Company SEC Filing entitled “Risk Factors” or “Cautionary Note Regarding Forward-Looking Statements” or similarly titled section in any other disclosures included in the Company SEC Filings, in each case, to the extent that such disclosure is cautionary, predictive or forward-looking in nature), the Company and Company Operating Partnership hereby jointly and severally represent and warrant to Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub that:
Section 4.1 Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly organized, validly existing and in good standing under the Laws of the State of Maryland, and Company Operating Partnership is a partnership duly formed, validly existing and in good standing under the Laws of the State of Delaware and each has the requisite organizational power and authority and any necessary governmental authorization, except for such failures to be so authorized that individually or in the aggregate have not had and would not reasonably be expected to have a Company Material Adverse Effect, to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Each of the Company and Company Operating Partnership 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, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
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(b) Section 4.1(b) of the Company Disclosure Letter sets forth a true and complete list of the Company Subsidiaries, together with (i) the jurisdiction of incorporation or organization, as the case may be, of each Company Subsidiary, (ii) the type of and percentage of interest held, directly or indirectly, by the Company in each Company Subsidiary, and (iii) the classification for U.S. federal income tax purposes of each Company Subsidiary, including by identifying each Company Subsidiary that is a Qualified REIT Subsidiary or a Taxable REIT Subsidiary. Each Company Subsidiary is duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite organizational power and authority and any necessary governmental authorization 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 organized, in good standing or have certain power and authority that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. Each Company Subsidiary 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, have not had and would not reasonably be expected to have a Company Material Adverse Effect. There are no current dissolution, revocation or forfeiture proceedings regarding any Company Subsidiary except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect and, to the Company’s knowledge, there are no grounds that currently exist for the administrative dissolution of the Company or any Company Subsidiary by any Governmental Authority.
(c) None of the Company, Company Operating Partnership or any Company Subsidiary directly or indirectly owns any interest in or of, or investment in, whether equity or debt, any Person (other than equity interests in the Company Subsidiaries).
Section 4.2 Organizational Documents. The Company has made available to Parent complete and correct copies of (i) the Company Charter and the Company Bylaws, and (ii) the Company Partnership Certificate and the Company Partnership Agreement, as in effect on the date hereof.
Section 4.3 Capital Structure.
(a) The authorized capital stock of the Company consists of 350,000,000 shares of capital stock, which have been classified as 300,000,000 shares of Company Common Stock and 50,000,000 shares of Company Preferred Stock. At the close of business on May 20, 2023 (i) 134,224,313 shares of Company Common Stock were issued and outstanding, (ii) 7,933,711 shares of Company Series A Preferred Stock were issued and outstanding, (iii) 4,595,175 shares of Company Series C Preferred Stock were issued and outstanding, (iv) 508,677 shares of Company Common Stock were reserved for issuance pursuant to awards outstanding under the Company 2018 Plan, (v) 8,528,885 shares of Company Common Stock were reserved for issuance upon a conversion of awards of LTIP Units pursuant to the Company 2021 OP Plan and (vi) 172,921 shares of Company Common Stock reserved for issuance upon conversion of Company Partnership Units. One hundred twenty thousand (120,000) shares of Company Preferred Stock is designated as Series B Preferred Stock, none of which is outstanding, and reserved for issuance in accordance with the stockholder rights plan adopted pursuant to the Company Rights Agreement (the “Company Rights Plan”). All issued and outstanding shares of the capital stock of the Company are and all shares of Company Common Stock reserved for issuance as noted above, shall be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and non-assessable, and free of preemptive rights. Except as set forth on Section 4.3(a) of the Company Disclosure Letter, there are no outstanding bonds, debentures, notes or other indebtedness of the Company or any Company Subsidiary 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 or other equity holders of such Company Subsidiary may vote. There are no other rights to purchase or receive the Company Common Stock granted under the Company Equity Plans, the company benefit plans or otherwise other than the Company Restricted Stock.
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(b) The Company is the sole general partner of Company Operating Partnership, and the Company owns, directly or indirectly, all of the general partner interests in Company Operating Partnership, free and clear of Liens (other than Permitted Liens). Section 4.3(b) of the Company Disclosure Letter sets forth, as of the date hereof, the name of, and the number and class of limited partnership interests held by, each partner in Company Operating Partnership. Other than such limited partnership interests set forth on Section 4.3(b) of the Company Disclosure Letter, the Company owns all of the issued and outstanding Company Partnership Units, free and clear of Liens (other than Permitted Liens or Liens arising pursuant to the Company Partnership Agreement).
(c) 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 and nonassessable. All equity interests in each of the Company Subsidiaries that is a partnership or limited liability company are duly authorized and validly issued. All shares of capital stock of (or other ownership interests in) each of the Company Subsidiaries that may be issued upon exercise of outstanding options or exchange rights are duly authorized and, upon issuance will be validly issued, fully paid and nonassessable. Except as set forth in Section 4.3(c) of the Company Disclosure Letter, the Company owns, directly or indirectly, all of the issued and outstanding capital stock and other equity interests of each of the Company Subsidiaries, free and clear of all Liens (other than Permitted Liens), and 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 equity interests of any Company Subsidiary or which would require any Company Subsidiary to issue or sell any shares of its capital stock, equity interests or securities convertible into or exchangeable for shares of its capital stock or equity interests.
(d) Except as set forth on Section 4.3(d) of the Company Disclosure Letter or pursuant to the Company Rights Plan, as of the date of this Agreement, there are no securities, options, warrants, calls, rights, commitments, agreements, rights of first refusal, arrangements or undertakings of any kind to which the Company or any Company Subsidiary is a party or by which any of them is bound, obligating the 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 interests or phantom stock or other contractual rights the value of which is determined in whole or in part by the value of any equity interest of the Company or any of the Company Subsidiaries or obligating the 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. As of the date of this Agreement, except as expressly provided in the Company Partnership Agreement or pursuant to the Company Rights Plan, there are no outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of Company Common Stock, shares of Company Preferred Stock, Company Partnership Units or other equity interests of the Company or any Company Subsidiary (other than in satisfaction of withholding Tax obligations pursuant to certain awards outstanding under the Company Equity Plans). Except as set forth on Section 4.3(d) of the Company Disclosure Letter, none of the Company, Company Operating Partnership or any Company Subsidiary is a party to or, to the knowledge of the Company, bound by any agreements or understandings concerning the voting (including voting trusts and proxies) of any capital stock or other equity interest of the Company or any of the Company Subsidiaries.
(e) Section 4.3(e) of the Company Disclosure Letter sets forth a true, complete and correct list of all Persons who, as of the close of business on May 22, 2023, held outstanding Company Restricted Stock, indicating, with respect to each share of Company Restricted Stock then outstanding, the type of award granted, the number of shares of Company Common Stock subject to such Company Restricted Stock, the date of grant, and the vesting schedule. All shares of Company Restricted Stock were (i) granted, accounted for, reported and disclosed in accordance with the applicable Laws, accounting rules and stock exchange requirements and (ii) validly issued and properly approved by the Company Board (or a duly authorized committee or subcommittee thereof) in compliance with all applicable Law and recorded on the Company’s financial statements in accordance with GAAP.
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(f) All dividends or other distributions on the outstanding shares of Company Common Stock, Company Preferred Stock, Company Partnership Units and any dividends or distributions on any securities of any Company Subsidiary which have been authorized or declared prior to the date hereof have been paid in full (except to the extent such dividends have been publicly announced and are not yet due and payable).
Section 4.4 Authority.
(a) Each of the Company and Company Operating Partnership has the requisite corporate or partnership power and authority, respectively, to execute and deliver this Agreement, to perform its obligations hereunder and, subject to receipt of the Company Stockholder Approval, to consummate the Mergers and the other transactions contemplated by this Agreement. The execution and delivery of this Agreement by each of the Company and Company Operating Partnership and the consummation by the Company and Company Operating Partnership of the Mergers and the other transactions contemplated hereby have been duly and validly authorized by all necessary corporate or partnership action, and no other corporate or partnership proceedings on the part of the Company or Company Operating Partnership are necessary to authorize this Agreement or the Mergers or to consummate the transactions contemplated hereby, subject, (x) with respect to the REIT Merger, to receipt of the Company Stockholder Approval and the filing and acceptance for record of the REIT Merger Articles of Merger with the Maryland SDAT and (y) with respect to the Partnership Merger, to the filing and acceptance for record of the Partnership Merger Certificate of Merger with the Delaware Secretary. The Company Board at a duly held meeting, upon the recommendation of the Company Special Committee, has, (i) duly and validly authorized the execution and delivery of this Agreement and declared advisable the consummation of the Mergers and the other transactions contemplated hereby, (ii) determined that the Mergers and the transactions contemplated by this Agreement are fair to and in the best interest of the Company and its stockholders and to Company Operating Partnership and its limited partners, (iii) directed that the REIT Merger be submitted for consideration at the Company Stockholder Meeting, and (iv) resolved to recommend that the stockholders of the Company vote in favor of the approval of the REIT Merger (the “Company Recommendation”) and to include such recommendation in the Joint Proxy Statement, subject to Section 6.5. The Company General Partner, in its capacity as the sole general partner of the Company Operating Partnership and in accordance with the Company Partnership Agreement, has approved this Agreement, the Partnership Merger and the other applicable transactions contemplated by this Agreement.
(b) This Agreement has been duly executed and delivered by the Company and Company Operating Partnership and, assuming due authorization, execution and delivery by each of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub, constitutes a legally valid and binding obligation of each of the Company and Company Operating Partnership, enforceable against the Company and Company Operating Partnership 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).
(c) The Company Special Committee, at a meeting duly called and held, has recommended that the Company Board approve and adopt this Agreement and determined that the transactions contemplated hereby, including the Mergers, are advisable and are fair and in the best interests of the Company and the stockholders of the Company.
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(d) As of the date hereof, neither the Company Board, nor the Company Special Committee has subsequently rescinded or modified, in any way, its determinations and approvals discussed above.
Section 4.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by each of the Company and Company Operating Partnership does not, and the performance of this Agreement and the consummation of the Mergers and the other transactions contemplated hereby by the Company and Company Operating Partnership will not, (i) assuming receipt of the Company Stockholder Approval, conflict with or violate any provision of (A) the Company Charter, Company Bylaws, Company Partnership Certificate or Company Partnership Agreement or (B) any of the organizational or governing documents of any other Company Subsidiary, (ii) assuming that 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 Law applicable to the Company, Company Operating Partnership or any Company Subsidiary or by which any property or asset of the Company, Company Operating Partnership or any Company Subsidiary is bound, or (iii) except as set forth on Section 4.5(a) of the Company Disclosure Letter, require any consent or approval under, result in any breach of or any loss of any benefit or material increase in any cost or obligation of the Company, Company Operating Partnership 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, cancellation, or payment (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 the Company, Company Operating Partnership or any Company Subsidiary pursuant to, any note, bond, debt instrument, indenture, contract, agreement, ground lease, license, permit or other legally binding obligation to which the Company, Company Operating Partnership or any Company Subsidiary is a party, except, as to clauses (i)(B), (ii) and (iii), respectively, for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by each of the Company and Company Operating Partnership does not, and the performance of this Agreement by the Company and Company Operating Partnership will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, except (i) the filing with the SEC of (A) a joint proxy statement in preliminary and definitive form relating to the Company Stockholder Meeting and the Parent Stockholder Meeting (together with any amendments or supplements thereto, the “Joint Proxy Statement”) and of a registration statement on Form S-4 pursuant to which the offer and sale of Parent Common Shares in the Mergers will be registered pursuant to the Securities Act and in which the Joint Proxy Statement will be included as a prospectus (together with any amendments or supplements thereto, the “Form S-4”), and the declaration of effectiveness of the Form S-4, and (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, (ii) as may be required under the rules and regulations of the NASDAQ and the NYSE, (iii) the filing of the REIT Merger Articles of Merger and the acceptance thereof for record by the Maryland SDAT pursuant to the MGCL and the MD LLC Act, (iv) the filing of the Partnership Merger Certificate of Merger and the acceptance thereof for record by the Delaware Secretary pursuant to the DRULPA and the DLLCA, (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 state and local 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, has not had and would not reasonably be expected to have a Company Material Adverse Effect.
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Section 4.6 Permits; Compliance with Law.
(a) Except for the Permits that are the subject of Section 4.14 or Section 4.16, which are solely the subject of the representations and warranties made therein, the Company, Company Operating Partnership and each Company Subsidiary is in possession of all Permits, including building permits and certificates of occupancy, necessary for the Company, Company Operating Partnership and each Company Subsidiary to own, lease and, to the extent applicable, operate its properties or to carry on its respective business substantially as it is being conducted as of the date hereof (collectively, the “Company Permits”), and all such Company Permits are valid and in full force and effect, except where the failure to be in possession of, or the failure to be valid or in full force and effect of, any of the Company Permits, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. All applications required to have been filed for the renewal of the Company Permits have been duly filed on a timely basis with the appropriate Governmental Authority, and all other filings required to have been made with respect to such Company Permits have been duly made on a timely basis with the appropriate Governmental Authority, except in each case for failures to file which, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. All fees and assessments due and payable by the Company, Company Operating Partnership or any Company Subsidiary, in each case, in connection with the Company Permits, have been paid, expect where the failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. None of the Company, Company Operating Partnership or any Company Subsidiary has received as of the date hereof, any written claim or notice indicating that, nor, to the knowledge of the Company, is, the Company or any Company Subsidiary currently not in compliance with the terms of any such Company Permits, except where the failure to be in compliance with the terms of any such Company Permits, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. No event has occurred with respect to a Company Permit that permits, or after notice or lapse of time or both would permit, the suspension, revocation, termination or material impairment of such Company Permit (or the rights thereunder), and no suspension, cancellation, revocation or material impairment of any Company Permit is pending, or the knowledge of the Company, threatened, except, in each case, where such suspension, revocation, cancellation or material impairment, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect.
(b) None of the Company, Company Operating Partnership or any Company Subsidiary is or has since January 1, 2021 been in conflict with, or in default or violation of (i) any Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound (except for compliance with Laws addressed in Section 4.10, Section 4.11, Section 4.14, Section 4.16 or Section 4.17, which are solely the subject of the representations and warranties made therein), or (ii) any Company Permits (except for the Company Permits addressed in Section 4.14, which are solely the subject of the representations and warranties made therein), except in each case for any such conflicts, defaults or violations that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
(c) Each of the Company, each Company Subsidiary and their respective controlled Affiliates (including in each case any of their officers, directors or employees) have complied in all material respects with applicable Anti-Corruption Laws. Neither the Company nor any Company Subsidiary nor, to the knowledge of the Company, any director, officer or Representative of the Company or any Company Subsidiary has (i) used any corporate funds for any unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity, (ii) made, taken or will take any action in furtherance of any direct or indirect unlawful payment, promise to pay or authorization or approval of the payment or giving of money, property or gifts of anything of value, directly or indirectly to any foreign or domestic government official or employee, (iii) made, offered or taken an act in furtherance of any direct or indirect unlawful bribe, rebate, payoff, kickback or other unlawful payment to any foreign or domestic government official or employee, (iv) made any payment to any customer, supplier or tenant, or to any officer, director, partner, employee or agent of any such customer, supplier or tenant, for the unlawful sharing of fees to any such customer, supplier or tenant or any such officer, director, partner, employee or agent for the unlawful rebating of charges, (v) engaged in any other unlawful reciprocal practice, or made any other unlawful payment or given any other unlawful consideration to any such customer, supplier or tenant or any such officer, director, partner, employee or agent of such customer, officer or tenant, or (vi) taken any action or made any omission in violation of any applicable Law governing imports into or exports from the United States or any foreign country, or relating to economic sanctions or embargoes, corrupt practices, money laundering, or compliance with unsanctioned foreign boycotts, in each case, in violation of any applicable Anti-Corruption Law. Neither the Company nor any Company Subsidiary has received any written communication that alleges that it, or any of its respective Representatives, is, or may be, in violation of, or has, or may have, any liability under, any Anti-Corruption Law.
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Section 4.7 SEC Filings; Company Financial Statements.
(a) The Company has timely filed with, or furnished (on a publicly available basis) to, the SEC all forms, reports, schedules, statements, certifications and other documents required to be filed or furnished by it under the Securities Act or the Exchange Act, as the case may be, including any amendments or supplements thereto, from and after January 1, 2019 (collectively, the “Company SEC Filings”). Each Company SEC Filing, as amended or supplemented, if applicable, (i) as of its date, or, if amended or supplemented, as of the date of the most recent amendment or supplement thereto, complied in all material respects with the requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and the applicable rules and regulations of the SEC thereunder, and (ii) did not, at the time it was filed (or became effective in the case of registration statements), or, if amended or supplemented, as of the date of the most recent amendment or supplement thereto, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. As of the date of this Agreement, no Company Subsidiary is separately subject to the periodic reporting requirements of the Exchange Act.
(b) Each of the consolidated financial statements contained or incorporated by reference in the Company SEC Filings (as amended, supplemented or restated, if applicable, in each case, to the extent filed and publicly available prior to the date of this Agreement), including the related notes and schedules, complied in all material respects as to form with the applicable accounting requirements and published rules and regulations of the SEC with respect thereto, was prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as indicated in the notes thereto, or in the case of unaudited quarterly financial statements, as may be permitted by the SEC on Form 10-Q, Form 8-K, Regulation S-X or any successor or like form under the Exchange Act), and each such consolidated financial statement presented fairly, in all material respects, in accordance with the applicable requirements of GAAP and the applicable rules and regulations of the SEC, the consolidated financial position, results of operations, stockholders’ equity and cash flows of the Company and its consolidated subsidiaries, taken as a whole, as of the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited quarterly financial statements, to normal year-end adjustments, none of which is material).
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(c) The Company is in compliance in all material respects with the provisions of and rules promulgated under the Sarbanes-Oxley Act, the Exchange Act and the Securities Act and the applicable listing and corporate governance rules of NASDAQ, in each case, relating to the Company which under the terms of such provisions or rules (including the dates by which such compliance is required) have become applicable to the Company. Each of the principal executive officer and the principal financial officer (in each case, having the meaning given to such terms in the Sarbanes-Oxley Act) of the Company has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act or Sections 302 and 906 of the Sarbanes-Oxley Act and the rules and regulations of the SEC promulgated thereunder with respect to the Company SEC Filings. Since January 1, 2021, the Company and the Company Subsidiaries have devised, designed, and maintain a system of “internal accounting controls over financial reporting” (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) that is sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including that: (i) transactions are executed only in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of the financial statements of the Company and the Company Subsidiaries and to maintain accountability for the assets of the Company and the Company Subsidiaries; (iii) access to such assets is permitted only in accordance with management’s authorization; (iv) the reporting of such assets is compared with existing assets at reasonable and regular intervals and appropriate action is taken with respect to any differences; and (v) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. The Company has disclosed to the Company’s auditors and the audit committee of the Company Board (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial data, and (ii) any fraud, whether or not material, that involves the Company’s management or other of the Company’s or any Company Subsidiary’s employees who have a significant role in the Company’s internal control over financial reporting, and the Company has made available to Parent copies of any material written materials relating to the foregoing (provided that the terms “significant deficiency” and “material weakness” shall have the meanings assigned to them in the auditing standards of the Public Company Over Oversight, as in effect on the date of this Agreement). Since January 1, 2021, the Company has established and maintains “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) designed to ensure that material information relating to the Company required to be included in reports filed or furnished under the Exchange Act is recorded, processed, summarized and communicated with in the time periods specified in the SEC’s rules and forms to the Company’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the chief executive officer and chief financial officer of the Company required pursuant to the Exchange Act with respect to such reports, and such disclosure controls and procedures are effective in timely alerting the Company’s principal executive officer and its principal financial officer to material information required to be included in the Company’s periodic reports required under the Exchange Act. The Company has delivered or made available to Parent complete and accurate copies of notices received as of the date hereof by the Company from its independent auditor of any significant deficiencies or material weaknesses in the Company’s internal control over financial reporting since January 1, 2021 and any other management letter or similar correspondence received as of the date hereof by the Company since January 1, 2021 from any independent auditor of the Company or any of the then-existing Subsidiaries of the Company. Since the enactment of the Sarbanes-Oxley Act, none of the Company or any Company Subsidiary has made any “extensions of credit” (within the meaning of Section 401 of the Sarbanes-Oxley Act) to any director, trustee or executive officer (as defined in Rule 3b-7 promulgated under the Exchange Act) of the Company or any consolidated Company Subsidiary.
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(d) None of the Company or any Company Subsidiary has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required under GAAP to be set forth on a consolidated balance sheet of the Company and the Company Subsidiaries or in the notes thereto, except for liabilities or obligations (i) reflected or reserved against the most recent consolidated balance sheet of the Company and Company Subsidiaries set forth in the Company SEC Filings made through and including the date of this Agreement (including any notes thereto), (ii) incurred in connection with the transactions contemplated by this Agreement, including Section 6.1 hereof, (iii) incurred in the ordinary course of business consistent with past practice since the most recent balance sheet set forth in the Company SEC Filings made through and including the date of this Agreement, (iv) described in any section of the Company Disclosure Letter, or (v) that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
(e) None of the Company or any Company Subsidiary is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar contract or arrangement, including any contract relating to any transaction or relationship between or among the Company or any Company Subsidiary, on the one hand, and any unconsolidated Affiliate of the Company or any Company Subsidiary, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K under the Securities Act), in each case, where the result, purpose or effect is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any consolidated Company Subsidiary in the Company’s consolidated audited financial statements or other SEC Documents or any Company Subsidiary’s audited financial statements.
(f) There are no (i) outstanding or unresolved comments from the SEC with respect to any SEC Document, and, to the knowledge of the Company, no SEC Document is the subject of ongoing SEC review, or (ii) internal investigations, SEC inquiries or investigations or other governmental inquiries or investigations pending or, to the knowledge of the Company, threatened. The Company has made available to Parent true and complete copies of all material written correspondence with the staff of the SEC received since January 1, 2021 relating to the Company SEC Filings. None of the Company SEC Filings is the subject of any confidential treatment request by the Company.
Section 4.8 Disclosure Documents. None of the information supplied or to be supplied by or on behalf of the Company or any Company Subsidiary for inclusion or incorporation by reference in (i) the Form S-4 will, at the time such document is filed with the SEC, at any time such document is amended or supplemented or at the time such document is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) the Joint Proxy Statement will, at the date it is first mailed to the stockholders of the Company and stockholders of Parent, respectively, at the time of the Company Stockholder Meeting and the Parent Stockholder Meeting, at the time the Form S-4 is declared effective by the SEC or at the REIT Merger Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. All documents that the Company is responsible for filing with the SEC in connection with the transactions contemplated herein, to the extent relating to the Company or any Company Subsidiary or other information supplied by or on behalf of the Company or any Company Subsidiary for inclusion therein, will comply as to form, in all material respects, with the provisions of the Securities Act or Exchange Act, as applicable, and the rules and regulations of the SEC thereunder and each such document required to be filed with any Governmental Authority (other than the SEC) will comply in all material respects with the provisions of any applicable Law as to the information required to be contained therein. The representations and warranties contained in this Section 4.8 shall not apply to statements or omissions included in the Form S-4 or the Joint Proxy Statement to the extent based upon information supplied to the Company by or on behalf of Parent.
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Section 4.9 Absence of Certain Changes or Events. From the date of the Company’s most recent audited balance sheet included in its SEC Documents through the date of this Agreement, except as contemplated by this Agreement or as set forth in Section 4.9 of the Company Disclosure Letter:
(a) each of the Company, Company Operating Partnership and each Company Subsidiary has conducted its business in the ordinary course consistent with past practice, and prior to the date hereof there has not been:
(i) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock or other equity interests of the Company or any Company Subsidiary, other than regular quarterly dividends consistent with past practice;
(ii) any repurchase, redemption or other acquisition by the Company or any Company Subsidiary of any shares of capital stock or other equity interests of the Company or any Company Subsidiary or any securities or other equity interests convertible into or exercisable for any shares of capital stock or other equity interests, of the Company or any Company Subsidiary, other than (A) the withholding of shares of Company Common Stock to satisfy withholding Tax obligations with respect to shares of Company Restricted Stock, and (B) the acquisition by the Company in the ordinary course of business consistent with past practice in connection with the forfeiture of shares of Company Restricted Stock pursuant to the terms of the Company Equity Plans upon termination of employment or service of an award holder;
(iii) any split, combination, subdivision or reclassification of any capital stock or other equity interests, or any issuance of any other securities or equity interests in respect of, in lieu of or in substitution for shares of capital stock or other equity interests, of the Company or any Company Subsidiary;
(iv) any (A) amendment to the Company Charter, Company Bylaws or other organizational documents of the Company; or (B) amendment to the articles or certificates of incorporation, bylaws or other organizational documents of any Company Subsidiary;
(v) except as required to comply with Law, any Company employment agreement or any Company Benefit Plan, (A) any grant of any severance, termination pay, retention, or change in control benefits to any current or former director, employee or other individual service provider of the Company or any Company Subsidiary, (B) any entry into any employment, change in control, deferred compensation or other similar agreement, plan, arrangement or policy (or any material amendment to any such agreement, plan arrangement or policy) with any current or former director or employee of the Company or any Company Subsidiary, (C) any increase in the compensation or benefits payable under any Company Benefit Plan other than increases in the ordinary course of business consistent with past practice, (D) recognition by the Company, Company Operating Partnership or any other Company Subsidiary of any labor union, (E) any establishment, adoption, entry into, amendment, modification or termination of any collective bargaining agreement, (F) any establishment, adoption, entry into, termination or amendment or modification in any material respect, of any material Company Benefit Plan or (G) the taking of any action to accelerate any material compensation or benefits, including vesting, funding and payment or the making of any material determinations, under any collective bargaining agreement, Company Equity Plan or Company Benefit Plan;
(vi) any material change in the Company’s method of accounting or accounting principles or policies, except for any such change required by reason of a change in GAAP or by Regulation S-X under the Exchange Act, as approved by the Company’s independent accountants; or
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(vii) any settlement or remediation of any material Claim against or affecting the Company or a Company Subsidiary; and
(b) there has not been any Company Material Adverse Effect or any effect, event, development or circumstance that, individually or in the aggregate with all other effects, events, developments and changes, would reasonably be expected to result in a Company Material Adverse Effect.
Section 4.10 Employee Benefit Plans and Service Providers.
(a) Other than the Company Equity Plans and as set forth in Section 4.10(a) of the Company Disclosure Letter, the Company and the Company Subsidiaries do not and are not required to, and have not and have never been required to, maintain, sponsor or contribute to any Benefit Plans. Neither the Company nor any Company Subsidiary has any contract, plan or commitment, whether or not legally binding, to create any Benefit Plan.
(b) Except as individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect, none of the Company, any Company Subsidiary or any of their respective ERISA Affiliates has incurred any obligation or liability with respect to or under any employee benefit plan, program or arrangement (including any agreement, program, policy or other arrangement under which any current or former employee, director or consultant has any present or future right to benefits) which has created or will create any obligation with respect to, or has resulted in or will result in any liability to Parent, Merger Sub or any of their respective subsidiaries.
(c) The Company Equity Plans have established and has been administered in all material respects in accordance with its terms and in material compliance with all applicable Laws, including the Code.
(d) None of the Company, any Company Subsidiaries or any of their respective ERISA Affiliates has ever maintained, contributed to, or participated in, or otherwise has any obligation or liability in connection with: (i) a “pension plan” under Section 3(2) of ERISA that is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code, (ii) a “multiemployer plan” (as defined in Section 3(37) of ERISA), (iii) a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA), (iv) a “multiple employer plan” (as defined in Section 413(c) of the Code), or (v) in respect to the Company Subsidiaries (and, in respect thereto, the laws of any relevant jurisdiction of the European Union), any equivalent pension or similar plan, scheme, or arrangement (excluding any mandatory governmental pension schemes, plans, or arrangements pursuant to the domestic laws of that jurisdiction, where applicable).
(e) Except as set forth in Section 4.10(e) of the Company 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) result in any payment becoming due to any service provider of the Company or any Company Subsidiary, (ii) increase or otherwise enhance any benefits otherwise payable by the Company or any Company Subsidiary or the amount of compensation due to any service provider of the Company or any Company Subsidiary or (iii) result in the acceleration of the time of payment or vesting of any such benefits or the funding of any such compensation or benefits.
(f) Neither the Company nor any Company Subsidiary is a party to or has any obligation under any Contract, any Benefit Plan, or otherwise to compensate any Person for excise taxes payable pursuant to Section 4999 of the Code or for additional taxes payable pursuant to Section 409A of the Code.
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Section 4.11 Labor and Employment Matters. Neither the Company nor any Company Subsidiary has, or has ever had, any employees or consultants.
Section 4.12 Material Contracts.
(a) Except for contracts listed in Section 4.12(a) of the Company Disclosure Letter or filed as exhibits to the Company SEC Filings, neither the Company nor any Company Subsidiary is a party to or bound by any contract that, as of the date of this Agreement (each, together with the Company Management Agreements and each Company Material Lease, a “Company Material Contract”):
(i) is required to be filed as an exhibit to the Company’s Annual Report on Form 10-K pursuant to Item 601(b)(2), (4), (9) or (10) of Regulation S-K promulgated by the SEC;
(ii) obligates the Company or any Company Subsidiary to make non-contingent aggregate expenditures (other than principal and/or interest payments or the deposit of other reserves with respect to debt obligations) in excess of $1,000,000 and is not cancelable within ninety (90) days without material penalty to the Company or such Company Subsidiary (except for any Company Lease, Company Management Agreements or any ground lease affecting any Company Property);
(iii) contains any non-compete or exclusivity provisions with respect to any line of business or geographic area that restricts the business of the Company or any Company Subsidiary, or that otherwise restricts the lines of business conducted by the Company or any Company Subsidiary or the geographic area in which the Company or any Company Subsidiary may conduct business (other than ground lease or exclusive lease provisions, non-compete provisions and other similar leasing restrictions entered into by the Company and the Company Subsidiaries in the ordinary course of business);
(iv) is an agreement that obligates the Company or any Company Subsidiary to indemnify (A) any past or present directors, officers, trustees and employees of the Company or any Company Subsidiary pursuant to which the Company or Company Subsidiary is the indemnitor, other than any customary indemnification obligations arising pursuant to the organizational or governing documents of any Company Party or Company Subsidiary or under the Company’s directors’ and officer’s or similar management liability insurance policy;
(v) constitutes Indebtedness of the Company or any Company Subsidiary with a principal amount outstanding (or, in the case of a guaranty or other contingent obligation, with a principal amount of the underlying obligation outstanding) as of the date hereof greater than $1,000,000, other than (x) surety or performance bonds, letters of credit or similar agreements entered into in the ordinary course of business, in each case, to the extent drawn upon and (y) any contract solely among the Company and its wholly owned Subsidiaries;
(vi) except for customary restrictions contained in credit facilities and mortgage or mezzanine loans commonly used in the real estate industry, prohibits the pledging of the capital stock or other equity securities of or the issuance of guarantees by the Company or any Company Subsidiary or otherwise contains covenants expressly limiting, in any material respect, the ability of the Company or any Company Subsidiary to sell, transfer, pledge or otherwise, dispose of any material assets;
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(vii) requires the Company or any Company Subsidiary to dispose of or acquire, or grants any Third Party the option to purchase from or sell to the Company or any Company Subsidiary, assets or properties (other than in connection with the expiration of a Company Lease or ground lease affecting any Company Property) with a fair market value in excess of $250,000, or involves any pending or contemplated merger, consolidation or similar business combination transaction;
(viii) constitutes an interest rate cap, interest rate collar, interest rate swap, forward purchasing contract or other contract or agreement relating to a hedging transaction;
(ix) sets forth the operational terms of a joint venture, partnership, joint development agreement, limited liability company or strategic alliance (each, a “JV Agreement”) of the Company or any Company Subsidiary;
(x) contains restrictions with respect to payment of dividends or any other distribution in respect of the equity interests of the Company or any Company Subsidiary;
(xi) relates to the acquisition or divestiture of the capital stock or other equity interests of any Person (other than the Company or a Company Subsidiary) by the Company or a Company Subsidiary; or
(xii) constitutes a loan to any Person (other than a wholly owned Company Subsidiary) by the Company or any Company Subsidiary (other than advances made pursuant to and expressly disclosed in the Company Material Leases or pursuant to any disbursement agreement, development agreement, or development addendum entered into in connection with a Company Material Lease with respect to the development, construction, or equipping of Company Properties or the funding of improvements to Company Properties) in an amount in excess of $1,000,000.
(b) Each Company Material Contract is legal, valid, binding and enforceable on the Company, Company Operating Partnership and each Company Subsidiary to the extent such Person is a party thereto and, to the knowledge of the Company, each other party thereto in accordance with its terms, and is in full force and effect, except as may be limited by 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). Except as, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect, the Company, Company Operating Partnership 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 the Company, each other party thereto has performed all obligations required to be performed by it under such Company Material Contract except where such failure has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. None of the Company, Company Operating Partnership or any Company Subsidiary has received as of the date hereof written notice of any violation or default under any Company Material Contract, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The Company has made true and correct copies of each Company Material Contract available to Parent.
Section 4.13 Litigation. Except as set forth in Section 4.13 of the Company Disclosure Letter or as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect, as of the date of this Agreement, (a) there is no suit, demand, arbitration, inquiry, claim, action, cause of action investigation, inquiry, arbitration, audit or other legal proceeding (each, a “Claim”), pending or, to the knowledge of the Company, threatened by or before any Governmental Authority, nor, to the knowledge of the Company, is there any investigation pending by any Governmental Authority, in each case, against or affecting the Company, Company Operating Partnership, any other Company Subsidiary or any of their respective properties at law or in equity, and (b) none of the Company, Company Operating Partnership or any other Company Subsidiary, nor any of their respective properties, is subject to any outstanding Order. As of immediately prior to the date of this Agreement, there is no suit, claim, action or proceeding to which the Company or any Company Subsidiary is a party pending or, to the Knowledge of the Company, threatened in writing seeking to prevent, hinder, modify, delay or challenge the Mergers or any of the other transactions contemplated by this Agreement.
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Section 4.14 Environmental Matters. Except as set forth on Section 4.14 of the Company Disclosure Letter and as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect:
(a) The Company, Company Operating Partnership and each Company Subsidiary are in compliance with all applicable Environmental Laws, possess all Environmental Permits necessary to conduct their current operations and are in compliance with their respective Environmental Permits;
(b) There is no Claim or Order pending, or, to the knowledge of the Company, threatened against the Company and any Company Subsidiary under any applicable Environmental Law;
(c) None of the Company, Company Operating Partnership or any Company Subsidiary has entered into or agreed to any consent decree or Order relating to compliance with Environmental Laws, Environmental Permits or the investigation, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Materials which remains unresolved;
(d) None of the Company, Company Operating Partnership or any Company Subsidiary has assumed, by contract or operation of Law, any liability under any Environmental Law or relating to any Hazardous Materials, or is an indemnitor in connection with any threatened or asserted claim by any third-party indemnitee for any liability under any Environmental Law or relating to any Hazardous Materials; and
(e) None of the Company, Company Operating Partnership or any Company Subsidiary has caused, and to the knowledge of the Company, no Third Party has caused any release of a Hazardous Material at any Company Property or other property formerly owned, operated or leased by the Company or any Company Subsidiary that would be required to be investigated or remediated by the Company or any Company Subsidiary under any Environmental Law.
This Section 4.14 contains the sole representations and warranties of the Company and Company Operating Partnership with regard to Hazardous Materials, Environmental Laws or other environmental matters.
Section 4.15 Intellectual Property. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect, (i) the Company, Company Operating Partnership and the other Company Subsidiaries own, free and clear of any Liens (other than Permitted Liens and non-exclusive license agreements) or has a valid and enforceable license, free and clear of any Liens (other than Permitted Liens), or otherwise possess valid and enforceable rights to use all Intellectual Property necessary to conduct the business of the Company, Company Operating Partnership and the other Company Subsidiaries as it is currently conducted, (ii) the Registered Intellectual Property owned by the Company or any Company Subsidiary has not been cancelled, abandoned or dedicated to the public domain and all applicable registrations are valid and enforceable, (iii), to the knowledge of the Company, the conduct of the business of the Company, Company Operating Partnership and the other Company Subsidiaries as it is currently conducted does not infringe, misappropriate or otherwise violate the Intellectual Property rights of any Third Party, (iv) there are no pending or, to the knowledge of the Company, threatened Claims and none of the Company, Company Operating Partnership or any other Company Subsidiary (nor any of their respective predecessors) has received any written notice since January 1, 2021 from any Third Party (A) asserting the infringement or other violation of any Intellectual Property of such Third Party by the Company, Company Operating Partnership or any other Company Subsidiary or (B) pertaining to or challenging the validity, enforceability, or registrability of, any right, title or interest of the Company or the Company Subsidiaries with respect to, any material Intellectual Property owned by the Company, Company Operating Partnership or any other Company Subsidiary, and (v) to the knowledge of the Company, no Third Party is currently infringing or misappropriating Intellectual Property owned by the Company, Company Operating Partnership or any other Company Subsidiary. The Company, Company Operating Partnership and the Company Subsidiaries have implemented commercially reasonable measures to maintain and protect each item of Intellectual Property that they own and that is material to the Company and the Company Subsidiaries, taken as a whole. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) the Company, Company Operating Partnership and the other Company Subsidiaries have reasonable data security programs that are consistent with industry standards and applicable Privacy/Data Security Laws and (ii) none of the Company, Company Operating Partnership or any of the other Company Subsidiaries has experienced any interruption to, or any breach of the security of, its information technology systems, or any personal, proprietary or other sensitive information in its possession or under its control.
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Section 4.16 Properties.
(a) Section 4.16(a) of the Company Disclosure Letter sets forth a list of the address of each real property owned, leased (as lessee or sublessee), including ground leased, by the Company, Company Operating Partnership or any other Company Subsidiary as of the date of this Agreement (all such real property interests, together with all buildings, structures and other improvements and fixtures located on or under such real property and all easements, rights and other appurtenances to such real property, are individually referred to herein as a “Company Property” and collectively referred to herein as the “Company Properties”).
(b) The Company, Company Operating Partnership or any other Company Subsidiary owns good and marketable fee simple title or leasehold title (as applicable) to each of the Company Properties, in each case, free and clear of Liens, except for Company Permitted Liens that have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. For the purposes of this Agreement, “Company Permitted Liens” shall mean any (i) Liens relating to any Indebtedness incurred in the ordinary course of business consistent with past practice, (ii) 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 the Company (if such reserves are required pursuant to GAAP), (iii) any Company Material Contracts or other service contracts, management agreements, leasing commission agreements, agreements or obligations set forth in Section 4.16(l) of the Company Disclosure Letter, or Company Leases or ground leases or air rights affecting any Company Property, (iv) Liens imposed or promulgated by Law or any Governmental Authority, including zoning regulations, permits and licenses, (v) Liens that are disclosed on the existing Company Title Insurance Policies made available by or on behalf of the Company, the Company Operating Partnership or any other Company Subsidiary to Parent prior to the date hereof and, with respect to leasehold interests, Liens on the underlying fee or leasehold interest of the applicable ground lessor, lessor or sublessor, (vi) any 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, and (vii) any other Liens, limitations, restrictions or title defects that do not materially impair the value of the applicable Company Property or the continued use and operation of the applicable Company Property as currently used and operated.
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(c) The Company Properties (x) are supplied with utilities and other services reasonably required for their continued operation as they are now being operated, (y) are, to the knowledge of the Company and except as set forth in Section 4.16(c) of the Company Disclosure Letter, in working order sufficient for their normal operation in the manner currently being operated and without any material structural defects other than as may be disclosed in any physical condition reports that have been made available to Parent, and (z) are, to the knowledge of the Company, adequate and suitable for the purposes for which they are presently being used.
(d) To the knowledge of the Company, each of the Company Properties has sufficient access to and from publicly dedicated streets for its current use and operation, without any constraints that materially interfere with the normal use, occupancy and operation thereof.
(e) Except as set forth on Section 4.16(e) of the Company Disclosure Letter. Neither the Company, the Company Operating Partnership, nor any of the Company Subsidiaries has received (i) written notice that any certificate, permit or license from any Governmental Authority having jurisdiction over any of the Company Properties or any agreement or easement that is necessary to permit the lawful use and operation of the buildings and improvements on any of the Company Properties or that is necessary to permit the lawful use and operation of all utilities, parking areas, retention ponds, driveways, roads and other means of egress and ingress to and from any of the Company Properties is not in full force and effect as of the date of this Agreement, 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, has had or would reasonably be expected to have a Company Material Adverse Effect.
(f) No certificate, variance, permit or license from any Governmental Authority having jurisdiction over any of the Company Properties or any agreement, easement or other right that is necessary to permit the current use of the buildings and improvements on any of the Company Properties or that is necessary to permit the current use of all parking areas, driveways, roads and other means of egress and ingress to and from any of the Company Properties has failed to be obtained or is not in full force and effect, and neither the Company, the Company Operating Partnership, nor any Company Subsidiary has received written notice of any outstanding threat of modification or cancellation of any such certificate, variance, permit or license, except for any of the foregoing as, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
(g) Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect or as set forth on Section 4.16(g) of the Company Disclosure Letter, no condemnation, eminent domain or similar proceeding has occurred or is pending with respect to any owned Company Property or, to the knowledge of the Company, any Company Property leased by the Company, the Company Operating Partnership, or any Company Subsidiary, and neither the Company, the Company Operating Partnership, nor any Company Subsidiary has received any written notice to the effect that (i) any condemnation or rezoning proceedings are threatened with respect to any of the Company Properties, or (ii) any zoning regulation or ordinance (including with respect to parking), Board of Fire Underwriters rules, building, fire, health or other Law has been violated (and remains in violation) for any Company Property.
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(h) Except for discrepancies, errors or omissions that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect, the rent rolls for each of the Company Properties, as of April 1, 2023, which rent rolls have previously been made available by or on behalf of the Company, the Company Operating Partnership or any Company Subsidiary to Parent, and the schedules with respect to the Company Properties subject to triple-net leases, which schedules have previously been made available to Parent, correctly reference each lease or sublease that was in effect as of April 1, 2023 and to which the Company, the Company Operating Partnership or the Company Subsidiaries are parties as lessors or sublessors with respect to each of the applicable Company Properties (all leases or subleases (including any triple-net leases), together with all amendments, modifications, supplements, renewals, exercise of options and extensions related thereto, the “Company Leases”). Section 4.16(h) of the Company Disclosure Letter sets forth the current rent annualized and security deposit amounts currently held for each Company Lease (which security deposits are in the amounts required by the applicable Company Lease).
(i) True and complete in all material respects copies of (i) all ground leases affecting the interest of the Company, the Company Operating Partnership or any Company Subsidiary in the Company Properties and (ii) all Company Leases (collectively, the “Company Material Leases”), in each case in effect as of the date hereof, together with all amendments, modifications, supplements, renewals and extensions through the date hereof related thereto, have been made available to Parent. Except as set forth on Section 4.16(i) of the Company Disclosure Letter or as individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect, (1) neither the Company, the Company Operating Partnership nor any Company Subsidiary is and, to the knowledge of the Company, no other party is in breach or violation of, or default under, any Company Material Lease, (2) no event has occurred which would result in a breach or violation of, or a default under, any Company Material Lease by the Company, the Company Operating Partnership or any Company Subsidiary, or, to the knowledge of the Company, any other party thereto (in each case, with or without notice or lapse of time or both) and no tenant under a Company Material Lease is in monetary default under such Company Material Lease, (3) no tenant under a Company Lease is the beneficiary or has the right to become a beneficiary of a loan or forbearance from the Company, the Company Operating Partnership or any Company Subsidiary in excess of $500,000 in the aggregate, (4) neither the Company, the Company Operating Partnership nor any Company Subsidiary is in receipt of any rent under any Company Lease paid more than 30 days before such rent is due and payable, and (5) to the Knowledge of the Company, each Company Material Lease is valid, binding and enforceable in accordance with its terms and is in full force and effect with respect to the Company, the Company Operating Partnership or a Company Subsidiary and, to the knowledge of the Company, with respect to the other parties thereto, except as may be limited by 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).
(j) Except as set forth on Section 4.16(j) of the Company Disclosure Letter, there are no Tax abatements or exemptions specifically affecting the Company Properties, and the Company, the Company Operating Partnership and the Company Subsidiaries have not received any written notice of (and the Company, the Company Operating Partnership and the Company Subsidiaries do not have any knowledge of) any proposed increase in the assessed valuation of any of the Company Properties or of any proposed public improvement assessments that will result in the Taxes or assessments payable in the next tax period increasing, except in each case for any such Taxes or assessments that have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(k) As of the date of this Agreement, no purchase option has been exercised under any Company Lease for which the purchase has not closed prior to the date of this Agreement.
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(l) Except for (1) Company Permitted Liens or (2) as set forth in any Company Lease, or as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (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 any Company Property or any portion thereof that would materially adversely affect the Company’s, the Company Operating Partnership’s or any other Company Subsidiary’s ownership, ground lease, or right to use a Company Property subject to a Company Material Lease, and (ii) there are no other outstanding rights or agreements to enter into any contract for sale, ground lease or letter of intent to sell or ground lease any Company Property or any portion thereof that is owned by any Company Subsidiary, which, in each case, is in favor of any Third Party.
(m) Except as pursuant to a Company Lease or any ground lease affecting any Company Property, neither the Company, the Company Operating Partnership nor any Company Subsidiary is a party to any agreement pursuant to which the Company, the Company Operating Partnership or any Company Subsidiary manages or manages the development of any real property for any Third Party.
(n) Neither the Company, the Company Operating Partnership nor any Company Subsidiary is party to any oral Company Lease.
(o) Each Company Property is covered by a valid Company Title Insurance Policy. A copy of each Company Title Insurance Policy in the possession of the Company has been made available to Parent. No written claim has been made against any Company Title Insurance Policy, which, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.
(p) To the knowledge of the Company, Section 4.16(p) of the Company Disclosure Letter lists each Company Property which is (i) under development as of the date hereof, and describes the status of such development as of the date hereof, and (ii) which is subject to a binding agreement for development or commencement of construction by the Company, the Company Operating Partnership or a Company Subsidiary, in each case other than those pertaining to minor capital repairs, replacements and other similar correction of deferred maintenance items in the ordinary course of business or alterations or expansions being performed by any tenant under a Company Lease.
(q) The Company, the Company Operating Partnership and the Company Subsidiaries have good and valid title to, or a valid and enforceable leasehold interest in, or other right to use, all personal property owned, used or held for use by them as of the date of this Agreement (other than property owned by tenants and used or held in connection with the applicable tenancy), except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. None of the Company’s, the Company Operating Partnership’s or any of the Company Subsidiaries’ ownership of or leasehold interest in any such personal property is subject to any Liens, except for Company Permitted Liens and Liens that have not had and would not reasonably be expected to have a Company Material Adverse Effect. Section 4.16(q) of the Company Disclosure Letter sets forth all leased personal property of the Company, the Company Operating Partnership or any Company Subsidiary with monthly lease obligations in excess of $250,000 and that are not terminable upon 30 days’ notice.
(r) Section 4.16(r) of the Company Disclosure Letter lists the parties currently providing third-party property management services to the Company, the Company Operating Partnership or a Company Subsidiary and the number of facilities currently managed by each such party.
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Section 4.17 Taxes.
(a) Except as set forth on Section 4.17(a) of the Company Disclosure Letter, the Company, Company Operating Partnership and, if applicable, each Company Subsidiary has timely filed (or there have been filed on their behalf) with the appropriate Governmental Authority all income and other material Tax Returns required to be filed by them, 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. The Company, Company Operating Partnership and each Company Subsidiary has duly paid (or there has been paid on their behalf), or made adequate provisions for, all income and other material Taxes required to be paid by them, whether or not shown on any Tax Return. True and materially complete copies of all U.S. federal income Tax Returns that have been filed with the IRS by the Company and, if applicable, each Company Subsidiary with respect to the taxable years ending on or after December 31, 2021 have been provided or made available to representatives of Parent.
(b) The Company (i) for all taxable years commencing with the Company’s taxable year ended December 31, 2013 through December 31, 2022, has been subject to taxation as a REIT and has satisfied all requirements to qualify as a REIT; (ii) has operated since January 1, 2023 to the date hereof in a manner consistent with the requirements for qualification and taxation as a REIT; (iii) intends to continue to operate in such a manner as to qualify as a REIT until the REIT Merger Effective Time; and (iv) has not taken or omitted to take any action that could reasonably be expected to result in a challenge by the IRS or any other Governmental Authority to its status as a REIT, and, to the knowledge of the Company, no such challenge is pending or has been threatened in writing.
(c) The most recent financial statements contained in the Company SEC Filings reflect an adequate reserve for all Taxes payable by the Company and the Company Subsidiaries for all taxable periods and portions thereof through the date of such financial statements in accordance with GAAP, whether or not shown as being due on any Tax Return.
(d) Except as set forth on Section 4.17(d) of the Company Disclosure Letter (i) there are no audits, examinations, investigations by any Governmental Authority or other proceedings ongoing or, to the knowledge of the Company, threatened with regard to any income or other material Taxes or Tax Returns of the Company or any Company Subsidiary and neither the Company nor any Company Subsidiary is a party to any litigation or administrative proceeding relating to Taxes; (ii) no material deficiency for Taxes of the Company or any Company Subsidiary has been claimed, proposed or assessed in writing or, to the knowledge of the Company, threatened, by any Governmental Authority, which deficiency has not yet been settled; (iii) none of the Company, Company Operating Partnership or any Company Subsidiary has waived any statute of limitations with respect to Taxes (other than in connection with any extension of time to file any Tax Return) or agreed to any extensions of time with respect to any Tax assessment or deficiency for any open tax year; (iv) neither the 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); and (v) neither the Company nor any Company Subsidiary has received a written claim by any Governmental Authority in any jurisdiction where any of them does not file Tax Returns or pay any Taxes that it is or may be subject to taxation by that jurisdiction.
(e) None of the Company, Company Operating Partnership or any Company Subsidiary holds any asset, the disposition of which would be subject to (or to rules similar to) Section 1374 of the Code or the “prohibited transactions” Tax under Section 857(b)(6) of the Code.
(f) No event has occurred, and no condition or circumstance exists, which presents a material risk that any material Tax described in the preceding sentence will be imposed upon the Company or the Company Subsidiaries.
(g) The 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 and 3402 of the Code or similar provisions under any state or foreign Laws) and have duly and timely withheld and, in each case, have paid over to the appropriate Governmental Authorities all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.
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(h) There are no Company Tax Protection Agreements (as hereinafter defined) 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 the Company, threatened to raise a material claim against the Company or any Company Subsidiary for any breach of any Company Tax Protection Agreements. As used herein, “Company Tax Protection Agreements” means any agreement to which the Company, or any Company Subsidiary is a party: (i) pursuant to which any liability to holders of limited partnership 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; and/or (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 the Company, or any Company Subsidiaries, to (A) maintain a minimum level of debt or continue a particular debt, (B) retain or not dispose of assets for a period of time that has not since expired, (C) make or refrain from making Tax elections, (D) operate (or refrain from operating) in a particular manner, (E) 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 assets of such party or any of its direct or indirect subsidiaries, (F) 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), and/or (G) only dispose of assets in a particular manner. As used herein, “Company Subsidiary Partnership” means a Company Subsidiary that is a partnership for U.S. federal income tax purposes.
(i) There are no Tax Liens upon any property or assets of the Company or any Company Subsidiary except for 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.
(j) None of the Company, Company Operating Partnership or any Company Subsidiary has requested, has received or is subject to any ruling of a Governmental Authority or has entered into any binding agreement with a Governmental Authority with respect to any Taxes.
(k) There are no Tax allocation or sharing agreements or similar agreements with respect to, binding, or otherwise involving the Company or any Company Subsidiary (other than customary arrangements under commercial contracts entered into in the ordinary course of business and which do not primarily relate to Taxes).
(l) To the knowledge of the Company, the Company does not have and will not have, as of the REIT Merger Effective Time, any current or accumulated “earnings and profits” for U.S. federal income tax purposes which would constitute “earnings and profits accumulated in any non-REIT year” (determined for purposes of Section 857(a)(2)(B) of the Code).
(m) None of the Company, Company Operating Partnership or any Company Subsidiary (i) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company) or (ii) has any liability for the Taxes of any Person (other than the 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, (other than customary arrangements under commercial contracts entered into in the ordinary course of business and which do not primarily relate to Taxes), or otherwise.
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(n) Except as set forth on Section 4.17(n) of the Company Disclosure Letter, none of the Company, Company Operating Partnership or any Company Subsidiary is or has been a party to any “reportable transaction” (within the meaning of Treasury Regulation Section 1.6011-4(b)).
(o) Neither the 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 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.
(p) Company Operating Partnership is not an investment company for purposes of Section 721(b) of the Code.
(q) Except as set forth on Section 4.17(q) of the Company Disclosure Letter, no written power of attorney that has been granted by Company or any of Company Subsidiary (other than to the Company or a Company Subsidiary) currently is in force with respect to any matter relating to Taxes.
(r) Except as set forth on Section 4.17(r) of the Company Disclosure Letter, no Company Subsidiary that is not a domestic corporation has ever been treated as other than a partnership or disregarded entity for U.S. federal income tax purposes. Without limitation of the foregoing, Company Operating Partnership is and always has been taxable as a partnership (and not as an association or publicly traded partnership taxable as a corporation) for U.S. federal income tax purposes.
(s) The Company is not aware of any fact or circumstance that could reasonably be expected to prevent the REIT Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Section 4.18 Insurance. The Company has made available to Parent copies of all material insurance policies maintained by the Company or the Company Subsidiaries and all material fidelity bonds or other insurance service contracts in each case in the Company’s possession providing coverage for all material Company Properties (the “Company Insurance Policies”). Except for those matters that have not had and would not reasonably be expected to have a Company Material Adverse Effect, there is no claim for coverage by the Company or any Company Subsidiary pending under any of the Company Insurance Policies that has been denied or disputed by the insurer. Except for those matters that have not had and would not reasonably be expected to have a Company Material Adverse Effect, all premiums payable under all Company Insurance Policies have been paid, and the Company and the Company Subsidiaries have otherwise complied in all material respects with the terms and conditions of all the Company Insurance Policies. To the knowledge of the Company, such Company Insurance Policies are valid and enforceable in accordance with their terms and are in full force and effect. No written notice of cancellation or termination has been received as of the date hereof by the Company or any Company Subsidiary with respect to any Company Insurance Policy which has not been replaced on substantially similar terms prior to the date of such cancellation.
Section 4.19 Opinion of Financial Advisor. The Company Special Committee has received the opinion of Truist Securities, Inc. (the “Company Financial Advisor”), the Company’s independent financial advisor, to the effect that, as of the date of such opinion and subject to the assumptions and limitations set forth therein, the Common Exchange Ratio is fair from a financial point of view to the holders of shares of Company Common Stock.
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Section 4.20 Takeover Statutes. Assuming the accuracy of the representations and warranties set forth in Section 5.24, the Company Board has taken all action necessary, if any, to render inapplicable to the REIT Merger the restrictions on business combinations contained in Section 3-602 of the MGCL, and any such action shall be irrevocable during the term of this Agreement. No other “business combination,” “control share acquisition” “fair price,” “moratorium” or other takeover or anti-takeover statute or similar federal or state Law is applicable to this Agreement, the Mergers or the other transactions contemplated by this Agreement.
Section 4.21 Vote Required. The affirmative vote of the holders of not less than a majority of all outstanding shares of Company Common Stock entitled to vote thereon to approve the REIT Merger (the “Company Stockholder Approval”) is the only vote of the holders of any class or series of shares of capital stock of the Company required to adopt this Agreement and approve the Mergers and the other transactions contemplated by this Agreement.
Section 4.22 Company Rights Plan. Other than the Company Rights Plan, there is no stockholders rights plan, “poison pill” anti-takeover plan or other similar arrangement in effect, to which the Company is party or otherwise bound. The Company has amended, and the Company and the Company Board have taken all necessary action to amend, the Company Rights Agreement to render the Rights (as defined therein) issued pursuant to the Rights Agreement inapplicable to the execution and delivery of this Agreement or the consummation of the Mergers and to ensure that none of the execution or delivery of this Agreement or the consummation of the Mergers will result in (a) the occurrence of an event described in Section 3.1 of the Company Rights Agreement, (b) a Stock Acquisition Date or a Distribution Date or (c) the Rights becoming evidenced by, and transferable pursuant to, certificates separate from the certificates representing shares of Company Common Stock. No Distribution Date or Stock Acquisition Date has occurred, and the Rights have not become evidenced by, or transferable pursuant to, certificates separate from the certificates representing the Company Common Stock. The Company and the Company Board have taken all actions necessary to ensure that the Rights shall expire immediately after the REIT Merger Effective Time, without the payment of any money or other consideration. A true and correct copy of such amendment to the Company Rights Plan and the action of the Company Board approving such amendment has been provided to Parent on or prior to the date hereof, and such amendment remains in full force and effect.
Section 4.23 Brokers. No broker, finder or investment banker (other than the Company Financial Advisor) is entitled to any brokerage, finder’s or other fee or commission in connection with or upon consummation of the Mergers based upon arrangements made by or on behalf of the Company or any Company Subsidiary. The Company has made available to Parent a true and complete copy of the Company’s engagement letter with the Company Financial Advisor, together with any amendment, modification, supplement, renewal, extension or other document related thereto, with respect to the transactions contemplated by this Agreement.
Section 4.24 Investment Company Act. None of the Company, Company Operating Partnership or any other Company Subsidiary is required to be registered as an investment company under the Investment Company Act.
Section 4.25 Ownership of Parent Common Shares. None of the Company, Company Operating Partnership, any Company Subsidiary or, to the knowledge of the Company, their respective Affiliates or “associates” (as defined in Section 3-601(c) of the MGCL) is, nor at any time during the last three years has been, an “interested stockholder” of Parent as defined in Section 3-601(j) of the MGCL.
Section 4.26 Affiliate Transactions. Except as set forth in the Company SEC Filings made through and including the date of this Agreement or as permitted by this Agreement, from January 1, 2021 through the date of this Agreement there have been no transactions, agreements, arrangements or understandings between the Company or any Company Subsidiary, on the one hand, and any Affiliates (other than Company Subsidiaries) of the 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.
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Section 4.27 [Reserved].
Section 4.28 No Other Representations or Warranties. Notwithstanding anything contained in this Agreement to the contrary, except for the representations and warranties contained in Article V, each of the Company and the Company Operating Partnership acknowledges that neither Parent nor any other Person or entity on behalf of Parent has made, and the Company and Company Operating Partnership have not relied upon, any representation or warranty, whether express or implied, with respect to Parent or any of the Parent Subsidiaries or their respective businesses, affairs, 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 other information provided or made available to the Company by or on behalf of Parent.
Article V.
Representations and Warranties
of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub
Except (a) as set forth in the corresponding sections of the disclosure letter that has been prepared by Parent and delivered by Parent to the Company immediately prior to the execution and delivery of this Agreement (the “Parent Disclosure Letter”), it being agreed that disclosure of any item in any Section of the Parent Disclosure Letter with respect to any Section or subsection of Article V of this Agreement shall be deemed disclosed with respect to any other Section or subsection of Article V of this Agreement to the extent the relevance of such item is reasonably apparent from the face of such disclosure (provided, however, that nothing in the Parent Disclosure Letter is intended to broaden the scope of any representation or warranty of Parent, Parent Operating Partnership, REIT Merger Sub or Partnership Merger Sub made herein or be construed as an admission or indication that (i) such item or other matter is material, (ii) such item or other matter is required to be referred to in the Company Disclosure Letter or (iii) any breach or violation of applicable Laws or any contract, agreement or arrangement to which the Parent, Parent Operating Partnership or their respective Subsidiaries is a party exists or has occurred), or (b) as disclosed in publicly available Parent SEC Filings filed with, or furnished to, as applicable, the SEC on or after January 1, 2022 and at least two (2) Business Days prior to the date of this Agreement (excluding any documents incorporated by reference therein or files as exhibits thereto, and excluding any disclosure set forth in any section of a Parent SEC Filing entitled “Risk Factors” or “Cautionary Note Regarding Forward-Looking Statements” or similarly titled section in any other disclosures included in the Parent SEC Filings, in each case to the extent that such disclosure is cautionary, predictive or forward-looking in nature), Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub hereby jointly and severally represent and warrant to the Company and Company Operating Partnership that:
Section 5.1 Organization and Qualification; Subsidiaries.
(a) Parent is a corporation duly organized, validly existing and in good standing under the Laws of the State of Maryland, and Parent Operating Partnership is a partnership duly organized, validly existing and in good standing under the Laws of the State of Delaware and each has the requisite organizational power and authority and any necessary governmental authorization, except for such failures to be so authorized that individually or in the aggregate have not had and would not reasonably be expected to have a Parent Material Adverse Effect, to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Each of Parent and Parent Operating Partnership 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, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
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(b) REIT Merger Sub is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Maryland and has the requisite organizational power and authority to carry on its business as it is now being conducted. REIT Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement.
(c) Partnership Merger Sub 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 carry on its business as it is now being conducted. Partnership Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement.
(d) Section 5.1(d) of the Parent Disclosure Letter sets forth a true and complete list of the Parent Subsidiaries, together with (i) the jurisdiction of incorporation or organization, as the case may be, of each Parent Subsidiary, (ii) the type of and percentage of interest held, directly or indirectly, by Parent in each Parent Subsidiary, and (iii) the classification for U.S. federal income tax purposes of each Parent Subsidiary, including by identifying each Parent Subsidiary that is a Qualified REIT Subsidiary or a Taxable REIT Subsidiary. Each Parent Subsidiary (other than REIT Merger Sub and Partnership Merger Sub) is duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite organizational power and authority and any necessary governmental authorization 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 organized, in good standing or have certain power and authority that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect. Each Parent Subsidiary 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, have not had and would not reasonably be expected to have a Parent Material Adverse Effect. There are no current dissolution, revocation or forfeiture proceedings regarding any Parent Subsidiary except as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect and, to the Parent’s knowledge, there are no grounds that currently exist for the administrative dissolution of Parent or any Parent Subsidiary by any Governmental Authority.
(e) None of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any Parent Subsidiary directly or indirectly owns any interest in or of, or investment in, whether equity or debt, any Person (other than equity interests in the Parent Subsidiaries and investments in short-term investment securities set forth on Section 5.1(e) of the Parent Disclosure Letter).
Section 5.2 Organizational Documents. Parent has made available to the Company complete and correct copies of (i) the Parent Charter and Parent Bylaws and (ii) the Parent Partnership Certificate and Parent Partnership Agreement, as in effect on the date hereof.
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Section 5.3 Capital Structure.
(a) As of the date of this Agreement, the authorized capital stock of Parent consists of 280,000,000 shares of capital stock, which have been classified as 250,000,000 shares of Parent Common Stock and 30,000,000 shares of Parent Preferred Stock. At the close of business on May 20, 2023, (i) 103,880,021 Parent Common Shares were issued and outstanding, (ii) 6,799,467 shares of Parent Series A Preferred Stock were issued and outstanding, (iii) 4,695,887 shares of Parent Series B Preferred Stock were issued and outstanding, (iv) 359,840 shares of Parent Common Stock were reserved for issuance pursuant to awards outstanding under the Parent 2021 Equity Plan, (v) 2,500,000 shares of Parent Common Stock were reserved for issuance upon a conversion of awards of LTIP Units pursuant to the Parent 2021 OPP and (vi) there are no shares of Parent Common Stock reserved for issuance upon conversion of Parent Partnership Units. One hundred thousand (100,000) shares of Parent Preferred Stock are designated as Parent Series C Preferred Stock, none of which is outstanding, and which are reserved for issuance in accordance with the stockholder rights plan adopted pursuant to the Parent Rights Agreement (the “Parent Rights Plan”). All issued and outstanding shares of the beneficial interests of Parent are, and all Parent Common Shares reserved for issuance as noted above, shall be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights, and all Parent Common Shares and Parent Preferred Shares to be issued to Parent Operating Partnership and provided by Parent Operating Partnership as the REIT Common Merger Consideration or the REIT Preferred Merger Consideration, when so issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid, non-assessable and free of preemptive rights. There are no outstanding bonds, debentures, notes or other indebtedness of Parent or any Parent Subsidiary having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which holders of Parent Common Shares or other equity holders of such Parent Subsidiary may vote.
(b) Parent is the sole general partner of Parent Operating Partnership, and Parent owns, directly or indirectly, all of the general partner interests in Parent Operating Partnership, free and clear of Liens (other than Permitted Liens). Section 5.3(b) of the Parent Disclosure Letter sets forth, as of the date hereof, the name of, and the number and class of partnership interests held by, each partner in Parent Operating Partnership. Other than such limited partnership interests set forth on Section 5.3(b) of the Parent Disclosure Letter, Parent owns all of the issued and outstanding limited partnership interests in Parent Operating Partnership, free and clear of Liens (other than Permitted Liens or Liens arising pursuant to the Parent Partnership Agreement).
(c) All of the REIT Merger Sub membership interests are owned directly or indirectly by Parent Operating Partnership, free and clear of Liens. All of the REIT Merger Sub membership interests are duly authorized and validly issued, and are not entitled to preemptive rights. There are no outstanding bonds, debentures, notes or other indebtedness of REIT Merger Sub having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which holder of REIT Merger Sub membership interests may vote.
(d) All of the Partnership Merger Sub membership interests are owned directly or indirectly by Parent Operating Partnership, free and clear of Liens. All of the Partnership Merger Sub membership interests are duly authorized and validly issued, and are not entitled to preemptive rights. There are no outstanding bonds, debentures, notes or other indebtedness of Partnership Merger Sub having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which holder of Partnership Merger Sub membership interests may vote.
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(e) All of the outstanding shares of capital stock of each of the Parent Subsidiaries that is a corporation are duly authorized, validly issued, fully paid and nonassessable. All equity interests in each of the Parent Subsidiaries that is a partnership or limited liability company are duly authorized and validly issued. All shares of capital stock of (or other ownership interests in) each of the Parent Subsidiaries that may be issued upon exercise of outstanding options or exchange rights are duly authorized and, upon issuance will be validly issued, fully paid and nonassessable. Except as set forth in Section 5.3(e) of the Parent Disclosure Letter, Parent owns, directly or indirectly, all of the issued and outstanding capital stock and other equity interests of each of the Parent Subsidiaries, free and clear of all Liens (other than Permitted Liens), and 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 equity interests of any Parent Subsidiary or which would require any Parent Subsidiary to issue or sell any shares of its capital stock, equity interests or securities convertible into or exchangeable for shares of its capital stock or equity interests.
(f) Except as set forth in Section 5.3(f) of the Parent Disclosure Letter or pursuant to the Parent Rights Plan, as of the date of this Agreement, there are no securities, options, warrants, calls, rights, commitments, agreements, rights of first refusal, arrangements or undertakings of any kind to which Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary is a party or by which any of them is bound, obligating Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary to issue, deliver or sell or create, or cause to be issued, delivered or sold or created, additional Parent Common Shares or REIT Merger Sub or Partnership Merger Sub partnership interests or other equity interests or phantom stock or other contractual rights the value of which is determined in whole or in part by the value of any equity interest of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any of the other Parent Subsidiaries or obligating Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, right of first refusal, arrangement or undertaking. As of the date of this Agreement, except as expressly provided in the Parent Partnership Agreement or pursuant to the Parent Rights Plan, there are no outstanding contractual obligations of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary to repurchase, redeem or otherwise acquire any Parent Common Shares, or other equity interests of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary (other than in satisfaction of withholding Tax obligations pursuant to certain awards outstanding under the Parent Equity Plan). Except as set forth on Section 5.3(f) of the Parent Disclosure Letter, none of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary is a party to or, to the knowledge of Parent, bound by any agreements or understandings concerning the voting of any capital stock or other equity interests of Parent, REIT Merger Sub, Partnership Merger Sub or any of the other Parent Subsidiaries.
(g) All dividends or distributions on the Parent Common Shares, Parent Preferred Stock, Parent Partnership Units and any dividends or distributions on any securities of any Parent Subsidiary which have been authorized or declared prior to the date hereof have been paid in full (except to the extent such dividends have been publicly announced and are not yet due and payable).
Section 5.4 Authority.
(a) Each of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub has the requisite corporate, partnership or limited liability company power and authority, respectively, to execute and deliver this Agreement, to perform its obligations hereunder and, subject to receipt of the Parent Stockholder Approval, to consummate the Mergers and the other transactions contemplated by this Agreement. The execution and delivery of this Agreement by each of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub and the consummation by each of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub of the Mergers and the other transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and no other corporate or limited partnership proceedings on the part of Parent, Parent Operating Partnership, REIT Merger Sub or Partnership Merger Sub, as applicable, are necessary to authorize this Agreement or the Mergers or to consummate the transactions contemplated hereby, subject (x) with respect to the REIT Merger, to receipt of the Parent Stockholder Approval and the filing and acceptance for record of the REIT Merger Articles of Merger with the Maryland SDAT and (y) with respect to the Partnership Merger, to the filing and acceptance for record of the Partnership Merger Certificate of Merger with the Delaware Secretary. The Parent Board at a duly held meeting, upon the recommendation of the Parent Special Committee, has (i) duly and validly authorized the execution and delivery of this Agreement and declared advisable the consummation of the Mergers and the other transactions contemplated hereby, (ii) determined that the Mergers and the transactions contemplated by this Agreement are fair to and in the best interest of Parent and its stockholders, (iii) directed that the Parent Share Issuances be submitted for consideration at the Parent Stockholder Meeting, and (iv) resolved to recommend that the stockholders of Parent vote in favor of the Parent Share Issuances (the “Parent Recommendation”) and to include such recommendation in the Joint Proxy Statement. Parent, in its capacity as the sole general partner of the Parent Operating Partnership and in accordance with the Parent Partnership Agreement, has approved this Agreement, the Partnership Merger and the other applicable transactions contemplated by this Agreement.
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(b) This Agreement has been duly executed and delivered by each of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub and, assuming due authorization, execution and delivery by each of the Company and Company Operating Partnership, constitutes a legally valid and binding obligation of each of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub, enforceable against Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub 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).
(c) The Parent Special Committee, at a meeting duly called and held, has recommended that the Parent Board approve and adopt this Agreement and determined that the transactions contemplated hereby, including the Mergers, are advisable and are fair and in the best interests of Parent and the stockholders of Parent.
(d) As of the date hereof, neither the Parent Board, nor the Parent Special Committee, has subsequently rescinded or modified, in any way, its determinations and approvals discussed above.
Section 5.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by each of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub does not, and the performance of this Agreement and the consummation of the Mergers and the other transactions contemplated hereby by each of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub will not, (i) assuming receipt of the Parent Stockholder Approval, conflict with or violate any provision of (A) the Parent Charter, Parent Bylaws, Parent Partnership Certificate, Parent Partnership Agreement or the organizational documents of REIT Merger Sub or Partnership Merger Sub or (B) any of the organizational or governing documents of any other Parent Subsidiary, (ii) assuming that all consents, approvals, authorizations and permits described in Section 5.5(b) have been obtained, all filings and notifications described in Section 5.5(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary or by which any property or asset of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary is bound, or (iii) to the extent not obtained prior to the date hereof, require any consent or approval under, result in any breach of or any loss of any benefit or material increase in any cost or obligation of Parent or any Parent 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 or payment (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 Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary pursuant to, any note, bond, debt instrument, indenture, contract, agreement, ground lease, license, permit or other legally binding obligation to which Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary is a party, except, as to clauses (i)(B), (ii) and (iii), respectively, for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
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(b) The execution and delivery of this Agreement by each of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub does not, and the performance of this Agreement by each of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, except (i) the filing with the SEC of (A) the Joint Proxy Statement, the Form S-4, and the declaration of effectiveness of the Form S-4, and (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, (ii) as may be required under the rules and regulations of the NASDAQ and the NYSE, (iii) the filing of the REIT Merger Articles of Merger and the acceptance thereof for record by the Maryland SDAT pursuant to the MGCL and the MD LLC Act, (iv) the filing of the Partnership Merger Certificate of Merger and the acceptance thereof for record by the Delaware Secretary pursuant to the DRULPA and the DLLCA, (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 state and local 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, has not had and would not reasonably be expected to have a Parent Material Adverse Effect.
Section 5.6 Permits; Compliance with Law.
(a) Except for the Permits that are the subject of Section 5.14 or Section 5.16, which are solely the subject of the representations and warranties made therein, Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub and each other Parent Subsidiary is in possession of all Permits, including building permits and certificates of occupancy, necessary for Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub and each other Parent Subsidiary to own, lease and, to the extent applicable, operate its properties or to carry on its respective business substantially as it is being conducted as of the date hereof (collectively, the “Parent Permits”), and all such Parent Permits are valid and in full force and effect, except where the failure to be in possession of, or the failure to be valid or in full force and effect of, any of the Parent Permits, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect. All applications required to have been filed for the renewal of Parent Permits have been duly filed on a timely basis with the appropriate Governmental Authority, and all other filings required to have been made with respect to such Parent Permits have been duly made on a timely basis with the appropriate Governmental Authority, except in each case for failures to file which, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect. All fees and assessments due and payable by Parent, Parent Operating Partnership or any other Parent Subsidiary, in each case, in connection with the Parent Permits, have been paid, expect where the failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect. None of Parent, Parent Operating Partnership or any Parent Subsidiary has received as of the date hereof, any written claim or notice indicating that, nor to the knowledge of Parent is, Parent, Parent Operating Partnership or any other Parent Subsidiary currently not in compliance with the terms of any such Parent Permits, except where the failure to be in compliance with the terms of any such Parent Permits, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect. No event has occurred with respect to a Parent Permit that permits, or after notice or lapse of time or both would permit, the suspension, revocation, termination or material impairment of such Parent Permit (or the rights thereunder), and no suspension, cancellation, revocation or material impairment of any Parent Permit is pending, or the knowledge of Parent, threatened, except, in each case, where such suspension, revocation, cancellation or material impairment, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect.
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(b) None of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary is or has since January 1, 2021, been in conflict with, or in default or violation of (i) any Law applicable to Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary or by which any property or asset of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary is bound (except for compliance with Laws addressed in Section 5.10, Section 5.11, Section 5.14, Section 5.16 or Section 5.17, which are solely the subject of the representations and warranties made therein), or (ii) any Parent Permits (except for Parent Permits addressed in Section 5.14, which are solely the subject of the representations made therein), except in each case for any such conflicts, defaults or violations that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(c) Each of Parent, each Parent Subsidiary and their respective controlled Affiliates (including in each case any of their officers, directors or employees) have complied in all material respects with applicable Anti-Corruption Laws. Neither Parent nor any Parent Subsidiary nor, to the knowledge of Parent, any director, officer or Representative of Parent or any Parent Subsidiary has (i) used any corporate funds for any unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity, (ii) made, taken or will take any action in furtherance of any direct or indirect unlawful payment, promise to pay or authorization or approval of the payment or giving of money, property or gifts of anything of value, directly or indirectly to any foreign or domestic government official or employee, (iii) made, offered or taken an act in furtherance of any direct or indirect unlawful bribe, rebate, payoff, kickback or other unlawful payment to any foreign or domestic government official or employee, (iv) made any payment to any customer, supplier or tenant, or to any officer, director, partner, employee or agent of any such customer, supplier or tenant, for the unlawful sharing of fees to any such customer, supplier or tenant or any such officer, director, partner, employee or agent for the unlawful rebating of charges, (v) engaged in any other unlawful reciprocal practice, or made any other unlawful payment or given any other unlawful consideration to any such customer, supplier or tenant or any such officer, director, partner, employee or agent of such customer, officer or tenant, or (vi) taken any action or made any omission in violation of any applicable Law governing imports into or exports from the United States or any foreign country, or relating to economic sanctions or embargoes, corrupt practices, money laundering, or compliance with unsanctioned foreign boycotts, in each case, in violation of any applicable Anti-Corruption Law. Neither Parent nor any Parent Subsidiary has received any written communication that alleges that it, or any of its respective Representatives, is, or may be, in violation of, or has, or may have, any liability under, any Anti-Corruption Law.
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Section 5.7 SEC Filings; Financial Statements.
(a) Parent has timely filed with, or furnished (on a publicly available basis) to, the SEC all forms, reports, schedules, statements, certifications and other documents required to be filed or furnished by it under the Securities Act or the Exchange Act, as the case may be, including any amendments or supplements thereto, from and after January 1, 2021 (collectively, the “Parent SEC Filings”). Each Parent SEC Filing, as amended or supplemented, if applicable, (i) as of its date, or, if amended or supplemented, as of the date of the most recent amendment or supplement thereto, complied in all material respects with the requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and the applicable rules and regulations of the SEC thereunder, and (ii) did not, at the time it was filed (or became effective in the case of registration statements), or, if amended or supplemented, as of the date of the most recent amendment or supplement thereto, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. As of the date of this Agreement, neither REIT Merger Sub nor Partnership Merger Sub nor any other Parent Subsidiary is separately subject to the periodic reporting requirements of the Exchange Act.
(b) Each of the consolidated financial statements contained or incorporated by reference in the Parent SEC Filings (as amended, supplemented or restated, if applicable, in each case, to the extent filed and publicly available prior to the date of this Agreement), including the related notes and schedules, complied in all material respects as to form with the applicable accounting requirements and published rules and regulations of the SEC with respect thereto, was prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as indicated in the notes thereto, or in the case of unaudited quarterly financial statements, as may be permitted by the SEC on Form 10-Q, Form 8-K, Regulation S-X or any successor or like form under the Exchange Act), and each such consolidated financial statement presented fairly, in all material respects, , in accordance with the applicable requirements of GAAP and the applicable rules and regulations of the SEC, the consolidated financial position, results of operations, stockholders’ equity and cash flows of Parent and its consolidated subsidiaries, taken as a whole, as of the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited quarterly financial statements, to normal year-end adjustments, none of which is material).
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(c) Parent is in compliance in all material respects with the provisions of and rules promulgated under the Sarbanes-Oxley Act, the Exchange Act and the Securities Act and the applicable listing and corporate governance rules of NYSE, in each case, relating to Parent which under the terms of such provisions or rules (including the dates by which such compliance is required) have become applicable to Parent. Each of the principal executive officer and the principal financial officer (in each case, having the meaning given to such terms in the Sarbanes-Oxley Act) of Parent has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act or Sections 302 and 906 of the Sarbanes-Oxley Act and the rules and regulations of the SEC promulgated thereunder with respect to the Parent SEC Filings. Since January 1, 2021, Parent and the Parent Subsidiaries have devised, designed and maintain a system of “internal accounting controls over financial reporting” (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) that is sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including that: (i) transactions are executed only in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of the financial statements of Parent and the Parent Subsidiaries and to maintain accountability for the assets of Parent and the Parent Subsidiaries; (iii) access to such assets is permitted only in accordance with management’s authorization; (iv) the reporting of such assets is compared with existing assets at reasonable and regular intervals and appropriate action is taken with respect to any differences; and (v) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. Parent has disclosed to Parent’s auditors and the audit committee of the Parent Board (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect Parent’s ability to record, process, summarize and report financial data, and (ii) any fraud, whether or not material, that involves Parent’s management or other of Parent’s or any Parent Subsidiary’s employees who have a significant role in Parent’s internal controls over financial reporting, and Parent has made available to the Company copies of any material written materials relating to the foregoing( provided that the terms “significant deficiency” and “material weakness” shall have the meanings assigned to them in the auditing standards of the Public Company Over Oversight, as in effect on the date of this Agreement). Since January 1, 2021, Parent has established and maintains “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) designed to ensure that material information relating to Parent required to be included in reports filed or furnished under the Exchange Act, is recorded, processed, summarized and communicated with in the time periods specified in the SEC’s rules and forms to Parent’s management, as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the chief executive officer and chief financial officer of the Company required pursuant to the Exchange Act with respect to such reports, and such disclosure controls and procedures are effective in timely alerting Parent’s principal executive officer and its principal financial officer to material information required to be included in Parent’s periodic reports required under the Exchange Act. Parent has delivered or made available to the Company complete and accurate copies of notices received as of the date hereof by Parent from its independent auditor of any significant deficiencies or material weaknesses in Parent’s internal control over financial reporting since January 1, 2021 and any other management letter or similar correspondence received as of the date hereof by Parent since January 1, 2021 from any independent auditor of Parent or any of the then-existing Parent Subsidiaries. Since the enactment of the Sarbanes-Oxley Act, none of Parent, Parent Operating Partnership or any other Parent Subsidiary has made any “extensions of credit” (within the meaning of Section 401 of the Sarbanes-Oxley Act) to any director, trustee or executive officer (as defined in Rule 3b-7 promulgated under the Exchange Act) of Parent or any consolidated Parent Subsidiary.
(d) None of Parent or any Parent Subsidiary has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required under GAAP to be set forth on a consolidated balance sheet of Parent and the Parent Subsidiaries or in the notes thereto, except for liabilities or obligations (i) reflected or reserved against on the most recent consolidated balance sheet of Parent and Parent Subsidiaries included in the Parent SEC Filings made through and including the date of this Agreement (including any notes thereto), (ii) incurred in connection with the transactions contemplated by this Agreement, including Section 6.2 hereof, (iii) incurred in the ordinary course of business consistent with past practice since the most recent balance sheet set forth in the Parent SEC Filings made through and including the date of this Agreement, (iv) described in any section of the Parent Disclosure Letter or (v) that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
(e) None of Parent or any Parent Subsidiary is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar contract or arrangement, including any contract relating to any transaction or relationship between or among Parent or any Parent Subsidiary, on the one hand, and any unconsolidated Affiliate of Parent or any Parent Subsidiary, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K under the Securities Act), in each case, where the result, purpose or effect is to avoid disclosure of any material transaction involving, or material liabilities of, Parent or any Parent Subsidiary in Parent’s consolidated audited financial statements or other SEC Documents or any Parent Subsidiary’s audited financial statements.
(f) There are no (i) outstanding or unresolved comments from the SEC with respect to any Parent SEC Filing, and, to the knowledge of Parent, no Parent SEC Filing is the subject of ongoing SEC review, or (ii) internal investigations, SEC inquiries or investigations or other governmental inquiries or investigations pending or, to the knowledge of Parent, threatened. Parent has made available to the Company true and complete copies of all material written correspondence with the staff of the SEC received since January 1, 2021 relating to the Parent SEC Filings. None of the Parent SEC Filings is the subject of any confidential treatment request by Parent.
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Section 5.8 Disclosure Documents. None of the information supplied or to be supplied by or on behalf of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary for inclusion or incorporation by reference in (i) the Form S-4 will, at the time such document is filed with the SEC, at any time such document is amended or supplemented or at the time such document is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) the Joint Proxy Statement will, at the date it is first mailed to the stockholders of the Company and stockholders of Parent, respectively, at the time of the Company Stockholder Meeting and the Parent Stockholder Meeting, at the time the Form S-4, is declared effective by the SEC or at the REIT Merger Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. All documents that Parent is responsible for filing with the SEC in connection with the transactions contemplated herein, to the extent relating to Parent or any Parent Subsidiary or other information supplied by or on behalf of Parent or any Parent Subsidiary for inclusion therein, will comply as to form, in all material respects, with the provisions of the Securities Act or Exchange Act, as applicable and the rules and regulations of the SEC thereunder and each such document required to be filed with any Governmental Authority (other than the SEC) will comply in all material respects with the provisions of any applicable Law as to the information required to be contained therein. The representations and warranties contained in this Section 5.8 shall not apply to statements or omissions included in the Form S-4 or the Joint Proxy Statement to the extent based upon information supplied to Parent by or on behalf of the Company.
Section 5.9 Absence of Certain Changes or Events. From the date of Parent’s most recent audited balance sheet included in its Parent SEC Filings through the date of this Agreement, except as contemplated by this Agreement or as set forth on Section 5.9 of the Parent Disclosure Letter:
(a) each of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub and each other Parent Subsidiary has conducted its business in the ordinary course consistent with past practice, and, prior to the date hereof there has not been:
(i) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock or other equity interests of Parent or any Parent Subsidiary, other than regular quarterly dividends consistent with past practice;
(ii) any repurchase, redemption or other acquisition by Parent or any Parent Subsidiary of any shares of capital stock or other equity interests of Parent or any Parent Subsidiary or any securities or other equity interests convertible into or exercisable for any shares of capital stock or other equity interests of Parent or any Parent Subsidiary, other than (A) the redemption or exchange of Parent Partnership Units pursuant to and in accordance with the provisions of the Parent Partnership Agreement, (B) the withholding of Parent Common Shares to satisfy withholding Tax obligations with respect to any restricted shares and RSUs under the Parent Equity Plans, and (C) the acquisition by Parent in the ordinary course of business consistent with past practice pursuant to the terms of the Parent Equity Plans upon termination of employment or service of an award holder;
(iii) any split, combination, subdivision or reclassification of any capital stock or other equity interests, or any issuance of any other securities or equity interests in respect of, in lieu of or in substitution for share of capital stock or other equity interests, of Parent or any Parent Subsidiary;
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(iv) any (A) amendment to the Parent Charter, Parent Bylaws or other organizational documents of Parent; or (B) amendment to the articles or certificates of incorporation, bylaws or other organizational documents of any Parent Subsidiary;
(v) except as required to comply with Law or any Parent Benefit Plan, (A) any grant of any severance, termination pay, retention, or change in control benefits to any current or former director, employee or other individual service provider of Parent or any Parent Subsidiary, (B) any entry into any employment, change in control, deferred compensation or other similar agreement, plan, arrangement or policy (or any material amendment to any such agreement, plan arrangement or policy) with any current or former director or employee of the Parent or any Parent Subsidiary, (C) any increase in the compensation or benefits payable under any Parent Benefit Plan other than increases in the ordinary course of business consistent with past practice, (D) recognition of any labor union, (E) any establishment, adoption, entry into, amendment, modification or termination of any collective bargaining agreement, (F) any establishment, adoption, entry into, termination or amendment or modification in any material respect, of any material Parent Benefit Plan or (G) the taking of any action to accelerate any material compensation or benefits, including vesting, funding and payment or the making of any material determinations, under any collective bargaining agreement, Parent Equity Plan or Parent Benefit Plan;
(vi) any material change in Parent’s method of accounting or accounting principles or policies, except for any such change required by reason of a change in GAAP or by Regulation S-X under the Exchange Act, as approved by Parent’s independent accountants; or
(vii) any settlement or remediation of any material Claim against or affecting Parent or a Parent Subsidiary; and
(b) there has not been any Parent Material Adverse Effect or any effect, event, development or circumstance that, individually or in the aggregate with all other effects, events, developments and changes, would reasonably be expected to result in a Parent Material Adverse Effect.
Section 5.10 Employee Benefit Plans and Service Providers.
(a) Other than the Parent Equity Plans and as set forth in Section 5.10(a) of the Parent Disclosure Letter, Parent and the Parent Subsidiaries do not and are not required to, and have not and have never been required to, maintain, sponsor or contribute to any Benefit Plans. Neither the Parent nor any Parent Subsidiary has any contract, plan or commitment, whether or not legally binding, to create any Benefit Plan.
(b) Except as individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect, none of Parent, any Parent Subsidiary or any of their respective ERISA Affiliates has incurred any obligation or liability with respect to or under any employee benefit plan, program or arrangement (including any agreement, program, policy or other arrangement under which any current or former employee, director or consultant has any present or future right to benefits) which has created or will create any obligation with respect to, or has resulted in or will result in any liability to Parent or any Parent Subsidiary.
(c) Each of the Parent Equity Plans has been established and administered in all material respects in accordance with its terms and in material compliance with all applicable Laws, including the Code.
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(d) None of Parent, Merger Sub, any Parent Subsidiary or any of their respective ERISA Affiliates has ever maintained, contributed to, or participated in, or otherwise has any obligation or liability in connection with: (i) a “pension plan” under Section 3(2) of ERISA that is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code, (ii) a “multiemployer plan” (as defined in Section 3(37) of ERISA), (iii) a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA), (iv) a “multiple employer plan” (as defined in Section 413(c) of the Code) or (v) in respect to the Parent Subsidiaries (and, in respect thereto, the Laws of any relevant jurisdiction of the European Union), any equivalent pension or similar plan, scheme, or arrangement (excluding any mandatory governmental pension schemes, plans, or arrangements pursuant to the domestic laws of that jurisdiction, where applicable).
(e) Except as set forth in Section 5.10(e) of the Parent 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) result in any payment becoming due to any service provider of Parent, Merger Sub or any Parent Subsidiary, (ii) increase or otherwise enhance any benefits otherwise payable by Parent, Merger Sub or any Parent Subsidiary or the amount of compensation due to any service provider of Parent, Merger Sub or any Parent Subsidiary or (iii) result in the acceleration of the time of payment or vesting of any such benefits or the funding of any such compensation or benefits.
(f) None of Parent, Merger Sub or any Parent Subsidiary is a party to or has any obligation under any Contract, any Benefit Plan or otherwise to compensate any Person for excise taxes payable pursuant to Section 4999 of the Code or for additional taxes payable pursuant to Section 409A of the Code.
Section 5.11 Labor and Other Employment Matters. Except as set forth in Section 5.11, neither Parent nor any Parent Subsidiary has, or has ever had, any employees.
Section 5.12 Material Contracts.
(a) Except for contracts listed in Section 5.12(a) of the Parent Disclosure Letter or filed as exhibits to the Parent SEC Filings, neither the Parent nor any Parent Subsidiary is a party to or bound by any contract that, as of the date of this Agreement (each, together with the Parent Management Agreements and each Parent Material Lease, a “Parent Material Contract”):
(i) is required to be filed as an exhibit to Parent’s Annual Report on Form 10-K pursuant to Item 601(b)(2), (4), (9) or (10) of Regulation S-K promulgated by the SEC;
(ii) obligates Parent or any Parent Subsidiary to make non-contingent aggregate expenditures (other than principal and/or interest payments or the deposit of other reserves with respect to debt obligations) in excess of $1,000,000 and is not cancelable within ninety (90) days without material penalty to Parent or such Parent Subsidiary (except for any Parent Lease, Parent Management Agreements or any ground lease affecting any Parent Property);
(iii) contains any non-compete or exclusivity provisions with respect to any line of business or geographic area that restricts the business of Parent or any Parent Subsidiary, or that otherwise restricts the lines of business conducted by Parent or any Parent Subsidiary or the geographic area in which Parent or any Parent Subsidiary may conduct business (other than ground lease or exclusive lease provisions, non-compete provisions and other similar leasing restrictions entered into by Parent and the Parent Subsidiaries in the ordinary course of business);
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(iv) is an agreement that obligates Parent or any Parent Subsidiary to indemnify (A) any past or present directors, officers, trustees and employees of Parent or any Parent Subsidiary pursuant to which Parent or Parent Subsidiary is the indemnitor, other than any customary indemnification obligations arising pursuant to the organizational or governing documents of Parent or any Parent Subsidiary or under Parent’s directors’ and officer’s or similar management liability insurance policy;
(v) constitutes Indebtedness of Parent or any Parent Subsidiary with a principal amount outstanding (or, in the case of a guaranty or other contingent obligation, with a principal amount of the underlying obligation outstanding) as of the date hereof greater than $1,000,000, other than (x) surety or performance bonds, letters of credit or similar agreements entered into in the ordinary course of business, in each case, to the extent drawn upon and (y) any contract solely among Parent and its wholly owned Subsidiaries;
(vi) except for customary restrictions contained in credit facilities and mortgage or mezzanine loans commonly used in the real estate industry, prohibits the pledging of the capital stock or other equity securities of or the issuance of guarantees by Parent or any Parent Subsidiary or otherwise contains covenants expressly limiting, in any material respect, the ability of Parent or any Parent Subsidiary to sell, transfer, pledge or otherwise, dispose of any material assets;
(vii) requires Parent or any Parent Subsidiary to dispose of or acquire, or grants any Third Party the option to purchase from or sell to Parent or any Parent Subsidiary, assets or properties (other than in connection with the expiration of a Parent Lease or ground lease affecting any Parent Property) with a fair market value in excess of $250,000 , or involves any pending or contemplated merger, consolidation or similar business combination transaction;
(viii) constitutes an interest rate cap, interest rate collar, interest rate swap, forward purchasing contract or other contract or agreement relating to a hedging transaction;
(ix) sets forth the operational terms of any JV Agreement of Parent or any Parent Subsidiary;
(x) contains restrictions with respect to payment of dividends or any other distribution in respect of the equity interests of Parent or any Parent Subsidiary;
(xi) relates to the acquisition or divestiture of the capital stock or other equity interests of any Person (other than Parent or a Parent Subsidiary) by Parent or a Parent Subsidiary; or
(xii) constitutes a loan to any Person (other than a wholly owned Parent Subsidiary) by Parent or any Parent Subsidiary (other than advances made pursuant to and expressly disclosed in the Parent Material Leases or pursuant to any disbursement agreement, development agreement, or development addendum entered into in connection with a Parent Material Lease with respect to the development, construction, or equipping of Parent Properties or the funding of improvements to Parent Properties) in an amount in excess of $1,000,000.
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Each Parent Material Contract is legal, valid, binding and enforceable on Parent and each Parent Subsidiary party thereto, and, to the knowledge of Parent, each other party thereto in accordance with its terms, and is in full force and effect, except as may be limited by 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). Except as, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect, Parent and each Parent Subsidiary has performed all obligations required to be performed by it prior to the date hereof under each Parent Material Contract and, to the knowledge of the Company, each other party thereto has performed all obligations required to be performed by it under such Parent Material Contract, except where such failure has not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. None of Parent or any Parent Subsidiary has received as of the date hereof any written notice of any violation or default under any Parent Material Contract, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Parent has made true and correct copies of each Parent Material Contract available to the Company.
Section 5.13 Litigation. Except as set forth in Section 5.13 of the Parent Disclosure Schedule or as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect, as of the date of this Agreement, (a) there is no Claim pending or, to the knowledge of Parent, threatened by or before any Governmental Authority, nor, to the knowledge of Parent, is there any investigation pending by any Governmental Authority, in each case, against or affecting Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub, any other Parent Subsidiary or any of their respective properties at law or in equity, and (b) none of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary, nor any of their respective properties, is subject to any outstanding Order. As of immediately prior to the date of this Agreement, there is no suit, claim, action or proceeding to which Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub, any other Parent Subsidiary is a party pending or, to the knowledge of the 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 5.14 Environmental Matters. Except as set forth on Section 5.14 of the Parent Disclosure Letter and as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect:
(a) Parent, Parent Operating Partnership and each Parent Subsidiary are in compliance with all applicable Environmental Laws, possess all Environmental Permits necessary to conduct their current operations and are in compliance with their respective Environmental Permits.
(b) There is no Claim or Order pending, or, to the knowledge of Parent, threatened against Parent and any Parent Subsidiary under any applicable Environmental Law.
(c) None of Parent, Parent Operating Partnership or any Parent Subsidiary has entered into or agreed to any consent decree or Order relating to compliance with Environmental Laws, Environmental Permits or the investigation, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Materials which remains unresolved.
(d) None of Parent, Parent Operating Partnership or any Parent Subsidiary has assumed, by contract or operation of Law, any liability under any Environmental Law or relating to any Hazardous Materials at any Parent Property or other property formerly owned, operated or leased by Parent or any Parent Subsidiary, or is an indemnitor in connection with any threatened or asserted claim by any third-party indemnitee for any liability under any Environmental Law or relating to any Hazardous Materials.
(e) None of Parent, Parent Operating Partnership or any Parent Subsidiary has caused, and to the knowledge of Parent, no Third Party has caused any release of a Hazardous Material at any Parent Property or other property formerly owned, operated or leased by Parent or any Parent Subsidiary that would be required to be investigated or remediated by Parent or any Parent Subsidiary under Environmental Law.
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This Section 5.14 contains the sole representations and warranties of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub with regard to Hazardous Materials, Environmental Laws or other environmental matters.
Section 5.15 Intellectual Property. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect, (i) Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub and the other Parent Subsidiaries own, free and clear of any Liens (other than Permitted Liens and non-exclusive license agreements) or has a valid and enforceable license, free and clear of any Liens (other than Permitted Liens), or otherwise possess valid and enforceable rights to use all Intellectual Property necessary to conduct the business of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub and the other Parent Subsidiaries as it is currently conducted, (ii) the Registered Intellectual Property owned by any of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or the other Parent Subsidiaries has not been cancelled, abandoned or dedicated to the public domain and all applicable registrations are valid and enforceable, (iii) to the knowledge of Parent, the conduct of the business of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub and the other Parent Subsidiaries as it is currently conducted does not infringe, misappropriate or otherwise violate the Intellectual Property rights of any Third Party, (iv) there are no pending or, to the knowledge of Parent, threatened Claims and none of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any Parent Subsidiary (nor any of their respective predecessors) has received any written notice since January 1, 2021 from any Third Party (A) asserting the infringement or other violation of any Intellectual Property of such Third Party by Parent, Parent Operating Partnership or any other Parent Subsidiary or (B) pertaining to or challenging the validity, enforceability, or registrability of, any right, title or interest of Parent, Parent Operating Partnership or any other Parent Subsidiary with respect to, any material Intellectual Property owned by Parent, Parent Operating Partnership or any other Parent Subsidiary, and (v) to the knowledge of Parent, no Third Party is currently infringing or misappropriating Intellectual Property owned by Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary. Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub and the other Parent Subsidiaries have implemented commercially reasonable measures to maintain and protect each item of Intellectual Property that they own and that is material to Parent and the Parent Subsidiaries, taken as a whole. Except as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, (i) Parent, Parent Operating Partnership and the other Parent Subsidiaries have reasonable data security programs that are consistent with industry standards and applicable Privacy/Data Security Laws and (ii) none of Parent, Parent Operating Partnership or any of the other Parent Subsidiaries has experienced any interruption to, or any breach of the security of, its information technology systems, or any personal, proprietary or other sensitive information in its possession or under its control.
Section 5.16 Properties.
(a) Section 5.16(a) of the Parent Disclosure Letter sets forth a list of the address of each real property owned, leased (as lessee or sublessee), including ground leased, by Parent, Parent Operating Partnership or any other Parent Subsidiary as of the date of this Agreement (all such real property interests, together with all buildings, structures and other improvements and fixtures located on or under such real property and all easements, rights and other appurtenances to such real property, are individually referred to herein as a “Parent Property” and collectively referred to herein as the “Parent Properties”). Parent, Parent Operating Partnership or a Parent Subsidiary owns good and valid fee simple title or leasehold title (as applicable) to each of the Parent Properties, in each case, free and clear of Liens, except for Parent Permitted Liens that have not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. For the purposes of this Agreement, “Parent Permitted Liens” shall mean any (i) Liens relating to any Indebtedness incurred in the ordinary course of business consistent with past practice, (ii) 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 Parent (if such reserves are required pursuant to GAAP), (iii) any Parent Material Contracts or other service contracts, management agreements, leasing commission agreements, agreements or obligations set forth in Section 5.16(j) of the Parent Disclosure Letter, Parent Leases or ground leases or air rights affecting any Parent Property, (iv) Liens imposed or promulgated by Law or any Governmental Authority, including zoning regulations, permits and licenses, (v) Liens that are disclosed on existing title policies made available by or on behalf of the Parent, Parent Operating Partnership or any Parent Subsidiary to Company prior to the date hereof and, with respect to leasehold interests, Liens on the underlying fee or leasehold interest of the applicable ground lessor, lessor, or sublessor, (vi) any 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, and (vii) any other Liens, limitations, restrictions or title defects that do not materially impair the value of the applicable Parent Property or the continued use and operation of the applicable Parent Property as currently used and operated.
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(b) The Parent Properties (x) are supplied with utilities and other services as reasonably required for their continued operation as they are now being operated, (y) are, to the knowledge of Parent, in working order sufficient for their normal operation in the manner currently being operated and without any material structural defects other than as may be disclosed in any physical condition reports that have been made available to the Company, and (z) are, to the knowledge of Parent, adequate and suitable for the purposes for which they are presently being used.
(c) To the knowledge of Parent, each of the Parent Properties has sufficient access to and from publicly dedicated streets for its current use and operation, without any constraints that materially interfere with the normal use, occupancy and operation thereof.
(d) None of Parent, Merger Sub or any of the other Parent Subsidiaries has received (i) written notice that any certificate, permit or license from any Governmental Authority having jurisdiction over any of the Parent Properties or any agreement or easement that is necessary to permit the lawful use and operation of the buildings and improvements on any of the Parent Properties or that is necessary to permit the lawful use and operation of all utilities, parking areas, retention ponds, driveways, roads and other means of egress and ingress to and from any of the Parent Properties is not in full force and effect as of the date of this Agreement, 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 Parent 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 Parent Material Adverse Effect, or (ii) written notice of any uncured violation of any Laws affecting any of the Parent Properties which, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect.
(e) No certificate, variance, permit or license from any Governmental Authority having jurisdiction over any of the Parent Properties or any agreement, easement or other right that is necessary to permit the current use of the buildings and improvements on any of the Parent Properties or that is necessary to permit the current use of all parking areas, driveways, roads and other means of egress and ingress to and from any of the Parent Properties has failed to be obtained or is not in full force and effect, and none of Parent, Parent Operating Partnership, or any other Parent Subsidiary has received written notice of any outstanding threat of modification or cancellation of any such certificate, variance, permit or license, except for any of the foregoing as, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.
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(f) Except as set forth on Section 5.16(f) of the Parent Disclosure Letter or as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect, (i) no condemnation, eminent domain or similar proceeding has occurred or is pending with respect to any owned Parent Property or, to the knowledge of Parent, any Parent Property leased by Parent, Parent Operating Partnership or any Parent Subsidiary, and (ii) none of Parent, Parent Operating Partnership or any other Parent Subsidiary has received any written notice to the effect that (A) any condemnation or rezoning proceedings are threatened with respect to any of the Parent Properties, or (B) any zoning regulation or ordinance (including with respect to parking), Board of Fire Underwriters rules, building, fire, health or other Law has been violated (and remains in violation) for any Parent Property.
(g) Except for discrepancies, errors, or omissions that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect, the rent rolls for each of the Parent Properties, as of April 1, 2023, which rent rolls have previously been made available by or on behalf of the Parent, Parent Operating Partnership or any other Parent Subsidiary to Company, and the schedules with respect to the Parent Properties subject to triple-net leases, which schedules have previously been made available to Company, correctly reference each lease or sublease that was in effect as of April 1, 2023, and to which Parent, Parent Operating Partnership or Parent Subsidiaries are parties as lessors or sublessors with respect to each of the applicable Parent Properties. Section 5.16(g) of the Parent Disclosure Letter sets forth the current rent annualized and security deposit amounts currently held for each Parent Lease (which security deposits are in the amounts required by the applicable Parent Lease).
(h) True and complete in all material respects copies of all ground leases affecting the interest of Parent, Parent Operating Partnership or any Parent Subsidiary in the Parent Properties and all leases and subleases to which Parent, Parent Operating Partnership or the other Parent Subsidiaries are parties that are required to be filed as exhibits to the Parent SEC Filings pursuant to Item 601(b)(10) of Regulation S-K promulgated by the SEC (the “Parent Material Leases”), in each case in effect as of the date hereof, together with all amendments, modifications, supplements, renewals and extensions through the date hereof related thereto, have been made available to the Company. Except as has not had and would not reasonably be expected to have a Parent Material Adverse Effect, (1) none of Parent, Parent Operating Partnership, or any other Parent Subsidiary is and, to the knowledge of Parent, no other party is in breach or violation of, or default under, any Parent Material Lease, (2) no event has occurred which would result in a breach or violation of, or a default under, any Parent Material Lease by Parent, Parent Operating Partnership or any other Parent Subsidiary, or, to the knowledge of Parent, any other party thereto (in each case, with or without notice or lapse of time or both) and no tenant under a Parent Material Lease is in monetary default under such Parent Material Lease, (3) no tenant under a Parent Material Lease is the beneficiary or has the right to become a beneficiary of a loan or forbearance from Parent, Parent Operating Partnership or any other Parent Subsidiary in excess of $500,000 in the aggregate, (4) none of Parent, Parent Operating Partnership or any other Parent Subsidiary is in receipt of any rent under any Parent Lease paid more than thirty (30) days before such rent is due and payable, and (5) to the knowledge of Parent, each Parent Material Lease is valid, binding and enforceable in accordance with its terms and is in full force and effect with respect to Parent, Parent Operating Partnership or any other Parent Subsidiary and, to the knowledge of Parent, with respect to the other parties thereto, except as may be limited by 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).
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(i) Except as set forth on Section 5.16(i) of the Parent Disclosure Letter, there are no Tax abatements or exemptions specifically affecting Parent Properties, and Parent, Parent Operating Partnership and the Parent Subsidiaries have not received any written notice of (and Parent, Parent Operating Partnership and the Parent Subsidiaries do not have any knowledge of) any proposed increase in the assessed valuation of any of the Parent Properties or of any proposed public improvement assessments that will result in the Taxes or assessments payable in the next tax period increasing, except in each case for any such Taxes or assessments that have not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
(j) Except as set forth in Section 5.16(j) of the Parent Disclosure Letter or as not had and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, as of the date of this Agreement, no purchase option has been exercised under any Parent Lease for which the purchase has not closed prior to the date of this Agreement.
(k) Except for (1) Parent Permitted Liens, (2) as set forth in Section 5.16(k) of the Parent Disclosure Letter, or (3) as set forth in any Parent Lease, or as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect, (i) there are no unexpired option to purchase agreements, rights of first refusal or any other rights to purchase or otherwise acquire any Parent Property or any portion thereof that would materially adversely affect Parent’s, Parent Operating Partnership’s or any Parent Subsidiary’s, ownership, ground lease or right to use a Parent Property subject to a Parent Material Lease, and (ii) there are no other outstanding rights or agreements to enter into any contract for sale, ground lease or letter of intent to sell or ground lease any Parent Property or any portion thereof that is owned by Parent Operating Partnership or any other Parent Subsidiary, which, in each case, is in favor of any party other than Parent, Parent Operating Partnership or a Parent Subsidiary.
(l) Except as set forth in Section 5.16(l) of the Parent Disclosure Letter or pursuant to a Parent Lease or any ground lease affecting any Parent Property, neither Parent, Parent Operating Partnership nor any Parent Subsidiary is a party to any agreement pursuant to which Parent, Parent Operating Partnership or any Parent Subsidiary manages or manages the development of any real property for any Third Party.
(m) Neither the Parent, Parent Operating Partnership nor any Parent Subsidiary is party to any oral Parent Lease.
(n) Each Parent Property is covered by a valid Parent Title Insurance Policy. A copy of each Parent Title Insurance Policy in the possession of the Parent, Parent Operating Partnership or any other Parent Subsidiary has been made available to Company. No written claim has been made against any Parent Title Insurance Policy, which, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect.
(o) To the knowledge of Parent, Section 5.16(o) of the Parent Disclosure Letter lists each Parent Property which is (i) under development as of the date hereof, and describes the status of such development as of the date hereof, and (ii) which is subject to a binding agreement for development or commencement of construction by Parent, Parent Operating Partnership or a Parent Subsidiary, in each case other than those pertaining to minor capital repairs, replacements and other similar correction of deferred maintenance items in the ordinary course of business or alterations or expansions being performed by any tenant under a Parent Lease.
(p) Parent, Parent Operating Partnership, and the other Parent Subsidiaries have good and valid title to, or a valid and enforceable leasehold interest in, or other right to use, all personal property owned, used or held for use by them as of the date of this Agreement (other than property owned by tenants and used or held in connection with the applicable tenancy), except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect. None of Parent’s, Parent Operating Partnership’s, or any other Parent Subsidiaries’ ownership of or leasehold interest in any such personal property is subject to any Liens, except for Parent Permitted Liens and Liens that have not had and would not reasonably be expected to have a Parent Material Adverse Effect. Section 5.16(p) of the Parent Disclosure Letter sets forth all leased personal property of Parent, Parent Operating Partnership or any Parent Subsidiary with monthly lease obligations in excess of $250,000 and that are not terminable upon 30 days’ notice.
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(q) Section 5.16(q) of the Parent Disclosure Letter lists the parties currently providing third-party property management services to Parent, Parent Operating Partnership or a Parent Subsidiary and the number of facilities currently managed by each such party.
Section 5.17 Taxes.
(a) Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub and, if applicable, each other Parent Subsidiary has timely filed (or there have been filed on their behalf) with the appropriate Governmental Authority all income and other material Tax Returns required to be filed by them, 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. Parent and each Parent Subsidiary has duly paid (or there has been paid on their behalf), or made adequate provisions for, all income and other material Taxes required to be paid by them, whether or not shown on any Tax Return. True and materially complete copies of all U.S. federal income Tax Returns that have been filed with the IRS by Parent and, if applicable, each Parent Subsidiary, with respect to the taxable years ending on or after December 31, 2021 have been provided or made available to representatives of Company.
(b) Parent (i) for all taxable years commencing with Parent’s taxable year ended December 31, 2013 through December 31, 2022, has been subject to taxation as a REIT and has satisfied all requirements to qualify as a REIT; (ii) has operated since January 1, 2023 to the date hereof in a manner consistent with the requirements for qualification and taxation as a REIT; (iii) intends to continue to operate in such a manner as to qualify as a REIT for its taxable year ending December 31, 2023; and (iv) has not taken or omitted to take any action that could reasonably be expected to result in a challenge by the IRS or any other Governmental Authority to its status as a REIT, and no such challenge, to the knowledge of Parent, is pending or has been threatened in writing.
(c) The most recent financial statements contained in the Parent SEC Filings reflect an adequate reserve for all Taxes payable by Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub and the other Parent Subsidiaries for all taxable periods and portions thereof through the date of such financial statements in accordance with GAAP, whether or not shown as being due on any Tax Return.
(d) (i) There are no audits, examinations, investigations by any Governmental Authority or other proceedings ongoing or, to the knowledge of Parent, threatened with regard to any income or other material Taxes or Tax Returns of Parent, Parent LP, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary and neither Parent nor any Parent Subsidiary is a party to any litigation or administrative proceeding relating to Taxes; (ii) no material deficiency for Taxes of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary has been claimed, proposed or assessed in writing or, to the knowledge of Parent, threatened, by any Governmental Authority, which deficiency has not yet been settled; (iii) none of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary has waived any statute of limitations with respect to Taxes (other than in connection with any extension of time to file any Tax Return), or agreed to any extensions of time with respect to any Tax assessment or deficiency for any open tax year; (iv) none of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any of the other Parent 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); and (v) neither Parent nor any Parent Subsidiary has received a written claim by any Governmental Authority in any jurisdiction where any of them does not file Tax Returns or pay any Taxes that it is or may be subject to taxation by that jurisdiction.
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(e) Except as may be acquired pursuant to the Mergers, none of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary holds any asset the disposition of which would be subject to (or to rules similar to) Section 1374 of the Code or the “prohibited transactions” Tax under Section 857(b)(6) of the Code.
(f) No event has occurred, and no condition or circumstance exists, which presents a material risk that any material Tax described in the preceding sentence will be imposed upon Parent, Merger Sub or the other Parent Subsidiaries.
(g) Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub and the other Parent 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 and 3402 of the Code or similar provisions under any state or foreign Laws) and have duly and timely withheld and, in each case, have paid over to the appropriate Governmental Authorities all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.
(h) There are no Parent Tax Protection Agreements (as hereinafter defined) 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 Parent threatened to raise, a material claim against Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary for any breach of any Parent Tax Protection Agreements. As used herein, “Parent Tax Protection Agreements” means any agreement to which Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary is a party: (i) pursuant to which any liability to holders of limited partnership interests in a Parent Subsidiary Partnership relating to Taxes may arise, whether or not as a result of the consummation of the transactions contemplated by this Agreement; and/or (ii) that was entered into in connection with or related to the deferral of income Taxes of a holder of limited partnership interests in a Parent Subsidiary Partnership, and that requires the Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or the other Parent Subsidiaries to (A) maintain a minimum level of debt or continue a particular debt, (B) retain or not dispose of assets for a period of time that has not since expired, (C) make or refrain from making Tax elections, (D) operate (or refrain from operating) in a particular manner, (E) 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 assets of such party or allocating one or more liabilities of such party or any of its direct or indirect subsidiaries under Section 752 of the Code, and/or (G) only dispose of assets in a particular manner. As used herein, “Parent Subsidiary Partnership” means a Parent Subsidiary that is a partnership for U.S. federal income tax purposes.
(i) There are no Tax Liens upon any property or assets of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary except for 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.
(j) None of Parent, Parent Operating Partnership or any Parent Subsidiary has requested, has received or is subject to any ruling of a Governmental Authority or has entered into any binding agreement with a Governmental Authority with respect to any Taxes.
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(k) There are no Tax allocation or sharing agreements or similar agreements with respect to, binding, or otherwise involving Parent or any Parent Subsidiary (other than customary arrangements under commercial contracts entered into in the ordinary course of business and which do not primarily relate to Taxes).
(l) To the knowledge of Parent, Parent does not have and will not have, as of the REIT Merger Effective Time, any current or accumulated “earnings and profits” for U.S. federal income tax purposes which would constitute “earnings and profits accumulated in any non-REIT year” (determined for purposes of Section 857(a)(2)(B) of the Code).
(m) None of Parent, Parent Operating Partnership or any Parent Subsidiary (i) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was Parent) or (ii) has any liability for the Taxes of any Person (other than Parent or any Parent 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 (other than customary arrangements under commercial contracts entered into in the ordinary course of business and which do not primarily relate to Taxes), or otherwise.
(n) None of Parent, Parent Operating Partnership or any Parent Subsidiary is or has been party to any “reportable transaction” (within the meaning of Treasury Regulation Section 1.6011-4(b)).
(o) Neither Parent nor any of the Parent Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (i) in the two years prior to the date of this Agreement or (ii) in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with transactions contemplated by this Agreement.
(p) Neither Parent Operating Partnership nor Partnership Merger Sub is an investment company for purposes of Section 721(b) of the Code.
(q) No written power of attorney that has been granted by Parent or any Parent Subsidiary (other than to Parent or a Parent Subsidiary) currently is in force with respect to any matter relating to Taxes.
(r) No Parent Subsidiary that is not a domestic corporation has ever been treated as other than a partnership or disregarded entity for U.S. federal income tax purposes. Without limitation of the foregoing, Parent Operating Partnership is and always has been taxable as a partnership (and not as an association or publicly traded partnership taxable as a corporation) for U.S. federal income tax purposes.
(s) Parent is not aware of any fact or circumstance that could reasonably be expected to prevent the REIT Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Section 5.18 Insurance. Parent has made available to the Company copies of all material insurance policies maintained by Parent or the Parent Subsidiaries and all material fidelity bonds or other insurance service contracts in each case in Parent’s possession providing coverage for all material Parent Properties (the “Parent Insurance Policies”). Except for those matters that have not had and would not reasonably be expected to have a Parent Material Adverse Effect, there is no claim for coverage by Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary pending under the Parent Insurance Policies that has been denied or disputed by the insurer. Except for those matters that have not had and would not reasonably be expected to have a Parent Material Adverse Effect, all premiums payable under all Parent Insurance Policies have been paid, and Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub and the other Parent Subsidiaries have otherwise complied in all material respects with the terms and conditions of all the Parent Insurance Policies. To the knowledge of Parent, such Parent Insurance Policies are valid and enforceable in accordance with their terms and are in full force and effect and no written notice of cancellation or termination has been received as of the date hereof by Parent or any Parent Subsidiary with respect to any Parent Insurance Policy which has not been replaced on substantially similar terms prior to the date of such cancellation.
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Section 5.19 Opinion of Financial Advisor. Parent Special Committee has received the opinion of BMO Capital Markets Corp. (the “Parent Financial Advisor”), Parent’s independent financial advisor, to the effect that, as of the date of such opinion and based on and subject to the assumptions and limitations set forth therein, the Common Exchange Ratio is fair from a financial point of view to the holder of the shares of Parent Common Stock and Parent.
Section 5.20 Vote Required.
(a) The affirmative vote of the holders of a majority of all the votes cast at the special meeting to approve the Parent Share Issuances (the “Parent Stockholder Approval”) is the only vote of the holders of any class or series of shares of capital stock required to approve the Parent Share Issuances.
(b) The only vote of the holders of any class or series of membership interests of REIT Merger Sub necessary to adopt this Agreement and the REIT Merger is the affirmative vote of Parent in its capacity as the sole member of REIT Merger Sub, which adoption shall be provided by the written consent of Parent at or immediately following the execution of this Agreement.
Section 5.21 Brokers. No broker, finder or investment banker (other than the Parent Financial Advisor) is entitled to any brokerage, finder’s or other fee or commission in connection with or upon consummation of the Mergers based upon arrangements made by or on behalf of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary. Parent has made available to the Company a true and complete copy of Parent’s engagement letter with the Parent Financial Advisor, together with any amendment, modification, supplement, renewal, extension or other document related thereto, with respect to the transactions contemplated by this Agreement.
Section 5.22 Investment Company Act. None of Parent, Parent Operating Partnership or any other Parent Subsidiary is required to be registered as an investment company under the Investment Company Act.
Section 5.23 Ownership of REIT Merger Sub and Partnership Merger Sub; No Prior Activities.
(a) REIT Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement. All of the interests of REIT Merger Sub are owned directly or indirectly by Parent.
(b) Except for the obligations or liabilities incurred in connection with its organization and the transactions contemplated by this Agreement, REIT Merger Sub has not, and will not have prior to the REIT Merger Effective Time, incurred, directly or indirectly, through any Subsidiary or Affiliate, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person.
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(c) Partnership Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement. All of the interests of Partnership Merger Sub are owned directly or indirectly by Parent Operating Partnership.
(d) Except for the obligations or liabilities incurred in connection with its formation and the transactions contemplated by this Agreement, Partnership Merger Sub has not, and will not have prior to the Partnership Merger Effective Time, incurred, directly or indirectly, through any Subsidiary or Affiliate, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person.
Section 5.24 Ownership of Company Common Stock. None of Parent, Parent Operating Partnership, any Parent Subsidiary or, to the knowledge of Parent, any of their respective Affiliates or “associates” (as defined in Section 3-601(c) of the MGCL) is, nor at any time during the last three years has been, an “interested stockholder” of the Company as defined in Section 3-601(j) of the MGCL.
Section 5.25 Takeover Statutes. The Parent Board has taken all action necessary to render the Maryland Control Share Acquisition Act inapplicable to the issuance of any Parent Common Shares attendant to the Mergers. The issuance of Parent Common Shares as REIT Common Merger Consideration shall not result in a “control share acquisition” as defined in Section 3-701(d) of the MGCL. No stockholder of Parent is an “interested stockholder” (as defined in Section 3-601(j) of the MGCL) and the Parent Board has taken all action necessary to render inapplicable to the Mergers (including the issuance of the Parent Common Shares) the restrictions on business combinations contained in Section 3-602 of the MGCL.
Section 5.26 Parent Rights Plan. Other than the Parent Rights Plan, there is no stockholder rights plan, “poison pill” anti-takeover plan or other similar arrangement in effect, to which the Parent is party or otherwise bound. No “Stock Acquisition Date” or “Distribution Date” (as such terms are defined in the Parent Rights Plan) will occur as a result of the execution of this Agreement or any other transactions contemplated by this Agreement or the consummation of the Mergers.
Section 5.27 Affiliate Transactions. Except as set forth in the Parent SEC Filings made through and including the date of this Agreement or as permitted by this Agreement or as otherwise set forth in Section 5.27 of the Parent Disclosure Letter, from January 1, 2021 through the date of this Agreement there have been no transactions, agreements, arrangements or understandings between Parent or any Parent Subsidiary, on the one hand, and any Affiliates (other than Parent Subsidiaries) of Parent 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 5.28 [Reserved].
Section 5.29 No Other Representations or Warranties. Notwithstanding anything contained in this Agreement to the contrary, except for the representations and warranties contained in Article IV, each of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub acknowledges that neither the Company nor any other Person or entity on behalf of the Company has made, and none of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub has relied upon, any representation or warranty, whether express or implied, with respect to the Company or any of the Company Subsidiaries or their respective businesses, affairs, 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 other information provided or made available to Parent, REIT Merger Sub or Partnership Merger Sub by or on behalf of the Company.
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Article VI.
Covenants and Agreements
Section 6.1 Conduct of Business by the Company.
(a) The Company and Company Operating Partnership covenant and agree that, between the date of this Agreement and the earlier to occur of the REIT Merger Effective Time and the date, if any, on which this Agreement is terminated pursuant to Section 8.1 (the “Interim Period”), except to the extent required by applicable Law, as may be agreed 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 (including with respect to all actions necessary to effect the Internalization and the transactions contemplated by the Internalization Merger Agreement), as set forth in Section 6.1(a) of the Company Disclosure Letter or for any Public Health Measures, the Company and Company Operating Partnership shall, and shall cause each of the Company Subsidiaries, to (i) conduct their businesses and operations in the ordinary course and in a manner consistent with past practice in all material respects, and (ii) use their respective commercially reasonable efforts to: (A) maintain the material assets and properties of the Company and Company Subsidiaries in their current condition (normal wear and tear and damage excepted), (B) preserve intact in all material respects their current business organization, goodwill, ongoing businesses and material relationships with Third Parties, (C) keep available the services of its present officers, key employees and key consultants, if any, (D) maintain, in all material respects, reasonably satisfactory relationships with significant customers, franchisors, managers and suppliers and with other Persons with whom they have significant business relations and (E) maintain the status of the Company as a REIT.
(b) [Reserved].
(c) Without limiting the foregoing, the Company and Company Operating Partnership covenant and agree that, during the Interim Period, except to the extent required by applicable Law, as may be agreed in writing by Parent (which consent shall not be unreasonably withheld, delayed or conditioned, except with respect to clauses (ii), (iii), (iv) or (xxiii) below, as to which Parent may grant or withhold its consent in its sole discretion), as may be expressly required or permitted pursuant to this Agreement, or as set forth in Section 6.1(c) of the Company Disclosure Letter, the Company and Company Operating Partnership shall not, and shall not cause or permit any Company Subsidiary to, do any of the following:
(i) amend or propose to amend the Company Charter, Company Bylaws, Company Partnership Certificate or Company Partnership Agreement or materially amend or propose to materially amend the equivalent organizational or governing documents of any other Company Subsidiary, if such amendment would be adverse to the Company and the Company Subsidiaries, taken as a whole;
(ii) split, combine, reclassify or subdivide any shares of stock or other voting securities or equity interests of the Company or any Company Subsidiary or, except as contemplated by Section 6.1(c)(iv), issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for its capital stock, other voting securities or equity interests or waive the stock ownership limit under the Company Charter;
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(iii) declare, set aside or pay any dividend on or make any other distributions (whether in cash, stock, property or otherwise) with respect to shares of capital stock of the Company or any Company Subsidiary or other equity securities or ownership interests in the Company or any Company Subsidiary, except for (A) the declaration and payment by the Company of regular quarterly dividends in accordance with past practice and with respect to shares of Company Common Stock at an annual rate not to exceed $0.85 per share of Company Common Stock (each a “Company Common Quarterly Dividend”), (B) the declaration and payment by the Company of regular quarterly dividends with respect to shares of Company Preferred Stock shall be made in accordance with the terms of such Company Preferred Stock as set forth in the Company Charter, (C) the declaration and payment of regular distributions that are required to be made in respect of Company Partnership Units, (D) the declaration and payment of dividends or distributions by any directly or indirectly wholly owned Company Subsidiary to its parent entity, and (E) the declaration and payment of dividends or distributions by any Company Subsidiary that is not wholly owned, directly or indirectly, by the Company, in accordance with the requirements of the organizational documents of such Company Subsidiary. Notwithstanding the foregoing, the Company and any Company Subsidiary shall be permitted to make distributions, including under Sections 858 or 860 of the Code, reasonably necessary for the Company to maintain its status as a REIT under the Code and avoid or reduce the imposition of any corporate level tax or excise Tax under the Code;
(iv) redeem, repurchase or otherwise acquire, or offer to redeem, repurchase or otherwise acquire, directly or indirectly, any shares of its capital stock or other equity interests of the Company or a Company Subsidiary or any securities of the Company or any Company Subsidiary convertible into or exchangeable or exercisable for capital stock or voting securities of, or equity interests in, the Company or any Company Subsidiary, or any warrants, calls, options or other rights to acquire any such capital stock, securities or interests, other than (A) the redemption or exchange of Company Partnership Units pursuant to and in accordance with the provisions of the Company Partnership Agreement, (B) the withholding of shares of Company Common Stock to satisfy withholding Tax obligations with respect to shares of Company Restricted Stock, and (C) the acquisition by the Company in the ordinary course of business consistent with past practice in connection with the forfeiture of shares of Company Restricted Stock pursuant to the terms of the Company Equity Plans upon termination of employment or service of an award holder;
(v) except for transactions among the Company and one or more wholly-owned Company Subsidiaries or among one or more wholly-owned Company Subsidiaries, as otherwise contemplated in Section 6.1(c)(iii), (iv), or (vi), or as set forth on Section 6.1(c)(v) of the Company Disclosure Letter in respect to the annual stock grants to Company’s directors or (subject to the Internalization Merger Agreement) the employees of AR Global, issue, deliver, sell, pledge, dispose, encumber or grant any shares of the Company’s or any of the Company Subsidiaries’ capital stock or other voting securities or equity interests, or any options, calls, warrants, convertible securities or other rights of any kind to acquire any shares of the Company’s or any of the Company Subsidiaries’ capital stock, voting securities or other equity interests or any other rights issued by the Company or any Company Subsidiary that are linked in any way to the price of Company Common Stock or any other shares of capital stock or other voting securities or equity interests of the Company or any Company Subsidiary, the value of the Company, any Company Subsidiary or any part of the Company or any Company Subsidiary or any dividends or other distributions declared or paid on any shares of capital stock or other voting securities or equity interests of the Company or any Company Subsidiary; provided, however, that the Company may issue shares of Company Common Stock upon the vesting of any Company Restricted Stock;
(vi) except as set forth on Section 6.1(c)(vi) of the Company Disclosure Letter or as may be specifically required under a Company employment agreement executed prior to the date of this Agreement or a company benefit plan adopted prior to the date of this Agreement or the provisions of the Internalization Merger Agreement relating to Advisor’s employees, grant, confer, award, or modify the terms of any options, convertible securities, restricted stock, phantom shares, equity-based compensation or other rights to acquire, or denominated in, any of the Company’s or any of the Company Subsidiaries’ capital stock or other voting securities or equity interests, other than as explicitly required by the terms of the shares of Company Restricted Stock outstanding on the date of this Agreement;
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(vii) acquire or agree to acquire (including by merger, consolidation or acquisition of equity or assets) (A) any corporation, partnership, limited liability company, other business organization or any division thereof or (B) any material amount of assets thereof (whether personal or real property), except the consummation of acquisitions pursuant to either (1) existing agreements to which the Company or any Company Subsidiary is a party and which are set forth on Section 6.1(c)(vii) of the Company Disclosure Letter or (2) agreements for acquisitions of real estate or entities owning real estate consistent with past practice;
(viii) sell, mortgage, pledge, lease, license, sell and leaseback, transfer, assign, otherwise dispose of or encumber or subject to any Lien (other than a Permitted Lien and other than ordinary course leasing activities which do not otherwise require Parent’s consent pursuant to this Section 6.1(b)), (A) any real property or any interests therein contributing, either individually or in the aggregate, more than 10% of the Company’s EBITDA for the fiscal year ending December 31, 2022, and (B) any personal property and assets in excess of $250,000 in the aggregate, except for pledges or encumbrances of direct or indirect equity interests in Company Subsidiaries from time to time under the Company’s existing revolving credit facilities (including with respect to the addition or substitution of Company Subsidiaries as guarantors under the Company’s existing revolving credit facilities);
(ix) incur, create, refinance, replace, prepay or assume any Indebtedness for borrowed money (other than by the Company or a wholly-owned Company Subsidiary to the Company or a wholly-owned Company Subsidiary) or issue or amend the terms of any outstanding debt securities of the Company or any wholly-owned Company Subsidiary or assume, guarantee or endorse, or otherwise become responsible (whether directly, contingently or otherwise) for the Indebtedness of any other Person (other than a wholly-owned Company Subsidiary), except (A) Indebtedness incurred under the Company’s existing revolving credit facilities in the ordinary course of business consistent with past practice (including to pay dividends or other distributions permitted by Section 6.1(c)(iii)), (B) the addition or substitution of Company Subsidiaries as guarantors under such revolving credit facilities as permitted by Section 6.1(c)(viii)) (provided that, there shall not be any increase in the aggregate principal commitments of such revolving credit facilities), and (C) Indebtedness received upon the acquisition of real properties or entities owning real properties or the refinancing of same;
(x) make any loans, advances or capital contributions to, or investments in, any other Person (including to any of its officers, directors, employees, Affiliates, agents or consultants), or make any change in its existing borrowing or lending arrangements for or on behalf of any of such Persons or enter into any “keepwell” or similar agreements to maintain the financial condition of any other Person, other than (A) by the Company or a wholly-owned Company Subsidiary, (B) loans, advances, capital contributions or investments required to be made under any Company Material Lease (it being understood that grants of relief as to the timing for payment of rent in the ordinary course of business are not loans, advances, capital contributions or investments) and (C) loans issued pursuant to the terms of a tax-qualified company benefit plan;
(xi) renew, modify or amend, terminate (other than through expiration in accordance with its terms), or waive, release, compromise or assign any rights or claims under, any Company Material Contract or Company Material Lease or enter into any new contract that, if entered into prior to the date of this Agreement, would have been required to be listed in Section 4.10 or Section 4.16(e) of the Company Disclosure Letter as a Company Material Contract or Company Material Lease; other than (A) new Company Leases for the lease of real property consistent with past practice, (B) any termination or renewal in accordance with the terms of such existing Company Material Contract or Company Material Lease that occur automatically without any action by Company or any Company Subsidiary, (C) the entry into any modification or amendment of, or waiver or consent under, any mortgage, deed of trust, deed to secure debt, similar agreement, or related agreement to which Company or any Company Subsidiary is a party as required or necessitated by this Agreement, the Mergers or the other transactions contemplated this Agreement or (D) as necessary to comply with the terms of this Agreement;
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(xii) enter into or modify any collective bargaining agreement or other labor union contract applicable to the employees of the Company or any Company Subsidiary;
(xiii) [Reserved];
(xiv) waive, release, assign any material rights or Claims or make any payment, directly or indirectly, of any other liability of the Company or any Company Subsidiary, in an amount in excess of $2,500,000, before the same comes due in accordance with its terms, other than in the ordinary course of business and consistent with past practice (including ordinary course workouts and bankruptcies of tenants);
(xv) except (A) pursuant to the Company’s operating budget previously provided to Parent, (B) capital expenditures necessary to repair any casualty losses or tenant build-outs in an amount up to $2,500,000 in the aggregate or to the extent such losses are covered by existing insurance, (C) tenant build-outs or ordinary course tenant improvements, and (D) capital expenditures in the ordinary course of business consistent with past practice necessary to repair or prevent damage to any Company Property in the event of an emergency situation, after prior notice to Parent (provided, that, if the nature of such emergency renders prior notice to Parent impracticable, the Company shall provide notice to Parent as promptly as reasonably practicable after making such capital expenditure), make or commit to make any capital expenditures in excess of $1,000,000 individually or $2,500,000 in the aggregate;
(xvi) settle or compromise (A) any Claim made or pending against the Company or any of the Company Subsidiaries, other than settlements set forth on Section 6.1(c)(xvi) of the Company Disclosure Letter where the amount paid (after the application of any insurance proceeds actually received or appropriate credits are applied from self-insurance reserves, if any) in settlement or compromise does not exceed the thresholds set forth on Section 6.1(c)(xvi) of the Company Disclosure Letter and that (x) do not require any material actions or impose any material restrictions on the business or operations of the Company and the Company Subsidiaries, and (y) do not provide for any admission of liability by the Company or any Company Subsidiaries and (B) any Claim involving any present, former or purported holder or group of holders of the Company Common Stock other than in accordance with Section 6.8, (provided, however, that notwithstanding the foregoing, the written consent of Parent shall be required in order for the Company or any Company Subsidiary to settle, compromise, dismiss, discharge or otherwise dispose of any Claim arising from, based upon or challenging the validity of this Agreement or the consummation of the transactions contemplated hereby or seeking to prevent the consummation of the transactions contemplated hereby);
(xvii) (A) hire or terminate any officer or director of the Company or any Company Subsidiary or promote or appoint any Person to a position of officer or director of the Company or any Company Subsidiary, (B) increase in any manner the amount, rate or terms of compensation or benefits of any of its directors or officers, except in the ordinary course of business consistent with past practice, (C) pay or agree to pay any pension, retirement allowance or other compensation or benefit to any former director, officer or consultant of the Company or any Company Subsidiary, except in the ordinary course of business consistent with past practice, (D) enter into, adopt, amend or terminate any employment, bonus, severance or retirement contract or other compensation or employee benefits arrangement, (E) accelerate the vesting or payment of any compensation or benefits under the Company Equity Plans, (F) grant any awards under the Company Equity Plans, bonus, incentive, performance or other compensation plan or arrangement, or (G) take any action to fund or in any other way secure the payment of compensation or benefits under the Company Equity Plans, in each case, other than as required by Law or the provisions of the Internalization Merger Agreement relating to Advisor’s employees;
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(xviii) fail to maintain all financial books and records in all material respects in accordance with GAAP or make any material change to its methods of accounting, principles or practices in effect at December 31, 2022, except as required by a change in GAAP (or any interpretation thereof) or in applicable Law or fail to maintain all financial books and records in all material respects in accordance with GAAP (or any interpretation thereof);
(xix) other than customary use and limited geographic restrictions granted to tenants, (A) enter into any contract, agreement, arrangement or commitment that limits or otherwise restricts the Company or any Company Subsidiary or any of their successors from engaging or competing in any line of business or in any geographic area, or (B) enter into any new line of business;
(xx) fail to duly and timely file all material reports and other material documents required to be filed with all Governmental Authorities and other authorities (including NASDAQ), subject to extensions permitted by Law;
(xxi) enter into, amend or modify any Company Tax Protection Agreement; make, change or rescind any material election relating to Taxes; change a material method of Tax accounting; amend any income Tax Return or any other material Tax Return; settle or compromise any material U.S. federal, state, local or foreign income Tax liability, audit, claim or assessment, enter into any material closing agreement related to Taxes; or knowingly surrender any right to claim any material Tax refund, except in each case as required by Law;
(xxii) take any action, or fail to take any action, which action or failure would reasonably be expected to (A) cause the Company to fail to qualify for taxation as a REIT, (B) cause any Company Subsidiary to cease to be treated as a Taxable REIT Subsidiary with respect to the Company or, in the case of any other Company Subsidiary, cause it to cease to be treated for U.S. federal income Tax purposes as a disregarded entity or partnership, as the case may be, or (C) cause the Company to become liable for U.S. federal income or excise Tax under Section 856, 857, 860 or 4981 of the Code (or similar provisions of state or local Tax Law); provided, that if any action described in clauses (A), (B) or (C) is required by Law or is necessary to preserve the status and taxation of the Company as a REIT under the Code, then the Company shall promptly notify Parent and make reasonable effort to permit Parent to review and comment on such action;
(xxiii) merge or consolidate or adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except for the merger of one or more wholly-owned Company Subsidiaries with or into one or more other wholly-owned Company Subsidiaries or the dissolution and liquidation of Company Subsidiaries in the ordinary course of business consistent with past practice, which, individually or in the aggregate, would not reasonably be expected to be material to the Company and the Company Subsidiaries, taken as a whole, or that would, or would reasonably be expected to, prevent or materially impair the ability of the Company or Company Operating Partnership to consummate the Mergers before the Outside Date;
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(xxiv) permit any material insurance policy covering the Company, Company Properties or the Company Subsidiaries and their respective properties, assets and businesses to terminate or lapse without replacing such policy with comparable coverage (to the extent that comparable coverage is available) or materially amend or cancel any material insurance policy;
(xxv) initiate or consent to any material zoning reclassification of any real property or any other material change to any approved site plan, special use permit, planned development approval or other land use entitlement affecting any Company Property, except as may be required under applicable Law or for the redevelopment of a property;
(xxvi) [Reserved];
(xxvii) amend or modify the compensation terms or any other obligations of the Company contained in the engagement letter with the Company Financial Advisor in a manner adverse to the Company, any Company Subsidiary or Parent or enter into any agreement or engage other financial advisors in connection with the transactions contemplated by this Agreement;
(xxviii) take, or agree to commit to take, any action that would or would reasonably be expected to result in any of the conditions to the Mergers set forth in Article VII not being satisfied by the Outside Date;
(xxix) amend (except as contemplated pursuant to this Agreement), terminate or grant any waiver of any provision of, or redeem the Rights (as defined in the Company Rights Plan) issued under, the Company Rights Plan; or
(xxx) authorize, or enter into any contract, agreement, commitment or arrangement to do any of the foregoing.
(d) Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit the Company from taking any action after giving prior written notice to Parent (to the extent practicable), at any time or from time to time, that in the reasonable judgment of the Company Board, upon advice of counsel to the Company, is reasonably necessary for the Company to avoid or to continue to avoid incurring entity-level income or excise Taxes under Sections 856, 857, 860 and 4981 of the Code (and similar provisions of state or local Tax Law), maintain its qualification as a REIT under the Code for any period or portion thereof ending on or prior to the REIT Merger Effective Time, including making dividend or distribution payments to stockholders of the Company in accordance with this Agreement or otherwise, or to qualify or preserve the status of any Company Subsidiary as a partnership or disregarded entity for U.S. federal income tax purposes or as a Qualified REIT Subsidiary or Taxable REIT Subsidiary, as the case may be.
Section 6.2 Conduct of Business by Parent.
(a) Parent and Parent Operating Partnership covenant and agree that, during the Interim Period, except to the extent required by applicable Law, as may be agreed in writing by the Company (which consent shall not be unreasonably withheld, delayed or conditioned), as may be expressly required or permitted pursuant to this Agreement (including with respect to all actions necessary to effect the Internalization and the transactions contemplated by the Internalization Merger Agreement), or as set forth in Section 6.2(a) of the Parent Disclosure Letter or for any Public Health Measures, Parent and Parent Operating Partnership shall, and shall cause each of the Parent Subsidiaries to, (i) conduct their business and operations in the ordinary course and in a manner consistent with past practice in all material respects, and (ii) use their commercially reasonable efforts to: (A) maintain the material assets and properties of Parent and Parent Subsidiaries in their current condition (normal wear and tear and damage caused by casualty or by any reason outside of Parent’s or the Parent Subsidiaries’ control excepted), (B) preserve intact in all material respects its current business organization, goodwill, ongoing businesses and material relationships with Third Parties (C) keep available the services of its present officers, key employees and key consultants, (D) maintain, in all material respects, reasonably satisfactory relationships with significant customers, franchisors, managers and suppliers and with other Persons with whom they have significant business relations and (E) maintain the status of Parent as a REIT.
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(b) [Reserved].
(c) Without limiting the foregoing, Parent and Parent Operating Partnership covenant and agree that, during the Interim Period, except to the extent required by applicable Law, as may be agreed in writing by the Company (which consent shall not be unreasonably withheld, delayed or conditioned, except with respect to clauses (ii), (iii), (iv) or (xxvi) below, as to which the Company may grant or withhold its consent in its sole discretion)), as may be expressly required or permitted pursuant to this Agreement, or as set forth in Section 6.2(b) of the Parent Disclosure Letter, Parent and Parent Operating Partnership shall not, and shall not cause or permit any of the Parent Subsidiaries to, do any of the following:
(i) amend (or, except in accordance with Section 6.18 of this Agreement, propose to amend) the Parent Charter, Parent Bylaws, Parent Partnership Certificate or Parent Partnership Agreement or amend or propose to amend the equivalent organizational or governing documents of any Parent Subsidiary, if such amendment would be adverse to Parent and the Parent Subsidiaries, taken as a whole;
(ii) split, combine, reclassify or subdivide any shares of stock or other voting securities or equity interests of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub or any other Parent Subsidiary or, except as contemplated by Section 6.2(c)(iv), issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for its capital stock, other voting securities or equity interests;
(iii) declare, set aside or pay any dividend on or make any other distributions (whether in cash, stock, property or otherwise) with respect to shares of capital stock of Parent or other equity securities or ownership interests in Parent, except for (A) the declaration and payment by Parent of regular quarterly dividends, in accordance with past practice and not for any interim period prior to the REIT Merger Effective Time, at an annual rate not to exceed $1.60 per Parent Common Share (each a “Parent Common Quarterly Dividend”), (B) the declaration and payment of dividends or distributions made to Parent by any wholly owned Parent Subsidiary and (C) the declaration and payment of dividends or distributions made by any Parent Subsidiary that is not wholly owned, directly or indirectly, by Parent, in accordance with the requirements of the organizational documents of such Parent Subsidiary. Notwithstanding the foregoing, Parent and any Parent Subsidiary shall be permitted to make distributions, including under Sections 858 or 860 of the Code, reasonably necessary for Parent to maintain its status as a REIT under the Code and avoid or reduce the imposition of any corporate level tax or excise Tax under the Code;
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(iv) redeem, repurchase or otherwise acquire, or offer to redeem, repurchase or otherwise acquire, directly or indirectly, any shares of its capital stock or other equity interests of Parent or a Parent Subsidiary or any securities of Parent or any Parent Subsidiary convertible into or exchangeable or exercisable for capital stock or voting securities of, or equity interests in, Parent or any Parent Subsidiary, or any warrants, calls, options or other rights to acquire any such capital stock, securities or interests, other than (A) the redemption or exchange of Parent Partnership Units pursuant to and in accordance with the provisions of the Parent Partnership Agreement, (B) the withholding of Parent Common Shares to satisfy withholding Tax obligations with respect to any restricted shares and RSUs under the Parent Equity Plans, and (C) the acquisition by Parent in the ordinary course of business consistent with past practice pursuant to the terms of the Parent Equity Plans upon termination of employment or service of an award holder;
(v) except for transactions among Parent and one or more wholly-owned Parent Subsidiaries or among one or more wholly-owned Parent Subsidiaries, or as otherwise contemplated in Section 6.2(c)(iii) or (iv), or as set forth on Section 6.2(c)(v) of the Parent Disclosure Letter in respect to the annual stock grants to Parent’s directors or (subject to the Internalization Merger Agreement) the employees of AR Global issue, deliver, sell, pledge, dispose, encumber or grant any shares of the Parent’s or any of the Parent Subsidiaries’ capital stock or other voting securities or equity interests, or any options, calls, warrants, convertible securities or other rights of any kind to acquire any shares of the Parent’s or any of the Parent Subsidiaries’ capital stock, voting securities or other equity interests or any other rights issued by Parent or any Parent Subsidiary that are linked in any way to the price of Parent Common Shares or any other shares of capital stock or other voting securities or equity interests of Parent or any Parent Subsidiary, the value of the Parent, any Parent Subsidiary or any part of Parent or any Parent Subsidiary or any dividends or other distributions declared or paid on any shares of capital stock or other voting securities or equity interests of Parent or any Parent Subsidiary; provided, however, that Parent may issue shares of Parent Common Shares pursuant to awards under the Parent Equity Plans;
(vi) except as may be specifically required under a Parent employment agreement executed prior to the date of this Agreement or a benefit plan adopted prior to the date of this Agreement, grant, confer, award, or modify the terms of any options, convertible securities, restricted stock, phantom shares, equity-based compensation or other rights to acquire, or denominated in, any of the Parent’s or any of the Parent Subsidiaries’ capital stock or other voting securities or equity interests or the provisions of the Internalization Merger Agreement relating to Advisor’s employees;
(vii) incur, create, refinance, replace, prepay or assume any Indebtedness for borrowed money (other than by Parent or a wholly-owned Parent Subsidiary to Parent or a wholly-owned Parent Subsidiary) or issue or amend the terms of any outstanding debt securities of Parent or any wholly-owned Parent Subsidiary or assume, guarantee or endorse, or otherwise become responsible (whether directly, contingently or otherwise) for the Indebtedness of any other Person (other than a wholly-owned Parent Subsidiary), except (A) Indebtedness incurred under the Parent’s existing revolving credit facilities in the ordinary course of business consistent with past practice (including to pay dividends or other distributions permitted by Section 6.2(c)(iii)), (B) the addition or substitution of Parent Subsidiaries as guarantors under such revolving credit facilities as permitted by Section 6.2(c)(ix)) (provided that, there shall not be any increase in the aggregate principal commitments of such revolving credit facilities), and (C) Indebtedness received upon the acquisition of real properties or entities owning real properties or the refinancing of same;
(viii) acquire or agree to acquire (including by merger, consolidation or acquisition of equity or assets), (A) any corporation, partnership, limited liability company, other business organization or any division thereof or (B) any material amount of assets thereof (whether personal or real property), in each case, that would, or would reasonably be expected to, prevent or materially impair the ability of Parent, REIT Merger Sub or Partnership Merger Sub to consummate the Mergers before the Outside Date;
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(ix) sell, mortgage, pledge, lease, license, sell and leaseback, transfer, assign, otherwise dispose of or encumber or subject to any Lien (other than a Permitted Lien and other than ordinary course leasing activities which do not otherwise require the Company’s consent pursuant to this Section 6.2(c)), (A) any real property or any interests therein contributing, either individually or in the aggregate, more than 10% of Parent’s EBITDA for the fiscal year ending December 31, 2022, and (B) any personal property and assets in excess of $250,000 in the aggregate, except for pledges or encumbrances of direct or indirect equity interests in Parent Subsidiaries from time to time under the Parent’s existing revolving credit facilities (including with respect to the addition or substitution of Parent Subsidiaries as guarantors under Parent’s existing revolving credit facilities);
(x) make any loans, advances or capital contributions to, or investments in, any other Person (including to any of its officers, directors, employees, Affiliates, agents or consultants), or make any change in its existing borrowing or lending arrangements for or on behalf of any of such Persons or enter into any “keepwell” or similar agreements to maintain the financial condition of any other Person, other than (A) by Parent or a wholly-owned Parent Subsidiary, (B) loans, advances, capital contributions or investments required to be made under any Parent Material Lease (it being understood that grants of relief as to the timing for payment of rent in the ordinary course of business are not loans, advances, capital contributions or investments) and (C) loans issued pursuant to the terms of a tax-qualified company benefit plan;
(xi) renew, modify or amend, terminate (other than through expiration in accordance with its terms), or waive, release, compromise or assign any rights or claims under, any Parent Material Contract or Parent Material Lease or enter into any new contract that, if entered into prior to the date of this Agreement, would have been required to be listed in Section 5.12 or Section 5.16 of the Parent Disclosure Letter as a Parent Material Contract or Parent Material Lease; other than (A) new Parent Leases for the lease of real property consistent with past practice, (B) any termination or renewal in accordance with the terms of such existing Parent Material Contract or Parent Material Lease that occur automatically without any action by Parent or any Parent Subsidiary, (C) the entry into any modification or amendment of, or waiver or consent under, any mortgage, deed of trust, deed to secure debt, similar agreement, or related agreement to which Parent or any Parent Subsidiary is a party as required or necessitated by this Agreement, the Mergers or the other transactions contemplated this Agreement or (D) as necessary to comply with the terms of this Agreement;
(xii) enter into or modify any collective bargaining agreement or other labor union contract applicable to the employees of Parent or any Parent Subsidiary;
(xiii) waive, release, assign any material rights or Claims or make any payment, directly or indirectly, of any other liability of Parent or any Parent Subsidiary, in an amount in excess of $2,500,000, before the same comes due in accordance with its terms, other than in the ordinary course of business and consistent with past practice (including ordinary course workouts and bankruptcies of tenants);
(xiv) settle or compromise (A) any Claim made or pending against Parent or any of the Parent Subsidiaries, other than settlements where the amount paid (after the application of any insurance proceeds actually received or appropriate credits are applied from self-insurance reserves, if any) in settlement or compromise does not exceed the thresholds set forth on Section 6.2(c)(xiv) of the Parent Disclosure Letter and that (x) do not require any material actions or impose any material restrictions on the business or operations of Parent and the Parent Subsidiaries, and (y) do not provide for any admission of liability by Parent or any Parent Subsidiaries and (B) any Claim involving any present, former or purported holder or group of holders of Parent Common Shares other than in accordance with Section 6.8, (provided, however, that notwithstanding the foregoing, the written consent of the Company shall be required in order for Parent or any Parent Subsidiary to settle, compromise, dismiss, discharge or otherwise dispose of any Claim arising from, based upon or challenging the validity of this Agreement or the consummation of the transactions contemplated hereby or seeking to prevent the consummation of the transactions contemplated hereby);
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(xv) (A) hire or terminate any officer or director of Parent or any Parent Subsidiary or promote or appoint any Person to a position of officer or director of Parent or any Parent Subsidiary, (B) increase in any manner the amount, rate or terms of compensation or benefits of any of its directors or officers, except in the ordinary course of business consistent with past practice, (C) pay or agree to pay any pension, retirement allowance or other compensation or benefit to any former director, officer or consultant of Parent or any Parent Subsidiary, except in the ordinary course of business consistent with past practice, (D) enter into, adopt, amend or terminate any employment, bonus, severance or retirement contract or other compensation or employee benefits arrangement, (E) accelerate the vesting or payment of any compensation or benefits under the Parent Equity Plans, (F) grant any awards under the Parent Equity Plans, bonus, incentive, performance or other compensation plan or arrangement, or (G) take any action to fund or in any other way secure the payment of compensation or benefits under the Parent Equity Plans, in each case, other than as required by Law or the provisions of the Internalization Merger Agreement relating to Advisor’s employees;
(xvi) fail to maintain all financial books and records in all material respects in accordance with GAAP or make any material change to its methods of accounting, principles or practices in effect at December 31, 2022, except as required by a change in GAAP (or any interpretation thereof) or in applicable Law or fail to maintain all financial books and records in all material respects in accordance with GAAP (or any interpretation thereof);
(xvii) other than customary use and limited geographic restrictions granted to tenants, (A) enter into any contract, agreement, arrangement or commitment that limits or otherwise restricts Parent or any Parent Subsidiary or any of their successors from engaging or competing in any line of business or in any geographic area, or (B) enter into any new line of business;
(xviii) enter into, amend or modify any Parent Tax Protection Agreement; make, change or rescind any material election relating to Taxes; change a material method of Tax accounting; amend any income Tax Return or any other material Tax Return; settle or compromise any material U.S. federal, state, local or foreign income Tax liability, audit, claim or assessment, enter into any material closing agreement related to Taxes; or knowingly surrender any right to claim any material Tax refund, except in each case as required by Law;
(xix) take any action, or fail to take any action, which action or failure would reasonably be expected to (A) cause Parent to fail to qualify for taxation as a REIT, (B) cause any Parent Subsidiary to cease to be treated as a Taxable REIT Subsidiary with respect to Parent or, in the case of any other Parent Subsidiary, cause it to cease to be treated for U.S. federal income Tax purposes as a disregarded entity or partnership, as the case may be, or (C) cause Parent to become liable for U.S. federal income or excise Tax under Section 856, 857, 860 or 4981 of the Code (or similar provisions of state or local Tax Law); provided, that if any action described in clauses (A), (B) or (C) is required by Law or is necessary to preserve the status and taxation of Parent as a REIT under the Code, then Parent shall promptly notify Parent and make reasonable effort to permit Parent to review and comment on such action;
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(xx) merge or consolidate or adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except for the merger of one or more wholly-owned Parent Subsidiaries with or into one or more other wholly-owned Company Parent or the dissolution and liquidation of Parent Subsidiaries in the ordinary course of business consistent with past practice, which, individually or in the aggregate, would not reasonably be expected to be material to Parent and the Parent Subsidiaries, taken as a whole, or that would, or would reasonably be expected to, prevent or materially impair the ability of Parent, REIT Merger Sub or Partnership Merger Sub to consummate the Mergers before the Outside Date;
(xxi) permit any material insurance policy covering Parent, the Parent Properties or the Parent Subsidiaries and their respective properties, assets and businesses to terminate or lapse without replacing such policy with comparable coverage (to the extent that comparable coverage is available) or materially amend or cancel any material insurance policy;
(xxii) initiate or consent to any material zoning reclassification of any real property or any other material change to any approved site plan, special use permit, planned development approval or other land use entitlement affecting any Parent Property, except as may be required under applicable Law or for the redevelopment of a property;
(xxiii) [Reserved];
(xxiv) except (A) pursuant Parent’s operating budget previously provided to the Company, (B) capital expenditures necessary to repair any casualty losses in an amount up to $2,000,000 in the aggregate or to the extent such losses are covered by existing insurance, (C) tenant build-outs or ordinary course tenant improvements, and (D) capital expenditures in the ordinary course of business consistent with past practice necessary to repair or prevent damage to any Parent Property in the event of an emergency situation, after prior notice to the Company (provided, that if the nature of such emergency renders prior notice to the Company impracticable, Parent shall provide notice to the Company as promptly as reasonably practicable after making such capital expenditure), make or commit to make any capital expenditures in excess of $1,000,000 individually or $2,500,000 in the aggregate;
(xxv) fail to duly and timely file all material reports and other material documents required to be filed with all Governmental Authorities and other authorities (including the NYSE), subject to extensions permitted by Law;
(xxvi) amend or modify the compensation terms or any other obligations of Parent contained in the engagement letter with the Parent Financial Advisor in a manner adverse to Parent, any Parent Subsidiary or the Company or enter into any agreement or engage other financial advisors in connection with the transactions contemplated by this Agreement;
(xxvii) take, or agree to commit to take, any action that would or would reasonably be expected to result in any of the conditions to the Mergers set forth in Article VII not being satisfied by the Outside Date;
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(xxviii) amend (except as contemplated pursuant to this Agreement), terminate or grant any waiver of any provision of, or redeem the Rights (as defined in the Parent Rights Plan) issued under, the Parent Rights Plan; or
(xxix) authorize, or enter into any contract, agreement, commitment or arrangement to do any of the foregoing.
(d) Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit Parent from taking any action, at any time or from time to time, that in the reasonable judgment of the Parent Board, upon advice of counsel to Parent, is reasonably necessary for Parent to avoid or to continue to avoid incurring entity-level income or excise Taxes under Sections 856, 857, 860 and 4981 of the Code (and similar provisions of state or local Tax Law) maintain its qualification as a REIT under the Code for any period or portion thereof ending on or prior to the REIT Merger Effective Time, including making dividend or distribution payments to stockholders of Parent in accordance with this Agreement or otherwise, or to qualify or preserve the status of any Parent Subsidiary as a partnership or disregarded entity for U.S. federal income tax purposes or as a Qualified REIT Subsidiary or Taxable REIT Subsidiary, as the case may be.
Section 6.3 Preparation of Form S-4, Joint Proxy Statement and NYSE Listing; Stockholder Meetings.
(a) As promptly as reasonably practicable, and no later than 45 days following the date of this Agreement, or such other time period as the parties hereto agree, (i) the Company and Parent shall jointly prepare and cause to be filed with the SEC the Joint Proxy Statement, (ii) the Company and Parent shall prepare, and Parent shall cause to be filed with the SEC, the Form S-4, which will include the Joint Proxy Statement as a prospectus, and (iii) Parent shall prepare and cause to be submitted to the NYSE the application and other agreements and documentation necessary for the listing of the Parent Common Shares issuable in the REIT Merger and in the Internalization Merger on the NYSE. Each of the Company and Parent shall use its commercially reasonable best efforts to (w) have the Form S-4 declared effective under the Securities Act as promptly as practicable after such filing, (x) ensure that the Form S-4 complies in all material respects with the applicable provisions of the Exchange Act or Securities Act, (y) mail or deliver the Joint Proxy Statement to its respective stockholders as promptly as practicable after the Form S-4 is declared effective and (z) keep the Form S-4 effective for so long as necessary to complete the Mergers and the other transaction contemplated hereby. Parent shall use its commercially reasonable best efforts to have the application for the listing of the Parent Common Shares issuable in the REIT Merger accepted by the NYSE as promptly as practicable following submission. Between the date of this Agreement and the REIT Merger Effective Time, Parent and the Company shall use its commercially reasonable best efforts to maintain its NYSE listing and NASDAQ listing, respectively. Each of the Company and Parent shall furnish all information concerning itself, its Affiliates and the holders of its capital stock or other equity interests to the other and provide such other assistance as may be reasonably requested in connection with the preparation, filing and distribution of the Form S-4 and Joint Proxy Statement and the preparation and filing of the NYSE listing application. The Form S-4, Joint Proxy Statement and the NYSE listing application shall include all information reasonably requested by such other party to be included therein. Each of the Company and Parent shall promptly notify the other upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to the Form S-4 or Joint Proxy Statement, and shall, as promptly as practicable after receipt thereof, provide the other with copies of all correspondence between it and its Representatives, on one hand, and the SEC, on the other hand. Each of the Company and Parent shall use its commercially reasonable best efforts to respond as promptly as practicable to any comments from the SEC with respect to the Joint Proxy Statement, and Parent shall use its commercially reasonable best efforts to respond as promptly as practicable to any comment from the SEC with respect to the Form S-4. Notwithstanding the foregoing, prior to (1) filing the Form S-4 (or any amendment or supplement thereto) or mailing the Joint Proxy Statement (or any amendment or supplement thereto) or responding to any comments of the SEC with respect thereto or (2) submitting the NYSE listing application to the NYSE or responding to any comments of the NYSE, in each case, each of the Company and Parent (i) shall cooperate and provide the other a reasonable opportunity to review and comment on such document or response (including the proposed final version of such document or response) and (ii) shall include in such document or response all comments reasonably proposed by the other. Parent shall advise the Company, promptly after it receives notice thereof, (x) of the time of effectiveness of the Form S-4 the issuance of any stop order relating thereto or the suspension of the qualification of the Parent Common Shares issuable in connection with the REIT Merger for offering or sale in any jurisdiction, and Parent shall use its commercially reasonable best efforts to have any such stop order or suspension lifted, reversed or otherwise terminated and (y) of the time the NYSE listing application is accepted.. Parent shall also take (or cause to be taken) any other action required to be taken under the Securities Act, the Exchange Act, any applicable foreign or state securities or “blue sky” Laws and the rules and regulations thereunder in connection with the issuance of Parent Common Shares in the REIT Merger or in connection with the issuance of New Parent LP Common Units in connection the Partnership Merger, and the Company shall furnish all information concerning the Company and the holders of its capital stock as may be reasonably requested in connection with any such actions.
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(b) If, at any time prior to the REIT Merger Effective Time, in the case of the Form S-4, or receipt of the Company Stockholder Approval and Parent Stockholder Approval, in the case of the Joint Proxy Statement, any information relating to the Company or Parent, or any of their respective Affiliates, should be discovered by the Company or Parent which, in the reasonable judgment of the Company or Parent, should be set forth in an amendment of, or a supplement to, any of the Form S-4 or the Joint Proxy Statement, so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other parties hereto, and the Company and Parent shall cooperate in the prompt filing with the SEC of any necessary amendment of, or supplement to, the Joint Proxy Statement or the Form S-4 and, to the extent required by Law, in disseminating the information contained in such amendment or supplement to stockholders of the Company and Parent, as applicable. Nothing in this Section 6.3(b) shall limit the obligations of any party under Section 6.3(a).
(c) As promptly as reasonably practicable following the date of this Agreement, the Company shall, in accordance with applicable Law and the Company Charter and Company Bylaws, establish a record date for, duly call, give notice of, convene and hold the Company Stockholder Meeting. The Company shall use its commercially reasonable best efforts to cause the Joint Proxy Statement to be mailed to the stockholders of the Company entitled to vote at the Company Stockholder Meeting and to hold the Company Stockholder Meeting as soon as reasonably practicable after the Form S-4 is declared effective under the Securities Act. The Company shall, through the Company Board, recommend to its stockholders that they give the Company Stockholder Approval, include such recommendation in the Joint Proxy Statement and solicit and use its commercially reasonable best efforts to obtain the Company Stockholder Approval. Notwithstanding the foregoing provisions of this Section 6.3(c), if, on a date for which the Company Stockholder Meeting is scheduled, the Company has not received proxies representing a sufficient number of shares of Company Common Stock to obtain the Company Stockholder Approval, whether or not a quorum is present, the Company shall have the right to make one or more successive postponements or adjournments of the Company Stockholder Meeting to the extent permitted by Law; provided, that the Company Stockholder Meeting is not postponed or adjourned to a date that is more than thirty (30) days after the date for which the Company Stockholder Meeting was originally scheduled (excluding any postponement or adjournments required by applicable Law); provided further, the Company Stockholder Meeting may not be postponed or adjourned on the date the Company Stockholder Meeting is scheduled if the Company shall have received proxies in respect of an aggregate number of Company Common Stock, which have not been withdrawn, such that Company Stockholder Approval will be obtained at such meeting.
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(d) As promptly as reasonably practicable following the date of this Agreement, Parent shall, in accordance with applicable Law and the Parent Charter and Parent Bylaws, establish a record date for, duly call, give notice of, convene and hold the Parent Stockholder Meeting. Parent shall use its commercially reasonable best efforts to cause the Joint Proxy Statement to be mailed to the stockholders of Parent entitled to vote at the Parent Stockholder Meeting and to hold the Parent Stockholder Meeting as soon as reasonably practicable after the Form S-4 is declared effective under the Securities Act. Parent shall, through the Parent Board, recommend to its stockholders that they give the Parent Stockholder Approval, include such recommendation in the Joint Proxy Statement and solicit and use its commercially reasonable best efforts to obtain the Parent Stockholder Approval. Notwithstanding the foregoing provisions of this Section 6.3(d), if, on a date for which the Parent Stockholder Meeting is scheduled, Parent has not received proxies representing a sufficient number of Parent Common Shares to obtain the Parent Stockholder Approval, whether or not a quorum is present, Parent shall have the right to make one or more successive postponements or adjournments of the Parent Stockholder Meeting to the extent permitted by Law; provided, that the Parent Stockholder Meeting is not postponed or adjourned to a date that is more than thirty (30) days after the date for which the Parent Stockholder Meeting was originally scheduled (excluding any postponement or adjournments required by applicable Law); provided further, the Parent Stockholder Meeting may not be postponed or adjourned on the date the Parent Stockholder Meeting is scheduled if Parent shall have received proxies in respect of an aggregate number of Parent Common Shares, which have not been withdrawn, such that Parent Stockholder Approval will be obtained at such meeting. Nothing contained in this Agreement shall be deemed to relieve Parent of its obligation to submit the issuance of shares of Parent Common Stock and New Parent Preferred Stock in connection with the Mergers to its stockholders for a vote on the approval thereof.
(e) Each of the Company and Parent will use its commercially reasonable best efforts to hold the Company Stockholder Meeting and the Parent Stockholder Meeting on the same date and as soon as reasonably practicable after the date of this Agreement.
Section 6.4 Access to Information; Confidentiality.
(a) During the Interim Period, to the extent permitted by applicable Law and contracts, each of the Company and Parent shall, and shall cause each of the Parent Subsidiaries and the Company Subsidiaries, respectively, to, afford to the other party and to the Representatives of such other party reasonable access during normal business hours and upon reasonable advance written notice to all of their respective properties, offices, books, contracts, commitments, personnel, and records and, during such period, each of the Company and Parent shall, and shall cause each of the Company Subsidiaries and the Parent Subsidiaries, respectively, to, furnish reasonably promptly to the other party (i) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of federal or state securities Laws, and (ii) all other information (financial or otherwise) concerning its business and properties and personnel as such other party may reasonably request, subject to any privacy protections with respect to information concerning personnel as may be required by applicable Law. Subject to the terms of the Company Material Leases, Parent, at its own expense, shall have the right to such reasonable access during normal business hours and upon reasonable advance notice in order to prepare or cause to be prepared surveys, inspections, engineering studies, environmental assessments and other tests, examination or studies with respect to any Company Property that Parent deems to be reasonably necessary, so long as such access does not unduly interfere with the Company’s ordinary conduct of business; provided, that (x) neither Parent nor any of its Representatives shall be entitled to conduct intrusive soil testing or similar assessments at any Company Property without the Company’s prior written consent and (y) Parent shall indemnify the Company for any losses, costs or damages caused by such access. Subject to the terms of any applicable leases, the Company, at its own expense, shall have the right to such reasonable access during normal business hours and upon reasonable advance notice in order to prepare or cause to be prepared surveys, inspections, engineering studies, environmental assessments and other tests, examination or studies with respect to any Parent Property that Company deems to be reasonably necessary, so long as such access does not unduly interfere with Parent’s ordinary conduct of business; provided, that (x) neither the Company nor any of its Representatives shall be entitled to conduct intrusive soil testing or similar assessments at any Parent Property without Parent’s prior written consent and (y) the Company shall indemnify Parent for any losses, costs or damages caused by such access. Notwithstanding the foregoing, neither the Company nor Parent shall be required by this Section 6.4 to provide the other party or the Representatives of such other party with access to or to disclose information (w) relating to the consideration, negotiation and performance of this Agreement and related agreements, (x) 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 (provided, however, that the withholding party shall use its reasonable best efforts to obtain the required consent of such Third Party to such access or disclosure), (y) the disclosure of which would violate any Law (including without limitation employee privacy Laws) or fiduciary duty (provided, however, that the withholding party shall use its commercially reasonable best efforts to make appropriate substitute arrangements to permit reasonable disclosure not in violation of any Law or fiduciary duty) or (z) that is subject to any attorney-client privilege (provided, however, that the withholding party shall use its commercially reasonable best efforts to allow for such access or disclosure to the maximum extent that does not result in a loss of attorney-client privilege).
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(b) Each of the Company and Parent will hold, and will cause its Representatives and Affiliates to hold, any nonpublic information, including any information exchanged pursuant to this Section 6.4, in confidence to the extent required by and in accordance with, and will otherwise comply with, the terms of the Confidentiality Agreement (which shall remain in full force and effect pursuant to the terms thereof notwithstanding the execution and delivery of this Agreement or the termination thereof).
Section 6.5 Company Acquisition Proposals.
(a) Notwithstanding anything to the contrary contained in this Agreement but subject to Section 6.5(e) and Section 6.5(g), during the period beginning on the date of this Agreement and continuing until 11:59 p.m. (New York City time) on June 22, 2023 (the “Go Shop Period End Time”), the Company and its respective Representatives may and shall have the right to, directly or indirectly: (i) initiate, solicit, encourage or facilitate any inquiries or the making of any proposal, offer or other action that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal, including by way of (A) contacting third parties, (B) broadly disseminating public disclosure or (C) providing access to the properties, offices, assets, books, records and personnel of the Company and the Company Subsidiaries and furnishing non-public information pursuant to (but only pursuant to) one or more Acceptable Confidentiality Agreements; provided, however, that the Company has previously or concurrently furnished, made available or provided access to such non-public information to Parent; (ii) enter into, continue or otherwise participate in any discussions or negotiations with any Person relating to, or in furtherance of such inquiries, proposals, offers or other actions or to obtain, an Acquisition Proposal; (iii) release any Person from, or refrain from enforcing, any standstill agreement or similar obligation to the Company or any of the Company Subsidiaries; and (iv) disclose to the stockholders of the Company any information required to be disclosed under applicable Law; provided, however, that in the case of this clause (iv) such disclosure shall be deemed to be a Company Change in Recommendation if not accompanied by an express public re-affirmation of the Company Recommendation. For purposes of this Agreement, the term “Go Shop Bidder” shall mean any Person (including its controlled Affiliates and Representatives) that submits a proposal or offer regarding an Acquisition Proposal not later than the Go Shop Period End Time that has not been withdrawn and that the Company Special Committee determines prior to the Go Shop Period End Time (or in the case of any Acquisition Proposal received less than two Business Days before the date of the Go Shop Period End Time, not later than two Business Days after the Go Shop Period End Time), has resulted in, or would be reasonably expected to result in, a Superior Proposal. No later than two Business Days after the Go Shop Period End Time, the Company shall notify Parent in writing of the identity of each Go Shop Bidder and provide to Parent (x) a copy of any related Acquisition Proposal made in writing and any other written material terms or proposals provided (including, to the extent not included therein, a copy of the acquisition agreement and any related transaction documents and financing commitments, if any) to the Company or any Company Subsidiary and (y) a written summary of the material terms of any related Acquisition Proposal not made in writing (including any material terms proposed orally or supplementally).
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(b) Except as permitted by, and subject to, Section 6.5(d), Section 6.5(e) and Section 6.5(g) and, except with respect to a Go Shop Bidder, from and after the Go Shop Period End Time, the Company shall not, and shall cause each of the Company Subsidiaries not to, and shall not authorize or permit any of its Representatives to, (i) initiate, solicit, knowingly encourage or facilitate any inquiries or the making of any proposal, offer or other action that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal, (ii) enter into, continue or otherwise participate in any discussions or negotiations with any Person, or furnish to any Person other than Parent any non-public information, in furtherance of such inquiries or to obtain an Acquisition Proposal, (iii) release any Person from or fail to enforce any standstill agreement or similar obligation to the Company or any Company Subsidiary, (iv) withdraw, modify or amend the Company Recommendation in any manner adverse to the Parent Parties or fail to make the Company Recommendation or fail to include the Company Recommendation in the Joint Proxy Statement, (v) approve, endorse or recommend any Acquisition Proposal (any event described in clause (iv) or this clause (v), whether taken by the Company Board or a committee thereof, a “Company Change in Recommendation”), (vi) enter into any agreement in principle, arrangement, understanding, contract or agreement (whether binding or not) contemplating or otherwise relating to an Acquisition Proposal, or (vii) take any action to exempt any Person from any takeover statute or similar restrictive provision of the Company Charter or Company Bylaws. For the avoidance of doubt, after the Go Shop Period End Time until the receipt of the Company Stockholder Approval, the Company, Company Subsidiaries and each of their respective Representatives may continue to take any of the actions described in Section 6.5(a) with respect to any proposals or offers regarding any Acquisition Proposal submitted by a Go Shop Bidder on or before the Go Shop Period End Time or with respect to any amended or modified proposal or offer with respect to any such Acquisition Proposal submitted by a Go Shop Bidder after the Go Shop Period End Time if the Company Special Committee has determined in good faith following consultation with its legal and financial advisors that such Acquisition Proposal (as may be amended or modified) is or is reasonably expected to lead to a Superior Proposal; provided that a Go Shop Bidder shall cease to be a Go Shop Bidder if the negotiations between the Company and such Go Shop Bidder with respect to the Acquisition Proposal that resulted in such Go Shop Bidder becoming a Go Shop Bidder shall have been terminated. The Company agrees that in the event any Representative of the Company or any Company Subsidiary takes any action that, if taken by the Company, would constitute a material violation of this Section 6.5(b), then the Company shall be deemed to be in violation of this Section 6.5(b) for all purposes of this Agreement.
(c) Except as permitted by, and subject to, Section 6.5(b), Section 6.5(d), Section 6.5(e) and Section 6.5(g), after the Go Shop Period End Time, the Company shall, and shall cause each Company Subsidiary and each of their respective Representatives to, immediately cease any discussions, negotiations or communications with any Person (other than Go Shop Bidders and the Parent Parties) with respect to any Acquisition Proposal or potential Acquisition Proposal and immediately terminate all physical and electronic data room access previously granted to any such Person (other than Go Shop Bidders and the Parent Parties).
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(d) If, from and after the Go Shop Period End Time and prior to receipt of the Company Stockholder Approval, the Company or any Company Subsidiary or their respective Representatives receives a bona fide written Acquisition Proposal which has not been initiated, solicited, encouraged or facilitated in violation of Section 6.5(b), and which the Company Special Committee has determined in good faith following consultation with its legal and financial advisors is or is reasonably expected to lead to a Superior Proposal, the Company and Company Subsidiaries or any of their respective Representatives thereafter may take the following actions (but only if and to the extent that the Company Special Committee determines in good faith following consultation with its legal advisors that the failure to do so would reasonably likely to be inconsistent with its duties to the stockholders of the Company under applicable Law): (i) furnish, make available or provide access to non-public information with respect to the Company and Company Subsidiaries to the Person who made such Acquisition Proposal and such Person’s Representatives (provided that the Company (A) concurrently or has previously furnished, made available or provided access to such non-public information to the Parent Parties and (B) furnishes, makes available or provides access to such non-public information pursuant to an Acceptable Confidentiality Agreement), (ii) participate in negotiations regarding such Acquisition Proposal, and (iii) disclose to the stockholders of the Company any information required to be disclosed under applicable Law; provided, however, that in the case of this clause (iii) such disclosure shall be deemed to be a Company Change in Recommendation if not accompanied by an express public re-affirmation of the Company Recommendation. From and after the Go Shop Period End Time, in the event the Company, any Company Subsidiary or any of their respective Representatives receives from a Person (including a Go Shop Bidder) or group of related Persons (x) an Acquisition Proposal or an amended or modified proposal or offer with respect to any such Acquisition Proposal, (y) any request for information relating to the Company or Company Subsidiaries from a Person who informs the Company or any Company Subsidiary that it is considering making or has made an Acquisition Proposal or (z) any inquiry or request for discussions or negotiations regarding any Acquisition Proposal, the Company shall promptly notify Parent of (but in no event more than 48 hours following) such receipt. Such notification shall include, to the extent then known, the identity of the parties and a copy of such Acquisition Proposal, inquiry or request or, if not made in writing, a written description of the material terms thereof. The Company shall keep Parent apprised on a current basis of (and in any event no later than 24 hours after) any material developments, discussions and negotiations concerning, any such Acquisition Proposal, inquiry or request, including by furnishing copies of any documentation and written correspondence that supplements or amends any such Acquisition Proposal, inquiry or request. Notwithstanding anything to the contrary in this Agreement, but subject to the preceding three sentences, nothing herein shall prohibit the Company, Company Subsidiaries and their respective Representatives from contacting in writing any Person submitting an Acquisition Proposal (that was not the result of a violation of this Section 6.5) solely to clarify the terms of the Acquisition Proposal for the sole purpose of the Company Board (or the Company Special Committee) informing itself about such Acquisition Proposal. Neither the Company nor any Company Subsidiary shall, after the date of this Agreement, enter into any confidentiality agreement that would prohibit it from providing such information to Parent.
(e) At any time prior to receipt of the Company Stockholder Approval, the Company Board may, if the Company Board determines in good faith after consultation with its legal advisor (and based on the recommendation of the Company Special Committee) that the failure to do so would reasonably be likely to be inconsistent with its duties to the stockholders of the Company under applicable Law, (i) upon receipt by the Company of an Acquisition Proposal that constitutes a Superior Proposal (whether or not from a Go Shop Bidder), make a Company Change in Recommendation (and the Company may so terminate this Agreement in accordance with Section 8.1(c)(ii) of this Agreement and enter into an agreement relating to, or for the implementation of, such Superior Proposal); or (ii) otherwise make a Company Change in Recommendation in response to a Company Intervening Event; provided that
(A) in the case of a Company Change in Recommendation under clause (i) of this Section 6.5(e), (1) such Acquisition Proposal did not result from the Company’s breach of its obligations under this Section 6.5, and (2) the Company Board has determined in good faith, after consultation with its legal and financial advisors (and based on the recommendation of the Company Special Committee), that such Acquisition Proposal constitutes a Superior Proposal and, after consultation with its legal advisor, that the failure of the Company to terminate this Agreement in accordance with Section 8.1(c)(ii) or make a Company Change in Recommendation, as the case may be, would be reasonably likely to be inconsistent with its duties to the stockholders of the Company under applicable Law, taking into account all adjustments to the terms of this Agreement that may be offered by the Parent Parties pursuant to Section 6.5(e)(D);
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(B) in the case of a Company Change in Recommendation under clause (ii) of this Section 6.5(e), the Company Board has determined in good faith, after consultation with its legal advisor (and based on the recommendation of the Company Special Committee), that failure of the Company to make a Company Change in Recommendation would be reasonably likely to be inconsistent with its duties to the stockholders of the Company under applicable Law, taking into account all adjustments to the terms of this Agreement that may be offered by the Parent Parties pursuant to Section 6.5(e)(D);
(C) the Company has notified Parent in writing that the Company Board intends to make a Company Change in Recommendation or enter into an agreement related to the Superior Proposal, attaching the most current version of such agreement (including any amendments, supplements or modifications) to such notice (a “Company Change Notice”); and
(D) during the five Business Day period following Parent’s receipt of a Company Change Notice, the Company shall have offered to negotiate with (and, if accepted, negotiated in good faith with), and shall have caused its respective financial and legal advisors to offer to negotiate with (and, if accepted, negotiate in good faith with), Parent in making adjustments to the terms and conditions of this Agreement (1) such that in circumstances involving or relating to an Acquisition Proposal, the Superior Proposal ceases to be a Superior Proposal; provided that any amendment, supplement or modification to any Acquisition Proposal shall be deemed a new Acquisition Proposal and the Company may not terminate this Agreement pursuant to Section 8.1(c)(ii) or make a Company Change in Recommendation pursuant to clause (i) of this Section 6.5(e) unless the Company has complied with the requirements of this Section 6.5(e) with respect to each such new Acquisition Proposal including sending a Company Change Notice with respect to each such new Acquisition Proposal (except that the new negotiation period under this Section 6.5(e)(D) shall be three Business Days instead of five Business Days), and (2) in circumstances not involving an Acquisition Proposal, as may be proposed by Parent
(f) Notwithstanding any Company Change in Recommendation, unless such Company Change in Recommendation is with respect to a Superior Proposal and the Company terminates this Agreement in accordance with Section 8.1(c)(ii) of this Agreement, the Company shall cause the approval of the REIT Merger, and the other transactions contemplated hereby to be submitted to a vote of the Company’s stockholders at the Company Stockholder Meeting.
(g) Nothing in this Section 6.5 or elsewhere in this Agreement shall prevent the Company Board or the Company, directly or indirectly, from (i) taking and disclosing to the stockholders of the Company a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act with respect to an Acquisition Proposal, making any required disclosure to the stockholders of the Company under applicable Law, including Rule 14d-9 promulgated under the Exchange Act or Item 1012(a) of Regulation M-A or (ii) making any disclosure to the stockholders of the Company if the Company Board determines in good faith after consultation with its legal advisors (and based on the recommendation of the Company Special Committee) that the failure to do so would be reasonably likely to be inconsistent with its duties to the stockholders of the Company under applicable Law; provided, however, that to the extent any such disclosure addresses the approval, recommendation or favorable declaration of advisability by the Company Board with respect to this Agreement or an Acquisition Proposal, such disclosure shall be deemed to be a Company Change in Recommendation if not accompanied by an express public re-affirmation of the Company Recommendation.
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(h) For purposes of this Agreement:
(i) “Acquisition Proposal” means any proposal, offer, indication of interest or inquiry, whether in one transaction or a series of related transactions, relating to any (a) merger, consolidation, share exchange, business combination or similar transaction involving the Company or any Company Subsidiary, (b) sale, lease, exchange, mortgage, pledge, license, transfer or other disposition, by merger, consolidation, share exchange, business combination or any similar transaction, of any assets of the Company or any of the Company Subsidiaries representing 20% or more of the consolidated assets of the Company and the Company Subsidiaries, (c) issue, sale or other disposition by the Company or any of the Company Subsidiaries (including by way of merger, consolidation, share exchange, business combination or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing 20% or more of the votes associated with the outstanding shares of Company Common Stock, (d) tender offer or exchange offer in which any Person or “group” (as such term is defined under the Exchange Act) shall acquire beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange Act), or the right to acquire beneficial ownership, of 20% or more of the votes associated with the outstanding shares of Company Common Stock, (e) recapitalization, restructuring, liquidation, dissolution or other similar type of transaction with respect to the Company in which a third party shall acquire beneficial ownership of 20% or more of the outstanding shares of Company Common Stock, or (f) transaction that is similar in form, substance or purpose to any of the foregoing transactions; provided, however, that the term “Acquisition Proposal” shall not include (i) the Mergers or any of the other transactions contemplated by this Agreement or (ii) any merger, consolidation, business combination, reorganization, recapitalization or similar transaction solely among the Company and one or more of the Company Subsidiaries or solely among the Company Subsidiaries.
(ii) “Company Intervening Event” means a material event, effect, circumstance, change, development or state of facts that was not known to the Company Board prior to the execution of this Agreement (or if known, the magnitude or consequences of which were not known or reasonably foreseeable as of the date hereof), which event, effect, circumstance, change, development or state of facts, or any material consequence thereof, becomes known to the Company Board prior to the REIT Merger Effective Time; provided, however, that in no event shall the receipt, existence or terms of an Acquisition Proposal or any matter relating thereto or consequence thereof constitute a Company Intervening Event and in no event shall entry into agreements that provide for any other strategic transaction or any matter relating thereto or consequence thereof constitute a Company Intervening Event.
(iii) “Superior Proposal” means a written Acquisition Proposal made by a Third Party (except for purposes of this definition, the references in the definition of “Acquisition Proposal” to “20%” shall be replaced with “50%”) which the Company Board (based on the recommendation of the Company Special Committee) determines in its good faith judgment (after consultation with its legal and financial advisors and after taking into account (a) all of the terms and conditions of the Acquisition Proposal and this Agreement (as it may be proposed to be amended by the Parent Parties) and (b) the feasibility and certainty of consummation of such Acquisition Proposal on the terms proposed (taking into account all legal, financial, regulatory and other aspects of such Acquisition Proposal deemed relevant by the Company Board (based on the recommendation of the Company Special Committee) and conditions to consummation thereof)) to be more favorable from a financial point of view to the Company’s stockholders (in their capacities as stockholders) than the REIT Merger and the other transactions contemplated by this Agreement (as it may be proposed to be amended by the Parent Parties)).
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Section 6.6 Parent Change in Recommendation.
(a) Except as permitted by, and subject to, Section 6.6(b), from and after the date of this Agreement, Parent shall not withdraw, modify or amend the Parent Recommendation in any manner adverse to the Company or fail to make the Parent Recommendation or fail to include the Parent Recommendation in the Joint Proxy Statement (such event, whether taken by the Parent Board or a committee thereof, a “Parent Change in Recommendation”).
(b) At any time prior to receipt of the Parent Stockholder Approval, the Parent Board may, if the Parent Board determines in good faith after consultation with its legal and financial advisors that the failure to do so would be inconsistent with its duties to the stockholders of Parent under applicable Law, make a Parent Change in Recommendation in response to a Parent Intervening Event; provided that
(i) the Parent Board has determined in good faith, after consultation with its legal and financial advisors, that failure of Parent to make a Parent Change in Recommendation would be inconsistent with its duties to the stockholders of Parent under applicable Law, taking into account all adjustments to the terms of this Agreement that may be offered by the Company pursuant to Section 6.5;
(ii) Parent has notified the Company in writing that the Parent Board intends to make a Parent Change in Recommendation (a “Parent Change Notice”); and
(iii) During the five Business Day period following the Company’s receipt of a Parent Change Notice, Parent shall have offered to negotiate with (and, if accepted, negotiated in good faith with), and shall have caused its respective financial and legal advisors to offer to negotiate with (and, if accepted, negotiate in good faith with), the Company in making adjustments to the terms and conditions of this Agreement as may be proposed by the Company.
Section 6.7 Appropriate Action; Consents; Filings.
(a) Upon the terms and subject to the conditions set forth in this Agreement (including Section 6.5), each of the Company and Parent shall (and shall cause the Company Subsidiaries and the Parent Subsidiaries, respectively, to) use its commercially reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other party in doing, all things necessary, proper or advisable under applicable Law or pursuant to any contract or agreement to consummate and make effective, as promptly as practicable, the Mergers and the other transactions contemplated by this Agreement, including (i) the taking of all actions necessary to cause the conditions to Closing set forth in Article VII to be satisfied, (ii) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from Governmental Authorities or other Persons necessary in connection with the consummation of the Mergers and the other transactions contemplated by this Agreement and the making of all necessary registrations and filings (including filings with Governmental Authorities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Authority or other Persons necessary in connection with the consummation of the Mergers and the other transactions contemplated by this Agreement, (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the Mergers or the other transactions and documents contemplated by this Agreement, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Authority vacated or reversed, the avoidance of each and every impediment under any antitrust, merger control, competition or trade regulation Law that may be asserted by any Governmental Authority with respect to the Mergers so as to enable the Closing to occur as soon as reasonably possible; and (iv) the execution and delivery of any additional instruments necessary to consummate the Mergers and the other transactions contemplated by this Agreement and to fully carry out the purposes of this Agreement; provided, that, notwithstanding anything to the contrary in this Agreement, no Party will have any obligation (A) to propose, negotiate, commit to or effect, by consent decree, hold separate order or otherwise, the sale, divestiture or other disposition of any assets or businesses of such Party, any of its subsidiaries or their Affiliates or (B) otherwise to take or commit to take any actions that would limit the freedom of such Party, its subsidiaries (including subsidiaries of Parent after the Closing) or their Affiliates with respect to, or their ability to retain, one or more of their businesses, product lines or assets).
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(b) In connection with and without limiting the foregoing Section 6.5(a), each of Parent and the Company shall give (or shall cause the Parent Subsidiaries or the Company Subsidiaries, respectively, to give) any notices to Third Parties. Each of the parties hereto will, and shall cause their respective Affiliates to, furnish to the other parties hereto such necessary information and reasonable assistance as such other parties may reasonably request in connection with the preparation of any required applications, notices, registrations and requests as may be required or advisable to be filed with any Governmental Authority and will reasonably cooperate in responding to any inquiry from a Governmental Authority, including promptly informing the other parties of such inquiry, consulting in advance with such other parties before making any presentations or submissions to a Governmental Authority, and supplying the other parties with copies of all material correspondence, filings or communications with any Governmental Authority with respect to this Agreement, the Mergers or the other transactions contemplated by this Agreement. To the extent reasonably practicable, the parties hereto or their respective Representatives shall have the right to review in advance and to consult on, all the information relating to the other and each of their Affiliates that appears in any filing made with, or written materials submitted to, any Governmental Authority in connection with this Agreement, the Mergers or the other transactions contemplated by this Agreement, except that confidential competitively sensitive business information may be redacted from such exchanges. To the extent reasonably practicable, no party hereto shall (nor shall permit its respective Representatives to) participate independently in any meeting or engage in any substantive conversation with any Governmental Authority in respect of any filing, investigation or other inquiry without giving the other parties hereto prior notice of such meeting or conversation and, to the extent permitted by applicable Law, without giving such other parties the opportunity to attend or participate (whether by telephone, electronically or in person) in any such meeting with such Governmental Authority. Notwithstanding the foregoing, obtaining any approval or consent from any Third Party that is not a Governmental Authority pursuant to this Section 6.5 shall not be considered a condition to the obligations of Parent, REIT Merger Sub and Partnership Merger Sub to consummate the Mergers unless otherwise expressly stated in Article VII.
(c) Notwithstanding anything to the contrary in this Agreement, in connection with obtaining any approval or consent from any Person (other than any Governmental Authority) with respect to the Mergers and the other transactions contemplated by this Agreement, none of the parties hereto or any of their respective Affiliates or Representatives shall be obligated to, pay or commit to pay to such Person whose approval or consent is being solicited any cash or other consideration, make any accommodation or commitment or incur any liability or other obligation to such Person (unless expressly required by a written agreement that was entered into prior to the date hereof with such Person). Subject to the immediately foregoing sentence, the parties shall cooperate with respect to reasonable accommodations that may be requested or appropriate to obtain such consents.
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Section 6.8 Notification of Certain Matters; Transaction Litigation.
(a) The Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, of any notice or other communication received by such party from any Governmental Authority in connection with this Agreement, the Mergers or the other transactions contemplated by this Agreement, or 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 shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, if (i) any representation or warranty made by it contained in this Agreement becomes untrue or inaccurate such that the applicable closing conditions would reasonably expected to be incapable of being satisfied by 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; 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 shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, if, to the knowledge of such party, the occurrence of any state of facts, change, development, event or condition would cause, or reasonably be expected to cause, any of the conditions to Closing set forth herein not to be satisfied or satisfaction to be materially delayed. Notwithstanding anything to the contrary in this Agreement, the failure by the Company or Parent to provide such prompt notice under this Section 6.7(a) shall not constitute a breach of covenant for purposes of Section 7.2(b) or Section 7.3(b).
(c) Each of the parties hereto agrees to give prompt written notice to the other parties upon becoming aware of the occurrence or impending occurrence of any event or circumstance relating to it or any of the other Company Subsidiaries or the other Parent Subsidiaries, respectively, which could reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or a Parent Material Adverse Effect, as the case may be.
(d) The Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, of any Actions commenced or, to such party’s knowledge, threatened against, relating to or involving such party or any of the Company Subsidiaries or the Parent Subsidiaries, respectively, which relate to this Agreement, the Mergers or the other transactions contemplated by this Agreement. The Company shall give Parent the opportunity to reasonably participate in the defense and settlement of any stockholder litigation against the Company and/or its directors relating to this Agreement and the transactions contemplated hereby, and no such settlement shall be agreed to without Parent’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed). Parent shall give the Company the opportunity to reasonably participate in the defense and settlement of any stockholder litigation against Parent and/or its directors relating to this Agreement and the transactions contemplated hereby, and no such settlement shall be agreed to without the Company’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed).
Section 6.9 Public Announcements. The Company and Parent 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 hereby, and none of the parties shall issue any such press release or make any such public statements or filings prior to obtaining 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, issue such press release or make such public statements or filings as may be required by Law, Order or the applicable rules of any stock exchange or the applicable provisions of any listing agreement of any party hereto. If for any reason it is not practicable to consult with the other party before making any public statement with respect to this Agreement or any of the transactions contemplated hereby, then the party making such statement shall not make a statement that is inconsistent with any press release or public statements or filings, if any, to which the other party had previously consented; provided, further, that such consultation and consent shall not be required with respect to any release, communication or announcement specifically permitted by Section 6.5 or Section 6.7.
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Section 6.10 Directors’ and Officers’ Indemnification and Insurance.
(a) Parent, REIT Merger Sub and Partnership Merger Sub agree that all rights to exculpation, indemnification and advancement of expenses for acts or omissions occurring at or prior to the REIT Merger Effective Time, whether asserted or claimed prior to, at or after the REIT Merger Effective Time (including any matters arising in connection with the transactions contemplated by this Agreement), now existing in favor of Indemnitees as provided in the Company Charter or Company Bylaws or each of the Company Subsidiaries’ respective articles or certificates of incorporation or bylaws (or comparable organizational or governing documents) or in any indemnification agreement of the Company or the Company Subsidiaries or other applicable contract as in effect on the date of this Agreement shall survive the Mergers and shall continue in full force and effect in accordance with their terms. Parent and the Surviving Entity shall (and Parent shall cause the Surviving Entity and any applicable Parent Subsidiaries to) (i) indemnify, defend and hold harmless, and advance expenses to, Indemnitees with respect to all acts or omissions by them in their capacities as such at any time prior to the REIT Merger Effective Time, to the fullest extent required by: (x) the Company Charter or Company Bylaws, or the articles or certificates of organization or incorporation or bylaws (or comparable organizational or governing documents) of any of the Company Subsidiaries, in each case, as in effect on the date of this Agreement, (y) any indemnification agreement of the Company or the Company Subsidiaries or other applicable contract as in effect on the date of this Agreement, or (z) applicable Law, and (ii) not amend, repeal or otherwise modify any such provisions referenced in subsections (i)(x) and (i)(y) above in any manner that would adversely affect the rights thereunder of any Indemnitees.
(b) Without limiting the provisions of Section 6.10(a), during the period commencing as of the REIT Merger Effective Time and ending on the sixth (6th) anniversary of the REIT Merger Effective Time, Parent and the Surviving Entity shall (and Parent shall cause the Surviving Entity and any applicable Parent Subsidiaries to): (i) indemnify and hold harmless each Indemnitee against and from any costs or expenses (including attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, to the extent such claim, action, suit, proceeding or investigation arises out of or pertains to (x) any action or omission or alleged action or omission in such Indemnitee’s capacity as a director, officer, partner, manager, member, trustee, employee or agent of the Company or any of the Company Subsidiaries, or (y) this Agreement or any of the transactions contemplated hereby, including the Mergers; and (ii) pay in advance of the final disposition of any such Action the expenses (including attorneys’ fees and any expenses incurred by any Indemnitee in connection with enforcing any rights with respect to indemnification) of any Indemnitee upon receipt of an undertaking by or on behalf of such Indemnitee to repay such amount if it shall ultimately be determined that such Indemnitee is not entitled to be indemnified. Notwithstanding anything to the contrary contained in this Section 6.10(b) or elsewhere in this Agreement, neither Parent nor the Surviving Entity shall (and Parent shall cause the Surviving Entity and any applicable Parent Subsidiaries not to) settle or compromise or consent to the entry of any judgment or otherwise seek termination with respect to any Action for which indemnification may be sought under this Section 6.10(b) unless such settlement, compromise, consent or termination includes an unconditional release of all Indemnitees from all liability arising out of such Action, and does not include an admission of fault or wrongdoing by any Indemnitee. Notwithstanding anything to the contrary set forth in this Agreement, Parent or the Surviving Entity (or any Parent Subsidiary) (i) shall not be liable for any settlement effected without their prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned) and (ii) shall not have any obligation hereunder to any Indemnitee to the extent that a court of competent jurisdiction shall determine in a final and non-appealable order that such indemnification is prohibited by applicable Law, in which case the Indemnitee shall promptly refund to Parent or the Surviving Entity the amount of all such expenses theretofore advanced pursuant hereto.
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(c) Prior to the REIT Merger Effective Time, the Company shall or, if the Company is unable to, Parent shall cause the Surviving Entity as of the REIT Merger Effective Time to, obtain the non-cancellable extension of the directors’ and officers’ liability coverage of the Company’s existing directors’ and officers’ insurance policies and the Company’s existing fiduciary liability insurance policies (collectively, the “D&O Insurance”), in each case, for a claims reporting or discovery period of at least six (6) years from and after the REIT Merger Effective Time with respect to any claim related to any period of time at or prior to the REIT Merger Effective Time from one or more insurance carriers with the same or better credit rating as the Company’s current insurance carrier with respect to D&O Insurance with terms, conditions, retentions and limits of liability that are no less favorable than the coverage provided under the Company’s existing policies and with policy limits no less than the limits on the Company’s existing policies as long as the annual premium does not exceed 300% of the annual premium under the Company’s existing policies. If the Company or the Surviving Entity for any reason fails to obtain such “tail” insurance policies as of the REIT Merger Effective Time, (i) the Surviving Entity shall continue to maintain in effect, for a period of at least six (6) years from and after the REIT Merger Effective Time, the D&O Insurance in place as of the date hereof with the Company’s current insurance carrier or with an insurance carrier with the same or better credit rating as the Company’s current insurance carrier with respect to D&O Insurance with terms, conditions, retentions and limits of liability that are no less favorable than the coverage provided under the Company’s existing policies as of the date hereof, or (ii) Parent shall provide, or shall cause the Surviving Entity to provide, for a period of not less than six (6) years after the REIT Merger Effective Time, the Indemnitees who are insured under the Company’s D&O Insurance with comparable D&O Insurance that provides coverage for events occurring at or prior to the REIT Merger Effective Time from an insurance carrier with the same or better credit rating as the Company’s current insurance carrier, that is no less favorable in the aggregate than the existing policy of the Company (which may be provided under Parent’s D&O Insurance policy) or, if substantially equivalent insurance coverage is unavailable, the best available coverage; provided, however, that Parent and the Surviving Entity shall not be required to pay an annual premium for the D&O Insurance in excess of 300% of the annual premium currently paid by the Company for such insurance; and provided, further, that if the annual premiums of such insurance coverage exceed such amount, Parent or the Surviving Entity shall be obligated to obtain a policy with the greatest coverage available, with respect to matters occurring prior to the REIT Merger Effective Time, for a cost not exceeding such amount. In all events, the cost of insurance required to be purchased or maintained pursuant to this Section 6.10(c) shall be borne by the Surviving Entity.
(d) The Indemnitees to whom this Section 6.10 applies are intended to be third party beneficiaries of this Section 6.10. The provisions of this Section 6.10 are intended to be for the benefit of each Indemnitee and his or her successors, heirs, executors, trustees, fiduciaries, administrators or representatives. Parent shall pay all reasonable expenses, including attorney’s fees, that may be incurred by any Indemnitee in successfully enforcing the indemnity and other obligations provided in this Section 6.10.
(e) The rights of each Indemnitee under this Section 6.10 shall be in addition to any rights such Person or any employee of the Company or any Company Subsidiary may have under the Company Charter, the Company Bylaws or the certificate of incorporation or bylaws (or equivalent organizational or governing documents) of any of the Company Subsidiaries, or the Surviving Entity or any of its Subsidiaries, or under any applicable Law or under any agreement of any Indemnitee or any employee with the Company or any of the Company Subsidiaries listed in Section 4.12(a)(iv) of the Company Disclosure Letter (each, an “Existing Indemnification Right”). To the extent of any conflict between an Existing Indemnification Right and the rights granted to Indemnitees pursuant to this Section 6.10, the provision or provisions more favorable to the Indemnitee shall control.
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(f) Any Indemnitee wishing to claim indemnification under this Section 6.10, upon learning of any such indemnifiable claim, shall promptly notify the Surviving Entity thereof, but the failure to so notify shall not relieve Parent or the Surviving Entity of any liability it may have to such Indemnitee, except to the extent such failure materially prejudices the Surviving Entity. In the event of any such threatened or actual indemnifiable claim (whether asserted or arising at or before or after the REIT Merger Effective Time), (A) Parent or the Surviving Entity shall have the right to assume the defense thereof, with counsel reasonably acceptable to the Indemnitee (which acceptance shall not be unreasonably withheld, delayed or conditioned), and Parent and the Surviving Entity shall not be liable to such Indemnitee for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnitee in connection with the defense thereof, except that if Parent or the Surviving Entity elects not to assume such defense, or counsel for the Indemnitee advises that there are issues that raise conflicts of interest between Parent or the Surviving Entity and the Indemnitee, the Indemnitee may retain counsel satisfactory to him or her, and Parent or the Surviving Entity shall pay all documented fees and expenses of such counsel for the Indemnitee within ten (10) Business Days after statements therefor are received; provided, however, that Parent and the Surviving Entity shall be obligated pursuant to this paragraph (f) to pay for only one firm of counsel for all Indemnitees in connection with an indemnifiable claim (selected by a majority of the applicable Indemnitees) in any jurisdiction except to the extent that any two or more Indemnitees have a conflict of interest in such claim, and (B) the Company and, after the REIT Merger Effective Time, the Surviving Entity shall (and Parent shall cause the Surviving Entity to or any applicable Parent Subsidiary) promptly pay expenses in advance of the final disposition of any such threatened or actual claim to each Indemnitee to the fullest extent permitted by applicable Law, subject to the receipt of an undertaking by such Indemnitee to repay such expenses if it is ultimately determined that such Indemnitee is not entitled to be indemnified; provided, however, that neither the Company nor the Surviving Entity shall be liable for any settlement effected without its prior written consent (which prior written consent shall not be unreasonably withheld, conditioned or delayed).
(g) Notwithstanding anything contained in Section 9.1 or Section 9.7 to the contrary, this Section 6.10 shall survive the consummation of the Mergers indefinitely and shall be binding, jointly and severally, on all successors and assigns of Parent, the Surviving Entity and the Parent Subsidiaries, and shall be enforceable by the Indemnitees and their successors, heirs or representatives. In the event that Parent or the Surviving Entity or any of its successors or assigns consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or transfers or conveys all or a majority 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 Parent or the Surviving Entity, as applicable, shall succeed to the obligations set forth in this Section 6.10. The parties acknowledge and agree that Parent guarantees the payment and performance of the Surviving Entity’s obligations pursuant to this Section 6.10. 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 the Company, any Company Subsidiary or the Company’s or any Company Subsidiary’s officers, directors, managers, employees and agents, it being understood and agreed that the indemnification provided for in this Section 6.10 is not prior to, or in substitution for, any such claims under any such policies.
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Section 6.11 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 herein (together with any related interests, penalties or additions to Tax, “Transfer Taxes”), and shall cooperate in attempting to minimize the amount of Transfer Taxes.
(b) Parent and Parent Operating Partnership shall deliver to the Company and Proskauer Rose LLP (or other counsel to the Company) a tax representation letter, signed by each of the officers of Parent and of Parent Operating Partnership principally responsible for legal, tax, and financial matters, in each case, in their capacities as officers of Parent and not in their individual capacities, dated as of (i) the effective date of the Form S-4 (if requested by Parent in connection with the delivery of a tax opinion as an exhibit to the Form S-4), and (ii) the Closing Date (such tax representation letter, the “Parent Tax Letter”). The Parent Tax Letter shall be in a form and substance reasonably acceptable to the Company. The Parent Tax Letter shall include language explicitly permitting Proskauer Rose LLP (or other counsel to the Company) to rely on the representations set forth therein for purposes of delivering the opinions described in Section 7.2(f) and Section 7.3(e) hereof.
(c) The Company and Company Operating Partnership shall deliver to Parent and Proskauer Rose LLP (or other counsel to Parent) a tax representation letter, signed by each of the officers of the Company and of Company Operating Partnership principally responsible for legal, tax, and financial matters, in each case, in their capacities as officers of the Company and not in their individual capacities, dated as of (i) the effective date of the Form S-4 (if requested by Parent in connection with the delivery of a tax opinion as an exhibit to the Form S-4), and (ii) the Closing Date (such tax representation letter, the “Company Tax Letter”). The Company Tax Letter shall be in a form and substance reasonably acceptable to Parent. The Company Tax Letter shall include language explicitly permitting Proskauer Rose LLP (or other counsel to Parent) to rely on the representations set forth therein for purposes of delivering the opinions described in Section 7.2(f) and Section 7.3(e) hereof.
(d) Each of Parent, Parent Operating Partnership, the Company and Company Operating Partnership shall use its commercially reasonable best efforts to cause the Mergers to qualify for the Intended Tax Treatment, including by executing and delivering the Parent Tax Letter and Company Tax Letter, respectively, and reporting consistently for all income Tax or other purposes. None of Parent, Parent Operating Partnership, the Company or Company Operating Partnership shall take any action, or fail to take any action, that would reasonably be expected to cause the Mergers to fail to qualify for the Intended Tax Treatment.
(e) All Tax Returns shall be prepared in a manner consistent with Section 2.5 of this Agreement.
Section 6.12 Control of Operations. Nothing contained in this Agreement shall be deemed to give Parent, Parent Operating Partnership, REIT Merger Sub or Partnership Merger Sub, directly or indirectly, the right to control or direct the operations of the Company or any Company Subsidiary prior to the REIT Merger Effective Time. Prior to the REIT Merger Effective Time, the Company shall exercise, consistent with and subject to the terms and conditions of this Agreement, complete control and supervision over its and the Company Subsidiaries’ operations.
Section 6.13 Dividends.
(a) In the event that the Closing Date is to occur prior to the end of the then current dividend period of the Company or Parent, as the case may be, then each of the Company and Parent shall declare a dividend to the respective holders of Company Common Stock and Parent Common Shares, the record date and payment date (to the extent practicable) for which shall be the close of business on the last Business Day prior to the Closing Date (the “Closing Dividend Date”), in each case, subject to funds being legally available therefor.
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(b) The per share dividend amount payable by the Company with respect to the shares of Company Common Stock shall be an amount equal to the Company Common Quarterly Dividend, multiplied by a fraction, the numerator of which is the number of days lapsed from the first day of the then current dividend period through and including the Closing Dividend Date, and the denominator of which is the actual number of days in the calendar quarter in which such dividend is declared.
(c) The per share dividend amount payable by Parent with respect to the Parent Common Shares shall be an amount equal to the Parent Common Quarterly Dividend, multiplied by a fraction, the numerator of which is the number of days lapsed from the first day of the then current dividend period through and including the Closing Dividend Date, and the denominator of which is the actual number of days in the calendar quarter in which such dividend is declared.
(d) Notwithstanding the foregoing, any dividend with respect to the shares of Company Series A Preferred Stock or Company Series C Preferred Stock shall be made in accordance with the terms of such Company Preferred Stock as set forth in the Company Charter; provided, however, if the Closing Date shall occur (i) with respect to Company Series A Preferred Stock, following a Series A Dividend Period but prior to a Series A Payment Date (in each case as defined in the Company Charter with regard to the Company Series A Preferred Stock) or (ii) with respect to Company Series C Preferred Stock, following a Series C Dividend Period but prior to a Series C Payment Date (in each case as defined in the Company Charter with regard to the Company Series C Preferred Stock), then, in each case of (i) and (ii), the Company shall declare a dividend to the respective holders of Company Preferred Stock as of end of the prior Series A Dividend Period or Series C Dividend Period, as applicable, and the payment date (to the extent practicable) shall be the Closing Dividend Date, subject to funds being legally available therefor.
(e) The Company Operating Partnership or Parent Operating Partnership, as the case may be, may make a distribution with respect to its partnership units in order to distribute funds sufficient for the payment of the applicable dividends described in Section 6.13(a) and Section 6.13(d).
(f) Parent Board, prior to the Closing Date, shall consider whether to reset the dividend rate for the first quarter following the Closing Date.
Section 6.14 Section 16 Matters. Assuming that the Company delivers to Parent, in a timely fashion prior to the REIT Merger Effective Time, all requisite information necessary for Parent and Parent Operating Partnership to take the actions contemplated by this Section 6.14, the Company, Parent, REIT Merger Sub and Partnership Merger Sub each shall take all such steps as may be necessary or appropriate to ensure that (a) any dispositions of Company Common Stock (including derivative securities related to such stock) resulting from the Mergers and the other 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 the Company immediately prior to the REIT Merger Effective Time are exempt under Rule 16b-3 promulgated under the Exchange Act, and (b) any acquisitions of Parent Common Shares (including derivative securities related to such stock) resulting from the Mergers and the other transactions contemplated by this Agreement by each individual who may become subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Parent are exempt under Rule 16b-3 promulgated under the Exchange Act. Upon request, the Company shall promptly furnish Parent with all requisite information for Parent and Parent Operating Partnership to take the actions contemplated by this Section 6.14.
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Section 6.15 Voting of Securities. Parent shall vote all shares of Company Common Stock beneficially owned by it or any of the Parent Subsidiaries as of the record date for the Company Stockholder Meeting in favor of the REIT Merger. The Company shall vote all Parent Common Shares beneficially owned by it or any of the Company Subsidiaries as of the record date for the Parent Stockholder Meeting in favor of the Parent Share Issuances.
Section 6.16 Parent Preferred Shares. Prior to the REIT Merger Effective Time, Parent shall (i) designate a number of Parent Preferred Shares as Parent Series D Preferred Shares sufficient to enable Parent to satisfy the REIT Series A Preferred Merger Consideration and (ii) designate a number of Parent Preferred Shares as Parent Series E Preferred Shares sufficient to enable Parent to satisfy the REIT Series C Preferred Merger Consideration, and shall adopt and file Articles Supplementary substantially in the form of Exhibit B attached hereto, setting forth the terms of the Parent Series D Preferred Shares and the Parent Series E Preferred Shares.
Section 6.17 Board of Directors of Parent. Parent shall take all corporate action necessary to increase the size of the Parent Board by three directors and the Parent Board shall elect three directors designated by the Company to fill the resulting vacancies, such expansion and election to be effective as of acceptance of Articles Supplementary opting out of MUTA (as provided in Section 6.18) which shall follow the REIT Merger Effective Time, such that Lisa Kabnick shall be appointed as a Class III director, Stanley R. Perla shall be appointed as a Class II director, and Leslie D. Michelson shall be appointed as a Class I director, effective upon the Closing. Upon the Closing Date, it is the intent of the parties hereto that P. Sue Perrotty shall continue to serve as Non-Executive Chair and Stanley R. Perla shall serve as Chair of the Audit Committee.
Section 6.18 Corporate Governance. Prior to the REIT Merger Effective Time, Parent shall (i) adopt and file Articles Supplementary opting out of MUTA substantially in the form of Exhibit C attached hereto, (ii) adopt and approve the Second Amended and Restated Bylaws substantially in the form of Exhibit D attached hereto, and (iii) authorize and enter into the Second Amendment to Rights Agreement with American Stock Transfer and Trust Company, LLC substantially in the form of Exhibit E attached hereto.
Section 6.19 Internalization. Substantially contemporaneously with (but immediately following) the REIT Merger Effective Time, (a) Parent shall (i) file the Articles of Merger with respect to the Internalization Merger Agreement, with the Maryland SDAT, and (ii) effect a termination of the Fourth Amended and Restated Advisory Agreement, dated as of June 2, 2015, by and among GNL, GNL OP, and GNL Advisor, as amended from time to time, and (b) the Company shall effect a termination of the Third Amended and Restated Advisory Agreement, dated as of September 6, 2016, by and among RTL (f/k/a American Finance Trust, Inc.), RTL OP (f/k/a American Finance Operating Partnership, L.P.) and RTL Advisor (f/k/a American Finance Advisors, LLC), as amended from time to time.
Article VII.
Conditions
Section 7.1 Conditions to the Obligations of Each Party. The respective obligations of each party to effect the Mergers and to consummate the other transactions contemplated by this Agreement shall be subject to the satisfaction or (to the extent permitted by Law) waiver by each of the parties, at or prior to the REIT Merger Effective Time, of the following conditions:
(a) Stockholder Approvals. The Company Stockholder Approval and the Parent Stockholder Approval shall each have been obtained.
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(b) No Restraints. No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law or Order (whether temporary, preliminary or permanent) which is then in effect which makes either of the Mergers illegal or otherwise restrains, enjoins, prevents, prohibits or makes illegal the consummation of either of the Mergers.
(c) Form S-4. The Form S-4 shall have become effective under the Securities Act, no stop order suspending the effectiveness of the Form S-4 shall have been issued by the SEC, and no proceeding for that purpose shall have been initiated or has been threatened by the SEC that has not been withdrawn.
(d) Listing. The Parent Common Shares to be issued in the REIT Merger shall have been authorized for listing on the NYSE, subject to official notice of issuance.
(e) Internalization Merger Agreement. All conditions set forth in the Internalization Merger Agreement (other than those conditions that by their terms are required to be satisfied or waived at the closing thereof, but subject to the satisfaction or waiver of such conditions) shall have been satisfied or waived so that the Internalization Merger shall occur substantially contemporaneous with (but immediately following) the consummation of the Mergers.
(f) Decrease in Parent Ownership Limit. Parent shall have decreased the Aggregate Share Ownership Limit (as defined in the Parent Charter) to 8.9% in value of the aggregate of the outstanding shares of stock of Parent and 8.9% (in value or in number of shares, whichever is more restrictive) of any class or series of stock of Parent and shall file a Certificate of Notice with the Maryland SDAT in respect to the decreased ownership limit.
Section 7.2 Conditions to the Obligations of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub. The respective obligations of Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub to effect the Mergers and to consummate the other transactions contemplated by this Agreement are subject to the satisfaction or (to the extent permitted by Law) waiver by Parent (acting at the direction of the Parent Special Committee), at or prior to the REIT Merger Effective Time, of the following additional conditions:
(a) Representations and Warranties. (i) The representations and warranties set forth in Section 4.1(a) (Organization and Qualification; Subsidiaries), Section 4.3(a) (Capital Structure), Section 4.4 (Authority), Section 4.19 (Opinion of Financial Advisor), Section 4.21 (Vote Required), Section 4.23 (Brokers) and Section 4.24 (Investment Company Act) shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date, as though made as of the Closing Date, and (ii) each of the other representations and warranties of the Company 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 (x) 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 (y) in the case of clause (ii) 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.
(b) Agreements and Covenants. The Company shall have performed or complied in all material respects with its agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date.
(c) Officer’s Certificate. The Company shall have delivered to Parent a certificate, dated as of the Closing Date and signed by its chief executive officer or another senior officer on behalf of the Company, certifying to the effect that the conditions set forth in Section 7.2(a) and Section 7.2(b) have been satisfied.
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(d) Absence of Material Adverse Effect. Since the date of this Agreement, there shall not have been any event, change or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.
(e) Company REIT Opinion. Parent shall have received with respect to the Company, a written opinion of Proskauer Rose LLP (or other counsel to Company reasonably acceptable to Parent), counsel to the Company, dated as of the Closing Date and in form and substance attached hereto as Exhibit F (and in the case of such other counsel rendering such opinion, in the form of such other counsel’s standard REIT opinion that is reasonably acceptable to Parent), to the effect that, for all taxable periods commencing with its taxable year ended December 31, 2013, the Company has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and that its current organization and actual method of operation will enable the Company to continue to meet the requirements for qualification and taxation as a REIT under the Code for its taxable year which ends on the REIT Merger Effective Time (which opinion will be subject to customary exceptions, assumptions and qualifications and based on customary representations contained in the Company Tax Letter).
(f) Parent Section 368 Opinion. Parent shall have received the written opinion of its counsel, Proskauer Rose LLP, dated as of the Closing Date and in form and substance as set forth in Exhibit G, to the effect that, on the basis of facts, representations and assumptions set forth in such opinion, the REIT Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, Proskauer Rose LLP may rely upon the Company Tax Letter and Parent Tax Letter. The condition set forth in this Section 7.2(f) shall not be waivable after receipt of the Parent Stockholder Approval unless further stockholder approval is obtained with appropriate disclosure.
(g) Required Consents. Parent shall have received the written consents of the applicable counterparties to the agreements set forth on Schedule 7.2(g).
Section 7.3 Conditions to the Obligations of the Company and Company Operating Partnership. The obligations of the Company and Company Operating Partnership to effect the Merger and to consummate the other transactions contemplated by this Agreement are subject to the satisfaction or (to the extent permitted by Law) waiver by the Company (acting at the direction of the Company Special Committee), at or prior to the REIT Merger Effective Time, of the following additional conditions:
(a) Representations and Warranties. (i) The representations and warranties set forth in Section 5.1(a) (Organization and Qualification; Subsidiaries), Section 5.3(a) (Capital Structure), Section 5.4 (Authority), Section 5.19 (Opinion of Financial Advisor), Section 5.20 (Vote Required), Section 5.21 (Brokers) and Section 5.22 (Investment Company Act) shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date, as though made as of the Closing Date, and (ii) each of the other representations and warranties of Parent, Parent Operating Partnership, Partnership Merger Sub and Partnership Merger Sub 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 (x) 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 (y) in the case of clause (ii) 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.
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(b) Agreements and Covenants. Parent, Parent Operating Partnership, REIT Merger Sub and Partnership Merger Sub shall have performed or complied in all material respects with its agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing Date.
(c) Officer’s Certificate. Parent shall have delivered to the Company a certificate, dated the date of the Closing and signed by its chief executive officer or another senior officer on behalf of Parent, certifying to the effect that the conditions set forth in Section 7.3(a) and Section 7.3(b) have been satisfied.
(d) Absence of Material Adverse Effect. Since the date of this Agreement, there shall not have been any event, change or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect.
(e) Parent REIT Opinion. The Company shall have received a written opinion of Proskauer Rose LLP (or other counsel to Parent reasonably acceptable to the Company), counsel to Parent, dated as of the Closing Date and in form and substance attached hereto as Exhibit H (and in the case of such other counsel rendering such opinion, in the form of such other counsel’s standard REIT opinion that is reasonably acceptable to the Company), to the effect that, for all taxable periods commencing with its taxable year ended December 31, 2013, Parent has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and that its current organization and proposed method of operation will enable Parent to continue to meet the requirements for qualification and taxation as a REIT under the Code for its taxable year which includes the REIT Merger Effective Time and thereafter (which opinion will be subject to customary exceptions, assumptions and qualifications and based on customary representations contained in the Parent Tax Letter and the Company Tax Letter).
(f) Company 368 Opinion. The Company shall have received the written opinion of its counsel, Proskauer Rose LLP, dated as of the Closing Date and in form and substance as set forth in Exhibit I, to the effect that, on the basis of facts, representations and assumptions set forth in such opinion, the REIT Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, Proskauer Rose LLP may rely upon the Company Tax Letter and Parent Tax Letter. The condition set forth in this Section 7.3(f) shall not be waivable after receipt of the Company Stockholder Approval unless further stockholder approval is obtained with appropriate disclosure.
(g) Required Consents. The Company shall have received the written consents of the applicable counterparties to the agreements set forth on Schedule 7.3(g).
Article VIII.
Termination, Amendment and Waiver
Section 8.1 Termination. This Agreement may be terminated at any time prior to the Closing Date, whether before or after receipt of the Company Stockholder Approval or the Parent Stockholder Approval (except as otherwise expressly noted below), as follows:
(a) by mutual written agreement of each of Parent (with the prior approval of the Parent Special Committee) and the Company (with the prior approval of the Company Special Committee); or
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(b) by either Parent (with the prior approval of the Parent Special Committee) or the Company (with the prior approval of the Company Special Committee), if:
(i) the Mergers shall not have occurred on or before June 1, 2024 (the “Outside Date”); provided, however, that the right to terminate this Agreement pursuant to this Section 8.1(b)(i) shall not be available to any party if the failure of such party (and (A) in the case of Parent, including the failure of any of the Parent Subsidiaries) and (B) in the case of the Company, including the failure of any of the Company Subsidiaries) to perform any of its obligations under this Agreement has been a principal cause of, or resulted in, the failure of the Mergers to be consummated on or before such date; or
(ii) any Governmental Authority of competent jurisdiction shall have issued an Order or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such Order or other action shall have become final and non-appealable; provided, however, that the right to terminate this Agreement under this Section 8.1(b)(ii) shall not be available to a party if the issuance of such final, non-appealable Order was primarily due to the failure of such party (and (A) in the case of Parent, including the failure of any of the Parent Subsidiaries) and (B) in the case of the Company, including the failure of any of the Company Subsidiaries) to perform any of its obligations under this Agreement, including pursuant to Section 6.7 (Appropriate Action; Consents; Filings); or
(iii) the Company Stockholder Approval or the Parent Stockholder Approval shall not have been obtained at a duly held Company Stockholder Meeting or Parent Stockholder Meeting, as applicable, or at any adjournment or postponement thereof at which this Agreement and the transactions contemplated hereby have been voted upon, provided, however, that the right to terminate this Agreement under this Section 8.1(b)(iii) shall not be available to a party if the failure to obtain the Company Stockholder Approval or the Parent Stockholder Approval was primarily due to the failure of such party (and (A) in the case of Parent, including the failure of any of the Parent Subsidiaries) and (B) in the case of the Company, including the failure of any of the Company Subsidiaries) to perform any of its obligations under this Agreement Parent Stockholder Approval; or
(c) by the Company (with the prior approval of the Company Special Committee), if:
(i) Parent, REIT Merger Sub or Partnership Merger Sub shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements set forth in this Agreement, which breach or failure to perform (x) would, or would reasonably be expected to, result in a failure of a condition set forth in Section 7.3(a) or Section 7.3(b) and (y) cannot be cured on or before the Outside Date or, if curable, is not cured by Parent within thirty (30) days of receipt by Parent of written notice of such breach or failure; provided that the Company shall not have the right to terminate this Agreement pursuant to this Section 8.1(c)(i) if the Company or Company Operating Partnership is then in breach of any of its respective representations, warranties, covenants or agreements set forth in this Agreement such that the conditions set forth in either Section 7.2(a) or Section 7.2(b) would not be satisfied;
(ii) if, prior to obtaining the Company Stockholder Approval, the Company Board (based on the recommendation of the Company Special Committee) approves and authorizes the Company to enter into a definitive agreement providing for the implementation of a Superior Proposal in a manner permitted under Section 6.5(e); provided, however, that this Agreement may not be so terminated unless concurrently with the occurrence of such termination the payment required by Section 8.3(a)(ii) is made in full to Parent and the definitive agreement relating to the Superior Proposal is entered into, and in the event that such definitive agreement is not concurrently entered into and such payment is not concurrently made, such termination shall be null and void; or
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(iii) if, at any time prior to the Parent Stockholder Approval, Parent, the Parent Board or the Parent Special Committee, for any reason, shall have effected a Parent Change in Recommendation.
(d) by Parent (with the prior approval of the Parent Special Committee), if:
(i) the Company shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements set forth in this Agreement, which breach or failure to perform (x) would, or would reasonably be expected to, result in a failure of a condition set forth in Section 7.2(a) or Section 7.2(b) and (y) cannot be cured on or before the Outside Date or, if curable, is not cured by the Company within thirty (30) days of receipt by the Company of written notice of such breach or failure; provided that Parent shall not have the right to terminate this Agreement pursuant to this Section 8.1(d)(i) if Parent, REIT Merger Sub or Partnership Merger Sub are then in breach of any of their respective representations, warranties, covenants or agreements set forth in this Agreement such that the conditions set forth in either Section 7.3(a) or Section 7.3(b) would not be satisfied; or
(ii) if, at any time prior to the Company Stockholder Approval, the Company, the Company Board or the Company Special Committee, for any reason, shall have effected a Company Change in Recommendation; or
(iii) if, at any time prior to the Company Stockholder Approval, (A) the Company Board or any committee thereof shall have approved, adopted or publicly endorsed or recommended any Acquisition Proposal, (B) the Company enters into a contract or agreement relating to an Acquisition Proposal (other than a confidentiality agreement entered into in compliance with Section 6.5(d)), (C) a tender offer or exchange offer for any shares of Company Common Stock that constitutes an Acquisition Proposal (other than by Parent or any of its Affiliates) is commenced and the Company Board fails to recommend against acceptance of such tender offer or exchange offer by the stockholders of the Company and to publicly reaffirm the Company Recommendation within ten (10) Business Days of being requested to do so by Parent, (D) the Company Board or any committee thereof fails to include the Company Recommendation in the Joint Proxy Statement, or (E) the Company shall have materially violated any of its obligations under Section 6.5 (or shall be deemed pursuant to the last sentence of Section 6.5(b) to have materially violated) any of its obligations under Section 6.5 (other than any immaterial or inadvertent violations thereof that did not result in an alternative Acquisition Proposal).
Section 8.2 Effect of Termination. In the event that this Agreement is terminated and the Mergers and the other transactions contemplated by this Agreement are abandoned pursuant to Section 8.1, 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 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 (or any of the Company Subsidiaries, Parent Subsidiaries or any of the Company’s or Parent’s respective Representatives), and all rights and obligations of any party hereto shall cease; provided, however, that, notwithstanding anything in the foregoing to the contrary (a) no such termination shall relieve any party hereto of any liability or damages resulting from or arising out of any willful or intentional breach of this Agreement; and (b) the Confidentiality Agreement, this Section 8.1(d)(ii), Section 8.3, Section 8.6, Article IX and the definitions of all defined terms appearing in such sections shall survive any termination of this Agreement pursuant to Section 8.1. If this Agreement is terminated as provided herein, all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the Governmental Authority or other Person to which they were made.
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Section 8.3 Termination Fees and Expenses.
(a) The Company agrees that if this Agreement shall be terminated:
(i) by Parent pursuant to Section 8.1(d)(ii) or Section 8.1(d)(iii);
(ii) by the Company pursuant to Section 8.1(c)(ii); or
(iii) by Parent or the Company pursuant to Section 8.1(b)(iii) (failure to obtain Company Stockholder Approval) or by Parent pursuant to Section 8.1(d)(i) (Company breach giving rise to termination), and at any time after the date of this Agreement and prior to the failure to obtain Company Stockholder Approval or prior to the breach giving rise to such termination, as applicable, (A) (x) in the case of a termination pursuant to Section 8.1(b)(iii), an Acquisition Proposal (whether or not conditional) shall have been made to the Company Board, the Company Special Committee or directly to the Company’s stockholders which proposal has been publicly announced to the Company’s stockholders and not publicly withdrawn prior to the Company Stockholder Meeting, or (y) in the case of a termination pursuant to Section 8.1(d)(i), an Acquisition Proposal (whether or not conditional) shall have been made to the Company Board or the Company Special Committee or directly to the Company’s stockholders which proposal has been publicly announced to the Company’s stockholders prior to the Termination Date, and (B) concurrently with such termination or within 12 months following the Termination Date, the Company consummates an Acquisition Proposal (in each case whether or not such Acquisition Proposal was the same Acquisition Proposal referred to in the foregoing clause (A), and for purposes of this Section 8.3(a)(iii), “50%” shall be substituted for “20%” in the definition of Acquisition Proposal);
then, in each such case, the Company shall pay to Parent the Termination Fee or, solely with respect to a termination by the Company pursuant to Section 8.1(c)(ii) or by Parent pursuant to Section 8.1(d)(ii) or Section 8.1(d)(iii), in each case in connection with the Company entering into or recommending a Superior Proposal with a Go Shop Bidder on or before the date that is fifteen (15) days following the Go Shop Period End Time, the Go Shop Termination Fee, as applicable, in immediately available funds to an account directed by Parent in writing, which payment shall be made (x) within three (3) Business Days of the Termination Date, in the case of a Termination Fee or Go Shop Termination Fee, as applicable, payable pursuant to Section 8.3(a)(i); (y) concurrently with, and as a condition to the effectiveness of, termination, in the case of a Termination Fee or Go Shop Termination Fee, as applicable, payable pursuant to Section 8.3(a)(ii); and (z) at the time of consummation of any transaction contemplated by an Acquisition Proposal, in the case of a Termination Fee payable pursuant to Section 8.3(a)(iii). In the event that this Agreement shall be terminated by the Company pursuant to Section 8.1(c)(i) or Section 8.1(c)(iii), Parent shall pay the Company the Termination Fee within three (3) Business Days of the Termination Date.
(b) The Company agrees that if this Agreement shall be terminated (i) by the Company pursuant to Section 8.1(c)(ii), or (ii) by Parent pursuant to Section 8.1(d)(i), Section 8.1(d)(ii), or Section 8.1(d)(iii), in each case in connection with the Company entering into or recommending a Superior Proposal, then, in addition to payment of the Go Shop Termination Fee or Termination Fee, as the case may be, the Company shall pay, within three (3) Business Days of the Termination Date, to Parent the Parent’s Expenses in immediately available funds to an account directed by Parent, up to an aggregate maximum of $3,000,000.
(c) Parent agrees that if this Agreement shall be terminated by the Company pursuant to Section 8.1(c)(i) or Section 8.1(c)(iii), then Parent shall pay, within three (3) Business Days of the Termination Date, to the Company the Company’s Expenses in immediately available funds to an account directed by the Company, up to an aggregate maximum of $3,000,000.
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(d) For purposes of this Agreement:
(i) “Go Shop Termination Fee” means $16,000,000.
(ii) “Termination Fee” means $40,000,000.
(e) Each of the parties acknowledges that the agreements contained in this Section 8.3 are an integral part of the transactions contemplated by this Agreement, and that without these agreements, the other parties would not enter into this Agreement. In the event that the Company shall fail to pay the Go Shop Termination Fee, the Termination Fee or Parent’s Expenses or Parent shall fail to pay the Termination Fee or Company’s Expenses, as the case may be, when due, the Company or Parent, as the case may be, shall reimburse Parent or the Company, as the case may be, for all reasonable costs and expenses actually incurred by Parent or the Company, as the case may be (including reasonable fees and expenses of counsel) in connection with the collection of such Go Shop Termination Fee, Termination Fee, Company’s Expenses or Parent’s Expenses, as the case may be, and enforcement of this Section 8.3. Further, if the Company or Parent, as the case may be, fails to timely pay any amount due pursuant to this Section 8.3, and, in order to obtain the payment, Parent or the Company, as the case may be, commences a suit which results in a judgment against the Company or Parent, as the case may be, for the payment set forth in this Section 8.3, the Company shall pay to Parent, or Parent shall pay to the Company, as the case may be, its reasonable and documented costs and expenses (including reasonable and documented attorneys’ fees) in connection with such suit. If payable, none of the Go Shop Termination Fee, the Termination Fee, Company’s Expenses or Parent’s Expenses shall be payable more than once pursuant to this Agreement.
(f) In the event that the Company or Parent, as the case may be (the “Paying Party”), is obligated to pay the Termination Fee or the Go Shop Termination Fee, as the case may be, to the other (the “Fee Recipient”), the Paying Party shall deposit the Termination Fee or the Go Shop Termination Fee, as the case may be, into escrow, in an amount equal to the lesser of (i) the Termination Fee or the Go Shop Termination Fee, as the case may be, and (ii) the sum of (1) the maximum amount that can be paid to the Fee Recipient without causing the Fee Recipient to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code determined as if the payment of such amount did not constitute income described in Sections 856(c)(2)(A)(H) or 856(c)(3)(A)(I) of the Code (“Qualifying Income”), as determined by the Fee Recipient’s independent certified public accountants, plus (2) in the event the Fee Recipient receives either (A) a letter from the its counsel indicating that the Fee Recipient has received a ruling from the IRS described in Section 8.3(g) or (B) an opinion from the Fee Recipient’s outside counsel as described in Section 8.3(g), an amount equal to the Termination Fee or the Go Shop Termination Fee, as the case may be, less the amount payable under clause (1) above. To secure the Paying Party’s obligation to pay these amounts, it shall deposit into escrow an amount in cash equal to the Termination Fee or the Go Shop Termination Fee, as the case may be, with an escrow agent selected by the Fee Recipient and on such terms (subject to Section 8.3(g)) as shall be mutually agreed upon by the Fee Recipient and the escrow agent. The payment or deposit into escrow by the Paying Party shall be made by wire transfer of immediately available funds at the time the Paying Party is obligated to pay the Fee Recipient such amount.
(g) The escrow agreement shall provide that the Termination Fee or the Go Shop Termination Fee, as the case may be, in escrow or any portion thereof shall not be released to the Fee Recipient unless the escrow agent receives any one or combination of the following: (i) a letter from the Fee Recipient’s independent certified public accountants indicating the maximum amount that can be paid by the escrow agent to it without causing it 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 Qualifying Income or a subsequent letter from the Fee Recipient’s accountants revising that amount, in which case the escrow agent shall release such amount to the Fee Recipient, or (ii) a letter from the Fee Recipient’s counsel indicating that the Fee Recipient received a ruling from the IRS holding that the receipt by it of the Termination Fee or the Go Shop Termination Fee, as the case may be, 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, the Fee Recipient’s outside counsel has rendered a legal opinion to the effect that the receipt by the Fee Recipient of the Termination Fee or the Go Shop Termination Fee, as the case may be, would constitute Qualifying Income, would be excluded from gross income within the meaning of Sections 856(c)(2) and (3) of the Code or would not otherwise disqualify the Fee Recipient as a REIT), in which case the escrow agent shall release the remainder of the Termination Fee or the Go Shop Termination Fee, as the case may be, to the Fee Recipient. The parties hereto agree to amend this Section 8.3(g) and Section 8.3(f) at the request of the Fee Recipient in order to (x) maximize the portion of the Termination Fee or the Go Shop Termination Fee, as the case may be, that may be distributed to the Fee Recipient hereunder without causing the Fee Recipient to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code, (y) improve the Fee Recipient’s chances of securing a favorable ruling described in this Section 8.3(g) or (z) assist the Fee Recipient in obtaining a favorable legal opinion from its outside counsel as described in this Section 8.3(g). The escrow agreement shall also provide that any portion of the Termination Fee or the Go Shop Termination Fee, as the case may be, remaining in escrow on the date that is five (5) years after the date the Termination Fee or the Go Shop Termination Fee, as the case may be, was deposited into escrow shall be released by the escrow agent to the Fee Recipient. Any costs and expenses of the escrow agent shall be borne solely by the Fee Recipient.
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(h) For the avoidance of doubt, no Termination Fee or expense reimbursement shall be due to either party in the event of a termination pursuant to Section 8.1(b)(iii) when the conditions set forth in Section 8.3(a)(iii) are not otherwise satisfied.
Section 8.4 Amendment. Subject to compliance with applicable Law, this Agreement may be amended by mutual agreement of the parties hereto by action taken or authorized by the Parent Board (only upon approval by the Parent Special Committee) and the Company Board (only upon approval by the Company Special Committee) at any time before or after receipt of the Company Stockholder Approval or the Parent Stockholder Approval and prior to the REIT Merger Effective Time; provided, however, that after the Company Stockholder Approval or the Parent Stockholder Approval has been obtained, there shall not be (a) any amendment of this Agreement that changes the amount or the form of the consideration to be delivered under this Agreement to the holders of Company Common Stock, or which by applicable Law or in accordance with the rules of any stock exchange requires the further approval of the stockholders of the Company or stockholders of Parent without such further approval of such stockholders, or (b) any amendment or change not permitted under applicable Law. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.
Section 8.5 Waiver. At any time prior to the REIT Merger Effective Time, subject to applicable Law, any party hereto may (a) extend the time for the performance of any obligation or other act of any other party hereto, (b) waive any inaccuracy in the representations and warranties of the other party contained herein or in any document delivered pursuant hereto, and (c) subject to the proviso of Section 8.4, waive compliance with any agreement or condition contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. Notwithstanding the foregoing, no failure or delay by the Company, Company Operating Partnership, Parent, Parent Operating Partnership, REIT Merger Sub or Partnership Merger Sub in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right hereunder.
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Section 8.6 Fees and Expenses. Except as otherwise provided in this Agreement, all Expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses, whether or not the transactions contemplated by this Agreement are consummated; provided, however, that the Company and Parent shall share equally all Expenses related to the printing and filing of the Form S-4 and the printing, filing and distribution of the Joint Proxy Statement, other than each party’s respective attorneys’ and accountants’ fees.
Article IX.
General Provisions
Section 9.1 Non-Survival of Representations and Warranties. None of the representations or warranties in this Agreement or any certificate or other writing delivered pursuant to this Agreement, including any rights arising out of any breach of such representations or warranties, shall survive the earlier of (a) the REIT Merger Effective Time or (b) the termination of this Agreement in accordance with Article VIII (except, in the case of termination, as set forth in Section 8.1(d)(ii)), and after such time there shall be no liability in respect thereof (except, in the case of termination, as set forth in Section 8.1(d)(ii)), whether such liability has accrued prior to or after such expiration of the representations and warranties. This Section 9.1 does not limit any covenant or agreement of the parties which by its terms contemplates performance after the Closing, REIT Merger Effective Time, Partnership Merger Effective Time or the Termination Date. The Confidentiality Agreement will survive termination of this Agreement in accordance with its terms.
Section 9.2 Notices. Any notice, request, claim, demand and other communications hereunder shall be in writing, shall be deemed to have been given (i) upon non-automated confirmation of successful transmission if sent by facsimile transmission or e-mail (provided that any notice received by facsimile or e-mail on any Business Day after 5:00 p.m. (Eastern time) which the recipient of such notice does not provide non-automated confirmation of receipt on that same day shall be deemed to have been received at 9:00 a.m. (Eastern time) on the next Business Day), or (ii) upon receipt by the receiving party if sent by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), and shall be addressed as follows (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.2):
if to Parent, Parent Operating Partnership or any other Parent Subsidiary party hereto:
Global Net Lease, Inc.
650 Fifth Avenue, 30th Floor
New York, NY 10019
| Phone: | (212) 415-6507 |
| Attention: | Michael Anderson, General Counsel |
| Email: | MAnderson@ar-global.com |
with a copy (which shall not constitute notice) to:
Global Net Lease, Inc.
650 Fifth Avenue, 30th Floor
New York, NY 10019
| Phone: | (610) 780-0482 |
| Attention: | P. Sue Perrotty, Non-Executive Chairman |
| Email: | SuePerrotty@aol.com |
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with a copy (which shall not constitute notice) to:
Shapiro Sher Guinot & Sandler, P.A.
250 West Pratt Street, Suite 2000
Baltimore, Maryland 21201
| Phone: | (410) 385-4205 |
| Attention: | William E. Carlson, Esq. |
| Email: | wec@shapirosher.com |
if to the Company or Company Operating Partnership prior to the Closing:
The Necessity Retail REIT, Inc.
650 Fifth Avenue, 30th
Floor
New York, NY 10019
| Phone: | (212) 415-6507 |
| Attention: | Michael Anderson, General Counsel |
| Email: | MAnderson@ar-global.com |
with a copy (which shall not constitute notice) to:
Arnold & Porter Kaye
Scholer LLP
601 Massachusetts Ave., NW
Washington, DC 20001-3743
| Phone: | (202) 942-5461 |
| Attention: | Kevin Lavin, Esq., Marisa White, Esq. |
| Email: | Kevin.Lavin@arnoldporter.com; marisa.white@arnoldporter.com |
Section 9.3 Interpretation; Certain Definitions. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. Reference to “this Agreement” shall include the Company Disclosure Letter and the Parent Disclosure Letter. When a reference is made in this Agreement to an Article, Section, Schedule or Exhibit, such reference shall be to an Article or Section of, or a Schedule or Exhibit to, this Agreement, unless otherwise indicated. The table of contents and headings for this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other instrument made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any Law defined or referred to herein or in any agreement or instrument that is referred to herein means such Law as from time to time amended, modified or supplemented, including (in the case of statutes) by succession of comparable successor Laws. References to a Person are also to its successors and permitted assigns. All references to “dollars” or “$” refer to currency of the United States of America.
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Section 9.4 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any present or future Law, or public policy, (a) such term or other provision shall be fully separable, (b) this Agreement shall be construed and enforced as if such invalid, illegal or unenforceable provision had never comprised a part hereof, and (c) all other conditions and provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable term or other provision or by its severance herefrom so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that transactions contemplated by this Agreement be consummated as originally contemplated to the fullest extent possible.
Section 9.5 Assignment; Delegation. Neither this Agreement nor any rights, interests or obligations hereunder shall be assigned or delegated, in whole or in part, by any of the parties hereto (whether by operation of Law or otherwise) without the prior written consent of the other parties hereto (except to the Surviving Entities).
Section 9.6 Entire Agreement. This Agreement (including the exhibits, schedules, annexes and appendices hereto) constitutes, together with the Confidentiality Agreement, the Company Disclosure Letter and the Parent Disclosure Letter, the entire agreement between the parties with respect to the subject matter hereof and thereof and supersedes all prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and thereof.
Section 9.7 No Third-Party Beneficiaries. Except for the provisions of Section 6.10, this Agreement is not intended to and shall not confer any rights or remedies upon any Person other than the parties hereto and their respective successors and permitted assigns. The representations and warranties in this Agreement are the product of negotiations among the parties hereto and are for the sole benefit of the parties hereto. Any inaccuracies in such representations and warranties are subject to waiver by the parties hereto in accordance with Section 8.5 without notice or liability to any other Person. The representations and warranties in this Agreement may represent an allocation among the parties hereto of risks associated with particular matters regardless of the knowledge of any of the parties hereto. Accordingly, Persons other than the parties hereto 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 9.8 Specific Performance. The parties hereto agree that irreparable damage, for which monetary damages (even if available) would not be an adequate remedy, would occur in the event that the parties hereto do not perform the provisions of this Agreement (including failing to take such actions as are required of it hereunder to consummate the Mergers and the other transactions contemplated by this Agreement) in accordance with its specified terms or otherwise breach such provisions. Accordingly, the parties acknowledge and agree that, prior to the termination of this Agreement pursuant to Section 8.1, the parties shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. Each of the parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that any other party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for any reason at law or in equity. Any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with any such order or injunction. In no event shall the exercise of any party’s right to seek specific performance pursuant to this Section 9.8 reduce, restrict or otherwise limit the right of such party to terminate this Agreement pursuant to Section 8.1.
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Section 9.9 Counterparts. This Agreement may be executed 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. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission or by e-mail of a pdf attachment shall be effective as delivery of a manually executed counterpart of this Agreement.
Section 9.10 Governing Law. This Agreement and all actions, proceedings or counterclaims (whether based on contract, tort or otherwise) directly or indirectly arising out of or relating to this Agreement or the actions of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub, the Company or Company Operating Partnership in the negotiation, administration, performance and enforcement thereof, shall be governed by, and construed in accordance with, the laws of the State of Maryland, without giving effect to any choice or conflict of Laws provision or rule (whether of the State of Maryland or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Maryland, except with respect to matters under the DRULPA and the DLLCA relating to the Partnership Merger, which shall be governed by the Laws of the State of Delaware.
Section 9.11 Consent to Jurisdiction.
(a) Each of the parties hereto hereby irrevocably submits to the exclusive jurisdiction of the courts of the State of Maryland and to the jurisdiction of the United States District Court for the District of Maryland, for the purpose of any action, proceeding or counterclaim (whether based on contract, tort or otherwise) directly or indirectly arising out of or relating to this Agreement or the actions of the parties hereto in the negotiation, administration, performance and enforcement thereof, and each of the parties hereto hereby irrevocably agrees that all claims in respect to such action or proceeding may be heard and determined exclusively in any state or federal court located in the State of Maryland. Each of the parties hereto further consents to the assignment to the Business and Technology Case Management Program with regard to any proceeding in the courts of the State of Maryland.
(b) Each of the parties hereto (i) irrevocably consents to the service of the summons and complaint and any other process in any other action or proceeding relating to the transactions contemplated by this Agreement, on behalf of itself or its property, by personal delivery of copies of such process to such party and nothing in this Section 9.11 shall affect the right of any party to serve legal process in any other manner permitted by Law, (ii) consents to submit itself to the personal jurisdiction of any United States federal court located in the State of Maryland or any Maryland state court in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (iii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (iv) agrees that it will not bring any action relating to this Agreement or the transactions contemplated by this Agreement in any court other than any United States federal court located in the State of Maryland or any Maryland state court. Each of Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub, the Company and Company Operating Partnership agrees that a final judgment in any action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
Section 9.12 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE OUT OF OR RELATING TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR THE ACTIONS OF THE PARTIES HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF. EACH OF THE PARTIES HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.12.
[Remainder of page intentionally left blank; signature pages follow.]
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IN WITNESS WHEREOF, Parent, Parent Operating Partnership, REIT Merger Sub, Partnership Merger Sub, the Company, and Company Operating Partnership have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
| PARENT: | |||
| GLOBAL NET LEASE, INC. | |||
| By: | /s/ Michael Anderson | ||
| Michael Anderson, Authorized Signatory | |||
| PARENT OPERATING PARTNERSHIP: | |||
| GLOBAL NET LEASE OPERATING PARTNERSHIP, L.P. | |||
| By: GLOBAL NET LEASE, INCGLOBAL NET LEASE OPERATING PARTNERSHIP, L.., its General Partner | |||
| By: | /s/ Michael Anderson | ||
| Michael Anderson, Authorized Signatory | |||
| REIT MERGER SUB: | |||
| OSMOSIS SUB I, LLC | |||
| By: GLOBAL NET LEASE, INC., its Sole Member | |||
| By: | /s/ Michael Anderson | ||
| Michael Anderson, Authorized Signatory | |||
[Signature pages continue]
[Signature Pages to Merger Agreement]
| PARTNERSHIP MERGER SUB: | |||
| OSMOSIS SUB II, LLC | |||
| By: GLOBAL NET LEASE OPERATING PARTNERSHIP, L.P., its Sole Member | |||
| By: GLOBAL NET LEASE, INC., its General Partner | |||
| By: | /s/ Michael Anderson | ||
| Michael Anderson, Authorized Signatory | |||
[Signature pages continue]
[Signature Pages to Merger Agreement]
| COMPANY: | |||
| THE NECESSITY RETAIL REIT, INC. | |||
| By: | /s/ Edward M. Weil, Jr. | ||
| Name: | Edward M. Weil, Jr. | ||
| Title: | Chief Executive Officer and President | ||
| COMPANY OPERATING PARTNERSHIP: | |||
| THE NECESSITY RETAIL REIT OPERATING PARTNERSHIP, L.P. | |||
| By: THE NECESSITY RETAIL REIT, INC., its General Partner | |||
| By: | /s Edward M. Weil, Jr. | ||
| Name: | Edward M. Weil, Jr. | ||
| Title: | Chief Executive Officer and President | ||
[Signature Pages to Merger Agreement]
EXHIBIT A
Form of “Internalization” Agreement and Plan of Merger
A-1
EXHIBIT B
Form of Articles Supplementary Designating Parent Preferred Shares
B-1
EXHIBIT C
Form of Articles Supplementary Opting out of MUTA
C-1
EXHIBIT D
Form of Second Amended and Restated Bylaws
D-1
EXHIBIT E
Form of Second Amendment of Rights Agreement
E-1
EXHIBIT F
Form of Company REIT Opinion
F-1
EXHIBIT G
Form of Parent Section 368 Opinion
G-1
EXHIBIT H
Form of Parent REIT Opinion
H-1
EXHIBIT I
Form of Company Section 368 Opinion
I-1
Exhibit 2.2
Execution Version
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GNL Advisor Merger Sub LLC
GNL PM Merger Sub LLC
RTL Advisor Merger Sub LLC
RTL PM Merger Sub LLC
Global Net Lease, Inc.
Global Net Lease Operating Partnership, L.P.
The Necessity Retail REIT, Inc.
The Necessity Retail REIT Operating Partnership, L.P.
AND
AR Global Investments, LLC
Global Net Lease Special Limited Partnership, LLC
Necessity Retail Space Limited Partner, LLC
Global Net Lease Advisors, LLC
Global Net Lease Properties, LLC
Necessity Retail Advisors, LLC
Necessity Retail Properties, LLC
DATED AS OF MAY 23, 2023
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this “Agreement”) is entered into as of May 23, 2023, by and among GNL Advisor Merger Sub LLC, a Delaware limited liability company and a wholly-owned Subsidiary of GNL OP (the “GNL Advisor Sub”), GNL PM Merger Sub LLC, a Delaware limited liability company and a wholly-owned Subsidiary of GNL OP (the “GNL PM Sub”), RTL Advisor Merger Sub LLC, a Delaware limited liability company and a wholly-owned Subsidiary of GNL OP (the “RTL Advisor Sub”), RTL PM Merger Sub LLC, a Delaware limited liability company and a wholly-owned Subsidiary of GNL OP (the “RTL PM Sub”) (GNL Advisor Sub, GNL PM Sub, RTL Advisor Sub and RTL PM Sub are individually an “Internalization Sub” and collectively the “Internalization Subs”), Global Net Lease, Inc., a Maryland corporation (“GNL”), Global Net Lease Operating Partnership, L.P., a Delaware limited partnership (“GNL OP”), The Necessity Retail REIT, Inc., a Maryland corporation (“RTL”), and The Necessity Retail REIT Operating Partnership, L.P., a Delaware limited partnership (“RTL OP”) on the one hand, and AR Global Investments, LLC, a Delaware limited liability company (“Advisor Parent”), Global Net Lease Special Limited Partnership, LLC, a Delaware limited liability company and an indirect wholly-owned Subsidiary of Advisor Parent (“GNL SLP”), Necessity Retail Space Limited Partner, LLC, a Delaware limited liability company and a wholly-owned Subsidiary of Advisor Parent (“RTL SLP”), Global Net Lease Advisors, LLC, a Delaware limited liability company and a wholly-owned subsidiary of GNL SLP (the “GNL Advisor”), Global Net Lease Properties, LLC, a Delaware limited liability company and a wholly-owned Subsidiary of GNL SLP (the “GNL Property Manager”), Necessity Retail Advisors, LLC, a Delaware limited liability company and a wholly-owned Subsidiary of RTL SLP (the “RTL Advisor”), and Necessity Retail Properties, LLC, a Delaware limited liability company and a wholly-owned Subsidiary of RTL SLP (the “RTL Property Manager”) (GNL Advisor, GNL Property Manager, RTL Advisor, and RTL Property Manager, along with each of their direct and indirect wholly-owned Subsidiaries, are individually a “Target LLC” and collectively the “Target LLCs”) on the other hand. The Internalization Subs, GNL, GNL OP, RTL, Advisor Parent, and the Target LLCs are collectively referred to as the “Parties”, and each, a “Party”. Capitalized terms used in this Agreement shall have the meanings ascribed to such terms in Article 11 to this Agreement.
R E C I T A L S
WHEREAS, as of the date hereof, GNL has entered into that certain Agreement and Plan of Merger (together with the schedules thereto, the “REIT Merger Agreement”) with GNL OP, Osmosis Sub I, LLC (“Merger Sub”), Osmosis Sub II, LLC (“OP Merger Sub”), RTL, and RTL OP, pursuant to which RTL will merge with Merger Sub, a wholly-owned Subsidiary of GNL, with Merger Sub being the surviving entity, and RTL OP will merge with OP Merger Sub, a wholly-owned Subsidiary of GNL OP, with RTL OP being the surviving entity (the “REIT Merger”);
WHEREAS, Advisor Parent is the (i) indirect parent company of GNL SLP, which is the direct parent company of GNL Advisor and GNL Property Manager and (ii) direct parent company of RTL SLP, which is the direct parent company of RTL Advisor and RTL Property Manager;
WHEREAS, GNL Advisor is the advisor to GNL, GNL Property Manager is the property manager for GNL, RTL Advisor is the advisor to RTL, and RTL Property Manager is the property manager for RTL, and each of the foregoing Target LLCs, together with Advisor Parent, own certain operating assets, and certain employees of Advisor Parent provide the services of employees necessary to the performance of their advisory and property management services to GNL and RTL;
WHEREAS, the Parties desire to effect a business combination transaction contemporaneously with, but following, the REIT Merger Agreement, in which (i) GNL Advisor Sub shall merge with and into GNL Advisor, with GNL Advisor being the surviving entity (the “GNL Advisor Merger”), and each outstanding membership interest of GNL Advisor will be converted into the right to receive from GNL the GNL Advisor Merger Consideration, (ii) GNL PM Sub shall merge with and into GNL Property Manager, with GNL Property Manager being the surviving entity (the “GNL PM Merger”), and each outstanding membership interest of GNL Property Manager will be converted into the right to receive from GNL the GNL PM Merger Consideration, (iii) RTL Advisor Sub shall merge with and into RTL Advisor, with RTL Advisor being the surviving entity (the “RTL Advisor Merger”), and each outstanding membership interest of RTL Advisor will be converted into the right to receive from GNL the RTL Advisor Merger Consideration and (iv) RTL PM Sub shall merge with and into RTL Property Manager, with RTL Property Manager being the surviving entity (the “RTL PM Merger”) (the GNL Advisor Merger, GNL PM Merger, RTL Advisor Merger and RTL PM Merger, are individually an “Internalization Merger” and collectively the “Internalization Mergers”), and each outstanding membership interest of RTL Property Manager will be converted into the right to receive from GNL the RTL PM Merger Consideration, in each case upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DLLC Act;
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WHEREAS, for U.S. federal income tax purposes (and, where applicable, state and local income tax purposes), the Parties intend that the Internalization Mergers shall be treated as taxable sales under Section 1001 of the Code of all of the assets held by the Target Companies (the “Intended Tax Treatment”);
WHEREAS, the Parties agree and acknowledge that the retention of certain key employees is necessary to the success of the Internalization Mergers;
WHEREAS, as of the date of this Agreement, GNL Advisor holds 2,500,000 long-term incentive plan units of limited partner interest in GNL OP (the “GNL LTIP Units”) and RTL Advisor holds 8,528,885 long-term incentive plan units of limited partner interest in RTL OP (the “RTL LTIP Units” and, together with the GNL LTIP Units, the “LTIP Units”);
WHEREAS, pursuant to the terms of this Agreement, Advisor Parent is obligated to transfer or cause its Affiliates to transfer to the Target Companies certain assets and agreements pursuant to the Assignment and Assumption Agreement to be entered into immediately prior to the Closing; and
WHEREAS, the board of directors of GNL has determined that each of the Internalization Mergers is in the best interests of GNL and its stockholders, approved this Agreement, the Internalization Mergers, the issuance each Share Consideration contemplated by this Agreement (the “GNL Share Issuance”), and the other transactions contemplated by this Agreement, directed that the GNL Share Issuance be submitted for consideration at a meeting of GNL’s stockholders and resolved to recommend that GNL’s stockholders vote to approve the GNL Share Issuance;
WHEREAS, the board of directors of RTL has determined that each of the Internalization Mergers is in the best interests of RTL and its stockholders, approved this Agreement and the Internalization Mergers and the other transactions contemplated by this Agreement; and
WHEREAS, in connection with the execution and delivery of this Agreement, GNL has entered into the Executive Employment Agreement with Edward M. Weil Jr. dated as of the date hereof and effective as of the Closing.
NOW, THEREFORE, in consideration of the above recitals, the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
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ARTICLE 1
THE MERGER; PURCHASE AND SALE OF ASSETS
Section 1.1 The Mergers.
(a) Upon the terms and subject to the conditions of this Agreement, and in accordance with the DLLC Act, at the Effective Time, GNL Advisor Sub shall be merged with and into GNL Advisor, whereupon the separate existence of GNL Advisor Sub shall cease, and GNL Advisor shall continue under the name “Global Net Lease Advisors, LLC” as the surviving entity in the GNL Advisor Merger (the “Surviving GNL Advisor Entity”).
(b) Upon the terms and subject to the conditions of this Agreement, and in accordance with the DLLC Act, at the Effective Time, GNL PM Sub shall be merged with and into GNL Property Manager, whereupon the separate existence of GNL PM Sub shall cease, and GNL Property Manager shall continue under the name “Global Net Lease Properties, LLC” as the surviving entity in the GNL PM Merger (the “Surviving GNL PM Entity”).
(c) Upon the terms and subject to the conditions of this Agreement, and in accordance with the DLLC Act, at the Effective Time, RTL Advisor Sub shall be merged with and into RTL Advisor, whereupon the separate existence of RTL Advisor Sub shall cease, and RTL Advisor shall continue under the name “Necessity Retail Advisors, LLC” as the surviving entity in the RTL Advisor Merger (the “Surviving RTL Advisor Entity”).
(d) Upon the terms and subject to the conditions of this Agreement, and in accordance with the DLLC Act, at the Effective Time, RTL PM Sub shall be merged with and into RTL Property Manager, whereupon the separate existence of RTL PM Sub shall cease, and RTL Property Manager shall continue under the name “Necessity Retail Properties, LLC” as the surviving entity in the RTL PM Merger (the “Surviving RTL PM Entity”) (the Surviving GNL Advisor Entity, the Surviving GNL PM Entity the Surviving RTL Advisor Entity and the Surviving RTL PM Entity, each, a “Surviving Entity” and collectively, the “Surviving Entities”).
(e) Each of Internalization Mergers shall have the effects provided in this Agreement and as specified in the DLLC Act.
Section 1.2 Closing. The closing of the Internalization Mergers (the “Closing”) shall occur as promptly as practicable but in no event later than the second (2nd) Business Day after all of the conditions set forth in Article 8 (other than those conditions that by their terms are required 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 and, subject to the foregoing, shall take place at such time and on a date to be specified by the Parties (the “Closing Date”). The Closing shall take place at the offices of Proskauer Rose LLP, Eleven Times Square, New York, N.Y., or at such other place as agreed to by the Parties.
Section 1.3 Closing Deliverables.
(a) At the Closing, Advisor Parent shall deliver to GNL (i) payment of the Estimated Advisor Closing Amount pursuant to Section 2.2(b), if any, (ii) a duly signed and authorized copy of the Registration Rights and Stockholders Agreement in the form attached hereto as Exhibit A (the “Registration Rights and Stockholders Agreement”); (iii) a duly signed and authorized copy the Assignment and Assumption Agreement; (iv) duly signed and authorized copies of the Confidentiality, Non-Competition and Non-Solicitation Agreements between GNL and each of Nicholas Schorsch and Edward M. Weil Jr., each in the form attached hereto as Exhibit B (the “Non-Competition Agreements”); (v) evidence, reasonably satisfactory to GNL, that all Related Party Agreements have been terminated; (vi) a certificate of good standing for each of the Target LLCs issued by its jurisdiction of incorporation; and (vii) a duly executed and validly completed U.S. IRS Form W-9 from the sole owner of Advisor Parent that is a regarded entity for U.S. federal income tax purposes.
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(b) At the Closing, GNL shall deliver, or cause to be delivered, to Advisor Parent or its designee (i) in consideration of the conversion of the membership interests of the Target LLCs pursuant to Section 2.1(a), the applicable Merger Consideration (consisting of, in the aggregate, the Aggregate Cash Consideration and the Aggregate Share Consideration); (ii) payment of the Estimated GNL Closing Amount pursuant to Section 2.2(b), if any, (iii) duly signed and authorized copies of the Non-Competition Agreements; and (iv) a duly signed and authorized copy of the Registration Rights and Shareholders Agreement.
Section 1.4 Effective Time.
(a) At Closing, Advisor Parent, GNL SLP, RTL SLP, the Target LLCs, and the Internalization Subs shall (i) cause articles of merger with respect to the applicable Internalization Merger (each, an “Internalization Merger Articles of Merger”) to be duly executed and filed with the Secretary of State of the State of Delaware as provided under the DLLC Act and (ii) make any other filings, recordings or publications required to be made by Advisor Parent, GNL SLP, RTL SLP, the Target LLCs, GNL or the Internalization Subs under the DLLC Act in connection with the applicable Internalization Merger. Each Internalization Merger shall become effective upon the time the last of the Internalization Merger Articles of Merger have been accepted for record by the Secretary of State of the State of Delaware, or such later time which the Parties shall have agreed upon and designated in an Internalization Merger Articles of Merger in accordance with the DLLC Act as the effective time of the Internalization Mergers (the “Effective Time”).
(b) Each Internalization Merger shall have the effects set forth in the DLLC Act and this Agreement. Without limiting the generality of the foregoing, and subject thereto, from and after the Effective Time, the Surviving GNL Advisor Entity, Surviving GNL PM Entity, Surviving RTL Advisor Entity and Surviving RTL PM Entity shall each possess all properties, rights, privileges, powers and franchises of GNL Advisor and GNL Advisor Sub, GNL Property Manager and GNL PM Sub, RTL Advisor and RTL Advisor Sub, and RTL Property Manager and RTL PM Sub, respectively, and all of the claims, obligations, liabilities, debts and duties of GNL Advisor and GNL Advisor Sub, GNL Property Manager and GNL PM Sub, RTL Advisor and RTL Advisor Sub, and RTL Property Manager and RTL PM Sub such shall become the claims, obligations, liabilities, debts and duties of the Surviving GNL Advisor Entity, Surviving GNL PM Entity, Surviving RTL Advisor Entity and Surviving RTL PM Entity, respectively.
Section 1.5 Organization Documents. The limited liability company agreement of each Internalization Sub, as in effect immediately prior to the Effective Time, except for such changes as may be necessary to reflect any change of name of the applicable Surviving Entity, shall be the limited liability company agreement of such Surviving Entity immediately following the Effective Time, until thereafter amended in accordance with the applicable provisions thereof and in accordance with applicable Law.
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Section 1.6 Tax Consequences; Purchase Price Allocation.
(a) The Parties intend that the Internalization Mergers shall qualify for the Intended Tax Treatment. As soon as reasonably practicable after the date hereof, but in no event later than thirty (30) days after finalization of the Merger Consideration pursuant to Section 2.3, Advisor Parent shall propose and deliver to GNL OP (i) an allocation of the GNL Advisor Merger Consideration (and any other applicable amounts treated as consideration for applicable Tax purposes) among the assets held by GNL Advisor, (ii) an allocation of the GNL PM Merger Consideration (and any other applicable amounts treated as consideration for applicable Tax purposes) among the assets held by GNL Property Manager, (iii) an allocation of the RTL Advisor Merger Consideration (and any other applicable amounts treated as consideration for applicable Tax purposes) among the assets held by RTL Advisor, and (iv) an allocation of the RTL PM Merger Consideration (and any other applicable amounts treated as consideration for applicable Tax purposes) among the assets held by RTL Property Manager, in each case, determined in a manner consistent with Section 1060 of the Code and any other applicable Tax Law (the “Allocation Statement”).
(b) Such Allocation Statement delivered by Advisor Parent shall become final and binding upon the Parties on the date that is thirty (30) days following receipt thereof by GNL OP, unless GNL OP gives written notice of its disagreement to Advisor Parent prior to such date. Any such notice shall specify in reasonable detail the dollar amount, nature and basis of each item of disagreement so asserted. If such notice is received by Advisor Parent in a timely manner, then the Parties shall endeavor in good faith to resolve any disputed items, and the Allocation Statement shall be adjusted to reflect any such resolution, at which point the Allocation Statement (as so adjusted) shall become final and binding on the Parties. If, following thirty (30) days of such good faith endeavors to resolve any such disputes, the Parties have not mutually agreed on a resolution with respect to the disputed items, the Parties shall not be bound by the Allocation Statement, and the Parties shall be permitted to determine their own separate purchase price allocations for applicable Tax purposes.
(c) If the Allocation Statement has become final and binding on the Parties pursuant to Section 1.6(b), none of Advisor Parent, GNL, or GNL OP shall (and Advisor Parent, GNL, and GNL OP shall cause their respective Affiliates not to) take any position inconsistent with the Allocation Statement, as finally determined pursuant to this Section 1.6, on any Tax Return, in any Tax proceeding or otherwise for Tax purposes, in each case, except to the extent otherwise required pursuant to a “determination” (within the meaning of Section 1313(a) of the Code, or any similar provision of state, local or foreign Law).
ARTICLE 2
EFFECT OF THE MERGERS
Section 2.1 Effect on Membership Interests. At the Effective Time, by virtue of the Internalization Mergers and without any action on the part of Advisor Parent, GNL SLP, RTL SLP, the Target LLCs, the Internalization Subs or the holders of any securities of the Target LLCs or Internalization Subs:
(a) Conversion of Target LLC Membership Interests.
(i) The membership interests in GNL Advisor issued and outstanding immediately prior to the Effective Time shall automatically be converted into the right to receive: (1) an allocable portion of the Aggregate Cash Consideration, without interest (the “GNL Advisor Cash Consideration”) and (2) an allocable portion of the Aggregate Share Consideration (the “GNL Advisor Share Consideration” and together with the GNL Advisor Cash Consideration, the “GNL Advisor Merger Consideration”). All GNL Advisor membership interests, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist.
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(ii) The membership interests in GNL Property Manager issued and outstanding immediately prior to the Effective Time shall automatically be converted into the right to receive: (1) an allocable portion of the Aggregate Cash Consideration, without interest (the “GNL PM Cash Consideration”) and (2) an allocable portion of the Aggregate Share Consideration (the “GNL PM Share Consideration” and together with the GNL PM Cash Consideration, the “GNL PM Merger Consideration”). All GNL Property Manager membership interests, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist.
(iii) The membership interests in RTL Advisor issued and outstanding immediately prior to the Effective Time shall automatically be converted into the right to receive: (1) an allocable portion of the Aggregate Cash Consideration, without interest (the “RTL Advisor Cash Consideration”) and (2) an allocable portion of the Aggregate Share Consideration (the “RTL Advisor Share Consideration” and together with the RTL Advisor Cash Consideration, the “RTL Advisor Merger Consideration”). All RTL Advisor membership interests, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist.
(iv) The membership interests in RTL Property Manager issued and outstanding immediately prior to the Effective Time shall automatically be converted into the right to receive: (1) an allocable portion of the Aggregate Cash Consideration, without interest and (2) an allocable portion of the Aggregate Share Consideration (the “RTL PM Share Consideration,” and together with the RTL PM Cash Consideration, the “RTL Merger Consideration”) (the GNL Advisor Merger Consideration, GNL PM Merger Consideration, RTL Advisor Merger Consideration and RTL PM Merger Consideration, each, a “Merger Consideration”). All RTL Property Manager membership interests, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist.
(v) If, prior to the Effective Time, the outstanding membership interests in a Target LLC or the shares of GNL have been increased, decreased, changed into or exchanged for a different number or kind of units or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, an appropriate and proportionate adjustment shall be made to the applicable Merger Consideration.
(vi) All membership interests of GNL Advisor Sub, GNL PM Sub, RTL Advisor Sub and RTL PM Sub issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding following the Effective Time and shall constitute the only issued and outstanding membership interests of the Surviving GNL Advisor Entity, Surviving GNL PM Entity, Surviving RTL Advisor Entity and Surviving RTL PM Entity, respectively.
Section 2.2 Estimated Closing Statements; Payment of Estimated Closing Amounts.
(a) Estimated Closing Statements. (i) Advisor Parent shall deliver to GNL, no later than two (2) Business Days prior to the Closing Date, a statement setting forth in reasonable detail Advisor Parent’s estimate, prepared in good faith to the reasonable satisfaction of GNL, of the Advisor Closing Amount (the “Estimated Advisor Closing Amount”), and (ii) GNL shall deliver to Advisor Parent, no later than two (2) Business Days prior to the Closing Date, a statement setting forth in reasonable detail GNL’s estimate, prepared in good faith to the reasonable satisfaction of Advisor Parent, of the GNL Closing Amount (the “Estimated GNL Closing Amount”).
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(b) Payment of Closing Amounts. At the Closing, (i) if the Estimated Advisor Closing Amount exceeds the Estimated GNL Closing Amount, Advisor Parent shall pay to GNL, by wire transfer of immediately available funds, the amount by which the Estimated Advisor Closing Amount exceeds the Estimated GNL Closing Amount (the “Estimated Advisor Adjustment Payment”), and (ii) if the Estimated GNL Closing Amount exceeds the Estimated Advisor Closing Amount, GNL shall pay to Advisor Parent, by wire transfer of immediately available funds, the amount by which the GNL Closing Amount exceeds the Estimated Advisor Closing Amount (the “Estimated GNL Adjustment Payment”).
(c) Payment Related to 2023 Annual Bonus. Advisor Parent shall deliver to GNL, at least two (2) Business Days prior to the Closing Date, a statement setting forth the full-year 2023 annual bonus amount for each Identified Employee, the amount that will have been accrued for each Identified Employee for the period beginning January 1, 2023 until the Measurement Time, and a proposed payment schedule that aligns with Advisor Parent’s past practice. At the Closing, Advisor Parent shall pay to GNL by wire transfer of immediately available funds an amount equal to the pro rata portion set forth in the aforementioned statement with respect to the Identified Employees (the “Pro Rata Bonus Payment”). GNL shall pay to the Identified Employees their respective portion of the Pro Rata Bonus Payment via payroll in accordance with the applicable Advisor Party’s past practice, including with respect to the timing of payments of such bonus amounts. If at any time an Identified Employee is no longer eligible to receive all or any portion of their portion of the Pro Rata Bonus Payment, GNL shall pay such amount to Advisor Parent or its designee.
Section 2.3 Post-Closing Adjustment.
(a) Closing Statement. Within thirty (30) days after the Closing Date, (i) Advisor Parent shall prepare and deliver to GNL a statement (the “Advisor Closing Statement”) setting forth in reasonable detail Advisor Parent’s determination of the actual Advisor Closing Amount, and (ii) GNL shall prepare and deliver to Advisor Parent a statement (the “GNL Closing Statement” and together with the Advisor Closing Statement, the “Closing Statements”) setting forth in reasonable detail GNL’s determination of the actual GNL Closing Amount. Each of Advisor Parent and GNL shall provide the other with reasonable access to such Party’s auditors and accounting and other personnel and to the books and records of such Party, and any other document or information reasonably requested by the other Party for all purposes of this Section 2.3, including in order to allow the other Party and its Representatives to review the Advisor Closing Statement or GNL Closing Statement, as applicable, and participate in the resolution of any items set forth in a Notice of Disagreement, and each Party shall direct its employees to provide reasonable assistance to the other Party in reviewing the applicable Closing Statement; provided, that (A) access to employees and information shall be on reasonably advanced notice, during normal business hours and in a manner that does not unreasonably interfere with the normal operations of the applicable Party, (B) shall be subject to applicable Laws relating to exchange of information and confidentiality obligations and (C) access to information provided by third parties (including workpapers of auditors) may be conditioned on the execution of customary confidentiality agreements and access letters.
(b) Notice of Disagreement. Each Closing Statement shall become final and binding upon the Parties on the date (the “Final Settlement Date”) that is forty-five (45) days following receipt thereof by Advisor Parent and GNL, as applicable, unless Advisor Parent or GNL gives written notice of its disagreement (a “Notice of Disagreement”) to the other Party prior to such date. Any Notice of Disagreement shall specify in reasonable detail the dollar amount, nature and basis of each item of disagreement so asserted. If a Notice of Disagreement is received by Advisor Parent or GNL in a timely manner, then the applicable Closing Statement (as revised in accordance with Section 2.3(c), if applicable) shall become final and binding on the Parties on, and the Final Settlement Date shall be, the earlier of (i) the date upon which Advisor Parent and GNL agree in writing with respect to all matters specified in the Notice of Disagreement and (ii) the date upon which the applicable Final Closing Statement is issued by the Accounting Expert. Any amount, determination or calculation contained in the Closing Statements and not specifically disputed in a timely delivered Notice of Disagreement shall be final, conclusive and binding on the Parties.
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(c) Final Closing Statement. If either Advisor Parent or GNL timely receive a Notice of Disagreement, Advisor Parent and GNL shall attempt in good faith to resolve any differences that they may have with respect to all matters specified in the Notice of Disagreement (and all discussions related thereto shall, unless otherwise agreed by Advisor Parent and GNL, be governed by Rule 408 of the Federal Rules of Evidence (and any applicable similar state rule)), but if they do not reach a final resolution within thirty (30) days after the delivery of the Notice of Disagreement, Advisor Parent and GNL shall submit such dispute to the dispute resolution group of a U.S. national independent accounting firm mutually acceptable to Advisor Parent and GNL (the “Accounting Expert”). Advisor Parent and GNL shall cooperate in good faith to promptly engage the Accounting Expert, pursuant to an engagement letter that requires the Accounting Expert to make all determinations in accordance with the definitions and terms contained herein. If any dispute is submitted to the Accounting Expert, Advisor Parent and GNL will promptly upon request, furnish to the Accounting Expert such work papers and other documents and information relating to the disputed issues as the Accounting Expert may request and are available to that Party or its independent accountants (including, with respect to GNL, any information of the Surviving Entities) and otherwise cooperate fully with the Accounting Expert’s review of the dispute, and both Advisor Parent and GNL shall be afforded the opportunity to present the Accounting Expert (with a copy concurrently delivered to the other Party) material relating to the determination and to discuss the determination with the Accounting Expert. The Accounting Expert (acting as an expert and not as an arbitrator) shall resolve only those matters set forth in such Notice of Disagreement that remain in dispute after the thirty (30)-day resolution period. With respect to any disputed item, the Accounting Expert’s determination shall be no greater than the higher of the amounts calculated and submitted by Advisor Parent and GNL, as the case may be, and no less than the lower of the amounts calculated and submitted by Advisor Parent and GNL, as the case may be. It is the intent of the Parties that the process set forth in this Section 2.3(c) and the activities of the Accounting Expert in connection herewith are not intended to be and, in fact, are not arbitration and that no formal arbitration rules shall be followed (including rules with respect to procedures and discovery). Advisor Parent and GNL shall use their commercially reasonable efforts to cause the Accounting Expert to resolve all such disagreements as soon as practicable but in no event later than sixty (60) days after submission of the disputed issues to the Accounting Expert. The resolution of the dispute by the Accounting Expert shall be final, binding and non-appealable on the Parties, except in the event of fraud or manifest error. The Closing Statement shall be modified if necessary to reflect such determination. The fees and expenses of the Accounting Expert shall be paid by Advisor Parent, on the one hand, and/or GNL, on the other hand, based upon the percentage which the portion of the contested amount not awarded to Advisor Parent or GNL, as applicable, bears to the amount actually contested by such Party, as determined by the Accounting Expert. As used in this Agreement, the term “Final Closing Statements” shall mean the Closing Statements described in Section 2.3(a), as prepared by Advisor Parent and GNL and, if applicable, as subsequently adjusted to reflect any subsequent written agreement between the Parties with respect thereto, or if submitted to the Accounting Expert, the Closing Statements issued by, or reflecting the conclusions of, the Accounting Expert.
(d) Payment of Adjustment.
(i) If the Advisor Closing Amount as finally determined in accordance with this Section 2.3 exceeds the GNL Closing Amount as finally determined in accordance with this Section 2.3, Advisor Parent shall pay to GNL, by wire transfer of immediately available funds within five (5) Business Days after the date on which the Advisor Closing Amount is finally determined, (A) the amount by which the Advisor Closing Amount exceeds the GNL Closing Amount, minus (B) any Estimated Advisor Adjustment Payment made pursuant to Section 2.2(b)(i), plus (C) any Estimated GNL Adjustment Payment made pursuant to Section 2.2(b)(ii). If such adjustment results in a negative amount, GNL shall pay to Advisor Parent, by wire transfer of immediately available funds within five (5) Business Days after the date on which the Advisor Closing Amount is finally determined, the amount of such shortfall.
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(ii) If the GNL Closing Amount as finally determined in accordance with this Section 2.3 exceeds the Advisor Closing Amount as finally determined in accordance with this Section 2.3, GNL shall pay to Advisor Parent, by wire transfer of immediately available funds within five (5) Business Days after the date on which the GNL Closing Amount is finally determined, (A) the amount by which the GNL Closing Amount exceeds the Advisor Closing Amount, minus (B) any Estimated GNL Adjustment Payment made pursuant to Section 2.2(b)(ii), plus (C) any Estimated Advisor Adjustment Payment made pursuant to Section 2.2(b)(i). If such adjustment results in a negative amount, Advisor Parent shall pay to GNL, by wire transfer of immediately available funds within five (5) Business Days after the date on which the GNL Closing Amount is finally determined, the amount of such shortfall.
(iii) Any payment made pursuant to this Section 2.3(d) shall constitute an adjustment to the Merger Consideration for Tax purposes and shall be treated as such by the Parties on their respective Tax Returns and in any communications with any Taxing Authorities, unless otherwise required by applicable Law.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
ADVISOR PARENT AND THE TARGET LLCS
Advisor Parent and each of the Target LLCs hereby jointly and severally represent and warrant to GNL and the Internalization Subs that:
Section 3.1 Organization and Good Standing.
(a) Each of Advisor Parent, GNL SLP, RTL SLP and the Target Companies is a limited liability company duly organized, validly existing, and in good standing under the Laws of its jurisdiction of formation. Each Target Company is duly authorized to conduct its business and is in good standing under the applicable Laws of each jurisdiction where such qualification is required. Each Target Company has the requisite power and authority necessary to own or lease its properties and to carry on its business as presently conducted. Each Target Company is in compliance with its Organizational Documents.
(b) Each of Advisor Parent, GNL SLP and RTL SLP is duly authorized to conduct its business and is in good standing under the applicable Laws of each jurisdiction where such qualification is required, except where such failure to be so authorized or qualified would be material to Advisor Parent. Each of Advisor Parent, GNL SLP and RTL SLP has the requisite power and authority necessary to own or lease its properties and to carry on its business as presently conducted except as would not reasonably be expected to impair the ability of Advisor Parent, GNL SLP or RTL SLP, as applicable, to comply with their obligations hereunder or consummate the transactions contemplated hereby. Except as would not be material to Advisor Parent and its Subsidiaries taken as a whole, each of Advisor Parent, GNL SLP and RTL SLP is in compliance with its Organizational Documents.
Section 3.2 Dissolution, Liquidation, and Insolvency. There is no pending or, to Advisor Parent’s Knowledge, threatened Action for the dissolution, liquidation or insolvency of any Advisor Party and, to Advisor Parent’s Knowledge, no circumstances have occurred or exist that have triggered or will trigger a dissolution of any Advisor Party.
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Section 3.3 Target LLC Ownership. Advisor Parent indirectly owns all of the outstanding equity interests of each of the Target LLCs, in each case free and clear of all liens, other than liens under applicable securities Laws and any liens that will be released at or prior to the Closing.
Section 3.4 Power and Authority; Enforceability. Advisor Parent, GNL SLP, RTL SLP and the Target LLCs have all requisite limited liability company power and authority to enter into each of the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby or thereby. The execution and delivery of each of the Transaction Documents by Advisor Parent, GNL SLP, RTL SLP and the Target LLCs and the consummation by Advisor Parent, GNL SLP, RTL SLP and the Target LLCs of the transactions contemplated hereby or thereby have been duly authorized by all necessary limited liability company action on their respective parts. Each of the Transaction Documents has been, or upon execution and delivery will be, duly executed and delivered by Advisor Parent, GNL SLP, RTL SLP and the Target LLCs, as applicable, and assuming the due authorization, execution and delivery of such Transaction Documents by the other parties thereto, will constitute, the valid and binding obligations of Advisor Parent, GNL SLP, RTL SLP and the Target LLCs, enforceable against Advisor Parent, GNL SLP, RTL SLP and the Target LLCs in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors’ rights and remedies generally, and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 3.5 No Conflicts; Required Consents. Except as set forth on Schedule 3.5, the execution and delivery of this Agreement and any other Transaction Document that such Party is a party to, by Advisor Parent, GNL SLP, RTL SLP and the Target LLCs, as applicable, does not, and the performance by Advisor Parent, GNL SLP, RTL SLP and the Target LLCs of the transactions contemplated hereby or, as applicable, thereby will not, (i) violate, conflict with, or result in any breach of any provision of their respective Organizational Documents, (ii) violate, conflict with, or result in a violation or breach of, or constitute a default (with or without due notice or lapse of time or both) under, or permit the termination of, or result in the acceleration of, or entitle any Person to accelerate any obligation of the Target Companies, or to the extent such obligation relates to the Business Assets, Advisor Parent, GNL SLP, or RTL SLP, or result in the loss of any benefit, or give rise to the creation of any Encumbrance on any property or asset of any Target Company or, to the extent such property or assets is a Business Asset, Advisor Parent, GNL SLP or RTL SLP under any of the terms, conditions or provisions of any material Contract, indenture, note, instrument or obligation to which any property or asset of any Target Company or any Business Asset may be bound or subject, or (iii) violate any Law applicable to Advisor Parent, GNL SLP, RTL SLP or any Target Company or by which or to which any property or asset of Advisor Parent, GNL SLP, RTL SLP or any Target Company or to the extent related to the Business Assets, Advisor Parent, GNL SLP, or RTL SLP is bound or subject, except in each of clauses (i), (ii) and (iii), as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.6 Capitalization. As of the date of this Agreement, Advisor Parent owns, directly or indirectly, all of the equity securities of the Target Companies. Except as set forth on Schedule 3.6, (i) there are no outstanding subscriptions, options, warrants, phantom stock or appreciation rights, commitments, preemptive rights, agreements, arrangements or commitments of any kind for or relating to the issuance, sale, registration or voting of, or outstanding securities convertible into or exchangeable for, any shares of capital stock of any class or other equity interests of any Target LLC or obligating any Target LLC to issue or sell any interests of, or any interest in, such Target Company and (ii) there are no Contracts, proxies or power of attorney or understandings in effect with respect to the voting or transfer of any of the interests of any Target LLC.
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Section 3.7 Contracts, Assets, and Employees. Schedule 3.7 sets forth all of the Contracts, assets, and employees which are needed to provide the services provided by Advisor Parent or its Affiliates pursuant to the Advisory Agreements and the Property Management Agreements, in each case, as such services are provided as of the date hereof in all material respects. The Target LLCs have delivered to the Internalization Subs a correct and complete copy of each Identified Contract. With respect to each Identified Contract (i) the agreement is legal, valid and binding on the applicable Advisor Party, and, to the Knowledge of Advisor Parent, each other party thereto, as applicable, and is in full force and effect in accordance with its terms, except as may be limited by bankruptcy, insolvency, moratorium and other similar applicable Laws affecting creditors’ rights generally and by general principles of equity; (ii) each Advisor Party is not, and, to Advisor Parent’s Knowledge, no other Person who or which is a party to an Identified Contract, is in material breach or default, and, to Advisor Parent’s Knowledge, no material event has occurred which with notice or lapse of time (or both) would constitute a material breach or default, or permit termination, modification, or acceleration under, such Identified Contract; (iii) to Advisor Parent’s Knowledge, no party to a Identified Contract has repudiated or threatened to repudiate any provision of any such Identified Contract; and (iv) the consummation of the Internalization Merger will not give rise to a material breach, default or violation by any Advisor Party of any Identified Contract. The Target LLCs have delivered to the Internalization Subs a correct and complete copy of each Material Employment Agreement. With respect to each Material Employment Agreement (i) the agreement is legal, valid, binding and in force and effect in accordance with its terms; (ii) no Advisor Party, and no other Person who or which is a party to a Material Employment Agreement, is in material breach or default, and no material event has occurred which with notice or lapse of time (or both) would constitute a material breach or default, or permit termination, modification, or acceleration under, such Material Employment Agreement; (iii) to Advisor Parent’s Knowledge, no party to a Material Employment Agreement has repudiated or threatened to repudiate any provision of any such Material Employment Agreement; and (iv) none of the actions contemplated by the Internalization Merger will give rise to a material breach, default or violation by any Advisor Party of any Material Employment Agreement.
Section 3.8 Financial Statements; Absence of Changes or Events; Indebtedness.
(a) Schedule 3.8(a) contains: (i) the unaudited consolidated and combined balance sheets of the Target Companies (taking into account an allocation of the Business Assets consistent with existing accounting methodology) as of December 31, 2022, and the related unaudited statements of income and cash flows for the fiscal year then ended; and (ii) the unaudited consolidated and combined balance sheet of the Target Companies (inclusive of the Business Assets) as of April 30, 2023, and the related unaudited statements of income for the four months then ended (collectively, the “Business Financial Statements”). Except as set forth therein or in Schedule 3.8(a), the Business Financial Statements have been prepared in accordance with GAAP, and in all material respects present accurately and fairly, on a pro forma basis after giving effect to the transactions contemplated by the Assignment and Assumption Agreements, the financial position, results of operations and cash flows of each of the Target Companies (taking into account the Business Assets) as of their respective dates and for the respective periods covered thereby in accordance with GAAP, assuming that the transactions contemplated by the Assignment and Assumption Agreement had actually occurred at such date or at the beginning of the periods covered thereby; provided, however, that the interim financial statements are subject to year-end adjustments, none of which are expected as of the date hereof to be material.
(b) Except as set forth in Schedule 3.8(b), since April 30, 2023 through the date hereof, (i) each of the Target Companies has conducted its business and the Business Assets have been operated by the other Advisor Parties only in the ordinary course of business, consistent with past practice, and (ii) no Advisor Party has taken any action that, if taken between the date hereof and the Closing Date, would require the approval of GNL and the Internalization Subs under Section 5.1. Since December 31, 2022 through the date hereof, with respect to the business of each Target Company or the business of any other Advisor Party as it relates to the Business Assets, there has not occurred a Material Adverse Effect.
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(c) None of the Target Companies has any indebtedness for borrowed money outstanding.
Section 3.9 Absence of Undisclosed Liabilities. As of the Measurement Time, none of the Target Companies or other Advisor Parties (solely with respect to the Business Assets) has any obligation or Liability (whether known or unknown, accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due and regardless of when asserted) of a type required by GAAP to be disclosed on a balance sheet, other than those: (a) set forth in or otherwise reflected in the Business Financial Statements, (b) incurred in the ordinary course of business subsequent to April 30, 2023; and (c) incurred in connection with, or in furtherance of, this Agreement, and (d) under Identified Contracts to which any of the Target Companies or other Advisor Parties (solely with respect to the Business Assets) is a party and that have been entered into in the ordinary course of business or otherwise disclosed pursuant to this Agreement and under which such Target Company or Advisor Party is currently not in material default.
Section 3.10 Compliance with Applicable Laws. (a) The Target Companies and, solely as it relates to ownership of the Business Assets, any other Advisor Party owning Business Assets possess and since December 31, 2020 have been in compliance in all material respects with, all Permits, approvals, franchises, Laws and registrations with Governmental Entities required to provide the services contemplated by the Advisory Agreements and the Property Management Agreements and own, lease or otherwise hold the Business Assets under applicable Law; (b) each of the Target Companies has conducted the business of such Target Company and, solely as it relates to the ownership of the Business Assets, each other Advisor Party has owned and operated the Business Assets in material compliance with all applicable Laws; (c) all material Permits necessary to provide the services contemplated by the Advisory Agreements and the Property Management Agreements and to own or use the Business Assets, are in force and effect, and there are no Actions pending or, to Advisor Parent’s Knowledge, threatened that seek the revocation, cancellation, suspension or any material adverse modification of any such Permits; and (d) as of the date hereof, none of the Advisor Parties have received any written notice of any investigation commenced or pending by any Governmental Entity with respect to Advisor Parent, the business of each Target Company, or the Business Assets. The Permits listed on Schedule 3.7 constitute, to Advisor Parent’s Knowledge, all of the Permits required to own and use the Business Assets and to provide the services contemplated by the Advisory Agreements and the Property Management Agreements commencing the Effective Time.
Section 3.11 Legal Proceedings. As of the date of this Agreement, (a) there are no Actions pending or, to Advisor Parent’s Knowledge, threatened against or affecting Advisor Parent (to the extent related to the Business Assets), any Target Company, or the Business Assets by or before any Governmental Entity, nor is there any material investigation relating to Advisor Parent (to the extent relating to the Business Assets), any Target Company, or the Business Assets pending or, to Advisor Parent’s Knowledge, threatened by or before any Governmental Entity; (b) there is no Order outstanding against Advisor Parent (to the extent relating to the Business Assets), any Target Company, or affecting any property or asset of any Target Company or against or affecting the Business Assets; and (c) there is no Action pending or, except as set for in Schedule 3.11, to Advisor Parent’s Knowledge, threatened against or affecting Advisor Parent (to the extent relating to the Business Assets), any Target Company, or the Business Assets.
Section 3.12 Availability, Title to and Condition of Business Assets. All of the material Personal Property included in the Business Assets, whether owned or leased, has been maintained in accordance with reasonable and customary business practice and is in good operating condition, ordinary wear and tear excepted. Each Advisor Party has good and valid title to all Business Assets that it purports to own, free and clear of any Encumbrances, except as would not be material to the operation as an internally managed REIT. No Advisor Party is in material default under any lease agreement for Personal Property included in the Business Assets to which such entity is a party.
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Section 3.13 Taxes. (a) each Target Company has timely filed all income and other material Tax Returns required to be filed by it; (b) all such Tax Returns were true, correct and complete in all material respects; (c) each Target Company has paid all Taxes (whether or not shown as due and owing on any such Tax Returns) and has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, equityholder or other Person; (d) no Target Company is currently the beneficiary of any extension of time within which to file any Tax Return; (e) there are no liens for Taxes (other than Taxes not yet due and payable) upon any of the Business Assets; (f) no foreign, federal, state, or local audits or Actions with respect to Taxes are threatened in writing, pending, or are being conducted with respect to any Target Company; (g) no Target Company has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency; (h) each of the Target Companies is, and has been since its formation, an entity that is disregarded as separate from its sole regarded owner for U.S. federal income tax purposes; (i) no written claim against any Target Company has been received by such Target Company from a Taxing Authority that any Target Company is or may be subject to taxation by that jurisdiction and in which any Target Company does not file Tax Returns; (j) no written claim or deficiency for any Taxes has been asserted, proposed or threatened against any Target Company that has not been finally resolved and/or paid in full; (k) none of the Target Companies (i) has ever been a member of an affiliated, consolidated, combined, unitary or similar Tax group or (ii) has any liability for the Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or foreign Law), as a transferee or successor, or by Contract (other than by a Contract entered into in the ordinary course of business, the primary purpose of which does not relate to Taxes); (l) none of the Target Companies is a party to or is bound by any Tax sharing, Tax receivable, Tax indemnification, or any other similar agreement (other than a Contract entered into in the ordinary course of business, the primary purpose of which does not relate to allocation or payment of Taxes); (m) none of the Target Companies has distributed the stock of another Person nor had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code; (n) none of the Target Companies is or has been a party to any “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4(b)(2) (or any analogous provision of any state, local or foreign Law); (o) none of the Target Companies has engaged in a trade or business, had a permanent establishment (within the meaning of an applicable Tax treaty), or otherwise becomes subject to Tax jurisdiction in a country other than the country of its formation; and (p) no Target Company is the beneficiary of any Tax incentive, Tax rebate, Tax holiday or similar arrangement or agreement with any Taxing Authority.
Section 3.14 Labor. Solely with respect to Employees: (a) Employer is not, nor has ever been, a party to any collective bargaining agreement; (b) no application or petition for an election, or for certification, of a collective bargaining agent is pending; (c) there has not been in the two (2) years preceding the date of this Agreement, there is not presently pending or existing, and, to the Knowledge of Employer, there is not threatened, any strike, slowdown, picketing or work stoppage or employee grievance process involving Employer; and (d) except as would not reasonably be likely to result to material liability to Employer taken as a whole, no Action is pending, or to the Knowledge of Employer, threatened against or affecting Employer, nor has there been any such actual or threatened Action in the two (2) years preceding the date of this Agreement, relating to the alleged violation of any Law pertaining to labor relations, including any charge or complaint filed with the National Labor Relations Board, and to the Knowledge of Employer, there is no organizational activity or other labor dispute against or affecting any Employees. Except as disclosed on Schedule 3.14, Employer has not terminated the employment of any Employee during the sixty (60)-day period preceding the date of this Agreement. No Employee has given notice of any intent to terminate employment.
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Section 3.15 Employee Benefit Plans.
(a) Schedule 3.15(a) sets forth a list of each material “employee benefit plan” (within the meaning of Section 3(3) of ERISA), and all material employment, severance, change in control, bonus, equity-based compensation, bonus, incentive and vacation plan, program, policy or agreement sponsored or maintained by Employer, in which Employees participate (collectively, the “Benefit Plans”).
(b) With respect to each material Benefit Plan, Employer has made available to GNL and the Internalization Subs copies, as applicable: the most recent plan documents and all amendments thereto and all related trust agreements or documentation pertaining to other funding vehicles (or, to the extent no such plan documents exist, a written summary of all material terms)
(c) Except as would not reasonably be likely to result in material liability, each of the Benefit Plans has been maintained, operated and administered in material compliance with its terms and applicable Laws, including ERISA and the Code. Each Benefit Plan that is a “nonqualified deferred compensation plan” within the meaning of Section 409A(d)(1) of the Code and any award thereunder, in each case that is subject to Section 409A of the Code, (i) has at all times been operated in material compliance with Section 409A of the Code and all applicable IRS guidance promulgated thereunder and (ii) either (A) has at all times been in a form which materially complies with the requirements of Section 409A of the Code or (B) has been timely amended under guidance issued pursuant to Section 409A of the Code so that its terms and provisions materially comply with the requirements of Section 409A of the Code.
(d) Each Benefit Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination or is entitled to rely on an opinion or advisory letter from the IRS with respect to a pre-approved master and prototype or volume submitter plan, and to the Knowledge of the Employer, nothing has occurred that would reasonably be expected to adversely affect the qualification of such Benefit Plan.
(e) Except as set forth on Schedule 3.15(e), no Employer or any of their ERISA Affiliates maintains, contributes to, or sponsors (and has not ever maintained, contributed to, or sponsored) a “multiemployer plan” (as defined in Section 3(37) of ERISA or Section 414(f) of the Code), a “defined benefit plan” as defined in Section 3(35) of ERISA, a pension plan subject to the funding standards of Section 302 of ERISA or Section 412 of the Code or a “multiple employer plan” within the meaning of Section 210(a) of ERISA or Section 413(c) of the Code in each case with respect to Employees. With respect to each group health plan benefiting Employees and former employees of Employer that is subject to Section 4980B of the Code, except as would not result in material Liability to Employer, Employer has complied with the continuation coverage requirements of Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA. The Employer has not provided post-employment medical or dental coverage to any of their former employees (or any dependent thereof), other than as required under COBRA or any similar state Law and purchased at the former employee’s own expense.
(f) Except as set forth on Schedule 3.15(f), neither the execution or delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will, either alone or in conjunction with any other transactions or events, (i) entitle any Employee to any payment (whether of severance pay or otherwise), (ii) increase the amount or value, or accelerate the vesting or timing, of any benefit or compensation to any Employee, (iii) cause any individual to accrue or receive additional benefits, service or accelerated rights to payment of benefits under any Benefit Plan or employment agreement, (iv) directly or indirectly cause Advisor Parent or any other entity to transfer or set aside any assets to fund or otherwise provide for benefits for any individual, (v) entitle Employee to any gross up or indemnification from the Employer with respect to arrangement subject to the excise tax imposed by Section 4999 of the Code or with respect to Section 409A of the Code, or (vi) cause the loss of a deduction by any of the Parties under Section 280G of the Code.
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Section 3.16 Insurance.
(a) Schedule 3.16(a) sets forth, a complete and correct list of all material insurance policies maintained by, or for the direct benefit of any Target Company or the Business Assets as of the date of this Agreement, and true and complete copies of such policies have been made available to GNL and the Internalization Subs. Each of the policies identified on Schedule 3.16(a) is valid, enforceable and in force and effect and has been issued by an insurance carrier that is, to Advisor Parent’s Knowledge, solvent, financially sound and reputable. All of the information contained in the applications submitted in connection with said policies, to the Knowledge of Advisor Parent, was (at the times said applications were submitted) accurate and complete in all material respects and, to Advisor Parent’s Knowledge, all premiums and other amounts owing with respect to said policies were paid in full on a timely basis. None of the policies identified in Schedule 3.16(a) will terminate or lapse by reason of the consummation of the transactions contemplated by this Agreement.
(b) No Advisor Party has received: (i) any written notice or other communication from the applicable insurance carrier regarding the actual or possible cancellation or invalidation of any of the policies identified in Schedule 3.16(a); (ii) any written notice or other communication from the applicable insurance carrier regarding any actual or possible refusal of coverage under, or any actual or possible rejection of any claim under, any of the policies identified in Schedule 3.16(a); or (iii) any written indication from the issuer of any of the policies identified in Schedule 3.16(a) that it may be unwilling or unable to perform any of its obligations thereunder. As of the date hereof, there is no pending material claim by any Advisor Party against any insurance carrier under any insurance policy held by any Advisor Party.
Section 3.17 Subsidiaries. Except as set forth on Schedule 3.17, other than the Target Companies, Advisor Parent does not directly or indirectly own any equity or similar interest in, or any interest convertible into, or exchangeable or exercisable for, any equity or similar interest in, any limited liability company, corporation, partnership, joint venture or other business entity that is necessary to provide the services contemplated by the Advisory Agreements and the Property Management Agreements.
Section 3.18 Intellectual Property; Data Privacy.
(a) Schedule 3.18(a) lists each Mark included in the Business Assets or currently used by any Target Company. To Advisor Parent’s Knowledge, unless otherwise set forth on Schedule 3.18(a), all such Marks (i) have been registered with the United States Patent and Trademark Office or with a corresponding state office, (ii) are currently in compliance in all material respects with all formal legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications), (iii) are valid and enforceable, and (iv) not subject to any Actions or maintenance fees or Taxes that are or will become due within ninety (90) days after the Closing Date. To Advisor Parent’s Knowledge, no Mark listed on Schedule 3.18(a) and except as otherwise described on such Schedule 3.18(a) has been, or is now involved in any pending Action that opposes or seeks invalidation or cancellation of any such Mark, and to Advisor Parent’s Knowledge without independent investigation, no such Action is threatened. To Advisor Parent’s Knowledge without independent investigation, all products and materials used by each Advisor Party in the ordinary course of business and containing one or more of such Marks bear any legal notice required by applicable Law.
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(b) Schedule 3.18(b) lists each Domain Name used by any Target Company. To Advisor Parent’s Knowledge, all Domain Names listed on Schedule 3.18(b) that have been registered are (i) currently in compliance in all material respects with all formal legal requirements, (ii) valid and enforceable, and (iii) not subject to any Actions or maintenance fees or Taxes that are or will become due within ninety (90) days after the Closing Date.
(c) To Advisor Parent’s Knowledge, each Target Company owns or has the right to use pursuant to Contract or otherwise all Intellectual Property necessary to provide the services contemplated by the Advisory Agreements and the Property Management Agreements. To Advisor Parent’s Knowledge, each of the Target Companies or any predecessor thereof has taken all commercially reasonably necessary action to maintain and protect each such item of Intellectual Property.
(d) Advisor Parent has delivered to GNL and the Internalization Subs copies of all written documentation in its possession that evidences the ownership (or other right to use), the right to maintain and prosecute (if applicable), and support, each item of material Intellectual Property used in the ordinary course of business by any Target Company or other Advisor Party in connection with the Business Assets. With respect to each such item of material Intellectual Property, to Advisor Parent’s Knowledge: (i) the applicable Advisor Party possesses all right, title, and interest in and to the item, free and clear of any Encumbrance; (ii) each item is not subject to any outstanding Order; (iii) no Action is pending, or threatened (and there is no basis therefor), which challenges the enforceability, use, or ownership of the item; and (iv) no Advisor Party agreed to indemnify any Person for, or against, any interference, infringement, misappropriation, or other conflict with respect to each such item.
(e) All IT Systems are, in all material respects, in good working condition and sufficient for the operation of the business of the Target Companies and the Business Assets as currently conducted. Since December 31, 2020, there has been no material malfunction, failure, continued substandard performance, denial-of-service, or other cyber incident, including any cyberattack, or other impairment of the IT Systems that has not been remedied. The applicable Advisor Party has, in all material respects, taken commercially reasonable steps to safeguard the confidentiality, availability, security, and integrity of the IT Systems, including implementing and maintaining appropriate backup, disaster recovery, and Software and hardware support arrangements.
(f) Each Target Company and other Advisor Party (solely with respect to the operation of the Business Assets) has, since December 31, 2020, complied in all material respects with all applicable Laws and all publicly posted policies concerning the collection, use, processing, storage, transfer, and security of personal information in the conduct of its business. Since December 31, 2020, no Target Company or other Advisor Party (solely with respect to the operation of the Business Assets) has (i) experienced any material data breach or other security incident involving personal information in its possession or control or (ii) received any written notice of any audit, investigation, complaint, or other Action by any Governmental Entity or other Person concerning the Target Companies or other Advisor Party’s collection, use, processing, storage, transfer, or protection of personal information or actual, alleged, or suspected violation of any applicable Law concerning privacy, data security, or data breach notification.
Section 3.19 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of any of the Advisor Parties that would be payable by the Target Companies.
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Section 3.20 Securities Law Matters; Transfer Restrictions.
(a) Advisor Parent acknowledge that GNL intends the offer and issuance of the GNL Shares to be exempt from registration under the Securities Act and applicable state securities Laws by virtue of (i) the status of Advisor Parent as an “accredited investor” within the meaning of the federal securities Laws, and (ii) Regulation D promulgated under Section 4(a)(2) of the Securities Act (“Regulation D”), and that GNL will rely in part upon the representations and warranties made by Advisor Parent in this Agreement in making the determination that the offer and issuance of the GNL Shares qualify for exemption under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D as an offer and sale only to “accredited investors.”
(b) Advisor Parent is an “accredited investor” within the meaning of the federal securities Law, particularly Regulation D.
(c) Advisor Parent will acquire the GNL Shares for its own account and not with a view to, or for sale in connection with, any “distribution” thereof within the meaning of the Securities Act. Advisor Parent has sufficient knowledge and experience in financial, Tax, and business matters to enable it to evaluate the merits and risks of investment in the GNL Shares. Advisor Parent has the ability to bear the economic risk of acquiring the GNL Shares. Advisor Parent acknowledges that (i) the transactions contemplated by this Agreement involve complex Tax consequences for Advisor Parent, and Advisor Parent is relying solely on the advice of Advisor Parent’s own Tax advisors in evaluating such consequences; (ii) neither GNL nor any Internalization Sub has made (nor shall it be deemed to have made) any representations or warranties as to the Tax consequences of such transaction to Advisor Parent; and (iii) references in this Agreement to the intended Tax effect of the transactions contemplated hereby shall not be deemed to imply any representation by GNL or any Internalization Sub as to a particular Tax effect that may be obtained by Advisor Parent. Advisor Parent remains solely responsible for all Tax matters relating to Advisor Parent.
(d) Advisor Parent has been supplied with, or had access to, information to which a reasonable investor would attach significance in making an investment decision to acquire the GNL Shares and any other information Advisor Parent has requested. Advisor Parent has had an opportunity to ask questions of, and receive information and answers from, GNL and/or any Internalization Sub concerning GNL, any Internalization Sub, the GNL Shares, and the contribution of the Business Assets, and to assess and evaluate any information supplied to Advisor Parent by GNL and/or the Internalization Subs, and all such questions have been answered, and all such information has been provided to the satisfaction of Advisor Parent.
(e) Advisor Parent acknowledges that it is aware that there are substantial restrictions on the transferability of the GNL Shares. Advisor Parent agrees that any GNL Shares it acquires will not be sold in the absence of registration unless such sale is exempt from registration under the Securities Act and applicable state securities Laws.
Section 3.21 Advisory Agreements. Except as set forth in Schedule 3.21, Advisor Parent has not submitted, and as of the date hereof is not currently intending to submit, any claims for indemnification that are pending as of the date hereof under any of the Advisory Agreements.
Section 3.22 Leased Real Property.
(a) There is no real property owned by any Advisor Party that is used in or necessary for the conduct of the business of the Target Companies or the Business Assets. Schedule 3.22(a) contains a true, complete and correct list of (i) all of the leases of real property necessary for the conduct of the business of the Target Companies or the Business Assets and which are in effect (the “Real Property Lease Agreements”) and (ii) all of the ground leases and prime leases that underlie any such lease agreement, each, including without limitation all amendments thereto and all guaranties provided by the Advisor Parties in connection therewith (the “Ground Lease Agreements”). The Real Property Lease Agreements are in full force and effect, and the applicable Advisor Party holds a valid and existing leasehold interest under each of the Real Property Lease Agreements, free and clear of any Encumbrances, other than (w) statutory Encumbrances of landlords under the Real Property Lease Agreements; (x) consisting of easements, zoning restrictions, rights-of-way, licenses, covenants, conditions, minor defects, encroachments or irregularities in title and similar Encumbrances on or affecting the underlying fee interest in the Leased Real Property that do not materially interfere with the ordinary conduct of the business of the Target Companies or the Business Assets; (y) the terms, covenants and conditions set forth in the Real Property Lease Agreements and Ground Lease Agreements; and (z) any Encumbrances for real estate taxes not yet due and payable or that are being contested in good faith through adequate proceedings.
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(b) Except as set forth in Schedule 3.22(b), no Advisor Party has assigned, pledged, mortgaged, hypothecated or otherwise transferred any Real Property Lease Agreement nor has any Advisor Party entered into with any other Person any sublease, license or other agreement that relates to the use or occupancy of all or any portion of the real property leased pursuant to the Real Property Lease Agreements (the “Leased Real Property”). The use and operation of the Leased Real Property in the conduct of the business of the Target Companies or the Business Assets does not violate in any material respect any applicable Law, covenant, condition, restriction, easement, license, Permit or Contract. No Advisor Party has received any written notice of any pending condemnation, expropriation, eminent domain or similar proceeding affecting all or any portion of the Leased Real Property. The Leased Real Property constitutes all of the real property used or occupied by the Advisor Party in connection with the conduct of the business of the Target Companies or the Business Assets.
Section 3.23 Anti-Corruption. Each Target Company and any of its managers, directors, officers and, to the Knowledge of the Advisor Parent, non-officer employees, agents, Representatives, or other Persons acting on behalf of any Target Company, is, and for the last five (5) years has been, in compliance with all Anti-Corruption Laws. No Target Company nor any Person acting on its behalf has (a) used or is using any corporate funds for any illegal contributions, gifts, entertainment or other unlawful expenses relating to political activity, (b) used or is using any corporate funds for any direct or indirect unlawful payments to any foreign or domestic Government Official, (c) made, offered, authorized or promised any payment or provision of anything of value to any Government Official corruptly to induce action or inaction on the part of the recipient or otherwise improperly influence a decision to award business or provide other favorable advantage or treatment, or (d) engaged in any conduct that could be construed as a bribe, kickback, payoff, or influence payment of any kind. The books of account and other financial records of the Target Companies (i) are accurate, complete, and correct, (ii) represent actual, bona fide transactions and (iii) have been maintained in accordance with sound business practices, including the maintenance of adequate internal accounting controls. No Target Company has not been the subject of any internal or external investigation, litigation, inquiry, allegations, or administrative, enforcement, or other proceedings by any Governmental Entity, bank, or any customer or other business partner regarding actual or alleged violations of any applicable Anti-Corruption Laws. No such investigation, litigation, inquiry or proceeding is pending or, to Advisor Parent’s Knowledge, threatened, and there are no circumstances which are likely to give rise to any such investigation, litigation, inquiry, allegations, or proceedings.
Section 3.24 Advisor Parent Ownership and Ownership of GNL and RTL. Advisor Parent has not Beneficially Owned or Constructively Owned more than nine and eight-tenths percent (9.8%) in value of the aggregate of the outstanding shares of stock of GNL or RTL, as applicable, or more than nine and eight-tenths percent (9.8%) percent (in value or in number of shares, whichever is more restrictive) of any class or series of shares of stock of GNL or RTL, as applicable. The direct and indirect owners of Advisor Parent and their ownership of Advisor Parent and their Beneficial Ownership and Constructive Ownership of GNL or RTL are reflected on Schedule 3.24 hereto. None of such direct and indirect owners of Advisor Parent Beneficially Own or Constructively Own more than nine and eight-tenths percent (9.8%) in value of the aggregate of the outstanding shares of stock of GNL and RTL.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE INTERNALIZATION SUBS, GNL, GNL OP, RTL AND RTL OP
Each Internalization Sub, GNL, GNL OP, RTL and RTL OP hereby jointly and severally represent and warrant to Advisor Parent that:
Section 4.1 Organization and Good Standing. Each of the Internalization Subs, GNL OP and RTL OP is a limited liability company or limited partnership duly organized, validly existing and in good standing under the Laws of the State of Delaware. Each of GNL and RTL is a corporation, duly incorporated, validly existing and in good standing under the Laws of the state of Maryland. Each of the Internalization Subs, GNL, GNL OP, RTL and RTL OP has all requisite power and authority to carry on its business as now being conducted. Each of the Internalization Subs, GNL, GNL OP, RTL and RTL OP are in compliance with their Organizational Documents.
Section 4.2 Power and Authority; Enforceability. The Internalization Subs, GNL, GNL OP, RTL and RTL OP each has all requisite limited liability company and corporate power and authority to enter into this Agreement and each of the other Transaction Documents to which it is a party and to consummate the transactions contemplated hereby or thereby (including without limitation, the consummation of the applicable Internalization Merger and the issuance of the applicable Share Consideration). The execution and delivery of each of this Agreement and the other Transaction Documents by the Internalization Subs, GNL, GNL OP, RTL and RTL OP and the consummation by the Internalization Subs, GNL, GNL OP, RTL and RTL OP of the transactions contemplated hereby and thereby (including without limitation, the consummation of the applicable Internalization Merger and the issuance of the applicable Share Consideration) have been duly authorized by all requisite action on the part of the Internalization Subs, GNL, GNL OP, RTL and RTL OP. This Agreement and each of the other Transaction Documents has been, or upon execution and delivery will be, duly executed and delivered by the Internalization Subs, GNL, GNL OP, RTL and RTL OP, as applicable, and constitute, or upon execution and delivery will constitute, the valid and binding obligations of the Internalization Subs, GNL, GNL OP, RTL and RTL OP, as applicable, enforceable in each case against the Internalization Subs, GNL, GNL OP, RTL and RTL OP in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting creditors’ rights and remedies generally, and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 4.3 No Conflicts; Required Consents. Except as provided in Schedule 4.3, the execution and delivery of this Agreement and the other Transaction Documents by the Internalization Subs, GNL, GNL OP, RTL and RTL OP does not, and the performance thereby of the transactions contemplated hereby and thereby (including without limitation, the consummation of the applicable Internalization Merger, the payment of the applicable Merger Consideration, and the issuance of the applicable Share Consideration) will not, (i) violate, conflict with, or result in any breach of any provision of the Internalization Subs, GNL, GNL OP, RTL or RTL OP’s Organizational Documents (in each case as may be modified prior to the Closing Date pursuant to Section 5.7), (ii) violate, conflict with, or result in a violation or breach of, or constitute a default (with or without due notice or lapse of time or both) under, or permit the termination, or result in the acceleration, of, or entitle any party to accelerate, any obligation of the Internalization Subs, GNL, GNL OP, RTL or RTL OP, or result in the loss of any benefit, or give rise to the creation of any Encumbrance on any property or asset of the Internalization Subs, GNL, GNL OP, RTL or RTL OP under any of the terms, conditions or provisions of any material Contract, indenture, note, instrument or obligation to which any property or asset of the Internalization Subs, GNL, GNL OP, RTL or RTL OP may be bound or subject, except any such violation, which, individually or in the aggregate, would not be material to the Internalization Subs, GNL, GNL OP, RTL and RTL OP, taken as a whole, or (iii) violate any Law applicable to such the Internalization Subs, GNL, GNL OP, RTL or RTL OP or by or to which any property or asset of the Internalization Subs, GNL, GNL OP, RTL or RTL OP is bound or subject, except in each of clauses (i), (ii) and (iii), as would not, individually or in the aggregate, reasonably be expected to materially and adversely affect the ability of the Internalization Subs, GNL, GNL OP, RTL, and RTL OP to consummate the transactions contemplated hereby.
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Section 4.4 Issuance of Shares. The GNL Shares, when issued and delivered in compliance with the provisions of this Agreement, will be duly authorized, validly issued, fully paid, and non-assessable. The GNL Shares will be free of any Encumbrances, other than those under applicable state and federal securities and antitakeover Laws and this Agreement. The GNL Shares will not be issued in violation of any preemptive rights or rights of first refusal in GNL’s Organizational Documents.
Section 4.5 Tax Status of the Internalization Subs. Each Internalization Sub has at all times during its existence been properly treated as an entity that is disregarded as separate from its owner for U.S. federal income tax purposes.
Section 4.6 Capitalization. Schedule 4.6 sets forth the equity capitalization of (a) GNL, GNL OP, RTL, RTL OP and the Internalization Subs as of the date hereof and (b) GNL and GNL OP as of the date of Closing, immediately after the consummation of the Internalization Mergers. Except as set forth on Schedule 4.6 and pursuant to this Agreement, there are no rights of any kind, written or oral, granted by GNL, GNL OP, RTL, RTL OP or the Internalization Subs to acquire any interest in GNL, GNL OP, RTL, RTL OP or the Internalization Sub. Except as set forth on Schedule 4.6, (i) there are no outstanding subscriptions, options, warrants, phantom stock or appreciation rights, commitments, preemptive rights, agreements, arrangements or commitments of any kind for or relating to the issuance, sale, registration or voting of, or outstanding securities convertible into or exchangeable for, any shares of capital stock of any class or other equity interests of GNL, GNL OP, RTL, RTL OP or the Internalization Subs or obligating GNL, GNL OP, RTL, RTL OP or the Internalization Subs to issue or sell any interests of, or any interest in, GNL, GNL OP, RTL, RTL OP or the Internalization Subs, respectively, (ii) there are no outstanding contractual obligations of GNL, GNL OP, RTL, RTL OP or the Internalization Subs to repurchase, redeem or otherwise acquire any of its interests or to provide funds to, or make any investment in, any other Person and (iii) there are no Contracts, proxies or power of attorney or understandings in effect with respect to the voting or transfer of any of the interests of GNL, GNL OP, RTL, RTL OP or the Internalization Subs.
Section 4.7 Legal Proceedings. Except as set forth in Schedule 4.7, as of the date of this Agreement, (a) there are no Actions pending or, to GNL’s Knowledge, threatened against GNL, GNL OP, RTL, RTL OP or the Internalization Subs or GNL or any material property or asset of GNL, GNL OP, RTL, RTL OP or the Internalization Subs by or before any arbitrator or Governmental Entity, nor is there any material investigation relating to GNL, GNL OP, RTL, RTL OP or the Internalization Subs any property or asset of GNL, GNL OP, RTL, RTL OP or the Internalization Subs pending or, to GNL’s Knowledge, threatened by or before any arbitrator or Governmental Entity; (b) there is no Order outstanding against GNL, GNL OP, RTL, RTL OP or the Internalization Subs affecting any property or asset of GNL, GNL OP, RTL, RTL OP or the Internalization Subs; and (c) there is no Action pending, or to GNL’s Knowledge, threatened against GNL, GNL OP, RTL, RTL OP or the Internalization Subs.
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Section 4.8 Brokers. Except as set forth on Schedule 4.8, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of GNL, GNL OP, RTL, RTL OP or the Internalization Subs.
Section 4.9 Sufficiency of Funds. GNL has, and at the Closing will have, sufficient cash on hand or other sources of immediately available funds to enable it to make payment of the Aggregate Cash Consideration and all other cash amounts payable pursuant to this Agreement and the other Transaction Documents.
Section 4.10 Rights Plan. No “Stock Acquisition Date” or “Distribution Date” (as such terms are defined in the REIT Merger Agreement) will occur as a result of the execution of this Agreement or any other transactions contemplated by this Agreement or the consummation of the Merger..
ARTICLE 5
COVENANTS
Section 5.1 Conduct of Business Prior to Closing. From the date hereof until the Closing or earlier termination of this Agreement in accordance with Article 11, except as otherwise expressly provided in this Agreement, the Target LLCs shall, and Advisor Parent shall cause the Target Companies and the other Advisor Parties, as applicable, to: (i) use commercially reasonable efforts to conduct the business of each Target Company in all material respects and the business of any other Advisor Party in all material respects as it relates to the Business Assets in the ordinary course, consistent with past practice and in compliance with the requirements of the Advisory Agreements and the Property Management Agreements; (ii) use commercially reasonable efforts to keep available the services of its present officers and employees who provide material services to GNL and RTL and their Subsidiaries; and (iii) use commercially reasonable efforts to preserve its relationships with others having business dealings with it relating to the business of each Target Company or the Business Assets. Without limiting the generality of the foregoing, except as otherwise contemplated by this Agreement, from the date hereof to the Closing, without the prior written consent of GNL and the Internalization Subs (which consent shall not be unreasonably withheld, conditioned or delayed), the Target Companies shall not, and Advisor Parent shall cause the Target LLCs not to:
(a) sell, lease, encumber, transfer, license or dispose of any Business Assets or material properties or assets of any of the Target Companies, other than in the ordinary course of business consistent with past practice;
(b) amend or terminate any Identified Contract, other than in the ordinary course of business;
(c) fail to timely pay any account payable in the ordinary course of business, other than amounts that are subject to dispute in good faith;
(d) take any action or fail to take any action, which action or failure that would adversely affect GNL or RTL’s qualification as a REIT or GNL OP’s or RTL OP’s qualification as a partnership for U.S. federal income tax purposes;
(e) enter into any new line of business;
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(f) make any loans, advances or capital contributions to, or investments in, any other Person (including to any of its officers, directors, Affiliates, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such Persons, or enter into any “keep well” or similar agreement to maintain the financial condition of another entity;
(g) allow the lapse or termination of material policies of insurance unless contemporaneously replaced;
(h) change (or permit to be changed) any material accounting or Tax procedure, method or practice (including any material method of accounting for Tax purposes) in a manner that would be binding on the Target Companies following the Closing; make, change or revoke (or permit to be made, changed or revoked) any material Tax election in a manner that would be binding on the Target Companies following the Closing; amend any material Tax Return of the Target Companies; change the Tax classification of any Target Company; or enter into any “closing agreement” with any Taxing Authority in a manner that would be binding on the Target Companies following the Closing;
(i) increase in any manner the compensation or benefits of any Employee, accelerate vesting of any benefit or payment to any Employee or pay or otherwise grant any benefit with respect to any Employee, or enter into any contract to do any of the foregoing, in each case other than as set forth in the REIT Merger Agreement or as set forth on Schedule 5.1(i);
(j) commit to any single or aggregate capital expenditure or commitment in excess of $25,000,000 (on a consolidated basis);
(k) except as required to consummate the transactions pursuant to this Agreement and the Transaction Documents, acquire, by merger, consolidation, acquisition of stock or assets, or otherwise, any business or Person or division thereof;
(l) cancel any debts or waive any claims or rights of relating to the business of the Target Companies or the Business Assets having an individual or aggregate value in excess of $2,500,000;
(m) enter into any lease for real property or assign its rights under, amend or terminate any lease with respect to real property;
(n) issue, sell or grant any equity interests of any of the Target Companies, or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for any equity interests of any of the Target Companies, or any rights, warrants, options, calls, commitments or any other agreements of any character to purchase or acquire any equity interests of any of the Target Companies or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for, any equity interests of any of the Target Companies or any other securities in respect of, in lieu of, or in substitution for, the equity interests of any Target Company that are outstanding on the date hereof;
(o) initiate any claim, action, suit or proceeding or settle or compromise any claim, action, suit or proceeding pending or threatened against it or relating to the Target Companies or the Business Assets, other than any such settlement or compromise that involves solely payment of money damages in an amount not in excess of $2,500,000 individually or $5,000,000 in the aggregate that is paid prior to Closing; provided, however, for the avoidance of doubt, that none of the Advisor Parties nor any of their Subsidiaries shall agree to, or shall, settle any claim, action, suit or proceeding if the settlement involves a conduct remedy or injunctive or similar relief or has a restrictive impact on the Target Companies or the Business Assets;
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(p) enter into a collective bargaining agreement or any other agreement with a union, works council or other labor organization;
(q) hire or terminate any executive officer or director of any Employer or Target Company other than (i) a termination for cause, or (ii) due to role elimination, or enter into any transaction or any contract with, any Employee, or promote or appoint any Person to a position of executive officer or director of any Target Company or Employer; in each case other than (w) as set forth on Schedule 5.1(q), (x) in the ordinary course of business, (y) to replace any departing officer, employee or director or (z) if such executive officer or director’s employment or service can be terminated upon not more than 30 days’ notice or without payment in excess of $1,000,000;
(r) make or authorize any change in its Organizational Documents;
(s) abandon, encumber, assign, convey title (in whole or in part), exclusively license or grant any right or other licenses to Intellectual Property;
(t) take, or agree or otherwise commit to take, or cause GNL or RTL to take or to agree or otherwise commit to take, any action that would reasonably be expected to, individually or in the aggregate, prevent, materially delay or materially impede the consummation of the transactions contemplated hereby; or
(u) take, or agree or otherwise commit to take, any of the foregoing actions or any other action that if taken would reasonably be expected to prevent the satisfaction of any condition set forth in Article 8.
Section 5.2 Reasonable Best Efforts; Government Approvals and Other Required Third-Party Consents.
(a) Upon the terms and subject to the conditions set forth in this Agreement, each of the Parties agrees to use their respective reasonable best efforts to take, or cause to be taken, or as appropriate to refrain from taking, all actions, and to do, or cause to be done, or as appropriate to refrain from doing, all things reasonably necessary, proper or advisable to consummate, in the most expeditious manner practicable, the transactions contemplated by the Transaction Documents. In addition, Advisor Parent, GNL SLP, RTL SLP and each of the Target Companies will cooperate with GNL and the Internalization Subs and shall take all steps reasonably requested by GNL to the extent necessary to obtain any third-party consents, waivers and approvals needed to consummate the transactions contemplated hereby; provided, that, except as set forth on Schedule 5.2, neither Advisor Parent, GNL SLP, RTL SLP nor any of the Target LLCs shall be required to pay any amounts or provide other consideration to any third party in obtaining any such consents.
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(b) Without limiting the foregoing, promptly following the execution of this Agreement, but in no event later than ten (10) Business Days following the date of this Agreement, the Parties shall file, or cause to be filed by their respective “ultimate parent entities,” with the Federal Trade Commission and the Department of Justice, the notifications and other information (if any) required to be filed under the HSR Act with respect to the transactions contemplated herein and in the other Transaction Documents. In addition, Advisor Parent and GNL shall promptly proceed to prepare and file with the appropriate Governmental Entities such additional requests, reports or notifications as may be required or, in the reasonable opinion of Advisor Parent or GNL, advisable, in connection with this Agreement. GNL shall pay one hundred percent (100%) of any filing fees required in connection with the foregoing filings and submissions. With respect to each of the filings and requests contemplated by this Section 5.2(b), the Parties shall diligently and expeditiously prosecute, and shall cooperate with each other in the prosecution of, such matters, including, subject to applicable Law, by permitting counsel for the other Party to review in advance, and consider in good faith the views of the other Party in connection with any such filing or any proposed written communication with any Governmental Entity and by providing counsel for the other Party with copies of all filings and submissions made by such Party and all correspondence between such Party (and its advisors) with any Governmental Entity and any other information supplied by such Party and such Party’s Subsidiaries to a Governmental Entity or received from such a Governmental Entity in connection with the transactions contemplated by this Agreement; provided, however, that (x) materials may be redacted before being provided to the other Party as necessary to avoid disclosure of other competitively sensitive information or to address reasonable privilege or confidentiality concerns, (y) copies of documents filed by a Party pursuant to Item 4(c) of the Notification and Report Form filed with the Federal Trade Commission and the Department of Justice shall only be provided to the other Party’s counsel and (z) nothing contained herein shall require any Party to disclose to the other Party (A) information which reveals such Party’s negotiating objectives or strategies regarding the transactions contemplated hereby, (B) information relating to businesses and investments of such Party’s Affiliates (except to the extent related to the Business Assets or the business of the Target Companies) or (C) any information for which disclosure is prohibited by any Governmental Entity. Subject to the limitations set forth herein, each of Advisor Parent and GNL shall furnish to the other such necessary information and reasonable assistance as the other may reasonably request in connection with its preparation of any such filing or submission. If permitted by applicable Law and the applicable Governmental Entity, each Party agrees to provide to the other Party and its counsel the opportunity, on reasonable advance notice, to participate in any substantive meetings or discussions, either in person or by telephone, between such Party and/or any of its Affiliates and Representatives, on the one hand, and any Governmental Entity, on the other hand, concerning or in connection with the transactions contemplated hereby.
(c) Notwithstanding the foregoing, nothing in this Section 5.2 shall require, or be construed to require, any Party: (i) to dispose, transfer or hold separate, or cause any of its Affiliates to dispose, transfer or hold separate any assets or operations, or to commit or to cause the Target Companies to dispose of any assets; (ii) to discontinue or cause any of its Affiliates to discontinue offering any product or service, or to commit to cause the Target Companies to discontinue offering any product or service; or (iii) to make or cause any of its Affiliates to make any commitment (to any Governmental Entity or otherwise) regarding its future operations or the future operations of the Target Companies, and the Target Companies shall not agree, commit or consent to any of such restrictions described in clauses (i)-(iii) with respect to itself, in each case without the prior written consent of the other Parties.
(d) To the extent necessary to effect the Internalization Mergers in accordance with the terms of this Agreement, GNL shall comply with its obligations set forth in (i) Section 6.3 of the REIT Merger Agreement as in effect as of the date hereof in order to obtain the Parent Stockholder Approval (as defined in the REIT Merger Agreement), and (ii) Section 6.6 of the REIT Merger Agreement as in effect as of the date hereof, including regarding Parent Recommendation (as defined in the REIT Merger Agreement).
Section 5.3 Public Announcements. The Parties shall mutually agree in writing as to the timing and contents of any public announcement or other public communications in respect of this Agreement or the transactions contemplated hereby, including, for the avoidance of doubt, a press release announcing the execution of this Agreement (with each Party to consider the other Parties’ comments with respect to such press release and any other public announcement or public communications in good faith); provided, that this provision shall not limit any Party’s disclosure obligations as required by (i) applicable Law (including, for the avoidance of doubt, any filings pursuant to the Securities Act) or (ii) the rules and regulations of any exchange on which such Party’s or its Affiliates’ securities are traded or listed (in either case, based upon the reasonable advice of counsel). Notwithstanding the foregoing, this Section 5.3 shall not apply to any press release or other public communication to the extent it is substantially consistent with any press release, public announcement or public communication previously issued or disclosed in accordance with this Section 5.3.
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Section 5.4 Employee Covenants.
(a) As soon as practicable and no later than fifteen (15) days after the date hereof (or with respect to an Identified Employee hired after the date of this Agreement, no later than three (3) Business Days after the date of which Advisor Parent notifies GNL that such Identified Employee has been added to the list of Identified Employees), GNL shall offer employment to the Identified Employees and such offer shall provide that GNL will maintain their respective salary and target bonus and will provide incentive compensation and other benefits that are substantially comparable to the benefits currently provided to such Identified Employees and such offer of employment shall commence as of the Closing. If Advisor Parent submits a substitute for an Additional Key Employee as contemplated by Section 8.2(f), then GNL shall promptly offer employment to such substitute employee and such offer shall be on terms that are substantially comparable to the terms currently provided to the Additional Key Employee for whom they are being substituted. Employees that commence employment with GNL as of the Closing shall be referred to as “Transferred Employees.” The Parties agree that they shall cooperate in providing appropriate information as to Employees in connection with GNL’s offers of employment and onboarding of Employees.
(b) During the period commencing on the Closing and ending on the date that is twelve (12) months from the Closing (or if earlier, the date of the Transferred Employee’s termination of employment with Employer), GNL and the Internalization Subs shall, or shall cause an Affiliate of GNL and the Internalization Subs to, maintain, for each Transferred Employee, (i) their respective salary and target bonus and (ii) employee group health insurance benefits, defined contribution retirement plan benefits opportunities and equity incentive opportunities that are, in the aggregate, substantially comparable to those provided to the Transferred Employees immediately prior to the Closing. GNL and its Affiliates shall not assume or have any liability with respect to any Benefit Plan established or maintained by Employer.
(c) GNL and the Internalization Subs shall, or shall cause its Affiliates to, give each Transferred Employee full credit for such Transferred Employee’s service with Employer (and predecessors, as applicable) prior to the Closing for eligibility and vesting purposes and for purposes of vacation accrual and severance benefit determinations under any Benefit Plans established or maintained by Employer in which the Transferred Employee participates following the Closing to the same extent recognized by Employer immediately prior to the Closing under a comparable Benefit Plan in which the Transferred Employee participated; provided, however, that such service shall not be recognized (i) for purposes of benefits accrual under any defined benefit pension plans or retiree health or welfare plan or arrangement or (ii) to the extent that such recognition would result in a duplication of coverage or benefits with respect to the same period of service. GNL and the Internalization Subs shall, or shall cause its Affiliates to, (i) waive any preexisting condition limitations otherwise applicable to Transferred Employees and their eligible dependents under any plan maintained by GNL and the Internalization Subs or its Affiliates that provides health benefits in which Transferred Employees may be eligible to participate following the Closing; (ii) honor any deductible, co-payment and out-of-pocket maximums incurred by a Transferred Employee and his or her eligible dependents under the health plans in which such Transferred Employee participated immediately prior to the Closing during the portion of the plan year prior to the Closing in satisfying any deductibles, co-payments or out-of-pocket maximums under health plans maintained by GNL and the Internalization Subs or its Affiliates in which such Transferred Employee is eligible to participate after the Closing in the same plan year in which such deductibles, co-payments or out-of-pocket maximums were incurred; and (iii) waive any waiting period limitation or evidence of insurability requirement that would otherwise be applicable to a Transferred Employee and his or her eligible dependents on or after the Closing, except to the extent such waiting period or requirement would have been applicable under a comparable Benefit Plan in which the Transferred Employee participated immediately prior to the Closing.
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(d) It is anticipated that effective as of the Closing, GNL and the Internalization Subs shall, or shall cause its Affiliates to, adopt employee benefit plans effective as of the Closing, with the terms and conditions of such plans to be substantially comparable to the comparable Benefit Plans prior to the Closing, in order to meet its obligations under this Section 5.4; provided that the terms and conditions of such new benefit plans may be modified as mutually agreed to between Advisor Parent and its Affiliates and GNL and the Internalization Subs and the parties shall cooperate together in good faith.
(e) GNL shall assume the employment agreements listed on Schedule 5.4(e) (the “Foreign Transferred Employees”) and shall comply with all Laws, including any Employee Transfer Legislation, if applicable. The Parties shall cooperate in good faith with respect to any obligation to consult or inform such employees and to enter into any documents required with respect to the transfer of employment and GNL shall indemnify and hold harmless Advisor Parent with respect to any liability with respect to the Foreign Transferred Employees. The Foreign Transferred Employees shall be included in the definition of Transferred Employee.
(f) Prior to the Closing, Advisor Parent may assign the Material Employment Agreements to GNL Advisor. GNL shall assume the Material Employment Agreements at the Closing.
(g) Following the Closing, Advisor Parent agrees to provide to GNL (or a Subsidiary) the services of Advisor Parent’s employees set forth on Schedule 5.4(g) for the purposes of providing transitional services as reasonably requested by GNL on a part-time basis in connection with the transactions contemplated with this Agreement for at least the minimum number of months set forth next to each employee’s name on Schedule 5.4(g) (“Advisor Transition Services Period”); provided, that, in no event shall the Advisor Transition Services Period for any employee exceed nine (9) months. GNL agrees to reimburse Advisor Parent for the base salary, bonus and benefits of each such employee for the Advisor Transition Services Period set forth on Schedule 5.4(g) (to be pro-rated to account for the part-time arrangement), and Advisor Parent agrees not to terminate the employment of such employees other than for cause during the Advisor Transition Services Period.
(h) Following the Closing, GNL agrees to provide to Advisor Parent (or a Subsidiary) the services of GNL’s employees set forth on Schedule 5.4(h) for the purposes of providing transitional services as reasonably requested by Advisor Parent on a part-time basis in connection with the transactions contemplated with this Agreement for at least the minimum number of months set forth next to each employee’s name on Schedule 5.4(h) (“GNL Transition Services Period”); provided, that, in no event shall the GNL Transition Services Period for any employee exceed nine (9) months. Advisor Parent agrees to reimburse GNL for the base salary, bonus and benefits of each such employee for the GNL Transition Services Period set forth on Schedule 5.4(h) (to be pro-rated to account for the part-time arrangement), and GNL agrees not to terminate the employment of such employees other than for cause during the GNL Transition Services Period.
(i) The treatment of outstanding equity or equity-based awards held by Employees with respect to GNL and RTL shall be as set forth on Schedule 5.4(i).
(j) On or after the date hereof and prior to the Closing, GNL or one of its Subsidiaries shall establish a retention pool described on Schedule 5.4(j) to be granted to employees (“Retention Cash Award”) payable in cash, less applicable taxes, as recommended by Edward M. Weil, Jr. and James Nelson to the GNL Board and/or Compensation Committee (which shall make the final determination), subject to such employee’s continued employment on the payout date, which shall not exceed 12 months following the Closing. If such employee’s employment is terminated in a Qualifying Termination, then the Retention Cash Award for such employee shall be paid to such terminated employee within 30 days following the date of such Qualifying Termination. For the avoidance of doubt, GNL shall be solely responsible for the payment of the Retention Cash Award and shall take all actions necessary or desirable to effectuate the foregoing; provided that such awards may be conditioned on the Closing.
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(k) This Section 5.4 shall be binding upon and inure solely to the benefit of each of the Parties, and nothing in this Section 5.4, express or implied, shall confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Section 5.4. Nothing contained herein, express or implied, shall be construed to establish, amend or modify any benefit plan, program, agreement or arrangement, including any Benefit Plan. The Parties acknowledge and agree that the terms set forth in this Section 5.4 shall not create any right in any Transferred Employee or any other Person to any continued employment with GNL and the Internalization Subs or compensation or benefits of any nature or kind whatsoever.
Section 5.5 GNL 2021 Award Treatment.
(a) Following the date hereof and prior to the Closing, GNL Advisor shall distribute the GNL LTIP Units to GNL SLP.
(b) Immediately following the date hereof, GNL and GNL OP shall take all actions required or necessary to permit the modification of the GNL 2021 Award so that such award may be converted, upon the GNL LTIP Election (as defined below), into 2,500,000 Restricted Shares instead of 2,500,000 LTIP Units (as defined in the GNL 2021 Plan). If, following the time of such conversion but prior to the Closing, the GNL Shares have been increased, decreased, changed into or exchanged for a different number or kind of units or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, an appropriate and proportionate adjustment shall be made to the number of Restricted Shares into which the award shall convert.
(c) From and after the date hereof, Advisor Parent shall have the right, in its sole discretion, to cause the GNL 2021 Award to be modified and converted into Restricted Shares (as defined in the GNL 2021 Plan) (the “GNL LTIP Election”). For the avoidance of doubt, no conversion of the GNL 2021 Award shall occur unless Advisor Parent elects, in its sole discretion, the GNL LTIP Election.
(d) Upon Advisor Parent exercising the GNL LTIP Election, GNL shall immediately issue to GNL SLP the applicable Restricted Shares, subject to an award agreement that is substantially identical to the GNL 2021 Award, except with such modifications as are contemplated by this Section 5.5. Whether or not the GNL LTIP Election is made, all vesting conditions, whether based on time or performance, shall continue to remain in full effect, except with such modifications as are contemplated hereby (including Section 5.5(g)).
(e) Pursuant to Section 4 of the GNL 2021 Award, each of the earned GNL LTIP Units is entitled to a priority catch up distribution in cash (the “GNL Catch Up”). At the Closing, GNL OP shall pay GNL SLP the then applicable GNL Catch Up in cash as a result of any earned GNL LTIP Units.
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(f) Effective as of immediately following Advisor Parent’s exercise of the GNL LTIP Election, other than with respect to any GNL Catch Up, any dividend or distribution which would otherwise be paid or provided with respect to LTIP Units shall instead be made on the 2,500,000 Restricted Shares with the provisions of Section 4 of the GNL 2021 Award applying to such dividends or distributions prior to the Closing.
(g) Upon the Closing, all 2,500,000 Restricted Shares (or LTIP Units, as applicable) shall vest and may be earned based upon the achievement of performance as calculated at the Closing and, in the case of any such vested and earned Restricted Shares, such shares shall be released from all restrictions and will be registered pursuant to an effective registration statement under the Securities Act and, when delivered, will be freely tradeable without restriction under the federal securities Laws. If the Closing does not occur, then such Restricted Shares (or LTIP Units, as applicable) shall continue to vest in accordance with their terms.
(h) GNL and the Committee (as defined in the GNL 2021 Plan) shall take all actions, including obtaining any necessary approvals, set forth in this Section 5.5 and acknowledges and agrees that the Committee has the authority to effectuate the foregoing.
Section 5.6 RTL 2021 Award Treatment.
(a) Following the date hereof and prior to the Closing, RTL Advisor shall distribute the RTL LTIP Units to RTL SLP.
(b) Immediately following the date hereof, RTL and RTL OP shall take all actions required or necessary to permit the modification of the RTL 2021 Award so that such award may be converted, upon the RTL LTIP Election (as defined below), into 8,528,885 Restricted Shares instead of 8,528,885 LTIP Units (as defined in the RTL 2018 Plan). If, following the time of such conversion but prior to the Closing, the shares of common stock of RTL have been increased, decreased, changed into or exchanged for a different number or kind of units or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, an appropriate and proportionate adjustment shall be made to the number of Restricted Shares into which the award shall convert.
(c) From and after the date hereof, Advisor Parent shall have the right, in its sole discretion, to cause the RTL 2021 Award to be modified and converted into Restricted Shares (as defined in the RTL 2018 Plan) (the “RTL LTIP Election”). For the avoidance of doubt, no conversion of the RTL 2021 Award shall occur unless Advisor Parent elects, in its sole discretion, the RTL LTIP Election.
(d) Upon Advisor Parent exercising the RTL LTIP Election, RTL shall immediately issue to RTL SLP the applicable Restricted Shares, subject to an award agreement that is substantially identical to the RTL 2021 Award, except with such modifications as are contemplated by this Section 5.6. Whether or not the RTL LTIP Election is made, all vesting conditions, whether based on time or performance, shall continue to remain in full effect, except with such modifications as are contemplated hereby (including Section 5.6(g)).
(e) Pursuant to Section 4 of the RTL 2021 Award, each of the earned RTL LTIP Units is entitled to a priority catch up distribution in cash (the “RTL Catch Up”). At the Closing, RTL OP shall pay RTL SLP the then applicable RTL Catch Up in cash as a result of any earned RTL LTIP Units.
(f) Effective as of immediately following Advisor Parent’s exercise of the RTL LTIP Election, other than with respect to the RTL Catch Up, any dividend or distribution which would otherwise be paid or provided with respect to LTIP Units shall instead be made on the 8,528,885 Restricted Shares with the provisions of Section 4 of the RTL 2021 Award applying to such dividends or distributions prior to the Closing.
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(g) Upon the Closing, all 8,528,885 Restricted Shares (or LTIP Units, as applicable) shall vest and may be earned based upon the achievement of performance as calculated at the Closing and, in the case of any such vested and earned Restricted Shares, such shares shall be released from all restrictions and will be registered pursuant to an effective registration statement under the Securities Act and, when delivered, will be freely tradeable without restriction under the federal securities laws. If the Closing does not occur, then such Restricted Shares (or LTIP Units, as applicable) shall continue to vest in accordance with their terms.
(h) GNL and the Committee (as defined in the RTL 2018 Plan) shall take all actions, including obtaining any necessary approvals, set forth in this Section 5.6 and acknowledges and agrees that the Committee has the authority to effectuate the foregoing.
Section 5.7 Waiver of Ownership Limitations. Advisor Parent acknowledges and understands that each of GNL and RTL intends to continue to operate in such a manner as to qualify as a REIT for the taxable year ended December 31, 2023 and beyond. Upon or prior to the Closing Date, GNL shall (a) waive pursuant to its Organizational Documents (and subject to the terms thereof) by the filing of a Certificate of Notice with the Maryland State Department of Assessments and Taxation any ownership limitations set forth in GNL’s Organizational Documents with respect to GNL Shares held by Advisor Parent or any Person that is a direct or indirect equity owner thereof, or otherwise exempt pursuant to its Organizational Documents (and subject to the terms thereof) Advisor Parent or any such Person from such ownership limitations, in each case to the extent such limitations would otherwise impact or restrict the ability for the Aggregate Share Consideration to be issued in full pursuant to this Agreement or the ability for LTIP Units to be fully exchanged for GNL Shares (including by designating Advisor Parent or any such Person as an “Excepted Holder” with an “Excepted Holder Limit” and decreasing the “Aggregate Share Ownership Limit” for all other Persons (each as defined in GNL’s Articles of Restatement)); and (b) provide Advisor Parent with evidence reasonably satisfactory to Advisor Parent of such waiver or exemption, and any such amendment. In connection with the foregoing, Advisor Parent shall execute, and shall cause any other Person that is a direct or indirect equity owner of Advisor Parent and that Beneficially Owns or Constructively Owns shares of stock of GNL or RTL (as applicable), or is otherwise designated as an “Excepted Holder” (as defined in GNL’s Articles of Restatement) on or prior to the Closing Date, to execute, an Ownership Limit Waiver Agreement (including, for the avoidance of any doubt, a Certificate of Representations and Covenants for Ownership Limited Waiver) in the form attached hereto. The foregoing waiver is dependent on (x) the ownership of Advisor Parent as reflected on Schedule 3.24 as of the date hereof being true, correct, and complete in all material respects as of the Closing, and (y) all distributions from Advisor Parent shall be made in accordance with such ownership.
Section 5.8 Assignment and Assumption Agreement. Prior to Closing, the Parties shall cooperate in good faith to negotiate and memorialize one or more Assignment and Assumption Agreements, in a form mutually acceptable to the Parties, pursuant to which the Business Assets will be transferred to the Target Companies (the “Assignment and Assumption Agreement”). The Assignment and Assumption Agreement shall be executed and delivered prior to the Closing and effective as of immediately prior to the Closing.
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Section 5.9 Access to Information.
From and after the date hereof until the Closing and subject to applicable Law, Advisor Parent shall, and shall direct each of its Affiliates, Subsidiaries and Representatives to, afford to GNL, RTL and their respective Representatives access, during normal business hours, upon reasonable advance prior written notice and in such manner as will not unreasonably interfere with the conduct of the business of the Advisor Parties, to all properties, books and records of the Target Companies, and all other information with respect to the business of the Target Companies or the Business Assets, together with the opportunity to make copies (at GNL’s expense) of such books, records and other documents and to discuss the business of the Target Companies or the Business Assets with such members of management, officers, directors, counsel, accountants and other Representatives for the Advisor Parties as GNL, RTL and their respective Representatives may reasonably request in writing, and the Advisor Parties shall use their commercially reasonable efforts to direct such members of management, officers, directors, counsel, accountants and other Representatives to reasonably cooperate with GNL, RTL and their respective Representatives in connection therewith. Notwithstanding the foregoing provisions of this Section 5.9, the Advisor Parties shall not be required to, or to cause any of their Affiliates or Subsidiaries to, grant access or furnish information to GNL, RTL or their respective Representatives to the extent that (i) such access would jeopardize attorney/client or attorney work product privilege, taking into account whether GNL and/or RTL is willing to enter into a customary joint defense agreement or similar arrangement or (ii) such access or the furnishing of such information is prohibited by applicable Law. In the event the Advisor Parties do not provide access or information pursuant to clauses (i) or (ii) of the preceding sentence, Advisor Parent will provide notice to GNL and RTL that such information is being withheld, and Advisor Parent will cause such entity to use its commercially reasonable efforts to communicate, to the extent feasible, the applicable information in a way that will not violate the applicable privilege or applicable Law and, if applicable, seek a waiver of any applicable third-party restrictions. All information provided pursuant to this Agreement shall remain subject in all respects to the letter agreement, dated April 2, 2023, by and among GNL, RTL and Advisor Parent.
Section 5.10 Post-Closing Asset Transfers. To the extent that GNL or any of the Target Companies discover following the Closing that any Business Asset that was intended to be transferred pursuant to this Agreement was not transferred at Closing, Advisor Parent shall or shall cause its Affiliates to promptly assign and transfer to the applicable Target Company all right, title and interest in such asset. To the extent that Advisor Parent discovers following the Closing that any asset that was included in the Business Assets but was not intended to be transferred pursuant to this Agreement was transferred at Closing, the applicable Target Company shall or shall cause its Affiliates to promptly to assign and transfer to the applicable Advisor Party all right, title and interest in such asset.
Section 5.11 Non-Waiver of Restrictive Covenants. Advisor Parent shall not waive, and shall enforce if reasonably requested, any of its rights under the agreements described on Schedule 5.11 without the prior written consent of GNL. GNL shall pay the expenses related to the enforcement of such agreements to the extent enforcement is initiated at the request of GNL.
Section 5.12 Non-Waiver of Condition. GNL and RTL shall not waive, amend or modify the condition set forth in Section 7.1(e) of the REIT Merger Agreement in effect as of the date hereof.
Section 5.13 Further Assurances. Following the Closing, each of the Parties shall, and shall cause their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement and the other Transaction Documents.
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ARTICLE 6
ADDITIONAL AGREEMENTS
Section 6.1 Tax Matters.
(a) Income Tax Returns. Advisor Parent will prepare and file, or cause to be prepared and filed, all Tax Returns that are filed or required to be filed with respect to or otherwise include the activities of any Target Company for all taxable periods ending on or prior to the Closing Date (“Pre-Closing Returns”). All Pre-Closing Returns required to be filed by a Target Company will be prepared in accordance with past practices of any Target Company, unless otherwise required by applicable Law. GNL will cooperate with Advisor Parent in filing Pre-Closing Returns, including causing any Target Company to sign Pre-Closing Returns, as necessary. Advisor Parent shall provide drafts of Pre-Closing Returns required to be filed by a Target Company to GNL at least thirty (30) days prior to the due date for filing such Pre-Closing Returns and GNL shall have such thirty (30) day period to review and provide comments to the Pre-Closing Returns, which comments shall be considered by Advisor Parent in good faith. Advisor Parent shall timely pay all Taxes shown as due on the Pre-Closing Returns.
(b) Other Tax Returns. GNL shall cause to be prepared and timely filed any Tax Returns required to be filed by a Target Company relating to a Straddle Period (all such Tax Returns, the “GNL Returns”). Any such GNL Returns shall be prepared in a manner consistent with past practice of the applicable Target Company, unless otherwise required by applicable Law. GNL shall provide drafts of any GNL Returns to Advisor Parent at least ten (10) days prior to the due date for filing such GNL Returns and Advisor Parent shall have such ten (10) day period to review and provide comments to the GNL Returns, which comments shall be considered by GNL in good faith. Advisor Parent shall pay to GNL the amount of any Taxes that relates to the pre-Closing portion of a Straddle Period (as determined under Section 6.1(c)) reflected on a GNL Return at least three (3) days before payment of such Taxes (including estimated Taxes) is due to the relevant Governmental Entity.
(c) Straddle Period Allocation. For any Tax payable for a Straddle Period, the portion of such Tax that relates to the pre-Closing portion of the Straddle Period will be: (i) in the case of Taxes based upon or related to income or receipts and payroll Taxes, equal to the amount that would be payable if the relevant Tax period ended on the Closing Date; and (ii) in the case of all other Taxes, equal to the amount of such Tax for the entire Straddle Period, multiplied by the number of calendar days in the pre-Closing portion of the Straddle Period (including the Closing Date) and divided by the total number of calendar days in the entire Straddle Period. The portion of any Tax for a Straddle Period that is allocated to the post-Closing portion of a Straddle Period will equal the balance of the Tax attributable to the Straddle Period.
(d) Tax Refunds. Advisor Parent shall be entitled to any refund of Taxes (or credit in lieu thereof if and when the credit reduces Taxes payable) that are attributable to a Pre-Closing Tax Period. To the extent GNL, GNL OP, or any of their Affiliates (including the Target Companies following the Closing) recovers any such refund (or credit in lieu thereof if and when the credit reduces Taxes payable), it shall promptly pay such refund (or credit in lieu thereof if and when the credit reduces Taxes payable) to Advisor Parent (net of any reasonable and documented out-of-pocket costs and additional Taxes GNL, GNL OP, or any of their Affiliates (including the Target Companies following the Closing) incurs as a result of the receipt of such refund (or credit in lieu thereof if and when the credit reduces Taxes payable)).
(e) Tax Sharing Agreements. All tax sharing or similar agreements of any Target Company, on the one hand, and Advisor Parent, its Affiliates or any third party, on the other hand, shall be terminated prior to the Closing Date, and, after the Closing Date, none of the Target Companies shall be bound thereby or have any liability thereunder.
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(f) Transfer Taxes. All transfer, stamp, documentary, sales, use, registration, value-added and other similar Taxes (including all applicable real estate transfer Taxes) incurred in connection with this Agreement and the transactions contemplated hereby, along with any filing expenses relating thereto (“Transfer Taxes”) will be borne fifty percent (50%) by GNL and fifty percent (50%) by Advisor Parent. Each Party hereby agrees to file in a timely manner all necessary documents (including, but not limited to, any related Tax Returns) with respect to all such amounts for which such Party is so liable and, if required by applicable Law, the Parties will, and will cause their respective Affiliates to, join in the execution of any such Tax Returns and other documentation. Each Party shall provide the other Party with evidence satisfactory to such other Party that such Transfer Taxes have been paid by such Party.
(g) Tax Cooperation. After the Closing, the Parties will cooperate in good faith with respect to the preparation and filing of all Tax Returns (including claims for refund of Taxes) and any Action with respect to Taxes. Each Party will make their respective relevant books and records (including work papers in the possession of their respective accountants), personnel, and other materials relevant to the preparation of such Tax Returns or Tax Actions available for inspection and copy by the other Parties (or their duly appointed representatives), at the requesting Party’s expense, at reasonable times during normal business hours. Until the end of the applicable statute of limitation, the Parties will not destroy or otherwise dispose of any such record without first providing the other Parties a reasonable opportunity to review and copy such record.
(h) Tax Withholding. Notwithstanding any other provision in this Agreement, GNL shall have the right to deduct and withhold any Taxes required to be deducted and withheld under applicable Law from any payments to be made hereunder. To the extent that amounts are so deducted and withheld and paid to the appropriate Taxing Authority, such withheld amounts shall be treated for all purposes of this Agreement as having been delivered and paid to Advisor Parent or any other recipient of payment in respect of which such deduction and withholding was made. Each Party shall endeavor in good faith to reduce or eliminate any such deduction and withholding, including by providing the other Parties advance notice of any intention to so deduct and withhold, and by providing any applicable Tax forms and certifications that it is legally entitled to provide.
Section 6.2 Waiver of Employee Non-Compete, Non-Solicitation. The Parties acknowledge and agree that, with respect to any Employee, effective as of the date of this Agreement and lasting until the Closing or the termination of this Agreement in accordance with its terms, any Non-Solicitation Covenant is hereby waived by the Employer with respect to GNL and the Internalization Subs for the limited purpose of retaining such Employee in connection with the Internalization Merger. To the extent an Employer is not party to this Agreement, a separate agreement shall be executed and delivered by such Employer effectuating the terms of this Section 6.2.
Section 6.3 Assignment of Business Assets.
(a) Notwithstanding anything to the contrary in this Agreement, to the extent that any sale, transfer, conveyance or assignment or attempted sale, transfer, conveyance or assignment of any Identified Contract (other than the Shared Contracts which are subject to Section 6.5) or other Business Asset to be sold, transferred, conveyed or assigned to the Target Companies, or any claim, right or benefit arising thereunder or resulting therefrom (collectively, the “Interests”), would constitute a breach thereunder or with respect thereto, or such Interest is not capable of being sold, transferred, conveyed or assigned without any consent, approval or authorization which has not been obtained by (or does not remain in full force and effect at) the Closing, this Agreement shall not constitute a sale, transfer, conveyance or assignment thereof, or an attempted sale, transfer, conveyance or assignment thereof, unless and until such Interest (a “Retained Interest”) can be sold, transferred, conveyed and assigned without such a breach or such consent, approval or authorization is obtained, at which time such Retained Interest shall be deemed to be sold, transferred, conveyed and assigned for no additional consideration and shall cease to be a Retained Interest. Upon the written request of GNL, Advisor Parent shall use its commercially reasonable efforts (including the dedication of resources thereto, but without any obligation to expend money or offer or grant any financial or other accommodation to any third party, except in each case to the extent required by Section 5.2, or commence litigation) to obtain any such consent, approval or authorization as promptly as reasonably practicable after the Closing Date.
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(b) To the extent any of the consents, approvals or authorizations necessary to sell, transfer, convey or assign any Interest has not been obtained (or does not remain in full force and effect) as of the Closing, Advisor Parent and GNL shall, while such Interest remains a Retained Interest, use their commercially reasonable efforts (including the dedication of resources thereto, but without any obligation to expend money or offer or grant any financial or other accommodation to any third party, except in each case to the extent required by Section 5.2, or commence litigation) to (i) cooperate in any reasonable and lawful arrangements designed to provide the benefits of such Retained Interest to GNL or the applicable Target Company; and (ii) enforce, at the request of GNL and at its expense, any rights of the Advisor Parties arising from such Retained Interest against the issuer thereof or the other party or parties thereto (including the right to elect to terminate any such Retained Interest in accordance with the terms thereof upon the request of GNL). In connection with any such arrangement, GNL shall reimburse Advisor Parent for any costs and expenses actually incurred by Advisor Parent in connection with the performance of any mutually agreeable arrangement or that otherwise would have been incurred by GNL or its Affiliates had such Interest been assigned, transferred or conveyed as contemplated by this Agreement, including any Liability arising out of GNL’s failure to perform thereunder (such costs and expenses, the “Alternative Arrangement Costs”).
Section 6.4 Shared Contracts.
(a) The Parties acknowledge that Advisor Parent and its Subsidiaries (including the Target Companies) are parties to certain of the Identified Contracts (collectively, the “Shared Contracts”) that relate in part to both (i) the operations or conduct of the business of the Target Companies and (ii) the operations or conduct of the business of Advisor Parent and its Subsidiaries other than the operations or conduct of business of the Target Companies (the “Retained Businesses”). Subject to Section 6.5(c), Advisor Parent and GNL shall cooperate with each other and use their respective commercially reasonable efforts prior to the Closing (i) to cause each Shared Contract to be apportioned (including by obtaining the consent of such counterparty to enter into a new contract or amendment, or splitting or assigning in relevant part such Shared Contract), effective as of the Closing, between the Target Companies and Advisor Parent and its Subsidiaries other than the Target Companies, pursuant to which Advisor Parent and its Subsidiaries other than the Target Companies will assume all of the rights and obligations under such Shared Contract that relate to the Retained Businesses, on the one hand, and the Target Companies will assume all of the rights and obligations under such Shared Contract that relate to the business of the Target Companies, on the other hand; and (ii) in the case of Advisor Parent and its Subsidiaries other than the Target Companies, to cause the applicable counterparty to release the Target Companies, as applicable, from the obligations of Advisor Parent and its Subsidiaries other than the Target Companies arising after the Closing Date under the portion of the Shared Contract apportioned to Advisor Parent and its Subsidiaries other than the Target Companies and, in the case of the Target Companies, to cause the applicable counterparty to release Advisor Parent and its Subsidiaries other than the Target Companies from the obligations of the Target Companies arising after the Closing Date under the portion of the Shared Contract apportioned to the Target Companies. Subject to Section 6.5(c), with respect to any Shared Contract for which the arrangements described in this Section 6.4(a) could not be entered into prior to the Closing, (i) Advisor Parent and GNL shall work in good faith to determine the feasibility of separating such Shared Contract and (ii) if, notwithstanding such good-faith efforts, the Parties are unable to agree on a mutually satisfactory plan for separating any such Shared Contract, Advisor Parent and GNL will negotiate in good faith appropriate means for (1) GNL and its Subsidiaries (including the Surviving Entities) to obtain the benefits and assume the obligations associated with the portion of such Shared Contract relating to the business of the Target Companies for a transitional period to be no longer than nine (9) months following the Closing and (2) Advisor Parent and its Subsidiaries to obtain the benefits and assume the obligations associated with the portion of such Shared Contract relating to the Retained Businesses for a transitional period.
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(b) From and after the Closing, (x) GNL shall indemnify and hold harmless Advisor Parent and its Subsidiaries against all Losses arising from or relating to the portion of any Shared Contract apportioned to the Target Companies, (y) Advisor Parent shall indemnify and hold harmless GNL and its Subsidiaries (including the Surviving Entities) against all Losses arising from or relating to the portion of any Shared Contract apportioned to Advisor Parent and its Subsidiaries other than the Target Companies and (z) GNL and the Surviving Entities shall not extend the term or otherwise amend the terms of any Shared Contract in a manner that would adversely affect any member of Advisor Parent and its Subsidiaries without Advisor Parent’s prior written consent, and Advisor Parent and its Subsidiaries shall not extend the term or otherwise amend the terms of any Shared Contract in a manner that would adversely affect GNL or the Surviving Entities without GNL’s prior written consent.
(c) Notwithstanding anything to the contrary in this Section 6.5, prior to the Closing, Advisor Parent shall take or cause to be taken all actions necessary to fully assign to the Target Companies the following lease agreements: (i) the Agreement of Lease dated as of June 13, 2019 by and between 650 Fifth Avenue Company and AR Global Investments, LLC and, (ii) the Lease Agreement, dated as of January 26, 2018, by and between ARG EXCNPTRI 01, LLC and AR Global Investments, LLC.
Section 6.5 Advisory Agreements. The Parties acknowledge and agree that, at the Closing, each of the Advisory Agreements shall be terminated in accordance with their respective terms and the Parties shall take any action necessary or advisable to effect such termination in accordance with the terms of this Section 6.5; provided, however, that, notwithstanding the foregoing, the Parties acknowledge and agree that as contemplated in the Advisory Agreements, any and all obligations that survive Closing and the termination of the respective Advisory Agreement shall survive in accordance with their respective terms (including, for the avoidance of doubt and without limiting the generality of this sentence, Section 8 of the GNL Advisory Agreement in favor of each Advisor Indemnified Party (as defined therein; provided, that the Parties acknowledge and agree that each of Advisor Parent and its Affiliates, officers, directors, managers, employees, executors, administrators, estate, successors, heirs and assigns (as applicable) shall be deemed to be Advisor Indemnified Parties for all purposes of indemnification under the GNL Advisory Agreement) and Sections 20 and 21 of the RTL Advisory Agreement in favor of each Indemnitee (as defined therein; provided, that the Parties acknowledge and agree that each of Advisor Parent and its Affiliates, officers, directors, managers, employees, executors, administrators, estate, successors, heirs and assigns (as applicable) shall be deemed to be an Indemnitee for all purposes of indemnification under the GNL Advisory Agreement). In addition, notwithstanding anything to the contrary in this Agreement, the REIT Merger Agreement, or any of the Contracts listed on Schedule 6.5, each of the provisions related to indemnification set forth in each of the Contracts listed on Schedule 6.5 shall survive the mergers. The Parties acknowledge that the provisions of this Section 6.5 are for the benefit of any of Advisor Parent or its Affiliates other than the Target Companies entitled to indemnification pursuant to the GNL Advisory Agreement or the RTL Advisory Agreement), and such Persons are intended as an express third-party beneficiary of the provisions of this Section 6.5 and shall have the right, exercisable in their sole discretion, to enforce the terms and conditions of this Section 6.5.
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Section 6.6 Maintenance of Net Worth. From and after the Closing until the twenty-four (24) month anniversary of the Closing Date, Advisor Parent shall maintain a net worth of not less than the amount set forth on Schedule 6.6 (the “Certification Period”). Promptly after the end of each fiscal quarter during the Certification Period, Advisor Parent shall deliver to GNL a certificate which demonstrates Advisor Parent’s compliance with this Section 6.6, and promptly after the end of each fiscal year during the Certification Period, Advisor Parent shall deliver to GNL a certification signed by Advisor Parent’s independent accountant that certifies Advisor Parent’s compliance with this Section 6.6. The obligations of Advisor Parent set forth in this Section 6.6 shall terminate in accordance with Section 7.11.
Section 6.7 Release.
(a) From and after the Closing, each of Advisor Parent, GNL SLP and RTL SLP agrees, on behalf of itself and its Affiliates, officers, directors, managers, employees, executors, administrators, estate, successors, heirs and assigns (as applicable) (collectively, the “Releasing Parties”), that none of the Target Companies or the current or former officers and directors of any Target Company (solely in such capacities) as of or prior to the Closing Date (the “Released Parties”) shall have any liability or responsibility to any of the Releasing Parties from and after the Closing, and each of the Releasing Parties, hereby unconditionally, absolutely, generally, irrevocably and completely release, remise, relinquish, waive and forever discharge the Released Parties from any obligations or liability arising out of, or relating to, any matter, occurrence, action or activity prior to the Closing, except for (i) any right, claim or entitlement of such Releasing Party under this Agreement and the other Transaction Documents, including the Fraud of any Person, (ii) any obligation of a Target Company under its Organizational Documents to indemnify such Releasing Party as a director, officer, manager or employee or any insurance policy of the Target Company with respect thereto, (iii) the indemnification provisions under the GNL Advisory Agreement, the RTL Advisory Agreement and the other agreements identified on Schedule 6.5 contemplated to survive pursuant to Section 6.5, and (iv) any claims which cannot be released as a matter of applicable Law.
(b) The foregoing releases extend to any and all claims of any nature whatsoever, whether known, unknown or capable or incapable of being known as of the Closing or thereafter, and includes any and all claims, actions, demands, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, Contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, expenses, executions, affirmative defenses, demands and other obligations or liabilities whatsoever, in law or equity. As of the Closing, each Releasing Party (in its capacity as such) hereby irrevocably agrees to refrain from, directly or indirectly, asserting, commencing, instituting or causing to be commenced, any Action, of any kind against any applicable Released Party, based upon any matter purported to be released hereby. The Releasing Parties (in their respective capacities as such) hereby explicitly waive all rights with respect to the foregoing releases under the provisions of Section 1542 of the California Civil Code, which section provides in pertinent part: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.” The Releasing Parties (in their respective capacities as such) agree that no provision of Section 1542 of the California Civil Code shall affect the validity or scope of any other aspect of the foregoing releases. The Releasing Parties (in their respective capacities as such) hereby expressly waive any and all rights with respect to the foregoing releases which they may have under any other provision of state or federal Law providing the same or similar effect.
Section 6.8 Preparation of Audited Financial Statements. Advisor Parent shall, and shall cause its independent accountants to, cooperate with GNL and its independent accountants to prepare audited financial statements for the Target LLCs (inclusive of the Business Assets) for inclusion in the Form S-4 and joint proxy statement to be filed with the Securities and Exchange Commission in connection with the REIT Merger. Without limiting the generality of the foregoing, Advisor Parent agrees that it will (a) consent to the use of such audited financial statements in any proxy statement or other document filed by GNL (or any of its Subsidiaries) under the Securities Act or the Exchange Act, and (b) execute and deliver, and cause its officers to execute and deliver, such “representation” letters as are customarily delivered in connection with audits and as Advisor Parent’s independent accountants may reasonably request under the circumstances.
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ARTICLE 7
INDEMNIFICATION; NON-RELIANCE
Section 7.1 Advisor Parent Indemnification. From and after the Closing, subject to the other provisions of this Article 7, Advisor Parent agrees to indemnify, defend, and hold GNL and each Surviving Entity (each, a “GNL Indemnified Party”), harmless from and against any and all Losses incurred by any GNL Indemnified Party arising from, as a result of, in connection with, or relating to:
(a) the breach of any representation or warranty made by Advisor Parent or the Target LLCs contained in Article 3 of this Agreement;
(b) the breach or failure to perform any covenant or agreement made or undertaken by (i) Advisor Parent in this Agreement and (ii) the Target LLCs in this Agreement, in the case of clause (ii), solely to the extent such covenant or agreement or undertaking contemplates performance prior to the Closing;
(c) any Taxes (i) relating to, or arising in connection with, the Target Companies or the Business Assets with respect to (or relating to any event, election, circumstance or transaction occurring in) any Pre-Closing Tax Period, (ii) of or with respect to Advisor Parent or its Affiliates, stockholders, partners, managers, and members (excluding the Target Companies) with respect to any Tax period, (iii) any Transfer Taxes, (iv) Taxes of any Person imposed on a Target Company under Treasury Regulations Section 1.1502-6 (or any similar provision of any other applicable Law), as a transferee or successor, by Contract, or otherwise, in each case of this clause (iv), as a result of an event or transaction occurring on or before the Closing Date, or (v) any withholding Taxes imposed on or otherwise due with respect to any payment to Advisor Parent or its respective Affiliates under this Agreement; and
(d) any Advisor Closing Amount to the extent not factored into the amounts paid pursuant to Section 2.2(b) or Section 2.3(d).
Section 7.2 GNL Indemnification. From and after the Closing, subject to the other provisions of this Article 7, GNL agrees to indemnify, defend and hold Advisor Parent and its Affiliates and its and their respective officers, directors, stockholders, partners, managers, and members and their respective heirs, legatees, devisees, executors, administrators, trustees, personal representatives, successors and assigns (each, an “Advisor Parent Indemnified Party”), harmless from and against any and all Losses incurred by any Advisor Parent Indemnified Party arising from, as a result of, in connection with, or relating to:
(a) the breach by GNL or any Internalization Sub of any representation or warranty made by GNL or any Internalization Sub and contained in Article 4;
(b) the breach or failure to perform any covenant or agreement made or undertaken by GNL or any Internalization Sub in this Agreement; and
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(c) any GNL Closing Amount to the extent not factored into the amounts paid pursuant to Section 2.2(b) or Section 2.3(d).
The Parties acknowledge that the provisions of this Section 7.2 are for the benefit of each Advisor Parent Indemnified Party and each Advisor Parent Indemnified Party is intended as an express third-party beneficiary of the provisions of this Article 7 and shall have the right, exercisable in their sole discretion, to enforce the terms and conditions of this Section 7.2.
Section 7.3 Indemnifying Procedures.
(a) Upon receipt by an Advisor Parent Indemnified Party or a GNL Indemnified Party, as the case may be (the “Indemnified Party”), of notice or information from a Third Party of any action, suit, proceeding, claim, demand or assessment against such Indemnified Party that could reasonably be expected to give rise to a claim for Losses under this Article 7 (a “Third Party Claim”), the Indemnified Party shall, as quickly as is practicable (but in any event within thirty (30) days after becoming aware of an indemnification claim) and by the most expeditious means available (promptly confirmed in writing), deliver notice thereof to GNL and the Surviving Entities, on the one hand, or Advisor Parent, on the other hand, as the case may be (the “Indemnifying Party”), indicating with reasonable particularity the nature of such Third Party Claim, the basis therefor and such additional relevant information in the Indemnified Party’s possession that the Indemnifying Party may reasonably request; provided, however, that failure to give such notice shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure. The Indemnifying Party will have thirty (30) days after its receipt of such notice of a Third Party Claim (the “Notice Period”) to notify the Indemnified Party whether or not it desires, at the cost and expense of the Indemnifying Party, to defend the Indemnified Party with respect to such Third Party Claim; provided, however, that any Indemnified Party is hereby authorized, but is not obligated, prior to and during the Notice Period, to file any motion, answer or other pleading that it reasonably shall deem necessary or appropriate to protect its interests or those of the Indemnifying Party. If the Indemnifying Party notifies the Indemnified Party within the Notice Period that it desires to defend the Indemnified Party against the Third Party Claim, the Indemnifying Party will have the right to control the defense of such matter by all appropriate proceedings and with counsel of its own choosing and at its sole cost and expense; provided that the Indemnifying Party shall not have the right to control the defense of any matter that (i) arises in connection with a criminal Action or seeks an injunction or other equitable relief against the Indemnified Party, (ii) would reasonably be likely to result in Losses that are greater than 150% of the amount in respect of which the Indemnifying Party could be obligated to provide indemnification under this Agreement in respect of the applicable Third Party Claim. If the Indemnifying Party fails to respond to the Indemnified Party within the Notice Period, elects not to defend the Third Party Claim, or after electing to defend fails to timely commence or reasonably pursue such defense, in each case, without curing such failure within thirty (30) days of receiving notice of such failure from the Indemnified Party, then the Indemnified Party shall have the right, but not the obligation, to undertake or continue the defense of, and to compromise or settle, the matter all on behalf, for the account, and at the risk, of the Indemnifying Party; provided, however, that any such compromise or settlement (i) consists solely of money damages to be borne by the Indemnifying Party (subject to the limitations set forth in this Article 7), and (ii) contains as an unconditional term thereof a full and complete release of the Indemnifying Party and the Indemnified Party by the Third Party. If the Indemnifying Party has assumed the defense of a Third Party Claim, (i) it shall reasonably proceed with such defense and promptly notify the Indemnified Party if it proposes to compromise or settle such Third Party Claim for the account, or at the risk, of the Indemnifying Party and (ii) it shall have the right to compromise or settle such Third Party Claim (A) without the prior consent of the Indemnified Party so long as such compromise or settlement (x) consists solely of money damages to be borne by the Indemnifying Party and (y) contains a full and complete release of the Indemnified Party by the Third Party or (B) in any other case, subject to the consent of the Indemnified Party, such consent to not be unreasonably withheld, delayed or conditioned. If the Indemnifying Party has assumed the defense of a Third Party Claim, the Indemnified Party shall have the right to participate in the defense with counsel selected by it at its own cost and expense (unless there exists a material conflict of interest with the Indemnifying Party controlling the defense which, as advised in writing by counsel to the Indemnified Party, necessitates separate counsel for effective representation), and its counsel shall reasonably cooperate with the Indemnifying Party and its counsel; provided, however, that the foregoing shall not prevent the Indemnified Party from taking the position that it is entitled to indemnification hereunder.
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(b) In the event any Indemnified Party should have an indemnification claim against any Indemnifying Party under a Transaction Document that does not involve a Third Party Claim, the Indemnified Party shall, as quickly as is practicable (but in any event within thirty (30) days after becoming aware of an indemnification claim) and by the most expeditious means available (promptly confirmed in writing), deliver notice thereof to the Indemnifying Party, indicating with reasonable particularity the nature of such claim, the basis therefor and such additional relevant information in the Indemnified Party’s possession that the Indemnifying Party may reasonably request; provided, however, that failure to give such notice shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure. If the Indemnifying Party disputes its liability with respect to such claim in a timely manner, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute and, if not resolved through negotiations, such dispute may be resolved by litigation before an appropriate Governmental Entity of competent jurisdiction.
(c) GNL and the Surviving Entities shall, as well as their respective directors, officers, partners, and employees, attorneys, accountants and agents to, at the request of Advisor Parent, cooperate with Advisor Parent as may be reasonably required in connection with the investigation and defense of any Third Party Claim, Action or investigation relating to Advisor Parent’s business that is brought against Advisor Parent or any of its Affiliates relating in any way to the business of the Target Companies at any time on or after the Closing.
Section 7.4 Survival. The Parties, intending to modify the applicable statute of limitations, agree that each of the representations and warranties, and each of the covenants and agreements (to the extent such covenant or agreement contemplates or requires performance at or prior to the Closing), of the Parties set forth in this Agreement, in any other Transaction Document and in any certificate delivered pursuant hereto or thereto shall terminate effective as of the Closing and shall not survive the Closing for any purpose, except as set specifically set forth below:
(a) (i) the representations and warranties set forth in Article 3 and Article 4 of this Agreement (other than the Fundamental Representations) shall survive until the fifteen (15) month anniversary of the Closing Date, and (ii) the Fundamental Representations shall survive until the four (4)-year anniversary of the Closing Date (collectively, in each respect, the “Survival Period”);
(b) all covenants and other agreements made by or obligating any Party contained in this Agreement, in any other Transaction Document or in any certificate delivered pursuant hereto or thereto, the performance of which is specified to occur on, at or prior to the Closing, shall survive for six (6) months following the Closing Date;
(c) all covenants and other agreements made by or obligating any Party contained in this Agreement or in any other Transaction Document that by their terms are to be performed after the Closing shall survive the Closing until performed in full or the obligation to perform shall have expired in accordance with the terms of this Agreement or such other Transaction Document; and
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(d) the obligations of Advisor Parent to indemnify the GNL Indemnified Parties pursuant to Section 7.1(c) shall survive the Closing until sixty (60) days following expiration of the applicable statute of limitations.
Section 7.5 Limitations. Notwithstanding anything to the contrary contained in this Agreement or in any other Transaction Document:
(a) (i) No GNL Indemnified Party will be entitled to indemnification under Section 7.1(a) of this Agreement unless such GNL Indemnified Party has incurred Losses in excess of $3,750,000 in the aggregate (the “Deductible”), in which case such GNL Indemnified Party will be entitled to indemnification under Section 7.1(a) of this Agreement only to the extent the aggregate Losses with respect to such claims exceed the Deductible; provided, however, that the Deductible shall not apply to Losses with respect to the breach of any Advisor Fundamental Representations; (ii) the aggregate amount of all Losses that the GNL Indemnified Parties may recover under Section 7.1(a) of this Agreement (other than with respect to the Advisor Fundamental Representations) shall not exceed $28,125,000 (the “Cap”); and (iii) notwithstanding anything to the contrary in this Agreement, the maximum aggregate liability of Advisor Parent pursuant to this Article 7 shall be $56,250,000 (the “Overall Cap”).
(b) The amount of any Loss for which indemnification is provided under this Article 7 shall be net of (i) any amounts recovered by the Indemnified Party pursuant to any indemnification by, or indemnification agreement with, any Third Party or (ii) insurance proceeds or other sources of reimbursement received, which shall be an offset against such Loss. The Indemnified Party shall use commercially reasonable efforts to seek recovery from all such sources to minimize any Loss for which indemnification is provided under this Article 7. If the amount to be netted hereunder from any payment required under this Article 7 is determined after payment by the Indemnifying Party of any amount otherwise required to be paid to an Indemnified Party pursuant to this Article 7, the Indemnified Party shall repay to the Indemnifying Party, promptly after such determination, any amount that the Indemnifying Party would not have had to pay pursuant to this Article 7 had such determination been made at the time of such payment.
(c) Notwithstanding anything to the contrary contained herein, an Indemnified Party’s right to indemnification, payments of Losses or any other remedy based on the representations, warranties, covenants and agreements contained in this Agreement will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time by any Party, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or agreement. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or agreement, will not affect the right to indemnification, payment of Losses, or any other remedy based on such representations, warranties, covenants and agreements.
Section 7.6 Exclusive Remedy. The Parties acknowledge and agree that if the Closing occurs, the remedies provided for in Article 7 of this Agreement shall be the Parties’ sole and exclusive remedies with respect to the subject matter of this Agreement, other than for a claim of Fraud. The Parties further acknowledge and agree that nothing in this Agreement shall limit the rights of the Parties to seek equitable remedies (including injunctive relief or specific performance). It is the Parties’ intention that the indemnification provisions set forth in Article 7 shall control and determine the Parties’ respective rights and obligations concerning any claims with respect to the Business Assets and the matters contemplated by this Agreement.
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Section 7.7 Nature of Damages. Notwithstanding anything to the contrary contained in this Agreement or any other Transaction Document, in no event shall any Indemnifying Party be liable to any Indemnified Party for any punitive, exemplary, or other similar damages, for any breach or default under, or any act or omission arising out of, or in any way relating to, this Agreement or any other Transaction Document, or the transactions contemplated hereby or thereby, under any form of action whatsoever, whether in contract or otherwise, except to the extent awarded to a Third Party in connection with a Third Party Claim.
Section 7.8 Method of Payment. All amounts due and payable from an Indemnifying Party to an Indemnified Party shall be made by wire transfer of immediately available funds within five (5) Business Days following final determination of a claim pursuant to Section 7.3, provided, however, that at Advisor Parent’s sole discretion, any amount payable to a GNL Indemnified Party pursuant to this Article 7 may be satisfied by delivery by Advisor Parent of an amount of GNL Shares based on a per share value of GNL Share equal to the Five-Day VWAP as of the date of payment.
Section 7.9 Indemnification Pursuant to the Other Agreements. The Parties acknowledge and agree that, notwithstanding the termination of the Advisory Agreements in accordance with their terms pursuant to and in accordance with Section 6.5 of this Agreement and in connection with the consummation of the transactions contemplated by this Agreement, the indemnification obligations set forth in (i) Section 8 of the GNL Advisory Agreement (in favor of each Advisor Indemnified Party (as defined therein; provided, that the Parties acknowledge and agree that each of Advisor Parent and its related Released Parties shall be deemed to be Advisor Indemnified Parties for all purposes of indemnification under the GNL Advisory Agreement)), (ii) Sections 20 and 21 of the RTL Advisory Agreement (in favor of each Indemnitee (as defined therein; provided, that the Parties acknowledge and agree that each of Advisor Parent and its related Released Parties shall be deemed to be an Indemnitee for all purposes of indemnification under the RTL Advisory Agreement)) and (iii) each of the provisions of the Contracts listed on Schedule 6.5 related to indemnification are hereby incorporated herein mutatis mutandis. The Parties acknowledge that the provisions of this Section 7.9 are for the benefit of each Advisor Indemnified Party (as defined in the GNL Advisory Agreement), Indemnitee (as defined in the RTL Advisory Agreement) and Advisor Parent’s Affiliates, officers, directors, managers, employees, executors, administrators, estate, successors, heirs and assigns (as applicable) and each such Person is intended and an express third party beneficiary of the provisions of this Article 7 and shall have the right, exercisable in their sole discretion, to enforce the terms and conditions of this Section 7.9.
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Section 7.10 Acknowledgement. Without in any way limiting any recourse for Fraud, GNL and each Internalization Sub acknowledges and agrees (on its own behalf and on behalf of its Affiliates and its and their respective Representatives) that: (a) it has conducted to its reasonable satisfaction its own independent investigation and verification of the financial condition, results of operations, assets, liabilities, properties and projected operations of the Target Companies and has been afforded reasonable access to the books and records, facilities and personnel of the Target Companies for purposes of conducting such investigation and verification, (b) the representations and warranties in Article 3 constitute the sole and exclusive representations and warranties of Advisor Parent and the Target Companies in connection with the transactions contemplated by this Agreement, (c) except for the representations and warranties in Article 3 by the Target Companies and Advisor Parent, none of the Target Companies, Advisor Parent or any other Person makes, or has made, any other express or implied representation or warranty with respect to Advisor Parent, the Target Companies or the transactions contemplated by this Agreement and all other representations and warranties of any kind or nature expressed or implied (including (i) regarding the completeness or accuracy of, or any omission to state or to disclose, any information, including in the estimates, projections or forecasts or any other information, document or material provided to or made available to GNL or the Internalization Subs or their Affiliates or representatives in certain “data rooms,” management presentations or in any other form in expectation of the transactions contemplated by this Agreement, including meetings, calls or correspondence with management of the Target Companies or Advisor Parent, and (ii) any relating to the future or historical business, condition (financial or otherwise), results of operations, prospects, assets or liabilities of the Target Companies, or the quality, quantity or condition of the Target Companies’ assets) are specifically disclaimed by Advisor Parent and the Target Companies and all other Persons (including the representatives of the Target Companies and Advisor Parent and its Affiliates and their respective representatives) and (d) GNL, the Internalization Subs and their Affiliates are not relying on any representations and warranties in connection with the transactions contemplated by this Agreement except the representations in Article 3 made by the Target Companies and Advisor Parent. In connection with GNL’s and the Internalization Subs’ investigation of the Target Companies, GNL and the Internalization Subs have received certain projections, including projected statements of operating revenues and income from operations of the Target Companies and certain business plan information. Each of GNL and the Internalization Subs acknowledge and agree that there are uncertainties inherent in attempting to make such estimates, projections and other forecasts and plans, that GNL and the Internalization Subs are familiar with such uncertainties and that GNL and each of the Internalization Subs is taking full responsibility for making its own evaluation of the adequacy and accuracy of all estimates, projections and other forecasts and plans so furnished to it, including the reasonableness of the assumptions underlying such estimates, projections and forecasts. Without limiting the foregoing provisions of this paragraph, each of GNL and each of the Internalization Subs hereby acknowledge and agree that none of Advisor Parent, the Target Companies or their Subsidiaries or any of their respective current or former Affiliates or representatives is making any representation or warranty with respect to such estimates, projections and other forecasts and plans, including the reasonableness of the assumptions underlying such estimates, projections and forecasts, and that neither GNL nor any Internalization Sub has relied on any such estimates, projections or other forecasts or plans. Each of GNL and the Internalization Subs further acknowledges and agrees that from and after the Closing (i) none of Advisor Parent, the Target Companies, their Subsidiaries or any other Person shall have or be subject to any liability to GNL, the Internalization Subs, the Target Companies or any other Person resulting from the distribution to GNL and the Internalization Subs, or GNL’s and the Internalization Subs’ use of, any such estimates, projections or forecasts or any other information, document or material provided to or made available to GNL or the Internalization Subs or their Affiliates or representatives in certain “data rooms,” management presentations or in any other form in expectation of the transactions contemplated by this Agreement and (ii) GNL, the Internalization Subs and their Affiliates have not relied on any such information, document or material. Effective upon Closing, GNL and the Internalization Subs waive, on their own behalf and on behalf of their respective Affiliates, to the fullest extent permitted under applicable Law, any and all rights, claims and causes of action it may have against Advisor Parent, the Subsidiaries of Advisor Parent, the Target Companies, and any of their respective current or former Affiliates or Representatives relating to the operation of the Target Companies and their Subsidiaries or their respective businesses or relating to the subject matter of this Agreement, the schedules or the transactions contemplated by this Agreement, whether arising under or based upon any federal, state, local or foreign Law, ordinance or otherwise. Each of GNL and the Internalization Subs acknowledges and agrees that it will not assert, institute or maintain any Action of any kind whatsoever, including a counterclaim, cross-claim, or defense, regardless of the legal or equitable theory under which such liability or obligation may be sought to be imposed, that makes any claim contrary to the agreements and covenants set forth in this Section 7.10. Advisor Parent shall have the right to enforce this Section 7.10 on behalf of any Person that would be benefitted or protected by this Section 7.10 if they were a party hereto. The foregoing agreements, acknowledgements, disclaimers and waivers are irrevocable.
Section 7.11 Representation and Warranty Insurance.
(a) GNL and Advisor Parent shall use their respective reasonable best efforts to take, or cause to be taken, all actions necessary for GNL to obtain by the Closing Date a fully bound representation and warranty insurance policy with a maximum coverage limit of $37,500,000 (the “RWI Policy”). Advisor Parent and the Target LLCs shall, and shall cause the other Advisor Parties to, and shall request the Advisor Parties’ Representatives to, provide all cooperation reasonably requested by GNL in connection with the arrangement and obtaining of the RWI Policy, and GNL shall keep Advisor Parent reasonably informed of the status of its efforts to arrange and obtain the RWI Policy.
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(b) All of the fees, costs and expenses (including, without limitation, premiums, diligence fees, and broker fees, but expressly excluding the fees and expenses of counsel for GNL. RTL or Advisor Parent) required to be paid in connection with placing the RWI Policy shall be borne fifty percent (50%) by GNL and fifty percent (50%) by Advisor Parent.
(c) If the RWI Policy is bound, then Advisor Parent’s obligations pursuant to Article 7 shall be modified as follows:
(i) Other than with respect to Advisor Fundamental Representations and Excluded Matters, (1) Advisor Parent’s obligations pursuant to Section 7.1(a) shall terminate, provided, however, that if GNL successfully makes a claim under the RWI Policy and collects proceeds under the RWI Policy, Advisor Parent shall promptly pay to GNL an amount equal to the retention under the RWI Policy and (2) for the avoidance of doubt, except with respect to the payment of the retention as contemplated by clause 1, GNL’s sole and exclusive remedy for a breach of any representation or warranty made by Advisor Parent or the Target LLCs contained in Article 3 of this Agreement (other than with respect to the Advisor Fundamental Representations and Excluded Matters) shall be recovery against the RWI Policy;
(ii) With respect to Advisor Fundamental Representations, Advisor Parent’s obligations pursuant to Section 7.1(a) shall remain unchanged; provided, however, that (1) GNL shall be required to seek recovery under the RWI Policy prior to seeking recovery from Advisor Parent; (2) the Overall Cap shall be reduced by amounts actually recovered by GNL under the RWI Policy; and (3) for, the avoidance of doubt to the extent the RWI Policy limit has been exhausted, GNL shall only be able to recover Losses pursuant to Section 7.1(a) with respect to breaches of Advisor Fundamental Representations in an amount not to exceed the amount of the Overall Cap (as reduced by any other payment pursuant to this Article 7) less the amounts recovered by GNL under the RWI Policy; and
(iii) With respect to Excluded Matters, Advisor Parent’s obligations pursuant to Section 7.1(a) shall remain unchanged and remain subject to the terms of this Article 7.
(d) Nothing in this Section 7.11 shall affect Advisor Parent’s indemnification obligations pursuant to Section 7.1(b), (c) and (d).
(e) The requirements set forth in Section 6.6 shall immediately terminate upon the date on which the RWI Policy is bound.
ARTICLE 8
CONDITIONS TO THE CLOSING
Section 8.1 Conditions to Obligations of Each Party. The respective obligations of each Party hereto to effect the transactions contemplated hereunder shall be subject to the satisfaction or waiver (where permitted) at or prior to the Closing of each of the following conditions:
(a) No Injunction. No Governmental Entity of competent jurisdiction shall have issued any Order that is in effect, and no Law shall have been enacted or promulgated, that renders the transactions contemplated hereunder illegal, or prohibits, enjoins, restrains or otherwise prevents or delays the transactions contemplated hereunder.
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(b) Merger. The REIT Merger shall have occurred substantially contemporaneous with (but immediately following) the Closing on the terms set forth in the REIT Merger Agreement.
(c) Stockholder Approval. The GNL Stockholder Approval shall have been obtained.
(d) HSR Approval. The filings required by any of the Parties pursuant to the HSR Act have been made and all waiting periods (and all extensions thereof) applicable to the Internalization Merger under the HSR Act and any agreement with any Governmental Entity not to consummate the transactions contemplated hereby shall have been terminated or shall have expired.
(e) Governmental Approvals. The Parties shall have obtained any necessary approvals or consents from any Governmental Authority.
(f) NYSE Supplemental Listing. GNL shall have obtained any necessary approvals to list the shares of GNL Shares issued pursuant to this Agreement.
Section 8.2 Conditions to Obligations of GNL and the Internalization Subs.
(a) Representations and Warranties. (i) The representations and warranties set forth in Article 3, other than the Advisor Fundamental Representations and the representation and warranty set forth in the first sentence of Section 3.7 (disregarding all qualifications set forth therein relating to “materiality”, “Material Adverse Effect” or other qualifications based on the word “material” or similar phrases) shall be true and correct in all respects as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, except representations and warranties that are made as of a specific date shall be true and correct only on and as of such date except, in each case, where the failure to be so true and correct would not have a Material Adverse Effect, (ii) each of the Advisor Fundamental Representations shall be true and correct in all respects (except for de minimus exceptions) as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, except representations and warranties that are made as of a specific date shall be true and correct in all material respects only on and as of such date, and (iii) the representation and warranty set forth in the first sentence of Section 3.7 shall be true and correct in all material respects as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time.
(b) Agreements and Covenants. Advisor Parent and the Target LLCs shall have performed or complied in all material respects with its agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing Date.
(c) Officer’s Certificate. Each of Advisor Parent and each of the Target LLCs shall have delivered to GNL and the Internalization Subs a certificate, dated the date of the Closing and signed by its chief executive officer or another senior officer on behalf of each of Advisor Parent and each of the Target LLCs, certifying to the effect that the conditions set forth in Section 8.2(a) and Section 8.2(b) have been satisfied.
(d) Closing Documentation. Advisor Parent and the Target LLCs, as applicable, shall have delivered to GNL and the Internalization Subs the items to be delivered to GNL and the Internalization Subs set forth in Section 1.3(a).
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(e) Absence of Material Adverse Effect. Since the date of this Agreement, there shall not have been any event, change, or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect.
(f) Key Employees. (i) Each of the Key Employees and at least 60% of the Additional Key Employees (or, if any such Key Employee or Additional Key Employee is unable or unwilling to serve, such substitutes for any such employee described in this condition with comparable qualifications and industry expertise that has been identified by Advisor Parent to GNL in writing prior to the Closing; provided that a substitute shall only be permitted with respect to Edward M. Weil Jr. or James Nelson in the event such person is unable to serve due to death, disability or family illness) are employed by Advisor Parent or any of its Subsidiaries as of immediately prior to the Closing Date and shall have accepted the offers of employment by GNL or one of its Subsidiaries (either via delivery of an executed offer letter or employment agreement or, with respect to Edward M. Weil Jr.,, the Executive Employment Agreement is in full force and effect, and no notice to rescind any such agreement or resign has been received by such person), provided if GNL does not comply with its obligation with respect to such substituted employee as contemplated by Section 5.4(a), then solely for purposes of this Section 8.2(f), such individual shall be deemed to have accepted an offer of employment by GNL or one of its Subsidiaries.
Section 8.3 Conditions to Obligations of Advisor Parent and the Target LLCs.
(a) Representations and Warranties. (i) The representations and warranties set forth in Article 4 of this Agreement, other than the GNL Fundamental Representations (disregarding all qualifications set forth therein relating to “materiality” or other qualifications based on the word “material” or similar phrases) shall be true and correct in all respects as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, except representations and warranties that are made as of a specific date shall be true and correct only on and as of such date except, in each case, where the failure to be so true and correct would materially and adversely affect the ability of GNL, GNL OP, RTL, RTL OP and the Internalization Subs to consummate the transactions contemplated hereby, and (ii) each of the GNL Fundamental Representations shall be true and correct in all respects (except for de minimus exceptions) as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, except representations and warranties that are made as of a specific date shall be true and correct in all material respects only on and as of such date.
(b) Agreements and Covenants. GNL and the Internalization Subs shall have performed or complied in all material respects with its agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing Date.
(c) Officer’s Certificate. Each of GNL and the Internalization Subs shall have delivered to Advisor Parent and each of the Target LLCs a certificate, dated the date of the Closing and signed by its chief executive officer or another senior officer on behalf of each of GNL and the Internalization Subs, certifying to the effect that the conditions set forth in Section 8.3(a) and Section 8.3(b) have been satisfied.
(d) Closing Documentation. Each Internalization Sub and GNL, as applicable, shall have delivered to Advisor Parent the items to be delivered to Advisor Parent set forth in Section 1.3(b).
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ARTICLE 9
GENERAL
Section 9.1 Schedules; Exhibits; Integration. Each schedule and exhibit delivered pursuant to the terms of this Agreement shall be in writing and shall constitute a part of this Agreement. This Agreement, together with such schedules and exhibits, constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the Parties in connection therewith.
Section 9.2 Interpretation. For all purposes of the Transaction Documents, except as otherwise specifically stated therein:
(a) the terms defined in Article 10 have the meanings assigned to them in Article 10 and include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the meanings assigned under GAAP;
(c) pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms;
(d) the words “include” and “including” shall be without limitation and shall be construed to mean “include, but not be limited to” or “including, without limitation;”
(e) except where the context requires otherwise, references to exhibits, schedules, Articles, Sections and paragraphs shall be references to the exhibits, schedules, Articles, Sections and paragraphs of this Agreement; and
(f) except where the context requires otherwise, the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision.
Section 9.3 Submission to Jurisdiction; Governing Law. The Parties, other than as may be required in accordance with Article XIV of GNL’s Bylaws, (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state and federal courts located in Wilmington, Delaware for the purpose of any Action arising out of or based upon any of the Transaction Documents (“Covered Matters”), (b) agree not to commence any Action arising out of, or based upon, any Covered Matters except in the state courts or federal courts located in Wilmington, Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper or that this Agreement or the subject matter of any Covered Matter may not be enforced in or by such court. All Covered Matters shall be governed by, interpreted and construed in accordance with the Laws of the State of Delaware without regard to conflict of law principles that would result in the application of any Law other than the Laws of the State of Delaware.
Section 9.4 Amendment. Subject to compliance with applicable Law, the provisions of this Agreement may not be amended, modified or supplemented without the prior written consent of Advisor Parent and the Internalization Subs.
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Section 9.5 Specific Performance. The Parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the Parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in any federal or state court located in Wilmington, Delaware in addition to any other remedy to which they are entitled at law or in equity. Any requirements for the securing or posting of any bond with such remedy are hereby waived.
Section 9.6 Assignment. No Transaction Document or any rights or obligations under any of them are assignable without the prior written consent of all of the Parties.
Section 9.7 Headings. The descriptive headings of the articles, sections and subsections of this Agreement are for convenience only and do not constitute a part of this Agreement.
Section 9.8 Parties in Interest. This Agreement shall be binding upon, and inure to the benefit of, each Party, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement, except for (i) Section 6.6 shall be for the benefit of the Persons as set forth therein, (ii) Section 7.2 shall be for the benefit of the Persons as set forth therein and (iii) Section 7.9 shall be for the benefit of the Persons as set forth therein. Nothing in this Agreement is intended to relieve or discharge the obligation of any third Person to any Party to this Agreement.
Section 9.9 Notices. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given (a) when personally delivered, (b) when transmitted via e-mail to the e-mail address set out below (unless the sender receives a “bounceback” or other failure to deliver message notification), (c) the day following the day (except if not a Business Day then the next Business Day) on which the same has been delivered prepaid to a reputable national overnight air courier service or (d) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid. Notices, demands and other communications, in each case to the respective Parties, shall be sent to the applicable address set forth below, unless another address has been previously specified in writing by such Party:
If to Advisor Parent, GNL Advisor, GNL Property Manager, RTL Advisor, RTL Property Manager, GNL SLP or RTL SLP, addressed to:
AR Global
650 5th Avenue, 30th Floor
New York, NY 10019
Attention: General Counsel
With a copy (which shall not constitute notice) to:
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019
Attention: Ross A. Fieldston, Jeffrey D. Marell, Megan Ward Spelman
Email: rfieldston@paulweiss.com, jmarell@paulweiss.com, mspelman@paulweiss.com
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If to GNL, GNL OP or any Internalization Sub addressed to:
c/o Global Net Lease, Inc.
650 Fifth Avenue, 30th Floor
New York, NY 10019
Attention: P. Sue Perrotty, Non-Executive Chair of the Board of Directors
Email: sueperrotty@aol.com
If to RTL or RTL OP, addressed to:
c/o The Necessity Retail REIT, Inc.
650 Fifth Avenue, 30th Floor
New York, NY 10019
Attention: Lisa Kabnick, Lead Independent Director of the Board of Directors
Email: lisa.kabnick@troutman.com
With copies (which shall not constitute notice) to:
Shapiro Sher Guinot & Sandler
250 West Pratt Street
Baltimore, MD 21201
Attention: William Carlson, Esq.
Email: wec@shapirosher.com
Arnold & Porter Kaye Scholer LLP
601 Massachusetts Avenue, NW
Washington, DC 20001
Attention: Kevin Lavin, Esq., Marisa White, Esq.
Email: kevin.lavin@arnoldporter.com, marisa.white@arnoldporter.com
or to such other address or to such other Person as each Party shall have last designated by such notice to the other Parties. Each such notice or other communication shall be effective (i) when delivered in Person, (ii) if given by telecommunication, when transmitted to the applicable number so specified in (or pursuant to) this Section 9.9 and an appropriate confirmation is received, and (iii) if given by mail, three (3) Business Days after delivery or the first attempted delivery.
Section 9.10 Expenses. Except as otherwise expressly set forth in this Agreement (including Section 5.7 and Section 10.3), Advisor Parent, GNL and the Internalization Subs shall pay their own expenses incident to the negotiation, preparation and performance of this Agreement and the transactions contemplated hereby, including, but not limited to, the fees, expenses and disbursements of its accountants and counsel and of securing third party consents and approvals required to be obtained by it, without reimbursement from any other Party.
Section 9.11 Representation By Counsel; Interpretation. Advisor Parent, GNL and the Internalization Subs each acknowledges that each Party to this Agreement has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of Law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the Party that drafted it has no application and is expressly waived. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intent of GNL, the Internalization Subs and Advisor Parent.
Section 9.12 Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable by any Governmental Entity, the remaining provisions of this Agreement shall remain in full force and effect; provided, that the essential terms and conditions of this Agreement for all Parties remain valid, binding and enforceable. In the event of any such determination, the Parties agree to negotiate in good faith to modify this Agreement to fulfill as closely as possible the original intents and purposes hereof. To the extent permitted by Law, the Parties hereby to the same extent waive any provision of Law that renders any provision hereof prohibited or unenforceable in any respect.
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Section 9.13 Counterparts. This Agreement may be executed in any number of counterparts, any of which may be executed and transmitted by facsimile, and each of which shall be deemed an original of this Agreement, and all of which, when taken together, shall be deemed to constitute one and the same Agreement.
ARTICLE 10
TERMINATION
Section 10.1 Termination. This Agreement may be terminated at any time prior to the Closing only as follows:
(a) by the mutual written consent of the Parties;
(b) by any Party, by written notice to the other, if any Governmental Entity of competent jurisdiction shall have issued any Order permanently enjoining, restraining or prohibiting the transactions contemplated hereunder, and such Order shall have become final and non-appealable, if applicable; provided, however, that the right to terminate this Agreement under this Section 10.1(b) shall not be available to any such Person if such Person is then in breach in any material respect of its obligations under this Agreement that has been the principal cause of, or principally resulted in, such Order, restraint or prohibition;
(c) by any Party if the Effective Time shall not have occurred on or before June 1, 2024 (the “Outside Date”) provided, however, that the right to terminate this Agreement pursuant to this Section 10.1(c) shall not be available to any party if the failure of such party to perform any of its obligations under this Agreement that has been a principal cause of, or resulted in, the failure of the Internalization Merger to be consummated on or before such date;
(d) by any Party if the REIT Merger Agreement is terminated pursuant to the terms thereof;
(e) by Advisor Parent if the exchange ratio set forth in the REIT Merger Agreement is amended or modified in a manner that would result in Advisor Parent receiving less than the ownership percentage set forth on Schedule 10.1(e) (the “Ownership Threshold”) of GNL after the Effective Time (not taking into account any issuances of GNL Shares after the date hereof other than as a result of the change in the exchange ratio); provided, that Advisor Parent shall not have the ability to terminate this Agreement in accordance with this Section 10.1(e) if GNL irrevocably commits to issue Advisor Parent additional GNL Shares in order to maintain the Ownership Threshold, and GNL shall issue such shares at the Closing; or
(f) by Advisor Parent if any of the parties to the REIT Merger Agreement waive, amend or otherwise modify any of the conditions to closing set forth in any of the following Sections of the REIT Merger Agreement in effect as of the date hereof: Section 7.2(d) (Absence of Material Adverse Effect), Section 7.2(e) (Company REIT Opinion), Section 7.3(d) (Absence of Material Adverse Effect) or Section 7.2(e) (Parent REIT Opinion).
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Section 10.2 Effect of Termination. If this Agreement is validly terminated in accordance with Section 10.1, this Agreement shall become void and of no further force and effect with no liability to any Person on the part of any Party hereto (or any officer, agent, employee, direct or indirect holder of any equity interest or securities or Affiliates of any Party hereto); provided, however, that (i) no such termination shall relieve GNL or RTL, as applicable, of any liability or obligation to make the expense reimbursement in accordance with Section 10.3, (ii) this Section 10.2, Section 10.3 and ARTICLE 9 shall each survive the termination of this Agreement and (iii) nothing herein shall relieve any Party from any liability resulting from Fraud or a willful and material breach of this Agreement prior to its termination, in which case the non-breaching Party shall be entitled to all rights and remedies available at law or in equity.
Section 10.3 Expense Reimbursement. If (a) this Agreement is validly terminated pursuant to Section 10.1(d) or pursuant to any other subsection of Section 10.1 at a time when this Agreement could also have been terminated pursuant to Section 10.1(d) and (b) a termination fee is paid pursuant to the REIT Merger Agreement, then, promptly but in any event within three (3) Business Days of the applicable Party receiving such termination fee, the applicable Party receiving such termination fee shall reimburse, or cause to be reimbursed, Advisor Parent or its designee for its out-of-pocket expenses incurred in connection with this Agreement, up to a maximum of $1,500,000, by wire transfer of immediately available funds to one or more accounts designated in writing by Advisor Parent.
ARTICLE 11
DEFINITIONS
For all purposes of the Transaction Documents, except as otherwise expressly provided or unless the context in which a term is used clearly requires otherwise:
“Accounting Expert” has the meaning set forth in Section 2.3(c).
“Action” means any action, complaint, petition, suit or other legal proceeding, whether civil or criminal, in law or in equity, or before any Governmental Entity.
“Additional Key Employees” mean those Persons listed on Schedule 11(a).
“Advisor Closing Amount” means the sum of (i) all amounts due to Employees who will be employed by GNL or one of its Subsidiaries as of the Closing with respect to periods ending at or prior to the Measurement Time, plus (ii) all amounts due under the Identified Contracts with respect to services provided under the Identified Contracts relating to the Business Assets for period ending at or prior to the Measurement Time (it being understood that to the extent payments are made with respect to a time period spanning the Measurement Time, such amount shall only include the pro rata portion of the amounts due for such period (e.g., payments are made under an Identified Contract on a monthly basis, the amount under such Contract shall be determined by multiplying the monthly rate for such Contract by a fraction the numerator of which is the number of days in the month through the Measurement Time and the denominator of which is the total number of days in that month)) minus (iii) any prepayments or credits under the Identified Contracts for periods after the Measurement time; provided, that, all year-end bonuses, under any bonus policy established by Advisor Parent, for the year ending December 31, 2023, shall not be included in the calculation of the Advisor Closing Amount.
“Advisor Closing Statement” has the meaning set forth in Section 2.3(a).
“Advisor Fundamental Representations” means the representations and warranties set forth in the first sentence of Section 3.1(a) (Organization and Good Standing), Section 3.4 (Power and Authority; Enforceability), clause (i) of Section 3.5 (No Conflicts; Required Consents), Section 3.6 (Capitalization), and Section 3.19 (Brokers).
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“Advisor Parent” has the meaning as set forth in the introductory paragraph.
“Advisor Parent Indemnified Party” has the meaning as set forth in Section 7.2.
“Advisor Parties” means, collectively, Advisor Parent, GNL SLP, RTL SLP, and solely to the extent related to time periods ending prior to the Measurement Time, the Target Companies and any of their respective Affiliates or Subsidiaries that own or has a leasehold interest in any Business Assets as of the date of this Agreement.
“Advisor Transition Services Period” has the meaning set forth in Section 5.4(f).
“Advisory Agreements” means, collectively, the GNL Advisory Agreement and the RTL Advisory Agreement.
“Affiliate” means with respect to any Person, any other Person that controls, is controlled by or is under common control with such Person. For purposes of this definition, “control” (including, with its correlative meanings, the terms “controlling,” “controlled by,” and “under common control with”) as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through ownership of voting securities or equity interests, by Contract or otherwise.
“Aggregate Cash Consideration” means fifty million dollars ($50,000,000).
“Aggregate Share Consideration” means twenty-nine million, six hundred fourteen thousand, eight hundred twenty five (29,614,825) GNL Shares.
“Agreement” has the meaning as set forth in the introductory paragraph.
“Allocation Statement” has the meaning as set forth in Section 1.6(a).
“Alternative Arrangement Costs” has the meaning set forth in Section 6.3(b).
“Anti-Corruption Laws” means all applicable Laws, rules, or regulations related to the prevention of bribery, corruption (governmental or commercial), kickbacks, money laundering, or similar unlawful or unethical conduct, including the Foreign Corrupt Practices Act of 1977, as amended, the U.K. Bribery Act of 2010, and all other national or international Laws enacted to implement the OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions, including local anti-corruption Laws in the countries in which the Target Companies conduct business.
“Assignment and Assumption Agreement” has the meaning as set forth in Section 5.8.
“Benefit Plans” has the meaning as set forth in Section 3.15(a).
“Beneficial Ownership” means ownership of Shares by a Person, whether the interest in the Shares is held directly or indirectly (including by a nominee) and shall include interests that would be treated as owned through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms “Beneficial Owner,” “Beneficially Own”, and “Beneficially Owned” if used in this letter shall have the correlative meanings.
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“Business Assets” means the Identified Contracts, Identified Assets, and Employees.
“Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking and other deposit gathering institutions in the Borough of Manhattan, City and State of New York are authorized or required by applicable Law to be closed.
“Business Financial Statements” has the meaning set forth in Section 3.8(a).
“Cap” has the meaning as set forth in Section 7.5(a).
“Certification Period” has the meaning set forth in Section 6.7.
“Closing” has the meaning as set forth in Section 1.2.
“Closing Date” has the meaning as set forth in Section 1.2.
“Closing Statements” has the meaning set forth in Section 2.3(a).
“Code” means the Internal Revenue Code of 1986, as amended.
“Constructive Ownership” means ownership of Shares by a Person, whether the interest in the Shares is held directly or indirectly (including by a nominee) and shall include interests that would be treated as owned through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms “Constructive Owner,” “Constructively Own,” “Constructively Owning” and “Constructively Owned” if used in this letter shall have the correlative meanings.
“Contract” means any binding agreement or contract, including any understanding, arrangement, instrument, note, guaranty, indemnity, representation, warranty, deed, lease, assignment, power of attorney, certificate, purchase order, work order, insurance policy, benefit plan, commitment, covenant, assurance or obligation of any kind or nature.
“Copyrights” means copyrights and published and unpublished works of authorship.
“Covered Matters” has the meaning as set forth in Section 9.3.
“COVID-19 Measures” means any action taken by Advisor Parent or the Target Companies pursuant to any Law, directive, or guideline promulgated by any Governmental Entity, including the Centers for Disease Control and Prevention and the World Health Organization, providing for quarantine, “shelter in place,” “stay at home,” social distancing, shut down, closure, sequester, safety or similar restrictions, in each case, in connection with or in response to any epidemic, pandemic (including COVID-19) or other disease outbreak.
“Deductible” has the meaning as set forth in Section 7.5(a).
“DLLC Act” means the Delaware Limited Liability Company Act.
“Domain Names” means websites or domain names.
“Effective Time” has the meaning as set forth in Section 1.4(a).
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“Employee Transfer Legislation” means (a) in relation to any EU member states, the Acquired Rights Directive (2001/23/EC), together with any national legislation implementing the Acquired Rights Directive (2001/23/EC), (b) in relation to the UK, the Transfer of Undertakings (Protection of Employment) Regulations 2006 and (c) in relation to any non-EU member state, any national, provincial or local legislation that is broadly similar in effect to the provisions of the Acquired Rights Directive (2001/23/EC), in each case as amended from time to time.
“Employees” mean the Key Employees, the Additional Key Employees, and the Identified Employees.
“Employer” means Advisor Parent and any of its Affiliates that employs an Employee.
“Encumbrance” means any lien, encumbrance, security interest, charge, mortgage, deed of trust, deed to secure debt, option, pledge or restriction (whether on voting, sale, transfer, disposition or otherwise) on transfer of title.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations issued thereunder.
“ERISA Affiliate” means any corporation or other entity that is included in a controlled group of corporations at any relevant time within which Advisor Parent is also included, as provided in Section 414(b) of the Code; or which is a trade or business under common control with Advisor Parent, as provided in Section 414(c) of the Code; or which constitutes a member of an affiliated service group within which Advisor Parent is also included, as provided in Section 414(m) of the Code.
“Estimated Advisor Adjustment Payment” has the meaning set forth in Section 2.2(b).
“Estimated Advisor Closing Amount” has the meaning set forth in Section 2.2(a).
“Estimated GNL Adjustment Payment” has the meaning set forth in Section 2.2(b).
“Estimated GNL Closing Amount” has the meaning set forth in Section 2.2(a).
“Executive Employment Agreement” means the Employment Agreement between GNL and Edward M. Weil Jr. entered concurrently with the execution of this Agreement and effective as of the Closing Date.
“Excluded Matters” means any transaction specific exclusions (as such term is used in the representations and insurance policy market) included in the RWI Policy.
“Final Closing Statements” has the meaning set forth in Section 2.3(c).
“Final Settlement Date” has the meaning set forth in Section 2.3(b).
“Five-Day VWAP” means, as of any date of determination, the volume weighted average price of the GNL Shares for the five (5) trading days ending on the first trading day immediately preceding such date of determination.
“Foreign Transfer Employees” has the meaning as set forth in Section 5.4(e).
“Fraud” means, with respect to the making of any representation or warranty set forth in this Agreement or any other Transaction Document, or in any certificate delivered pursuant to this Agreement or any other Transaction Document, an act, committed by a party hereto, with intent to deceive another party hereto, or to induce that party to enter into this Agreement or the other Transaction Documents and requires (i) a false representation of material fact made in this Agreement, another Transaction Document, or such certificate, (ii) with knowledge that such representation is false, (iii) with an intention to induce the party to whom such representation is made to act or refrain from acting in reliance upon it, (iv) causing that party, in justifiable reliance upon such false representation and with ignorance to the falsity of such representation, to take or refrain from taking action, and (v) causing such party to suffer damage by reason of such reliance.
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“Fundamental Representations” means the Advisor Fundamental Representations and the GNL Fundamental Representations.
“GAAP” means United States generally accepted accounting principles.
“GNL” has the meaning as set forth in the introductory paragraph.
“GNL 2021 Award” means that certain Advisor Multi-Year Outplacement Performance Award, effective as of June 3, 2021, by and among GNL, GNL OP and GNL Advisor, as amended, modified or supplemented from time to time.
“GNL 2021 Plan” means that certain 2021 Advisor Omnibus Incentive Compensation Plan of GNL, as amended, modified or supplemented from time to time.
“GNL Advisor” has the meaning as set forth in the introductory paragraph.
“GNL Advisor Cash Consideration” has the meaning as set forth in Section 2.1(a)(i).
“GNL Advisor Merger” has the meaning as set forth in the Recitals.
“GNL Advisor Merger Consideration” has the meaning as set forth in Section 2.1(a)(i).
“GNL Advisor Share Consideration” has the meaning as set forth in Section 2.1(a)(i).
“GNL Advisor Sub” has the meaning as set forth in the introductory paragraph.
“GNL Advisory Agreement” means that certain Fourth Amended and Restated Advisory Agreement, dated as of June 2, 2015, by and among GNL, GNL OP, and GNL Advisor, as amended from time to time.
“GNL Catch Up” has the meaning as set forth in Section 5.5(e).
“GNL Closing Amount” means all amounts due under the Advisory Agreements and the Property Management Agreements as of the Measurement Time.
“GNL Closing Statement” has the meaning set forth in Section 2.3(a).
“GNL Fundamental Representations” means the representations and warranties set forth in Section 4.1 (Organization and Good Standing), Section 4.2 (Power and Authority; Enforceability), clause (i) of Section 4.3 (No Conflicts; Required Consents), Section 4.6 (Capitalization), and Section 4.8 (Brokers).
“GNL Indemnified Party” has the meaning as set forth in Section 7.1.
“GNL OP” has the meaning as set forth in the introductory paragraph.
“GNL LTIP Election” has the meaning set forth in Section 5.6(c).
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“GNL LTIP Units” has the meaning as set forth in the recitals.
“GNL PM Cash Consideration” has the meaning as set forth in Section 2.1(a)(ii).
“GNL PM Merger” has the meaning as set forth in the Recitals.
“GNL PM Merger Consideration” has the meaning as set forth in Section 2.1(a)(ii).
“GNL PM Share Consideration” has the meaning as set forth in Section 2.1(a)(ii).
“GNL PM Sub” has the meaning as set forth in the introductory paragraph.
“GNL Property Manager” has the meaning as set forth in the introductory paragraph.
“GNL Returns” has the meaning as set forth in Section 6.1(b).
“GNL Share Issuance” has the meaning as set forth in the introductory paragraph.
“GNL Shares” means the Common Stock, par value $0.01 per share, of GNL, or any other equity security of GNL or its Affiliates issued in connection with the transactions contemplated by this Agreement.
“GNL SLP” has the meaning as set forth in the introductory paragraph.
“GNL Stockholder Approval” means such approval as may be required by the New York Stock Exchange rules and regulations.
“GNL Transition Services Period” has the meaning set forth in Section 5.4(g).
“Government Official” means (i) any officer, employee, or Person acting in an official capacity or performing public duties or functions on behalf of (a) any government, including all levels and subdivisions of government from national to local; (b) any department, committee, agency, or instrumentality of government; (c) any business or commercial entity owned, managed, or controlled by a government, such as a public university, public hospital, or state research institute; or (d) any political party or official thereof; (ii) any candidate for public office; (iii) any officer, employee, or agent of a public international organization, including for example the United Nations, the International Monetary Fund, or the World Bank; or (iv) any close relative of any Government Official.
“Governmental Entity” means any government or any agency, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality in each case of any government, whether federal, state or local, domestic or foreign.
“Ground Lease Agreement” has the meaning set forth in Section 3.22(a).
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
“Identified Assets” mean those assets listed on Schedule 11(b).
“Identified Contracts” mean those assets listed on Schedule 11(c).
“Identified Employees” means the individuals listed on Schedule 11(d) and any additional individual hired by one of the Advisor Parties to replace any departing individual listed on Schedule 11(d).
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“Indemnified Party” has the meaning as set forth in Section 7.3(a).
“Indemnifying Party” has the meaning as set forth in Section 7.3(a).
“Intellectual Property” means any rights in, including but not limited to the right to all past and future income, royalties, damages and payments due, licenses or Encumbrances of, equities in, and other claims that any Person may have to claim ownership, authorship or invention or the use of, or to object to, or prevent the modification of, or to withdraw from circulation, or control the publication or distribution, of any Marks, Patents, Copyrights, trade secrets, Software or Domain Names.
“Intended Tax Treatment” has the meaning as set forth in the Recitals.
“Interests” has the meaning set forth in Section 6.4(a).
“Internalization Merger” or “Internalization Mergers” has the meaning as set forth in the Recitals.
“Internalization Merger Articles of Merger” has the meaning as set forth in Section 1.4(a).
“Internalization Sub” or “Internalization Subs” has the meaning as set forth in the introductory paragraph.
“IRS” means the Internal Revenue Service or any successor entity.
“IT Systems” means all Software, computer hardware, servers, networks, platforms, peripherals, and similar or related items of automated, computerized, or other information technology (IT) networks and systems (including telecommunications networks and systems for voice, data and video) owned, leased, licensed, or used (including through cloud-based or other third-party service providers) in the business of the Target Companies or in connection with the Business Assets.
“Key Employees” mean those Persons listed on Schedule 11(e).
“Knowledge” means (i) with respect to Advisor Parent, the actual knowledge of Michael Anderson and Joseph Marnikovic and the knowledge that such Person, without independent inquiry, would reasonably be excepted to obtain in the course of diligently performing his or her duties; (ii) with respect to GNL, the actual knowledge of James Nelson and Christopher Masterson and the knowledge that such Person, without independent inquiry, would reasonably be excepted to obtain in the course of diligently performing his or her duties; and (iii) with respect to any other Person, the actual knowledge of such Person and the knowledge that such Person, without independent inquiry, would reasonably be excepted to obtain in the course of diligently performing his or her duties.
“Law” means any constitutional provision, statute or other law, rule, regulation, or interpretation of any Governmental Entity, and any Order.
“Leased Real Property” has the meaning set forth in Section 3.22(b).
“Liability” means all indebtedness, obligations and other liabilities of a Person (whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due), including those arising under any Law, Action, investigation, inquiry or Order and those arising under any Contract.
“Loss or “Losses” means any and all costs, expenses, direct losses or damages, fines, penalties or liabilities (including interest which may be imposed or incurred in connection therewith, court costs, litigation expenses, reasonable attorneys’ fees and costs); provided, however, that “Losses” shall not include any consequential, punitive, exemplary, indirect, incidental or other similar damages, including lost profits or Losses based upon a multiple of Losses.
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“LTIP Units” has the meaning as set forth in the recitals.
“Mark” means any brand name, logos, service mark, trademark, trade name, trade dress, design rights and other similar designations of source, sponsorship, association or origin, together with the goodwill connected with the use of and symbolized by, and all registrations or application for registration of, any of the foregoing.
“Material Adverse Effect” means an event, change, condition or occurrence that has or could reasonably be expected to have a material adverse impact or effect on (x) the Target Companies, the Business Assets, or the business, operations, financial condition, assets, liabilities or results of operations of the Target Companies, taken as a whole, or (y) the ability of the Advisor Parent, the Internalization Subs, GNL SLP, RTL SLP or the Target Companies to consummate the transactions contemplated hereby; provided, that “Material Adverse Effect” shall neither be deemed to include the impact or effect of, nor shall there be taken into account in determining whether there has been a “Material Adverse Effect”: (a) changes in Laws or interpretations thereof or binding directives of Governmental Entities, (b) the announcement of this Agreement and the transactions contemplated hereby or the taking of any action contemplated by the Transaction Documents, including any employee attrition and any impact on revenues or relationships with any Persons having business dealings with the Parties, (c) changes in GAAP or other accounting requirements or principles or the interpretations thereof, (d) compliance with, and performance of, this Agreement and the transactions contemplated by this Agreement, (e) changes affecting general economic conditions or the industry or geographies in which the Target Companies operate, (f) the failure of the Target Companies to meet projections of earnings, revenues or other financial measures (whether such projections were made by Advisor Parent or any independent Third Parties); provided, that the underlying cause of any such failure may be taken into consideration in making such determination, (g) national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack within or upon the United States, or any of its territories, possessions, or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (h) changes in financial, banking, or securities markets (including any disruption thereof and any decline in the price of any security or any market index), (i) any act of God, including any earthquake, hurricane, tsunami, floor, or other natural disaster, epidemic or pandemic or any COVID-19 Measure taken after the date hereof in accordance with the terms of this Agreement or (j) any of the matters disclosed on the Schedules to this Agreement. Notwithstanding the foregoing, if any matter described in any of subclauses (a), (c), (e), (g), (h) or (i) of the preceding sentence has had a disproportionate effect on the business, financial condition or results of operations of the Target Companies or the Business Assets relative to other participants in the industry sector or sectors in which the Target Companies operate, then the impact of such event on the Target Companies or the Business Assets to the extent of such disproportionate effect shall be taken into account for purposes of determining whether a Material Adverse Effect has occurred or would be reasonably likely to occur.
“Material Employment Agreements” means (i) the Employment Agreement between AR Global Investments, LLC and Jason Slear, dated May 7, 2015, as amended in June 2016 and further amended in April, 2022 and (ii) the Employment Agreement between AR Global Investments, LLC and James Nelson, dated July 10, 2017 as amended on March 24, 2022.
“Measurement Time” means 11:59 PM, New York time, on the day immediately prior to the Closing Date.
“Merger Consideration” has the meaning as set forth in Section 2.1(a)(iv).
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“Merger Sub” has the meaning as set forth in the recitals.
“Non-Competition Agreements” has the meaning set forth in Section 1.3(a).
“Non-Solicitation Covenants” shall mean, collectively, any non-solicitation, non-hire, or other similar restrictive covenant contained in any agreement by and between Advisor Parent or a Target Company and any of their respective employees.
“Notice of Disagreement” has the meaning set forth in Section 2.3(b).
“Notice Period” has the meaning as set forth in Section 7.3(a).
“OP Merger Sub” has the meaning as set forth in the recitals.
“Order” means any decree, injunction, judgment, order, ruling, assessment or writ of a Governmental Entity or arbitration award.
“Organizational Documents” means the articles of incorporation, certificate of incorporation, charter, bylaws, articles of formation or organization, certificate of formation or organization, regulations, operating agreement, limited liability company agreement, certificate of limited partnership, partnership agreement, and all other similar documents, instruments, or certificates executed, adopted, or filed in connection with the creation, formation, or organization of a Person, including any amendments thereto.
“Outside Date” has the meaning as set forth in Section 10.1(c).
“Ownership Threshold” has the meaning set forth in Section 10.1(e).
“Parties” has the meaning as set forth in the introductory paragraph.
“Party” has the meaning as set forth in the introductory paragraph.
“Patent” means patents and patent applications, including provisionals, continuations and continuations-in-part, divisionals, reissues, reexaminations, supplementary protection certificates, substitutions, renewals and extensions thereof.
“Permit” means any license, permit, franchise, certificate of authority, approval, registration, or authorization, or any waiver of the foregoing, required to be issued by any Governmental Entity.
“Person” means an association, a corporation, an individual, a limited liability company, a partnership (whether general or limited), a trust (whether inter vivos or testamentary) or any other entity or organization, whether organized for profit or not for profit, and including a Governmental Entity.
“Personal Property” means machinery, computer programs, computer Software, tools, motor vehicles, office equipment, inventories, supplies, plant, spare parts, and other tangible or intangible personal property, excluding, however, furniture, fixtures, and equipment, and Contracts, Permits, Marks, Patents, Copyrights, trade secrets, Domain Names and Intellectual Property.
“Pre-Closing Returns” has the meaning as set forth in Section 6.1(a).
“Pre-Closing Tax Period” means (a) any taxable period of any Target Company ending on or prior to the Closing Date and (b) the portion of any Straddle Period beginning on the first day of such Straddle Period and ending on the Closing Date.
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“Property Management Agreements” means the amended and restated property management agreement, dated as of September 6, 2016, by and among RTL (f/k/a American Finance Trust, Inc.) and RTL Property Manager, as amended from time to time; the amended and restated leasing agreement, dated as of September 6, 2016, by and among RTL and the RTL Property Manager, as amended from time to time; the amended and restated property management and leasing agreement, dated as of September 6, 2016, by and among RTL, RTL OP, and RTL Property Manager, as amended from time to time; and the property management and leasing agreement, dated as of April 20, 2012, by and among GNL (f/k/a American Realty Capital Global Daily Net Asset Value Trust, Inc.), GNL OP (f/k/a American Realty Capital Global Operating Partnership, L.P., and GNL Property Manager (F/k/a American Realty Capital Global Properties, LLC), as amended from time to time.
“Pro Rata Bonus Payment” has the meaning set forth in Section 2.2(c).“Qualifying Termination” means a termination of employment by Advisor Parent or GNL or any of their Subsidiaries without cause (as defined if such employee’s employment agreement, if applicable); provided, that if an employee is offered employment by GNL or one of its Affiliates on the terms and conditions as set forth in this Agreement, then the termination of such employee’s employment with Advisor Parent or an Affiliate shall not be considered a Qualifying Termination.
“Real Property Lease Agreements” has the meaning set forth in Section 3.22(a).
“Registration Rights and Shareholders Agreement” has the meaning as set forth in Section 1.3(a).
“Regulation D” has the meaning set forth in Section 3.20(a).
“REIT” means a “real estate investment trust” within the meaning of Section 856 of the Code.
“REIT Merger” has the meaning as set forth in the Recitals.
“REIT Merger Agreement” has the meaning as set forth in the Recitals.
“Related Party Agreements” means, to the extent related to the business of the Target Companies or the Business Assets, all Contracts, including any guarantee obligations, between or among any Advisor Party, on the one hand, and any other Advisor Party, their respective Affiliates, or any employee, officer, manager, or director of any Advisor Party or their respective Affiliates, on the other hand.
“Released Parties” has the meaning as set forth in Section 6.7(a).
“Releasing Parties” has the meaning as set forth in Section 6.7(a).
“Restricted Person” means Advisor Parent and each of its Affiliates.
“Restricted Period” means the period commencing on the Closing Date and ending on the five (5) year anniversary thereof.
“Restricted Territory” means North America and Europe.
“Retained Businesses” has the meaning as set forth in Section 6.4(a).
“Retained Interest” has the meaning set forth in Section 6.4(a).
“Retention Cash Award” has the meaning set forth in Section 5.4(i).
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“RTL” has the meaning as set forth in the introductory paragraph.
“RTL 2018 Plan” means that certain 2018 Advisor Omnibus Incentive Compensation Plan of RTL, as amended, modified or supplemented from time to time.
“RTL 2021 Award” means that certain Advisor Multi-Year Outplacement Performance Award, effective as of July 21, 2021 by and among RTL, RTL OP and RTL Advisor, as amended, modified or supplemented from time to time.
“RTL Advisor” has the meaning as set forth in the introductory paragraph.
“RTL Advisor Cash Consideration” has the meaning as set forth in Section 2.1(a)(iii).
“RTL Advisor Merger” has the meaning as set forth in the Recitals.
“RTL Advisor Merger Consideration” has the meaning as set forth in Section 2.1(a)(iii)
“RTL Advisor Share Consideration” has the meaning as set forth in Section 2.1(a)(iii)
“RTL Advisor Sub” has the meaning as set forth in the introductory paragraph.
“RTL Advisory Agreement” means that certain Third Amended and Restated Advisory Agreement, dated as of September 6, 2016, by and among RTL (f/k/a American Finance Trust, Inc.), RTL OP (f/k/a American Finance Operating Partnership, L.P.) and RTL Advisor (f/k/a American Finance Advisors, LLC), as amended from time to time.
“RTL Catch Up” has the meaning as set forth in Section 5.6(e)..
“RTL LTIP Election” has the meaning set forth in Section 5.5(c).
“RTL LTIP Units” has the meaning as set forth in the recitals.
“RTL OP” has the meaning as set forth in the introductory paragraph.
“RTL PM Cash Consideration” has the meaning as set forth in Section 2.1(a)(iv).
“RTL PM Merger” has the meaning as set forth in the Recitals.
“RTL PM Merger Consideration” has the meaning as set forth in Section 2.1(a)(iv).
“RTL PM Share Consideration” has the meaning as set forth in Section 2.1(a)(iv).
“RTL PM Sub” has the meaning as set forth in the introductory paragraph.
“RTL Property Manager” has the meaning as set forth in the introductory paragraph.
“RTL SLP” has the meaning as set forth in the introductory paragraph.
“RWI Policy” has the meaning set forth in Section 7.11(a).
“Securities Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.
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“Share Consideration” has the meaning as set forth in Section 2.1(a)(iv).
“Shared Contract” has the meaning set forth in Section 6.4(a).
“Software” means software, data and databases.
“Straddle Period” means any taxable period that includes, but does not end on, the Closing Date.
“Subsidiary” means, with respect to any Person (a) any corporation of which at least fifty percent (50%) of the outstanding voting securities is directly or indirectly owned (b) any partnership, limited liability company, joint venture or other entity of which at least fifty percent (50%) of the total equity interest is directly or indirectly owned by such Person or of which such Person or any of its Subsidiaries is a general partner, manager, managing member or the equivalent.
“Surviving Entity” or “Surviving Entities” has the meaning as set forth in Section 1.1(d).
“Surviving GNL Advisor Entity” has the meaning as set forth in Section 1.1(a).
“Surviving GNL PM Entity” has the meaning as set forth in Section 1.1(b).
“Surviving RTL Advisor Entity” has the meaning as set forth in Section 1.1(c).
“Surviving RTL PM Entity” has the meaning as set forth in Section 1.1(d).
“Target LLC” or “Target LLCs” has the meaning as set forth in the introductory paragraph.
“Target Companies” means the Target LLCs and each of their respective Subsidiaries.
“Tax” or “Taxes” means all federal, state, local and foreign taxes, including any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, assessable payment under Code Section 4980H, or other tax, charge, fee, levy, or assessment of a similar kind imposed or administered by a Taxing Authority, including any interest, fine, penalty, or addition thereto and any liability for any of the foregoing as a result of any Contract, transferee or successor liability, operation of Law, or under Treasury Regulations Section 1.1502-6 (or any similar provision of U.S. federal, state, or local, or non-U.S. Law).
“Tax Return” means any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Taxing Authority in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Law relating to any Tax, including any amendment thereof.
“Taxing Authority” means the IRS or any other Governmental Entity responsible for the administration, implementation, collection, or enforcement of any Tax.
“Third Party” means any Person other than any Party.
“Third Party Claim” has the meaning as set forth in Section 7.3(a).
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“Transaction Documents” means this Agreement, the Registration Rights and Shareholders Agreement, the Assignment and Assumption Agreement, the Non-Competition Agreements, and any amendments to any of them.
“Transferred Employees” has the meaning as set forth in Section 5.4(a).
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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date first written above.
| Advisor Parent: | ||
| AR Global Investments, LLC | ||
| a Delaware limited liability company | ||
| By: | /s/ Michael Anderson | |
| Michael Anderson, Authorized Signatory | ||
| GNL SLP: | ||
| Global Net Lease Special Limited Partnership, LLC | ||
| a Delaware limited liability company | ||
| By: | /s/ Michael Anderson | |
| Michael Anderson, Authorized Signatory | ||
| RTL SLP: | ||
| Necessity Retail Space Limited Partner, LLC | ||
| a Delaware limited liability company | ||
| By: | /s/ Michael Anderson | |
| Michael Anderson, Authorized Signatory | ||
| GNL Advisor: | ||
| Global Net Lease Advisors, LLC | ||
| a Delaware limited liability company | ||
| By: | /s/ Michael Anderson | |
| Michael Anderson, Authorized Signatory | ||
| GNL Property Manager: | ||
| Global Net Lease Properties, LLC | ||
| a Delaware limited liability company | ||
| By: | /s/ Michael Anderson | |
| Michael Anderson, Authorized Signatory | ||
| RTL Advisor: | ||
| Necessity Retail Advisors, LLC | ||
| a Delaware limited liability company | ||
| By: | /s/ Michael Anderson | |
| Michael Anderson, Authorized Signatory | ||
[Signature Page to Agreement and Plan of Merger]
| RTL Property Manager: | ||
| Necessity Retail Properties, LLC | ||
| a Delaware limited liability company | ||
| By: | /s/ Michael Anderson | |
| Michael Anderson, Authorized Signatory | ||
| GNL Advisor Sub: | ||
| GNL Advisor Merger Sub LLC | ||
| a Delaware limited liability company | ||
| By: | /s/ Michael Anderson | |
| Michael Anderson, Authorized Signatory | ||
| GNL PM Sub: | ||
| GNL PM Merger Sub LLC | ||
| a Delaware limited liability company | ||
| By: | /s/ Michael Anderson | |
| Michael Anderson, Authorized Signatory | ||
| RTL Advisor Sub: | ||
| RTL Advisor Merger Sub LLC | ||
| a Delaware limited liability company | ||
| By: | /s/ Michael Anderson | |
| Michael Anderson, Authorized Signatory | ||
| RTL PM Sub: | ||
| RTL PM Merger Sub LLC | ||
| a Delaware limited liability company | ||
| By: | /s/ Michael Anderson | |
| Michael Anderson, Authorized Signatory | ||
| GNL: | ||
| Global Net Lease, Inc. | ||
| a Maryland corporation | ||
| By: | /s/ Michael Anderson | |
| Michael Anderson, Authorized Signatory | ||
[Signature Page to Agreement and Plan of Merger]
| GNL OP: | ||
| Global Net Lease Operating Partnership, L.P. | ||
| a Delaware limited partnership | ||
| By: Global Net Lease, Inc., its General Partner | ||
| By: | /s/ Michael Anderson | |
| Michael Anderson, Authorized Signatory | ||
| RTL: | ||
| The Necessity Retail REIT, Inc. | ||
| a Maryland corporation | ||
| By: | /s/ Edward M. Weil, Jr. | |
| Edward M. Weil, Jr., Chief Executive Officer and President | ||
| RTL OP: | ||
| The Necessity Retail REIT Operating Partnership, L.P. | ||
| a Delaware limited partnership | ||
| By: The Necessity Retail REIT, Inc., its General Partner | ||
| By: | /s/ Edward M. Weil, Jr. | |
| Edward M. Weil, Jr., Chief Executive Officer and President | ||
[Signature Page to Agreement and Plan of Merger]
Exhibit A
Form of Registration Rights and Shareholders Agreement
See attached.
Exhibit B
Form of Non-Competition Agreement
See attached.
Exhibit 4.1
GLOBAL NET LEASE, INC.
CERTIFICATE OF NOTICE
Global Net Lease, Inc., a Maryland corporation (the “Company”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Company, pursuant to Section 5.7(ii)(h) of Article V of the charter of the Company (the “Charter”), has decreased the Aggregate Share Ownership Limit (as defined in the Charter) to 8.9% in value of the aggregate of the outstanding shares of stock of the Company and 8.9% (in value or in number of shares, whichever is more restrictive) of any class or series of stock of the Company.
SECOND: The undersigned acknowledges this Certificate of Notice to be the act of the Company and, as to all matters or facts required to be verified under oath, the undersigned officer acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this Certificate of Notice to be executed under seal in its name and on its behalf by its Authorized Signatory and attested by its Chief Financial Officer, Treasurer and Secretary on this 25th day of May, 2023.
| ATTEST: | GLOBAL NET LEASE, INC. | |||
| /s/ Christopher J. Masterson | By: | /s/ Michael Anderson | (SEAL) | |
| Name: Christopher J. Masterson | Name: Michael Anderson | |||
| Title: Chief Financial Officer, Treasurer and Secretary | Title: Authorized Signatory | |||
Exhibit 10.1
Execution Version
CONFIDENTIALITY, NON-COMPETITION AND NON-SOLICITATION AGREEMENT
This CONFIDENTIALITY, NON-COMPETITION AND NON-SOLICITATION AGREEMENT, dated as of May 23, 2023 (this “Agreement”), is made and entered into by and between Global Net Lease, Inc., a Maryland corporation and real estate investment trust (“GNL”), and Edward M. Weil, Jr. (the “Restricted Person”).
WHEREAS, contemporaneously with execution and delivery of this Agreement, GNL is entering into that certain Agreement and Plan of Merger, dated on or about the date hereof (the “Merger Agreement”), by and among GNL, GNL Advisor Merger Sub, a Delaware limited liability company and a wholly-owned subsidiary of GNL OP (the “GNL Advisor Sub”), GNL PM Merger Sub, a Delaware limited liability company and a wholly-owned subsidiary of GNL OP (the “GNL PM Sub”), RTL Advisor Merger Sub, a Delaware limited liability company and a wholly-owned subsidiary of GNL OP (the “RTL Advisor Sub”), RTL PM Merger Sub, a Delaware limited liability company and a wholly-owned subsidiary of GNL OP (the “RTL PM Sub”) (GNL Advisor Sub, GNL PM Sub, RTL Advisor Sub and RTL PM Sub are individually an “Internalization Sub” and collectively the “Internalization Subs”), Global Net Lease Operating Partnership, L.P., a Delaware limited partnership (“GNL OP”), The Necessity Retail REIT, Inc., a Maryland corporation and real estate investment trust (“RTL”) and The Necessity Retail REIT Operating Partnership, L.P., a Delaware limited partnership (“RTL OP”) on the one hand, and AR Global Investments, LLC, a Delaware limited liability company (“Advisor Parent”), Global Net Lease Special Limited Partnership, LLC, a Delaware limited liability company and an indirect wholly-owned subsidiary of Advisor Parent (“GNL SLP”), Necessity Retail Space Limited Partner, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Advisor Parent (“RTL SLP”), Global Net Lease Advisors, LLC, a Delaware limited liability company and a wholly-owned subsidiary of GNL SLP (the “GNL Advisor”), Global Net Lease Properties, LLC, a Delaware limited liability company and a wholly-owned subsidiary of GNL SLP (the “GNL Property Manager”), Necessity Retail Advisors, LLC, a Delaware limited liability company and a wholly-owned subsidiary of RTL SLP (the “RTL Advisor”), and Necessity Retail Properties, LLC, a Delaware limited liability company and a wholly-owned subsidiary of RTL SLP (the “RTL Property Manager”) (GNL Advisor, GNL Property Manager, RTL Advisor, and RTL Property Manager, along with each of their direct and indirect wholly-owned subsidiaries, are individually a “Target LLC” and collectively the “Target LLCs”) on the other hand. Capitalized terms used in this Agreement shall have the meanings ascribed to such terms in Article 11 of the Merger Agreement;
WHEREAS, it is the intention of the parties to the Merger Agreement to effect a business combination transaction in which (i) GNL Advisor Sub shall merge with and into GNL Advisor, with GNL Advisor being the surviving entity (the “GNL Advisor Merger”), and each outstanding membership interest of GNL Advisor will be converted into the right to receive from GNL or its designee the GNL Advisor Merger Consideration, (ii) GNL PM Sub shall merge with and into GNL Property Manager, with GNL Property Manager being the surviving entity (the “GNL PM Merger”), and each outstanding membership interest of GNL Property Manager will be converted into the right to receive from GNL or its designee the GNL PM Merger Consideration, (iii) RTL Advisor Sub shall merge with and into RTL Advisor, with RTL Advisor being the surviving entity (the “RTL Advisor Merger”), and each outstanding membership interest of RTL Advisor will be converted into the right to receive from GNL or its designee the RTL Advisor Merger Consideration and (iv) RTL PM Sub shall merge with and into RTL Property Manager, with RTL Property Manager being the surviving entity (the “RTL PM Merger”) (the GNL Advisor Merger, GNL PM Merger, RTL Advisor Merger and RTL PM Merger, are individually an “Internalization Merger” and collectively the “Internalization Mergers”), and each outstanding membership interest of RTL Property Manager will be converted into the right to receive from GNL or its designee the RTL PM Merger Consideration, in each case upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DLLC Act;
WHEREAS, the Restricted Person is an equity owner in Advisor Parent and will be receiving proceeds in respect of such ownership as a result of the Merger (the “Merger Consideration”);
WHEREAS, the Restricted Person acknowledges that execution and delivery of this Agreement is a material inducement for GNL to execute and deliver the Merger Agreement;
WHEREAS, the parties hereby acknowledge and agree that this Agreement is not a service contract and is not intended to govern the terms or conditions of the Restricted Person’s employment with any GNL Group Company (defined below).
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein, and for other good and valuable consideration, including the Merger Consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
Article I
PROTECTION OF GOODWILL
Section 1.01 Confidentiality. During the Restricted Period, the Restricted Person shall not, and shall cause its Affiliates not to, publicly disclose, reveal, divulge or communicate to any Person any Confidential Information; provided, however, that the foregoing shall not restrict the Restricted Person or its Affiliates from (i) disclosing (under appropriate obligations of confidentiality) Confidential Information to the extent necessary to enforce and exercise his rights under this Agreement, the Merger Agreement or the Transaction Documents (as defined in the Merger Agreement), (ii) disclosing Confidential Information to the extent necessary in connection with such Restricted Person’s employment, service as a director or consulting services for any GNL Group Company, if applicable, (iii) disclosing Confidential Information in confidence to his financial, tax and legal advisors who are bound by similar confidentiality obligations and (iv) shall not have any obligation to keep confidential any Confidential Information if and to the extent disclosure thereof is required by applicable law or requested by a governmental authority; provided, however, that in the event disclosure is required by applicable law or requested by a governmental authority, the Restricted Person shall to the extent legally permissible and practicable provide GNL with prompt notice of such requirement prior to making any disclosure so that GNL may seek an appropriate protective order at its own cost or waive compliance with the provisions of this Section 1.01, provided that no such notice shall be required under circumstances where a notice requirement would be deemed to violate applicable law. GNL (on behalf of itself and each GNL Group Company) acknowledges that Confidential Information may enhance the Restricted Person’s and his Affiliates’ and his representatives’ knowledge and understanding of the industry of the GNL Group Companies in a way that cannot be separated from such Persons’ other knowledge and GNL (on behalf of itself and each GNL Group Company) agrees that, so long as Confidential Information is not disclosed in violation of this Agreement, neither the Restricted Person nor any of his Affiliates or representatives will be deemed to have violated this Agreement to the extent Residual Information (as defined below) is used in the ordinary course by the Restricted Person, any of his Affiliates or his representatives in connection with their ongoing business.
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Section 1.02 Non-Competition and Non-Solicitation. During the Restricted Period, the Restricted Person shall not, and shall cause its Affiliates not to, directly or indirectly through any Person or contractual arrangement:
(a) manage, operate, advise or consult for, render services to, run, control or externally manage any Restricted Business (other than any real estate held or owned by the Restricted Person in his personal capacity or any trust controlled by such individual whose beneficiaries are members of his family whether acquired prior to or after the date hereof) in the Restricted Territory; provided, however, that the restrictions contained in this Agreement shall in no way be deemed to restrict the Restricted Person or its Affiliates from (i) serving as an employee, officer, director or other service provider of any GNL Group Company; (ii) owning, directly or indirectly (x) up to 9.9 % of any class of securities of any public entity or (y) any passive investment in any entity that the Restricted Person does not control; (iii) investing equity of no more than the amount set forth on Schedule 1.02(a) of this Agreement in real estate partnerships that own mixed use and shopping center real estate provided, that such activities do not conflict with the terms of the Employment Agreement dated May 23, 2023, by and among GNL and the Restricted Person (the “Weil Employment Agreement”) or the Restricted Person’s fiduciary duties to GNL; or (iv) working as an employee or acting as a consultant or contractor to a Competitive Entity to the extent such activities do not conflict with the terms of the Weil Employment Agreement; provided, that the Restricted Person does not personally engage in, or provide any services primarily for use in, the Restricted Business and that the Restricted Person performs services exclusively in a division, subsidiary or affiliated entity of the Competitive Entity that does not primarily engage in the Restricted Business;
(b) employ, hire, enter into an agency or consulting relationship with or recruit or solicit for employment any employee of a GNL Group Company (“Restricted Employees”); provided, that the foregoing shall not apply to (i) Restricted Employees who ceased to be employed by a GNL Group Company at least ninety (90) days prior to any solicitation by, and the commencement of any discussions with, the Restricted Person or any of its Affiliates; (ii) any general solicitations not targeted at Restricted Employees (including through the use of recruiting firms or advertisements in any newspaper, magazine, trade publication, electronic medium or other media) or any hiring as a result thereof; and (iii) the assistant and secretary assigned to work with the Restricted Person during his employment with GNL; provided, further, that, notwithstanding the foregoing, the Restricted Person shall not, and shall cause its Affiliates not to, directly or indirectly, (x) solicit or induce James Nelson to leave the employ of GNL or (y) employ, hire or enter into a consulting arrangement with them, in each case, during the term of such individual’s Executive Employment Agreement (as defined in the Merger Agreement); and provided, further, notwithstanding this Agreement or any other agreement to the contrary, it is acknowledged and agreed that Edward M. Weil, Jr. and Nicholas Schorsch are each direct or indirect members, owners, directors or officers of AR Global Investments, LLC and certain other entities that do not engage in activities that are violative of Section 1.02(a) of this Agreement and that such individuals shall be permitted to continue to engage in such business activities; or
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(c) encourage any customer or supplier who is, as of the Closing Date, a customer or supplier of any GNL Group Company to terminate or adversely modify any relationship with a GNL Group Company.
Section 1.03 Non Disparagement. During the Restricted Period, (a) the Restricted Person shall not, directly or indirectly, make, and shall not cause or direct any of his Affiliates to publicly make any negative, derogatory, disparaging or untrue comments, communications or statements, whether written or oral about any of the Internalization Subs, Target LLCs, GNL, GNL OP, RTL, RTL OP or any of their respective Affiliates, or any officer, director, shareholder, manager or member thereof (collectively, “GNL Protected Persons”) or the business, management, operations or strategies of the GNL Protected Persons and (b) each GNL Group Company shall not and shall not cause, permit or direct any of its directors or officers to publicly make any negative, derogatory, disparaging or untrue comments, communications or statements, whether written or oral about the Restricted Person or any of his Affiliates and any officer, director, shareholder, manager or member thereof (collectively, the “Restricted Persons Protected Persons”) or the business, management, operations or strategies of any Restricted Persons Protected Persons. “Disparaging” comments or statements include such comments or statements which discredit, ridicule or defame any Person or entity or impair the reputation, goodwill or commercial interest thereof. Nothing in this Section 1.03 shall limit the Restricted Person, any GNL Group Company or their respective Affiliates’ ability to make true and accurate statements, as required by applicable Laws, to a Governmental Authority or otherwise make any true and accurate statements as part of litigation, arbitration, regulatory or administrative proceeding.
Section 1.04 Social Media Activities. For purposes of the restrictions set forth in Sections 1.01, 1.02, and 1.03 prohibited conduct shall include direct or indirect oral, written, and/or electronic communications, including, without limitation, social media communications, by the Restricted Person and the Restricted Person’s Affiliates that violate such restrictions. As used herein, social media includes all means of communicating or posting information or content of any sort on the Internet, including a Person’s own or someone else’s web log, blog, journal, diary, personal web site, social networking or affinity web site, web bulletin board, or chat room. By way of example only, neither the Restricted Person nor any of its Affiliates shall initiate social media communications from the Restricted Person’s or such Affiliate’s business or personal social media accounts (including, without limitation, status updates, posts, direct/personal messages or tweets on Twitter, LinkedIn, Google+, Facebook, or other social media) (collectively, “Posts”) that violate the restrictions in Sections 1.01, 1.02 and 1.03.
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Article II
definitions
Section 2.01 Definitions. For purposes hereof, the following capitalized terms shall have the respective meanings set forth below:
“Affiliate” of a Person means any other Person controlling, controlled by or under common control with such first Person; provided, however, the term “Affiliate” shall not include any publicly traded real estate investment trust that is externally managed by AR Global Investments, LLC or any of its Subsidiaries.
“Closing Date” means the date on which the closing under the Merger Agreement occurs.
“Competitive Entity” means a Person wholly or partially engaged in the Restricted Business.
“Confidential Information” means all confidential and proprietary information relating to any GNL Group Company or their respective businesses, products, markets, condition (financial or other), operations, assets, liabilities, results of operations, cash flows or prospects, which is considered confidential or proprietary information and is maintained as such within the GNL Group Company, through agreements with relevant Persons, policies and/or other appropriate safeguards against disclosure, other than (i) information which is, was or becomes generally available to the public other than as a result of a disclosure in violation of this Agreement, (ii) was or is developed by the Restricted Person without the use of the Confidential Information or (iii) was, is or becomes available to the Restricted Person or any of his Affiliates or any of their respective representatives on a non-confidential basis from a third party not known by such Person to be in breach of any legal obligation of confidentiality to the GNL Group Company not to disclose such information.
“GNL Group Company” means GNL and any company or other legal entity that is an Affiliate of GNL, determined from time to time.
“Person” means a corporation, limited liability company, partnership, association, joint stock company, trust, joint venture, unincorporated organization, governmental entity or other entity.
“Residual Information” means information about the industry in which the GNL Group Companies operate retained in the unaided memories of individuals associated with the Restricted Person, his Affiliates or any of his representatives without reference to written or electronic information that is not proprietary information that specifically relates to any GNL Group Company.
“Restricted Business” means any business that has as its primary investment strategy the acquisition of any properties of any type or asset class that represents at least 10% of the portfolio of GNL after giving effect to the combination of RTL by GNL as of the date of this Agreement (excluding Healthcare Trust, Inc. and American Strategic Investment Co.).
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“Restricted Period” means the five (5)-year period commencing from and after the Closing Date.
“Restricted Territory” means North America, Germany, Guernsey, Italy, Spain, France, the United Kingdom, Finland, and Luxembourg.
Article III
MISCELLANEOUS
Section 3.01 Specific Performance / Injunctive Relief. If any party breaches, or threatens to commit a breach of, any of the provisions of Article I, GNL and its successors and assigns (on behalf of itself and each GNL Group Company) or the Restricted Person on behalf of himself and his successors (each a “Beneficiary,” and collectively, the “Beneficiaries”) shall have the right and remedy, in addition to, and not in lieu of, any other rights and remedies available to any of the Beneficiaries, to have the provisions of Article I specifically enforced by way of an injunction or other legal relief, it being agreed that any breach or threatened breach of the covenants specified in Article I would cause irreparable injury to the Beneficiaries and that pecuniary compensation would not afford adequate relief to the Beneficiaries, or it would be extremely difficult to ascertain the amount of compensation which would afford adequate relief. Therefore, each of GNL and the Restricted Person agrees that, in the event of any such breach or threatened breach of Article 1, the Beneficiaries will have the right to seek and obtain injunctive relief, to the greatest extent permitted by applicable law.
Section 3.02 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial messenger or courier service, or mailed by registered or certified mail (return receipt requested) or sent via e-mail (with acknowledgment of receipt) to the applicable party as set forth on Annex A hereto (or at such other address or e-mail address for a party as shall be specified by like notice).
Section 3.03 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart.
Section 3.04 Assignment. This Agreement shall not be assigned by operation of law or otherwise; provided, that GNL may assign all or part of its rights and obligations under this Agreement to an Affiliate of GNL, which the Restricted Person expressly approves by executing this Agreement. Any assignment in violation of this Section 3.04 shall be void.
Section 3.05 Severability. In the event that any provision of this Agreement or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.
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Section 3.06 Amendments. This Agreement may not be amended except by written agreement signed by GNL and the Restricted Person.
Section 3.07 Other Remedies. Any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy.
Section 3.08 Governing Law / Place of Venue. This Agreement, and all claims or causes of action that may be based upon, arise out of or relate to this Agreement (including without limitation non-contractual disputes) will be governed by and construed in accordance with the laws of the State of Maryland. The parties hereby consent to the non-exclusive jurisdiction of the state and federal courts located in the State of Maryland for the determination of any dispute arising from or in connection with this Agreement.
Section 3.09 Opportunity to Seek Counsel. The Restricted Person acknowledges and agrees that he has had adequate opportunity to consult with counsel of his own choosing prior to entering into this Agreement, and that Proskauer Rose LLP represented GNL, in connection with the negotiation and preparation of this Agreement and the transactions contemplated by the Merger Agreement, and has not provided any legal advice to the Restricted Person in connection with this Agreement or the transactions contemplated hereby or by the Merger Agreement.
Section 3.10 Effectiveness. This Agreement shall be effective as of the Closing.
Section 3.11 Termination. In the event that the Merger Agreement is terminated in accordance with its terms, this Agreement shall be null and void ab initio.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the date and year first above written.
| GLOBAL NET LEASE, INC. | ||
| By: | /s/ Michael Anderson | |
| Name: Michael Anderson | ||
| Title: Authorized Signatory | ||
| RESTRICTED PERSON | ||
| /s/ Edward M. Weil, Jr. | ||
| Name: Edward M. Weil, Jr. | ||
| Address | ||
| Facsimile: | ||
[Signature Page to Confidentiality, Non-Compete and Non-Solicitation Agreement of Edward M. Weil, Jr.]
Annex A
Notice Information
if to GNL, to:
Global Net Lease, Inc.
650 Fifth Avenue, 30th Floor
New York, NY 10019
Attention: General Counsel
if to the Restricted Person, to:
Edward M. Weil, Jr.
222 Bellevue Avenue
Newport, RI 02840
Exhibit 10.2
Execution Version
CONFIDENTIALITY, NON-COMPETITION AND NON-SOLICITATION AGREEMENT
This CONFIDENTIALITY, NON-COMPETITION AND NON-SOLICITATION AGREEMENT, dated as of May 23, 2023 (this “Agreement”), is made and entered into by and between Global Net Lease, Inc., a Maryland corporation and real estate investment trust (“GNL”), and Nicholas S. Schorsch (the “Restricted Person”).
WHEREAS, contemporaneously with execution and delivery of this Agreement, GNL is entering into that certain Agreement and Plan of Merger, dated on or about the date hereof (the “Merger Agreement”), by and among GNL, GNL Advisor Merger Sub, a Delaware limited liability company and a wholly-owned subsidiary of GNL OP (the “GNL Advisor Sub”), GNL PM Merger Sub, a Delaware limited liability company and a wholly-owned subsidiary of GNL OP (the “GNL PM Sub”), RTL Advisor Merger Sub, a Delaware limited liability company and a wholly-owned subsidiary of GNL OP (the “RTL Advisor Sub”), RTL PM Merger Sub, a Delaware limited liability company and a wholly-owned subsidiary of GNL OP (the “RTL PM Sub”) (GNL Advisor Sub, GNL PM Sub, RTL Advisor Sub and RTL PM Sub are individually an “Internalization Sub” and collectively the “Internalization Subs”), Global Net Lease Operating Partnership, L.P., a Delaware limited partnership (“GNL OP”), The Necessity Retail REIT, Inc., a Maryland corporation and real estate investment trust (“RTL”) and The Necessity Retail REIT Operating Partnership, L.P., a Delaware limited partnership (“RTL OP”) on the one hand, and AR Global Investments, LLC, a Delaware limited liability company (“Advisor Parent”), Global Net Lease Special Limited Partnership, LLC, a Delaware limited liability company and an indirect wholly-owned subsidiary of Advisor Parent (“GNL SLP”), Necessity Retail Space Limited Partner, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Advisor Parent (“RTL SLP”), Global Net Lease Advisors, LLC, a Delaware limited liability company and a wholly-owned subsidiary of GNL SLP (the “GNL Advisor”), Global Net Lease Properties, LLC, a Delaware limited liability company and a wholly-owned subsidiary of GNL SLP (the “GNL Property Manager”), Necessity Retail Advisors, LLC, a Delaware limited liability company and a wholly-owned subsidiary of RTL SLP (the “RTL Advisor”), and Necessity Retail Properties, LLC, a Delaware limited liability company and a wholly-owned subsidiary of RTL SLP (the “RTL Property Manager”) (GNL Advisor, GNL Property Manager, RTL Advisor, and RTL Property Manager, along with each of their direct and indirect wholly-owned subsidiaries, are individually a “Target LLC” and collectively the “Target LLCs”) on the other hand. Capitalized terms used in this Agreement shall have the meanings ascribed to such terms in Article 11 of the Merger Agreement;
WHEREAS, it is the intention of the parties to the Merger Agreement to effect a business combination transaction in which (i) GNL Advisor Sub shall merge with and into GNL Advisor, with GNL Advisor being the surviving entity (the “GNL Advisor Merger”), and each outstanding membership interest of GNL Advisor will be converted into the right to receive from GNL or its designee the GNL Advisor Merger Consideration, (ii) GNL PM Sub shall merge with and into GNL Property Manager, with GNL Property Manager being the surviving entity (the “GNL PM Merger”), and each outstanding membership interest of GNL Property Manager will be converted into the right to receive from GNL or its designee the GNL PM Merger Consideration, (iii) RTL Advisor Sub shall merge with and into RTL Advisor, with RTL Advisor being the surviving entity (the “RTL Advisor Merger”), and each outstanding membership interest of RTL Advisor will be converted into the right to receive from GNL or its designee the RTL Advisor Merger Consideration and (iv) RTL PM Sub shall merge with and into RTL Property Manager, with RTL Property Manager being the surviving entity (the “RTL PM Merger”) (the GNL Advisor Merger, GNL PM Merger, RTL Advisor Merger and RTL PM Merger, are individually an “Internalization Merger” and collectively the “Internalization Mergers”), and each outstanding membership interest of RTL Property Manager will be converted into the right to receive from GNL or its designee the RTL PM Merger Consideration, in each case upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DLLC Act;
WHEREAS, the Restricted Person is an equity owner in Advisor Parent and will be receiving proceeds in respect of such ownership as a result of the Merger (the “Merger Consideration”); and
WHEREAS, the Restricted Person acknowledges that execution and delivery of this Agreement is a material inducement for GNL to execute and deliver the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein, and for other good and valuable consideration, including the Merger Consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
Article I
PROTECTION OF GOODWILL
Section 1.01 Confidentiality. During the Restricted Period, the Restricted Person shall not, and shall cause its Affiliates not to, publicly disclose, reveal, divulge or communicate to any Person any Confidential Information; provided, however, that the foregoing shall not restrict the Restricted Person or its Affiliates from (i) disclosing (under appropriate obligations of confidentiality) Confidential Information to the extent necessary to enforce and exercise his rights under this Agreement, the Merger Agreement or the Transaction Documents (as defined in the Merger Agreement), (ii) disclosing Confidential Information to the extent necessary in connection with such Restricted Person’s employment, service as a director or consulting services for any GNL Group Company, if applicable, (iii) disclosing Confidential Information in confidence to his financial, tax and legal advisors who are bound by similar confidentiality obligations and (iv) shall not have any obligation to keep confidential any Confidential Information if and to the extent disclosure thereof is required by applicable law or requested by a governmental authority; provided, however, that in the event disclosure is required by applicable law or requested by a governmental authority, the Restricted Person shall to the extent legally permissible and practicable provide GNL with prompt notice of such requirement prior to making any disclosure so that GNL may seek an appropriate protective order at its own cost or waive compliance with the provisions of this Section 1.01, provided that no such notice shall be required under circumstances where a notice requirement would be deemed to violate applicable law. GNL (on behalf of itself and each GNL Group Company) acknowledges that Confidential Information may enhance the Restricted Person’s and his Affiliates’ and his representatives’ knowledge and understanding of the industry of the GNL Group Companies in a way that cannot be separated from such Persons’ other knowledge and GNL (on behalf of itself and each GNL Group Company) agrees that, so long as Confidential Information is not disclosed in violation of this Agreement, neither the Restricted Person nor any of his Affiliates or representatives will be deemed to have violated this Agreement to the extent Residual Information (as defined below) is used in the ordinary course by the Restricted Person, any of his Affiliates or his representatives in connection with their ongoing business.
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Section 1.02 Non-Competition and Non-Solicitation. During the Restricted Period, the Restricted Person shall not, and shall cause its Affiliates not to, directly or indirectly through any Person or contractual arrangement:
(a) manage, operate, advise or consult for, render services to, run, control or externally manage any Restricted Business (other than any real estate held or owned by the Restricted Person in his personal capacity or any trust controlled by such individual whose beneficiaries are members of his family whether acquired prior to or after the date hereof) in the Restricted Territory; provided, however, that the restrictions contained in this Agreement shall in no way be deemed to restrict the Restricted Person or its Affiliates from (i) serving as an employee, officer, director or other service provider of any GNL Group Company; (ii) owning, directly or indirectly (x) up to 9.9 % of any class of securities of any public entity or (y) any passive investment in any entity that the Restricted Person does not control; (iii) investing equity of no more than the amount set forth on Schedule 1.02(a) of this Agreement in real estate partnerships that own mixed use and shopping center real estate; or (iv) working as an employee or acting as a consultant or contractor to a Competitive Entity; provided, that the Restricted Person does not personally engage in, or provide any services primarily for use in, the Restricted Business and that the Restricted Person performs services exclusively in a division, subsidiary or affiliated entity of the Competitive Entity that does not primarily engage in the Restricted Business;
(b) employ, hire, enter into an agency or consulting relationship with or recruit or solicit for employment any employee of a GNL Group Company (“Restricted Employees”); provided, that the foregoing shall not apply to (i) Restricted Employees who ceased to be employed by a GNL Group Company at least ninety (90) days prior to any solicitation by, and the commencement of any discussions with, the Restricted Person or any of its Affiliates; and (ii) any general solicitations not targeted at Restricted Employees (including through the use of recruiting firms or advertisements in any newspaper, magazine, trade publication, electronic medium or other media) or any hiring as a result thereof; provided, further, that, notwithstanding the foregoing, the Restricted Person shall not, and shall cause its Affiliates not to, directly or indirectly, (x) solicit or induce Edward M. Weil, Jr. or James Nelson to leave the employ of GNL or (y) employ, hire or enter into a consulting arrangement with them, in each case, during the term of such individual’s Executive Employment Agreement (as defined in the Merger Agreement); and provided, further, notwithstanding this Agreement or any other agreement to the contrary, it is acknowledged and agreed that Edward M. Weil, Jr. and Nicholas Schorsch are each direct or indirect members, owners, directors or officers of AR Global Investments, LLC and certain other entities that do not engage in activities that are violative of Section 1.02(a) of this Agreement and that such individuals shall be permitted to continue to engage in such business activities; or
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(c) encourage any customer or supplier who is, as of the Closing Date, a customer or supplier of any GNL Group Company to terminate or adversely modify any relationship with a GNL Group Company.
Section 1.03 Non Disparagement. During the Restricted Period, (a) the Restricted Person shall not, directly or indirectly, make, and shall not cause or direct any of his Affiliates to publicly make any negative, derogatory, disparaging or untrue comments, communications or statements, whether written or oral about any of the Internalization Subs, Target LLCs, GNL, GNL OP, RTL, RTL OP or any of their respective Affiliates, or any officer, director, shareholder, manager or member thereof (collectively, “GNL Protected Persons”) or the business, management, operations or strategies of the GNL Protected Persons and (b) each GNL Group Company shall not and shall not cause, permit or direct any of its directors or officers to publicly make any negative, derogatory, disparaging or untrue comments, communications or statements, whether written or oral about the Restricted Person or any of his Affiliates and any officer, director, shareholder, manager or member thereof (collectively, the “Restricted Persons Protected Persons”) or the business, management, operations or strategies of any Restricted Persons Protected Persons. “Disparaging” comments or statements include such comments or statements which discredit, ridicule or defame any Person or entity or impair the reputation, goodwill or commercial interest thereof. Nothing in this Section 1.03 shall limit the Restricted Person, any GNL Group Company or their respective Affiliates’ ability to make true and accurate statements, as required by applicable Laws, to a Governmental Authority or otherwise make any true and accurate statements as part of litigation, arbitration, regulatory or administrative proceeding.
Section 1.04 Social Media Activities. For purposes of the restrictions set forth in Sections 1.01, 1.02, and 1.03 prohibited conduct shall include direct or indirect oral, written, and/or electronic communications, including, without limitation, social media communications, by the Restricted Person and the Restricted Person’s Affiliates that violate such restrictions. As used herein, social media includes all means of communicating or posting information or content of any sort on the Internet, including a Person’s own or someone else’s web log, blog, journal, diary, personal web site, social networking or affinity web site, web bulletin board, or chat room. By way of example only, neither the Restricted Person nor any of its Affiliates shall initiate social media communications from the Restricted Person’s or such Affiliate’s business or personal social media accounts (including, without limitation, status updates, posts, direct/personal messages or tweets on Twitter, LinkedIn, Google+, Facebook, or other social media) (collectively, “Posts”) that violate the restrictions in Sections 1.01, 1.02 and 1.03.
Article II
definitions
Section 2.01 Definitions. For purposes hereof, the following capitalized terms shall have the respective meanings set forth below:
“Affiliate” of a Person means any other Person controlling, controlled by or under common control with such first Person, including, for the avoidance of doubt, AR Global Investments, LLC and its subsidiaries; provided, however, the term “Affiliate” shall not include any publicly traded real estate investment trust that is externally managed by AR Global Investments, LLC or any of its Subsidiaries.
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“Closing Date” means the date on which the closing under the Merger Agreement occurs.
“Competitive Entity” means a Person wholly or partially engaged in the Restricted Business.
“Confidential Information” means all confidential and proprietary information relating to any GNL Group Company or their respective businesses, products, markets, condition (financial or other), operations, assets, liabilities, results of operations, cash flows or prospects, which is considered confidential or proprietary information and is maintained as such within the GNL Group Company, through agreements with relevant Persons, policies and/or other appropriate safeguards against disclosure, other than (i) information which is, was or becomes generally available to the public other than as a result of a disclosure in violation of this Agreement, (ii) was or is developed by the Restricted Person without the use of the Confidential Information or (iii) was, is or becomes available to the Restricted Person or any of his Affiliates or any of their respective representatives on a non-confidential basis from a third party not known by such Person to be in breach of any legal obligation of confidentiality to the GNL Group Company not to disclose such information.
“GNL Group Company” means GNL and any company or other legal entity that is an Affiliate of GNL, determined from time to time.
“Person” means a corporation, limited liability company, partnership, association, joint stock company, trust, joint venture, unincorporated organization, governmental entity or other entity.
“Residual Information” means information about the industry in which the GNL Group Companies operate retained in the unaided memories of individuals associated with the Restricted Person, his Affiliates or any of his representatives without reference to written or electronic information that is not proprietary information that specifically relates to any GNL Group Company.
“Restricted Business” means any business that has as its primary investment strategy the acquisition of any properties of any type or asset class that represents at least 10% of the portfolio of GNL after giving effect to the combination of RTL by GNL as of the date of this Agreement (excluding Healthcare Trust, Inc. and American Strategic Investment Co.).
“Restricted Period” means the five (5)-year period commencing from and after the Closing Date.
“Restricted Territory” means North America, Germany, Guernsey, Italy, Spain, France, the United Kingdom, Finland, and Luxembourg.
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Article III
MISCELLANEOUS
Section 3.01 Specific Performance / Injunctive Relief. If any party breaches, or threatens to commit a breach of, any of the provisions of Article I, GNL and its successors and assigns (on behalf of itself and each GNL Group Company) or the Restricted Person on behalf of himself and his successors (each a “Beneficiary,” and collectively, the “Beneficiaries”) shall have the right and remedy, in addition to, and not in lieu of, any other rights and remedies available to any of the Beneficiaries, to have the provisions of Article I specifically enforced by way of an injunction or other legal relief, it being agreed that any breach or threatened breach of the covenants specified in Article I would cause irreparable injury to the Beneficiaries and that pecuniary compensation would not afford adequate relief to the Beneficiaries, or it would be extremely difficult to ascertain the amount of compensation which would afford adequate relief. Therefore, each of GNL and the Restricted Person agrees that, in the event of any such breach or threatened breach of Article 1, the Beneficiaries will have the right to seek and obtain injunctive relief, to the greatest extent permitted by applicable law.
Section 3.02 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial messenger or courier service, or mailed by registered or certified mail (return receipt requested) or sent via e-mail (with acknowledgment of receipt) to the applicable party as set forth on Annex A hereto (or at such other address or e-mail address for a party as shall be specified by like notice).
Section 3.03 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart.
Section 3.04 Assignment. This Agreement shall not be assigned by operation of law or otherwise; provided, that GNL may assign all or part of its rights and obligations under this Agreement to an Affiliate of GNL, which the Restricted Person expressly approves by executing this Agreement. Any assignment in violation of this Section 3.04 shall be void.
Section 3.05 Severability. In the event that any provision of this Agreement or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.
Section 3.06 Amendments. This Agreement may not be amended except by written agreement signed by GNL and the Restricted Person.
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Section 3.07 Other Remedies. Any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy.
Section 3.08 Governing Law / Place of Venue. This Agreement, and all claims or causes of action that may be based upon, arise out of or relate to this Agreement (including without limitation non-contractual disputes) will be governed by and construed in accordance with the laws of the State of Maryland. The parties hereby consent to the non-exclusive jurisdiction of the state and federal courts located in the State of Maryland for the determination of any dispute arising from or in connection with this Agreement.
Section 3.09 Opportunity to Seek Counsel. The Restricted Person acknowledges and agrees that he has had adequate opportunity to consult with counsel of his own choosing prior to entering into this Agreement, and that Proskauer Rose LLP represented GNL, in connection with the negotiation and preparation of this Agreement and the transactions contemplated by the Merger Agreement, and has not provided any legal advice to the Restricted Person in connection with this Agreement or the transactions contemplated hereby or by the Merger Agreement.
Section 3.10 Effectiveness. This Agreement shall be effective as of the Closing.
Section 3.11 Termination. In the event that the Merger Agreement is terminated in accordance with its terms, this Agreement shall be null and void ab initio.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the date and year first above written.
| GLOBAL NET LEASE, INC. | ||
| By: | /s/ Michael Anderson | |
| Name: Michael Anderson | ||
| Title: Authorized Signatory | ||
| RESTRICTED PERSON | ||
| /s/ Nicholas S. Schorsch | ||
| Name: Nicholas S. Schorsch | ||
| Address | ||
| Facsimile: | ||
[Signature Page to Confidentiality, Non-Compete and Non-Solicitation Agreement of Nicholas S. Schorsch]
Annex A
Notice Information
if to GNL, to:
Global Net Lease, Inc.
650 Fifth Avenue, 30th Floor
New York, NY 10019
Attention: General Counsel
if to the Restricted Person, to:
Nicholas S. Schorsch
222 Bellevue Avenue
Newport, RI 02840
Exhibit 10.3
Execution Version
EMPLOYMENT AGREEMENT
BETWEEN
GLOBAL NET LEASE, INC. AND
EDWARD M. WEIL, JR.
This Employment Agreement (the “Agreement”), entered into on May 23, 2023, and effective as of the Effective Date (as defined below) by and between Global Net Lease, Inc., a Maryland corporation and real estate investment trust (the “Company”) and Edward M. Weil, Jr. (the “Executive”) (each of them being referred to as a “Party” and together as the “Parties”. The “Effective Date” shall be the date on which the transactions (the “Transaction”) contemplated by that certain Merger Agreement are consummated. “Merger Agreement” means that certain Agreement and Plan of Merger, dated as of May 23, 2023, by and among GNL Internalization Advisor Merger Sub, a Delaware limited liability company, GNL PM Merger Sub, a Delaware limited liability company, RTL Advisor Merger Sub, a Delaware limited liability company, RTL PM Merger Sub, a Delaware limited liability company, the Company, Global Net Lease Operating Partnership, L.P., a Delaware limited partnership, The Necessity Retail REIT, Inc., a Maryland corporation and real estate investment trust (“RTL”), and The Necessity Retail REIT Operating Partnership, L.P., a Delaware limited partnership (“RTL OP”) on the one hand, and AR Global Investments, LLC, a Delaware limited liability company, Global Net Lease Special Limited Partnership, LLC, a Delaware limited liability company, Global Net Lease Advisors, LLC, a Delaware limited liability company, Global Net Lease Properties, LLC, a Delaware limited liability company, Necessity Retail Advisors, LLC, a Delaware limited liability company, and Necessity Retail Properties, LLC, a Delaware limited liability company, on the other hand, as amended, modified, supplemented or restated from time to time.
WHEREAS, the Company and the Executive desire to memorialize the terms of the Executive’s employment relationship with the Company effective as of the Effective Date on the terms and conditions set out below.
NOW, THEREFORE, the Company and the Executive, in consideration of the respective covenants set out below, hereby agree as follows:
1. EMPLOYMENT.
(a) Position(s). The Executive shall be employed as the Co-Chief Executive Officer (“CEO”) of the Company and James Nelson (“Nelson”) shall be the other Co-Chief Executive Officer until April 14, 2024. Commencing on the earlier of (i) April 14, 2024 or (ii) such date that Nelson is no longer serving as Co-Chief Executive Officer, the Executive shall be the sole Chief Executive Officer of the Company. The Company agrees to use its reasonable best efforts to cause Company to nominate the Executive as a director of the Board and shall continue to nominate him during the Term. Failure to be made a director of the Company shall not be a breach of or default under this Agreement. The Executive shall work primarily out of the Company’s offices located in Newport, Rhode Island or his home and also out of New York, New York; provided, however, that the Executive understands and agrees that reasonable travel, at the Company’s cost, as applicable, may be required from time to time for business reasons, including working from the New York, New York or Newport, Rhode Island offices when requested by the Board.
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(b) Duties. The Executive shall report directly to the board of directors of the Company (the “Board”), which shall reasonably and in good faith allocate duties and responsibilities as between the two Co-CEOs, and the Executive’s principal duties and responsibilities shall be consistent with his position. At all times during the Term (as defined below), the Executive shall adhere in all material respects to all of the Company’s policies, rules and regulations governing the conduct of its employees that apply to the Executive and have been previously provided to him, including without limitation, any compliance manual, code of ethics, employee handbook or other policies adopted by the Company from time to time; provided, however, that in any conflict between this Agreement and any policies, rules or regulations, this Agreement shall control.
(c) Extent of Services. Except for illnesses and vacation periods, the Executive shall devote a substantial majority of his business time and attention and his best efforts to the performance of his duties and responsibilities under this Agreement, and consistent with the time and effort customary for chief executive officers of publicly-traded companies. Notwithstanding the foregoing, the Executive may (i) participate or hold directorships in charitable, academic or community activities, and in trade or professional organizations, (ii) hold directorships on other companies and (iii) manage his and/or his family’s personal investments; provided that all of the Executive’s activities outside of the Executive’s duties to the Company, individually or in the aggregate, comply with the Company’s conflict of interest practices. Notwithstanding the foregoing, the Executive shall be permitted to make other investments and the Executive shall be permitted to continue his existing relationships and business interests (including, without limitation, continuing to be a partner in entities to which he is currently a partner) and other activities, to the extent permitted under the RCA.
2. TERM. This Agreement and the Executive’s employment shall be effective as of the Effective Date and shall continue in full force and effect thereafter until April 30, 2025 (the “Initial Term”); and shall be automatically extended for a renewal term of one (1) additional year (a “Renewal Term”) at the end of the Initial Term, and an additional one (1) year Renewal Term at the end of each Renewal Term (the last day of the Initial Term and each such Renewal Term is referred to herein as a “Term Date”), unless either party notifies the other party of its non- renewal of this Agreement not later than sixty (60) days prior to a Term Date by providing written notice to the other party of such party’s intent not to renew, or if the Executive’s employment is sooner terminated pursuant to Section 5. For purposes of this Agreement (and, for the avoidance of doubt, the non-competition and non-solicitation provisions set forth in Section 8 below), “Term” shall mean the actual duration of the Executive’s employment hereunder, taking into account any extensions pursuant to this Section 2 or early termination of employment pursuant to Section 5. For the avoidance of doubt, if the Merger Agreements are terminated in accordance with their terms and the Transactions are not consummated, then this Agreement shall be null and void ab initio and of no force and effect without any liability to any party hereto or to any other person.
3. COMPENSATION.
(a) Base Salary. The Company shall pay the Executive a base salary (the “Base Salary”), which shall be payable in periodic installments according to the Company’s normal payroll practices. For the Term, the Base Salary shall be at the annual rate of two million dollars ($2,000,000).
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(b) Annual Bonus. The Executive shall be eligible to receive an annual bonus (each an “Annual Bonus”) for each completed calendar year during the Term. The Executive shall be entitled to earn an Annual Bonus with a guaranteed minimum bonus of 50% of Base Salary ($1,000,000); provided that such Annual Bonus may be increased (but not decreased) and the Board shall engage a national compensation consulting firm reasonably promptly after the date hereof to recommend to the Board prior to the Effective Date if there should be an increase to the Annual Bonus (based on the consulting firm’s recommendation based on analysis of peer employers in the industry and which may be based on the performance of the Company and additional targets) and the Board shall consider such recommendation acting in good faith to consider an increase in the Annual Bonus. The Annual Bonus will be paid 50% in cash and 50% in equity and to the extent that such equity is not fully vested on grant shall vest in equal monthly installments with 100% fully vested by April 30, 2025. The Annual Bonus for a fiscal year shall be paid as soon as possible following the end of the fiscal year, but in no event later than March 15th of the year following the year to which the Annual Bonus relates. Other than as set forth in Section 6, the Executive must be employed by the Company or an affiliate of the Company on the date Annual Bonus is paid to be eligible to receive the and Annual Bonus for such year.
4. BENEFITS.
(a) Vacation. The Executive shall be entitled to five (5) weeks paid vacation per full calendar year, which shall accrue in accordance with the Company’s vacation policy as in effect from time to time.
(b) Sick and Personal Days. The Executive shall be entitled to sick and personal days pursuant to Company policy.
(c) Employee Benefit Plans. The Executive will be eligible for and entitled to participate in any Company sponsored employee benefit plans maintained for the Company’s employees, including but not limited to benefits such as group health, life and long-term disability insurance and a 401(k) plan, as such benefits may be offered from time to time, on a basis no less favorable than that applicable to other similarly situated executives of the Company. Notwithstanding the foregoing, the Company may modify or terminate any employee benefit plan at any time. The Company shall also pay all standard premiums associated with an executive term life insurance policy in the amount of $2,000,000 for the benefit of the Executive’s designated beneficiaries, with any expense above “standard” premiums to be paid by the Executive.
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(d) Other Benefits.
(i) INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. The Company shall, consistent with the terms below, indemnify the Executive for all costs, charges, damages, or expenses incurred or sustained by the Executive in connection with any demand, action, suit, or proceeding (“Claims”) to which the Executive may be made a party by reason of the Executive being or having been an officer, director, or employee of the Company, or any of their affiliates, to the maximum extent permitted by New York law. The Executive’s right to indemnification from the Company pursuant to the preceding sentence does not apply, however, to any Claim (other than a derivative Claim) brought by the Company, against the Executive, or by the Executive against the Company, (excluding any Claim brought in defense of an indemnifiable Claim or to enforce any right to indemnification as contemplated in the previous sentence.). For the avoidance of doubt, nothing in this Section 4(d) shall limit any right to indemnity the Executive may have under (x) the organizational documents or By-Laws of any of the Company. The Executive shall notify the Company within five (5) business days of any Claim, and the Company shall be entitled to assume the defense with counsel selected by the Company; provided, however, that the Executive shall have the right to employ counsel to represent him (at the Company’s expense) if Company counsel would have a conflict of interest (as determined by Company counsel) in representing both the Company and the Executive. The Company agrees to advance fees and expenses reasonably incurred by the Executive in connection with any Claim if it has chosen not to assume the defense of that Claim or if the Executive retains separate counsel because the Company’s counsel has determined there is a conflict of interest. The Executive agrees to cooperate with the Company’s efforts to obtain insurance coverage, or to get indemnified or recovery from another source, for any costs, charges, damages, or expenses incurred in the Executive’s defense. During the Term, the Executive shall continue to be entitled to directors and officers insurance coverage for his acts and omissions while serving as an officer of the Company on a basis no less favorable to the Executive than the coverage provided generally to the other officers and trustees of the Company. Additionally, after any termination of employment of the Executive for any reason, for a period through the sixth anniversary of the termination of employment, the Company shall maintain directors and officers insurance coverage for the Executive covering his acts or omissions while an officer of the Company on a basis no less favorable to the Executive than the coverage generally provided to then-current officers and trustees.
(ii) EXPENSES, OFFICE AND SECRETARIAL SUPPORT. The Executive shall be entitled to reimbursement of all reasonable business expenses, in accordance with the Company’s policy as in effect from time to time and on a basis no less favorable than that uniformly applicable to other senior executives of the Company (provided that the Executive shall be entitled to reimbursement for first class travel), including, without limitation, telephone, lodging, parking and reasonable entertainment expenses incurred by the Executive in connection with the business of the Company, promptly after the presentation by the Executive of appropriate documentation. The Company shall provide the Executive with the technology and support for Zoom, Teams and similar web based conference capabilities in the New York and Rhode Island offices as well as at his home residence. The Executive shall also receive appropriate office space, administrative support, and such other facilities and services as are suitable to the Executive’s positions and adequate for the performance of the Executive’s duties in both the New York and Rhode Island offices (including space in both offices for Executive’s assistants and support team). In addition to the foregoing standard executive expense reimbursements, the Executive shall receive $12,500 per month ($150,000 annually) for travel to New York, NY and/or Newport, Rhode Island (including local transportation, the “Allowance”).
(iii) CONTINUING EDUCATION AND PROFESSIONAL DEVELOPMENT. The Company shall pay for the professional licenses of the Executive in all states in which he is licensed, and shall reimburse the Executive for all reasonable and customary costs incurred in his complying with any continuing education requirements required to maintain his license(s).
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5. TERMINATION. Notwithstanding any other provision of this Agreement to the contrary, the employment of the Executive by the Company and this Agreement shall terminate immediately upon his death, the Company shall have the right to and may, in the exercise of its discretion, terminate the Executive at any time by reason of Disability, or with Cause or without Cause, and the Executive shall have the right to and may, in the exercise of his discretion, Voluntarily Resign for any reason his employment during the Term, subject to the provisions set forth below:
(a) The employment of the Executive by the Company shall terminate immediately upon death of the Executive or immediately upon the giving of written notice by the Company to the Executive of his termination due to Disability. As used in this Agreement, “Disabled” shall mean the Executive is unable to perform his duties hereunder due to any sickness, injury or disability for a consecutive period of one hundred eighty (180) days or an aggregate of six (6) months in any twelve (12)-consecutive month period. A determination of “Disabled” shall be made by a physician satisfactory to both the Executive and the Company, provided that if the Executive and the Company do not agree on a physician, the Executive and the Company shall each select a physician and these two together shall select a third physician, whose determination as to Disabled shall be binding on all parties, and which cost, in any such case, shall be paid entirely by the Company. The appointment of one or more individuals to carry out the offices or duties of the Executive during a period of the Executive’s inability to perform such duties and pending a determination of Disabled shall not be considered a breach of this Agreement by the Company.
(b) With Cause. The employment of the Executive by the Company shall terminate at the election of the Company immediately upon the giving of written notice by the Company to the Executive of his termination with Cause, subject to the terms of this Section 5(b). For purposes of this Agreement, the term “Cause” means that the Executive: (1) has been convicted of, or entered a plea of guilty or “nolo contendere” to, a felony (excluding any felony relating to the negligent operation of an automobile), (2) has intentionally failed to substantially perform (other than by reason of illness or temporary disability) his reasonably assigned material duties hereunder, including but not limited to duties consistent with the Executive’s position as are assigned by the Board after the date of this Agreement, (3) has engaged in willful misconduct or gross negligence in the performance of his duties, (4) has engaged in conduct that materially violated the Company’s then existing written internal policies or procedures that apply to the Executive and were provided to him prior to the violation and which is detrimental to the business or reputation of the Company, or (5) has materially breached the RCA or any non-competition in effect between the Executive and the Company, provided, however, that in the case of clause (4) and, to the extent curable, clause (5) above “Cause” shall not exist unless the Executive fails to remedy to the reasonable satisfaction of the Board such act, omission or condition, within thirty (30) days after the Executive receives from the Board written notice that sets forth in reasonable detail the basis for the Board’s belief that “Cause” exists; and in the event of termination pursuant to this Section 5(b), notwithstanding anything in this Agreement to the contrary, except as set forth in Section 6(c), no payments under Section 3(b) through (e) shall be payable to Executive. For purposes of this Section 5(b), no act, or failure to act, on the Executive’s part will be deemed “gross negligence” or “willful misconduct” if the Executive’s act or failure to act was done, or omitted to be done, by the Executive in good faith and with a reasonable belief that the Executive’s act, or failure to act, was in the best interest of the Company.
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(c) Without Cause; Voluntary Resignation. The employment of the Executive by the Company and this Agreement shall terminate at the election of the Company without Cause, and at the election of the Executive for any reason other than Good Reason (“Voluntary Resignation”), in either case upon thirty (30) days prior written notice to the Executive or the Company, as the case may be.
(d) Good Reason. The employment of the Executive shall terminate at the election of the Executive for Good Reason subject to the terms of this Section 5(d). For purposes of this Agreement, “Good Reason” means any of the following occurring without Executive’s consent: (i) any reduction in the amount of the Base Salary payable or Annual Bonus; (ii) any change in Executive’s title or material diminution in Executive’s responsibilities in a manner which is materially inconsistent with the position Executive holds (including, without limitation, a change in reporting structure); (iii) the Company’s requiring Executive to be based at any location other than as specified in this Agreement that materially increases Executive’s commute; or (iv) any material breach by the Company of any material term or provision of the Agreement; provided, however, that none of the events described in the foregoing clauses shall constitute Good Reason unless Executive has notified the Company in writing describing the events that constitute Good Reason within thirty (30) calendar days following the first occurrence of such events and then only if the Company fails to cure such events within thirty (30) calendar days after the Company’s receipt of such written notice, and Executive shall have terminated Executive’s employment with the Company within thirty (30) calendar days following the expiration of such cure period.
(e) Non-renewal. This Agreement and the Executive’s employment shall terminate at a Term Date if either the Executive or the Company notifies the other party of its non-renewal of this Agreement not later than sixty (60) days prior to such Term Date by providing written notice to the other party of such party’s intent not to renew (“Non-renewal”).
(f) Notice of Termination. Any termination of the Executive’s employment by the Company or by the Executive (other than termination pursuant to Death) shall be communicated by written Notice of Termination to the other party hereto in accordance with this Agreement. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.
(g) Date of Termination. The “Date of Termination” shall mean (i) if the Executive’s employment is terminated by his death, the date of his death, (ii) if the Executive’s employment is terminated pursuant Disability or for Cause, the date of delivery of the Notice of Termination unless otherwise specified in such notice, (iii) the applicable Term Date if termination is due to a notice of Non-renewal, and (iv) if the Executive’s employment is terminated for any other reason the date the Executive ceases performing services as an employee of the Company.
6. EFFECTS OF TERMINATION.
(a) Death or Termination by the Company for Disability. If the employment of the Executive should terminate during the Term due to his death or at the election of the Company due to Disability, then the Company will pay or provide to the Executive (or his estate, if applicable):
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(i) any earned and accrued but unpaid installment of Base Salary and Allowance through the Date of Termination payable in accordance with the Company’s normal payroll practices;
(ii) reimbursement for any unreimbursed business expenses incurred through the Date of Termination in accordance with Sections 4(d) and 14(l)(ii);
(iii) all other applicable payments or benefits to which the Executive shall be entitled under, and paid or provided in accordance with, the terms of any applicable arrangement, plan or program under Section 4(c) through the Date of Termination (collectively, Sections 6(a)(i) through 6(a)(iii), payable in accordance with this Section 6(a), shall be hereafter referred to as the “Accrued Benefits”);
(iv) any accrued but unpaid Annual Bonus for the year prior to the year of termination;
(v) payment of Annual Base Salary through April 30, 2025, or if later through the end of any Renewal Term;
(vi) (A) accelerated vesting of all unvested shares of equity or equity based awards (collectively, the “Vesting Benefits”);
(vii) a pro-rated Annual Bonus for the year in which the Date of Termination occurs, payable at the time and in the manner set forth in Section 3 (the “Pro Rata Incentives”).
(b) Termination by the Company without Cause or by the Executive for Good Reason. If the employment of the Executive should terminate during the Term at the election of the Company without Cause or by the Executive for Good Reason and other than pursuant to Section 6(a) above), then, the Company shall pay or provide to the Executive:
(i) the Accrued Benefits;
(ii) any accrued but unpaid Annual Bonus for the year prior to the year of termination;
(iii) the Pro Rata Incentives;
(iv) the Vesting Benefits; and
(v) subject to Sections 6(e) and 14(l)(iv) and (v), payment of cash severance equal to the sum of (1) the Executive’s Base Salary and (2) the annual amount of the Allowance and the Company’s contribution to the cost of Executive’s healthcare benefits for the greater of (x) the remainder of the Initial Term or any Renewal Term or (y) twelve (12) months following the Date of Termination, payable in accordance with the Company’s normal payroll practices (but off employee payroll) in approximately equal installments over the twelve (12) months following the Date of Termination (collectively, the “Severance Payments”); provided, that the first payment of the Severance Payments shall be made on the sixtieth (60th) day after the Date of Termination, and will include payment of any amount of the Severance Payments that were otherwise due prior thereto.
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(c) By the Company for Cause, or Voluntary Resignation by the Executive (including Non-renewal by Executive). In the event that the Executive’s employment is terminated during the Term by the Company for Cause, the Company shall pay the Executive only the Accrued Benefits, and the Company shall have no further obligations to the Executive under this Agreement and the Executive shall forfeit all right, title and interest in any vested and unvested portions of the Executive Interests. In the event that the Executive’s employment is terminated during the Term by a Voluntary Resignation (including due to the non-renewal of the Initial Term or any Renewal Term by the Executive) other than Good Reason, the Company shall pay the Executive: (i) the Accrued Benefits, and (ii) the Pro Rata Incentives (pursuant to the terms of Section 6(a)(vii) above). For the avoidance of doubt, the Executive’s Voluntary Resignation shall not be deemed to waive any right to damages or other compensation the Executive may be entitled to in law or in equity due to breach by the Company of the terms or provisions of this Agreement.
(d) By the Company due to Non-renewal. If the employment of the Executive should terminate during the Term or on the Term Date at the election of the Company due to Non-renewal, then, the Company shall pay or provide to the Executive the payments and benefits as set forth in Section 6(b).
(e) Release. Payments by the Company required under this Section 6 following termination or expiration of the Executive’s employment for any reason (other than payments of the Accrued Benefits) shall be conditioned on and shall not be payable unless the Company receives from the Executive within sixty (60) days of the Date of Termination a fully effective and non-revocable written release in form attached as Annex A to this Agreement (the “General Release”), which, for the avoidance of doubt, shall not contain any post-employment restrictions other than as contained herein, and shall not release any rights to indemnification, any Severance Payments, or other vested or accrued benefits under any other benefit plan in which the Executive participates that are due and payable on and after the Date of Termination or rights with respect to vested equity or equity based awards.
(f) Termination of Authority. Immediately upon the Executive terminating or being terminated from his employment with the Company for any reason, notwithstanding anything else appearing in this Agreement or otherwise, the Executive will stop serving the functions of his terminated or expired position(s) and shall be without any of the authority or responsibility for such position(s).
7. CONFIDENTIAL INFORMATION. The provisions of Section 1 of the RCA shall apply to the Executive during the Term as if set forth in this Agreement. “RCA” means that certain Confidentiality, Non-Competition and Non Solicitation Agreement in the form attached as Exhibit B to the Merger Agreement and such RCA shall be signed on the Effective Date.
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8. COVENANTS.
(a) Non-Competition and Non-Solicitation. The provisions of Section 1.02 of the RCA shall apply during the Term and for a period of twelve (12) months following the Date of Termination as if set forth in this Agreement
(b) Non-Disparagement. The provisions of Section 1.03 of the RCA shall apply as if set forth in this Agreement.
(c) Acknowledgement. The Executive acknowledges that he will acquire much Confidential Information concerning the past, present and future business of the Company as the result of his employment, as well as access to the relationships between the Company and its clients and employees. The Executive further acknowledges that the business of the Company is very competitive and that competition by him in that business during his employment, or after his employment terminates, would severely injure the Company. The Executive understands and agrees that the restrictions contained in this Section 8 are reasonable and are required for the Company’s legitimate protection, and do not unduly limit his ability to earn a livelihood.
(d) Rights and Remedies upon Breach. The Executive acknowledges and agrees that any breach by him of any of the provisions of Sections 7 and 8 (the “Restrictive Covenants”) would result in irreparable injury and damage for which money damages would not provide an adequate remedy. Therefore, if the Executive breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company and its affiliates shall have the following rights and remedies, each of which rights and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company and its affiliates, under law or in equity (including, without limitation, the recovery of damages):
(i) the right and remedy to seek to have the Restrictive Covenants specifically enforced (without posting bond and without the need to prove damages) by any court of competent jurisdiction, including, without limitation, the right to an entry against the Executive of restraining orders and injunctions (preliminary, mandatory, temporary and permanent) against violations, threatened or actual, and whether or not then continuing, of such covenants; and
(ii) the right and remedy to seek to require the Executive to account for and pay over to the Company and its affiliates all compensation, profits, monies, accruals, increments or other benefits derived or received by him solely as the result of any transactions constituting a breach of the Restrictive Covenants.
(e) If any court or other decision-maker of competent jurisdiction determines that any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration, scope of activities or geographical scope of such provision, then, after such determination has become final and unappealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.
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9. INTELLECTUAL PROPERTY. The Executive shall promptly disclose to the Company or any successor or assign, and grant to the Company and its successors and assigns without any separate remuneration or compensation other than that received by him in the course of his employment, his entire right, title and interest in and to any and all inventions, developments, discoveries, models, or business plans or opportunities, or any other intellectual property of any type or nature whatsoever (“Intellectual Property”), developed by him during the period of, and in connection with, his employment by the Company and whether developed by him during or after business hours, or alone or in connection with others, that is in any way related to the business of the Company, its successors or assigns. This provision shall not apply to books or articles authored by the Executive during non-work hours, consistent with his obligations under this Agreement, so long as such books or articles (a) are not funded in whole or in part by the Company, and (b) do not contain any Confidential Information or Intellectual Property of the Company. The Executive agrees, at the Company’s expense, to take all steps necessary or proper to vest title to all such Intellectual Property in the Company, and cooperate fully and assist the Company in any litigation or other proceedings involving any such Intellectual Property.
10. EQUITABLE RELIEF. The Executive acknowledges and agrees that, notwithstanding anything herein to the contrary, including without limitation Section 11 hereof, upon any breach by the Executive of his obligations under Sections 7, 8 or 9 hereof, the Company will have no adequate remedy at law, and accordingly shall be immediately entitled to specific performance and other appropriate injunctive and equitable relief in a court of competent jurisdiction.
11. ALTERNATIVE DISPUTE RESOLUTION (“ADR”) POLICY AND PROCEDURE.
(a) Coverage. Except as otherwise expressly provided in this or by law, this ADR Policy and Procedure is the sole and exclusive method by which the Executive and the Company are required to resolve any and all disputes arising out of or related to the Executive’s employment with the Company or the termination of that employment, each of which is referred to as “Employment-Related Dispute”, including, but not limited to, disputes arising out of or related to any of the following subjects:
· Compensation or other terms or conditions of the Executive’s employment; or
· Application or enforcement of any Company program or policy to the Executive; or
· Any disciplinary action or other adverse employment decision of the Company or any statement related to the Executive’s employment, performance or termination; or
· Any policy of the Company or any agreement between the Executive and the Company; or
· Disputes over the arbitrability of any controversy or claim which arguably is or may be subject to this ADR Policy and Procedure; or
· Claims arising out of or related to any current or future federal, state or local civil rights laws, fair employment laws, wage and hour laws, fair labor or employment standards laws, laws against discrimination, equal pay laws, wage and salary payment laws, plant or facility closing or layoff laws, laws in regard to employment benefits or protections, family and medical leave laws, and whistleblower laws, including by way of example, but not limited to, the federal Civil Rights Acts of 1866, 1871, 1964 and 1991, the Pregnancy Discrimination Act of 1978, the Age Discrimination in Employment Act of 1967, the Equal Pay Act of 1963, the Fair Labor Standards Act of 1938, the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, and the Employee Retirement Income Security Act of 1978, as they have been or may be amended from time to time; or
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· Any other dispute arising out of or related to the Executive’s employment or its termination.
(b) Step 1: Negotiation. The Executive and the Company shall attempt in good faith to negotiate a resolution of any Employment-Related Dispute.
(c) Step 2: Mediation. If an Employment-Related Dispute cannot be settled through negotiation and remains unresolved 15 days after it is asserted, the Executive or the Company may submit the dispute to mediation and the parties shall attempt in good faith to resolve the dispute by mediation, under the mediation procedure of JAMS or the American Arbitration Association (“AAA”). The choice of the JAMS or AAA mediation procedure shall be made by the party initiating mediation. Unless the Parties agree otherwise in writing, the mediation shall be conducted by a single mediator, and the mediator shall be selected from an appropriate JAMS or AAA panel pursuant to the JAMS or AAA rules, respectively. The mediation shall be conducted in New York City, New York. Unless the Parties agree otherwise, the cost of the mediator’s professional fees and expenses and any reasonable administrative fee will be shared and paid equally by the Parties, and each Party shall bear its own attorneys’ fees and costs of the mediation.
(d) Step 3: Binding Arbitration. If an Employment-Related Dispute cannot be settled through mediation and remains unresolved the shorter of 45 days after the appointment of the mediator or 5 days after the aforementioned first mediation hearing, the Executive or the Company may submit the dispute to arbitration and the dispute shall be settled in arbitration by a single arbitrator in accordance with the applicable rules for arbitration of employment disputes of JAMS or the AAA in effect at the time of the submission to arbitration. The choice of JAMS or AAA arbitration rules shall be made by the Party initiating arbitration. The arbitration shall be kept confidential and shall be conducted in the city and state in which the Company office is located in which the Executive work(ed). The arbitrator shall not have the authority to alter or amend any lawful policy, procedure or practice of the Company or agreement to which the Company is a party or the substantive rights or defenses of either Party under any statute, contract, constitution or common law. Each Party shall be responsible for its own attorneys’ fees and other costs, fees and expenses, if any, with respect to its conduct of the arbitration. The administrative cost of the arbitration, including any reasonable administrative fee and arbitrator’s fees and expenses, shall be shared equally and paid by the Parties. The arbitrator is expressly empowered to award reasonable attorneys’ fees and expenses to the prevailing party as well as all other remedies to which either party would be entitled if the dispute were resolved in court. The decision and award of the arbitrator is final and binding. The arbitrator shall promptly issue a written decision in support of his/her award. Judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction, and the award may be confirmed and enforced in any such court. The Federal Arbitration Act or any applicable state law shall govern the application and enforcement of the provisions of this Section 11.
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(e) Provisional Remedies. The Executive or the Company may file a complaint or commence a court action to obtain an injunction to enforce the provisions of this ADR Policy and Procedure, or to seek a temporary restraining order or preliminary injunction or other provisional relief to maintain the status quo or in aid of or pending the application or enforcement of this ADR Policy and Procedure. Despite such complaint or action, the parties shall continue to participate in good faith in this ADR Policy and Procedure.
(f) Administrative Agencies. Nothing in this ADR Policy and Procedure is intended to prevent the Executive from filing a complaint or charge with any administrative agency, including, but not limited to, the Equal Employment Opportunity Commission and the National Labor Relations Board.
(g) At-Will Employment/Waiver of Jury or Court Trial. This ADR Policy and Procedure does not alter the terms and conditions of the Executive’s employment pursuant to this Agreement. Nothing in this ADR Policy and Procedure limits in any way the Executive’s right or the Company’s right to terminate the Executive’s employment at any time consistent with the terms of the Agreement. This ADR Policy and Procedure does not require the Executive or Company to start the arbitration process before taking action of any kind, including without limitation the termination of the Executive’s employment. This Policy waives any right that the Executive or the Company may have to a jury trial or a court trial of any Employment-Related Dispute (except as provided above in Sections 10 or 11(e) for a court to issue provisional or equitable remedies).
(h) ADR Agreement and Savings Provision.
(i) The Executive and the Company agree that this ADR Policy and Procedure shall mandatorily apply and be the sole and exclusive method by which both the Executive and the Company are required to resolve any and all Employment-Related Disputes, to the fullest extent permitted and not prohibited or restricted by law.
(ii) Should any provision of this ADR Policy and Procedure be held invalid, illegal or unenforceable, the Executive and the Company agree that it shall be deemed to be modified so that its purpose can lawfully be effectuated and the balance of this ADR Policy and Procedure shall remain in full force and effect. The Executive and the Company further agree that the provisions of this ADR Policy and Procedure shall be deemed severable and the invalidity or enforceability of any provision of the Agreement shall not affect the validity or enforceability of the provisions of this Section 11.
12. COOPERATION IN FUTURE MATTERS. The Executive hereby agrees that for a period of eighteen (18) months following his termination of employment, he shall cooperate fully with the Company’s reasonable requests relating to matters that pertain to the Executive’s employment by the Company, including, without limitation, providing information or limited consultation as to such matters, participating in legal proceedings, investigations or audits on behalf of the Company, or otherwise making himself reasonably available to the Company for other related purposes. Any such cooperation shall be performed at scheduled times taking into consideration the Executive’s other commitments and all reasonable out of pocket costs incurred by the Executive shall be fully paid by the Company. The Executive shall not be required to perform such cooperation to the extent it conflicts with any requirements of exclusivity of services for another employer or otherwise, nor in any manner that in the good faith belief of the Executive would conflict with his rights under or ability to enforce this Agreement.
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13. RETURN OF PROPERTY. On the date of the Executive’s termination of employment with the Company for any reason (or at any time prior thereto at the Company’s request), the Executive will promptly return all property belonging to the Company or any of its affiliates.
14. GENERAL.
(a) Notices. All notices and other communications hereunder shall be in writing or by written telecommunication, and shall be deemed to have been duly given if delivered personally or if sent by overnight courier or by certified mail, return receipt requested, postage prepaid, to the relevant address set forth below, or to such other address as the recipient of such notice or communication shall have specified in writing to the other party hereto, in accordance with this Section 14(a).
If to the Company, to: 650 Fifth
Avenue, 30th Floor
New York, NY 10019
Attn: General Counsel
If to the Executive, at his last residence shown on the records of the Company,
(b) Severability. If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired.
(c) Waivers.
(i) No delay or omission by either party hereto in exercising any right, power or privilege hereunder shall impair such right, power or privilege, nor shall any single or partial exercise of any such right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege.
(ii) Except as expressly set forth in this Agreement, Executive shall not be entitled to and the Company shall not be responsible to the Executive for any remuneration or benefits on behalf of Executive’s services to the Company, his employment or the termination of such employment.
(d) Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart.
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(e) Assigns. This Agreement shall be binding upon and inure to the benefit of the Company’s successors and assigns and the Executive’s personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. This Agreement shall not be assignable by the Executive, it being understood and agreed that this is a contract for the Executive’s personal services. This Agreement shall be assignable by the Company, to a successor to the Company’s business or assets, upon notice to the Executive. When assigned to a successor, the assignee shall assume this Agreement and expressly agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it in the absence of such an assignment and the Company shall be released of all obligations hereunder. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets that executes and delivers the assumption agreement described in the immediately preceding sentence or that becomes bound by this Agreement by operation of law.
(f) Entire Agreement. This Agreement contains the entire understanding of the parties, supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter hereof and may not be amended except by a written instrument hereafter signed by the Executive and the Chief Executive Officer or a duly authorized representative of the Company (other than the Executive).
(g) Governing Law. This Agreement and the performance and enforcement hereof shall be construed and governed in accordance with the laws of the State of New York without regard to any choice of law or conflict of law principles, rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.
(h) Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. The headings of sections of this Agreement are for convenience of reference only and shall not affect its meaning or construction. Whenever any word is used herein in one gender, it shall be construed to include the other gender, and any word used in the singular shall be construed to include the plural in any case in which it would apply and vice versa.
(i) Payments and Exercise of Rights after Death. Any amounts payable hereunder after the Executive’s death shall be paid to the Executive’s designated beneficiary or beneficiaries, whether received as a designated beneficiary or by will or the laws of descent and distribution. The Executive may designate a beneficiary or beneficiaries for all purposes of this Agreement, and may change at any time such designation, by notice to the Company making specific reference to this Agreement. If no designated beneficiary survives the Executive or the Executive fails to designate a beneficiary for purposes of this Agreement prior to his death, all amounts thereafter due hereunder shall be paid, as and when payable, to his spouse, if he survives the Executive, and otherwise to his estate.
(j) Consultation with Counsel. The Executive acknowledges that he has had a full and complete opportunity to consult with counsel or other advisers of his own choosing concerning the terms, enforceability and implications of this Agreement, that the Company has not made any representations or warranties to the Executive concerning the terms, enforceability and implications of this Agreement other than as are reflected in this Agreement, and that the Executive’s execution of this Agreement is knowing and voluntary.
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(k) Withholding. Any payments provided for in this Agreement shall be paid net of any applicable income tax withholding required under federal, state or local law.
(l) Section 409A.
(i) Although the Company does not guarantee the tax treatment of any payments under the Agreement, the intent of the Parties is that the payments and benefits under this Agreement be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and all Treasury Regulations and guidance promulgated thereunder (“Code Section 409A”) and to the maximum extent permitted the Agreement shall be limited, construed and interpreted in accordance with such intent. In no event whatsoever shall the Company or its affiliates or their respective officers, directors, employees or agents be liable for any additional tax, interest or penalties that may be imposed on Executive by Code Section 409A or damages for failing to comply with Code Section 409A.
(ii) Notwithstanding any other provision of this Agreement to the contrary, to the extent that any reimbursement of expenses constitutes “deferred compensation” under Code Section 409A, such reimbursement shall be provided no later than December 31 of the year following the year in which the expense was incurred (or, where applicable, no later than such earlier time required by the Agreement). The amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year. The amount of any in-kind benefits provided in one year shall not affect the amount of in-kind benefits provided in any other year.
(iii) For purposes of Code Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), the right to receive payments in the form of installment payments shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment shall at all times be considered a separate and distinct payment. Whenever a payment under this Agreement may be paid within a specified period, the actual date of payment within the specified period shall be within the sole discretion of the Company.
(iv) Notwithstanding any other provision of this Agreement to the contrary, if at the time of Executive’s separation from service (as defined in Code Section 409A), Executive is a “Specified Employee”, then solely to the extent required by Code Section 409A, the Company will defer the payment or commencement of any nonqualified deferred compensation subject to Code Section 409A payable upon separation from service (without any reduction in such payments or benefits ultimately paid or provided to Executive) until the date that is six (6) months following separation from service or, if earlier, the earliest other date as is permitted under Code Section 409A (and any amounts that otherwise would have been paid during this deferral period will be paid in a lump sum on the day after the expiration of the six (6) month period or such shorter period, if applicable). Executive will be a “Specified Employee” for purposes of this Agreement if, on the date of Executive’s separation from service, Executive is an individual who is, under the method of determination adopted by the Company designated as, or within the category of executives deemed to be, a “Specified Employee” within the meaning and in accordance with Treasury Regulation Section 1.409A-1(i). The Company shall determine in its sole discretion all matters relating to who is a “Specified Employee” and the application of and effects of the change in such determination.
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(v) Notwithstanding anything in this Agreement or elsewhere to the contrary, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits that constitute “non-qualified deferred compensation” within the meaning of Code Section 409A upon or following a termination of the Employee’s employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service” and the date of such separation from service shall be the date of termination for purposes of any such payment or benefits.
(m) Section 280G. Notwithstanding any provision of this Agreement, if any portion of the payments or benefits under this Agreement, or under any other agreement with the Executive or plan of the Company or its affiliates (in the aggregate, “Total Payments”), would constitute an “excess parachute payment” and would result in the imposition on the Executive of an excise tax under Section 4999 of the Code (the “Excise Tax”), then the Total Payments to be made to the Executive shall either be (i) delivered in full, or (ii) delivered in such amount so that no portion of such Total Payments would be subject to the Excise Tax, whichever of the foregoing results in the receipt by the Executive of the greatest benefit on an after-tax basis (taking into account the applicable federal, state and local income taxes and the Excise Tax). The determination required by this section shall be made by a national accounting firm (after taking into account any mitigation provisions including reasonable compensation and valuation of any restrictive covenants), and the Executive shall cooperate in good faith with the Company in making such determination and providing any necessary information for this purpose.
(n) Survival. Notwithstanding anything in this Agreement or elsewhere to the contrary, the provisions of Sections 6, 7, 8, 9, 10, 11, 12, 13 and 14 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Employment Agreement to be duly executed as of the date first above written.
| GLOBAL NET LEASE, INC. | ||
| By: | /s/ Michael Anderson | |
| Name: Michael Anderson | ||
| Title: Authorized Signatory | ||
| Executive | ||
| By: | /s/ Edward M. Weil, Jr. | |
| Edward M. Weil, Jr. | ||
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Annex A: Form of General Release
[See attached.]
ANNEX A
GENERAL RELEASE AND WAIVER AGREEMENT
This General Release and Waiver Agreement (the “General Release”) is made as of the day of ___________________________, 20_ by ___________________________ (the “Executive”),
WHEREAS, the Executive and Global Net Lease, Inc., a Maryland corporation and real estate investment trust (the “Company”) have entered into an Employment Agreement (the “Agreement”) dated as of May 23, 2023, that provides for certain compensation and severance amounts upon the Executive’s termination of employment; and
WHEREAS, the Executive has agreed, pursuant to the terms of the Agreement, to execute a release and waiver in the form set forth in this General Release and Waiver Agreement in consideration of the Company’s agreement to provide the compensation and severance amounts upon his termination of employment set out in the Agreement; and
WHEREAS, the Executive has incurred a termination of employment effective as of ___________________________, 20_;
WHEREAS, the Company and the Executive desire to settle all rights, duties and obligations between them, including without limitation all such rights, duties, and obligations arising under the Agreement or otherwise out of the Executive’s employment by the Company; and
WHEREAS, capitalized terms not otherwise defined herein have the meaning ascribed to such terms in the Agreement.
NOW THEREFORE, intending to be legally bound and for good and valid consideration the sufficiency of which is hereby acknowledged, the Executive agrees as follows:
1. RELEASE. In consideration of the Agreement and for the payments to be made pursuant to the Agreement:
(a) Executive knowingly and voluntarily releases, acquits and forever discharges the Company, and any and all of its past and present owners, parents, affiliated entities, divisions, subsidiaries and each of their respective stockholders, members, predecessors, successors, assigns, managers, agents, directors, officers, employees, representatives, attorneys, employee benefit plans and plan fiduciaries, and each of them (collectively, the “Releasees”) from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, damages, causes of action, suits, rights, costs, losses, debts and expenses of any nature whatsoever, known or unknown, suspected or unsuspected, foreseen or unforeseen, matured or unmatured, against them which the Executive or any of his heirs, executors, administrators, successors and assigns (“Executive Persons”) ever had, now has or at any time hereafter may have, own or hold by reason of any matter, fact, or cause whatsoever from the beginning of time up to and including the effective date of this General Release (hereinafter referred to as the “Executive’s Claims”), including without limitation: (i) any claims arising out of or related to any federal, state and/or local labor or civil rights laws including, without limitation, the federal Civil Rights Acts of 1866, 1871, 1964 and 1991, the Rehabilitation Act, the Pregnancy Discrimination Act of 1978, the Age Discrimination in Employment Act of 1967, as amended by, inter alia, the Older Workers Benefit Protection Act of 1990, the National Labor Relations Act, the Worker Adjustment and Retraining Notification Act, the Family and Medical Leave Act of 1993, the Employee Retirement Income Security Act of 1974, the Consolidated Omnibus Budget Reconciliation Act of 1985, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act of 1938, as they may be or have been amended from time to time, and any and all other federal, state or local laws, regulations or constitutions covering the same or similar subject matters; and (ii) any and all other of the Executive’s Claims arising out of or related to any contract, any and all other federal, state or local constitutions, statutes, rules or regulations, or under any common law right of any kind whatsoever, or under the laws of any country or political subdivision, including, without limitation, any of the Executive’s Claims for any kind of tortious conduct (including but not limited to any claim of defamation or distress), breach of the Agreement, violation of public policy, promissory or equitable estoppel, breach of the Company’s policies, rules, regulations, handbooks or manuals, breach of express or implied contract or covenants of good faith, wrongful discharge or dismissal, and/or failure to pay in whole or part any compensation, bonus, incentive compensation, overtime compensation, severance pay or benefits of any kind whatsoever, including disability and medical benefits, back pay, front pay or any compensatory, special or consequential damages, punitive or liquidated damages, attorneys’ fees, costs, disbursements or expenses, or any other claims of any nature; and all claims under any other federal, state or local laws relating to employment, except in any case to the extent such release is prohibited by applicable federal, state and/or local law.
(b) The Executive acknowledges that he is aware that he may later discover facts in addition to or different from those which he now knows or believes to be true with respect to the subject matter of this Release, but it is his intention to fully and finally forever settle and release any and all matters, disputes, and differences, known or unknown, suspected and unsuspected, which now exist, may later exist or may previously have existed between himself and the Releasees or any of them, and that in furtherance of this intention, the Executive’s general release given herein shall be and remain in effect as a full and complete general release notwithstanding discovery or existence of any such additional or different facts.
(c) Executive represents that he has not filed or permitted to be filed and will not file against the Releasees, any claim, complaints, charges, arbitration or lawsuits and covenants and agrees that he will not seek or be entitled to any personal recovery in any court or before any governmental agency, arbitrator or self-regulatory body against any of the Releasees arising out of any matters set forth in Section 1(a) hereof. If Executive has or should file such a claim, complaint, charge, grievance, arbitration, lawsuit or similar action, he agrees to remove, dismiss or take similar action to eliminate such claim, complaint, charge, grievance, arbitration, lawsuit or similar action within five (5) days of signing this General Release.
(d) Notwithstanding the foregoing, this General Release is not intended to interfere with Executive’s right to file a charge with the Equal Employment Opportunity Commission (hereinafter referred to as the “EEOC”) in connection with any claim he believes he may have against the Company. However, Executive hereby agrees to waive the right to recover money damages in any proceeding he may bring before the EEOC or any other similar body or in any proceeding brought by the EEOC or any other similar body on his behalf. This General
(e) Release does not release, waive or give up any claim for workers’ compensation benefits, indemnification or director’s and officer’s liability insurance rights, any Accrued Benefits, Severance Payments, vested retirement or welfare benefits he is entitled to under the terms of the Company’s retirement and welfare benefit plans, any other vested shares, equity or benefits (including rights with respect to vested equity or equity based awards held by the Executive) or indemnification arrangements, as in effect from time to time, any right to unemployment compensation that Executive may have, or his right to enforce his rights under the Agreement and this General Release.
2. CONFIRMATION OF OBLIGATIONS. Executive hereby confirms and agrees to his continuing obligation under the Agreement after termination of employment not to directly or indirectly disclose to third parties or use any Confidential Information (as defined in the Agreement) that he may have acquired, learned, developed, or created by reason of his employment with the Company.
3. CONFIDENTIALITY; NO COMPETITION; NONSOLICITATION.
(a) Executive hereby confirms and agrees to his confidentiality, nonsolicitation and non-competition obligations pursuant to the Agreement and his duty of loyalty and fiduciary duty to the Company under applicable statutory or common law.
(b) The Executive and the Company each agree to keep the terms of this General Release confidential and shall not disclose the fact or terms to third parties, except as required by applicable law or regulation or by court order or, as to the Company, in the normal course of its business; provided, however, that Executive may disclose the terms of this General Release to members of his immediate family, his attorney or counselor, and persons assisting him in financial planning or tax preparation, provided these people agree to keep such information confidential.
4. NO DISPARAGEMENT. Each of the Executive and the Company agree not to disparage the other, including making any statement or comments or engaging in any conduct that is disparaging toward the Company (including the Releasees and each of them) or the Executive, as the case may be, whether directly or indirectly, by name or innuendo; provided, however, that nothing in this General Release shall restrict communications protected as privileged under federal or state law to testimony or communications ordered and required by a court, in arbitration or by an administrative agency of competent jurisdiction, or limit the Executive’s ability to communicate with or participate in any investigation or proceeding (including by providing documents or other information, without notice to the Company) regarding possible violations of federal securities laws that may be conducted by the U.S. Securities and Exchange Commission, the U.S. Department of Justice, U.S. Consumer Financial Protection Bureau or the U.S. Commodity Futures Trading Commission.
5. REMEDIES FOR BREACH. In the event that either Party breaches, violates, fails or refuses to comply with any of the provisions, terms or conditions or any of the warranties or representations of this Agreement (the “Breach”), in its sole discretion the non-breaching Party shall recover against the breaching Party damages, including reasonable attorneys’ fees, accruing to the non-breaching Party as a consequence of the Breach. Regardless of and in addition to any right to damages the non-breaching Party may have, the non-breaching Party shall be entitled to injunctive relief. The provisions of Paragraphs 1, 2, 3 and 4 hereof are material and critical terms of this Agreement, and the Executive agrees that, if he breaches any of the provisions of these paragraphs, the Company shall be entitled to injunctive relief against the Executive regardless of and in addition to any other remedies which are available.
6. NO RELIANCE. Neither the Executive nor the Company is relying on any representations made by the other (including any of the Releasees) regarding this General Release or the implications thereof.
7. MISCELLANEOUS PROVISIONS.
(a) This General Release contains the entire agreement between the Company and the Executive and supersedes any and all prior agreements, arrangements, negotiations, discussions or understandings between the Parties relating to the subject matter hereof. No oral understanding, statements, promises or inducements contrary to the terms of this General Release exist. This General Release cannot be changed or terminated orally. Should any provision of this General Release be held invalid, illegal or unenforceable, it shall be deemed to be modified so that its purpose can lawfully be effectuated and the balance of this General Release shall be enforceable and remain in full force and effect.
(b) This General Release shall extend to, be binding upon, and inure to the benefit of the Parties and their respective successors, heirs and assigns.
(c) This General Release shall be governed by and construed in accordance with the laws of the State of New York, without regard to any choice of law or conflict of law, principles, rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.
(d) This General Release may be executed in any number of counterparts each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.
8. EFFECTIVE DATE/REVOCATION. The Executive may revoke this General Release in writing at any time during a period of seven (7) calendar days after his execution of this General Release (the “Revocation Period”). This General Release shall be effective and enforceable automatically on the date of actual receipt by the Chief Operating Officer of the Company of the Certificate of Non-Revocation of the General Release Agreement (the form of which is attached hereto as Attachment A) executed and dated by the Executive at least one (1) calendar day after expiration of the Revocation Period (the “Effective Date”). The Agreement is deemed revoked unless the Executive signs and delivers to the General Counsel of the Company within five (5) calendar days after the Revocation Period, the Certificate of Non-Revocation of the General Release Agreement. If the Executive revokes this General Release, no severance or any other payment conditioned on the effectiveness of this General Release pursuant to the Agreement or otherwise shall be due or payable by the Company to the Executive.
9. ACKNOWLEDGEMENT. In signing this General Release, the Executive acknowledges that:
(a) The Executive has read and understands the Agreement and the General Release and the Executive is hereby advised in writing to consult with an attorney prior to signing this General Release;
(b) The Executive has consulted with his attorney, and he has signed the General Release knowingly and voluntarily and understands that the General Release contains a full and final release of all of the Executive’s Claims;
(c) The Executive is aware and is hereby advised that the Executive has the right to consider this General Release for twenty-one (21) calendar days before signing it (or in the event of a group termination program forty-five (45) days), and that if the Executive signs this Agreement prior to the expiration of the twenty-one (21) calendar days (or 45 days, if applicable), the Executive is waiving the right freely, knowingly and voluntarily; and
(d) The General Release is not made in connection with an exit incentive or other employee separation program offered to a group or class of employees.
IN WITNESS WHEREOF, the Executive has executed this General Release as of the day and year first above written.
ATTACHMENT A
CERTIFICATE OF NON-REVOCATION
OF THE GENERAL RELEASE AGREEMENT
I hereby certify and represent that seven (7) calendar days have passed since the Parties signed the General Release and Waiver Agreement, dated as of _________________, 20___ (the “General Release”), and that I have NOT exercised my right to revoke that General Release pursuant to the Older Workers Benefit Protection Act of 1990 or any other provision of law. I understand that the Company and the other Releasees on behalf of themselves and their subsidiaries and affiliates, in providing me with payments and/or benefits under the General Release, are relying on this Certificate, and that I can no longer revoke the General Release.
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| Executive | Date of Execution by Executive |
IMPORTANT:
This Certificate should be signed, dated and returned to General Counsel no earlier than on the eighth (8th) calendar day after the General Release is executed by both Parties, and no later than on the fifth (5th) calendar day (inclusive of said 8th calendar day) thereafter.