<PAGE>
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): November 12, 1997
Prime Retail, Inc.
______________________________________________________
(Exact name of registrant as specified in its charter)
Maryland 0-23616 52-1836258
________ _______ __________
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
100 East Pratt Street
Nineteenth Floor, Baltimore, Maryland 21202
_____________________________________ _____
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (410) 234-0782
______________
No Change
____________________________________________________________
(Former name or former address, if changed since last report)
<PAGE>
Item 5. OTHER EVENTS.
On November 12, 1997, Prime Retail, Inc. ("Prime") and Horizon Group, Inc.
("Horizon") entered into a definitive agreement and plan of merger (the "Merger
Agreement"). As a result of the transactions contemplated in the Merger
Agreement, Prime Retail will own and operate 20 of Horizon's existing 37 outlet
centers. Immediately prior to the merger, a subsidiary of Horizon ("Continuing
Horizon") will become the sole general partner of Horizon/Glen Outlet Centers
Limited Partnership ("Horizon Partnership") and the common stock of such
subsidiary will be distributed to the shareholders of Horizon. In addition,
Continuing Horizon will issue $43.7 million in par value of 10.0% Series A
Preferred Stock that will be distributed to Prime's convertible preferred and
common stock shareholders and unit holders, representing $1.00 in par value for
each such security on a fully-diluted basis. With the issuance of such Series A
Preferred Stock, it is expected that the Common Stock of Continuing Horizon will
have a nominal value. Continuing Horizon will own the 17 remaining Horizon
centers, including Horizon's Dole Cannery project, as well as three outlet
centers to be contributed from Prime's existing portfolio.
Under the terms of the Merger Agreement, Prime will pay a fixed exchange ratio
of 0.20 of a share of Series B Preferred Stock and 0.597 of a share of Common
Stock of each share of Common Stock of Horizon. In addition, each Common Unit
in Horizon Partnership will entitle the holder to receive a Common Unit in a
newly formed partnership that will, in turn, be converted into the right to
receive, at the holder's election, either (i) 0.20 of a Series B Preferred Unit
and 0.597 of a Common Unit of Prime Retail, L.P. or (ii) $7.125 in cash and
0.4595 of a Common Unit of Prime Retail, L.P. Based on the closing prices of
Prime's Common Stock and Series B Preferred Stock on November 12, 1997, the
exchange ratio represents a price of $12.87 for each share of Common Stock of
Horizon. As of October 31, 1997, there were 28.3 million shares of Horizon
Common Stock and Common Units outstanding. Pending completion of the merger,
Prime expects to continue to pay regular quarterly distributions on its Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Common Stock of $0.6562, $0.5312, $0.295 and $0.295, respectively. Horizon may
pay a distribution on its Common Stock on or about February 15, 1998 in an
amount not to exceed $0.105 per share. Thereafter, until the consummation of
the merger, Horizon may make distributions on its Common Stock in an amount
equal to 0.919 of any distribution paid on Prime's Common Stock.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Number Description
2.1 Agreement and Plan of Merger among Prime Retail, Inc.,
Prime Retail, L.P., Horizon Group, Inc., Sky Merger Corp.,
Sky Newco, L.P. and Horizon/Glen Outlet Centers Limited
Partnership dated as of November 12, 1997.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
PRIME RETAIL, INC.
(Registrant)
Date: November 14, 1997
By: /s/ Robert P. Mulreaney
_______________________
Name: Robert P. Mulreaney
Title: Executive Vice President,
Chief Financial Officer
and Treasurer
3
<PAGE>
EXHIBIT INDEX
Number Description
2.1 Agreement and Plan of Merger among Prime Retail, Inc.,
Prime Retail, L.P., Horizon Group, Inc., Sky Merger Corp.,
Sky Newco, L.P. and Horizon/Glen Outlet Centers Limited
Partnership dated as of November 12, 1997.
<PAGE>
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AMONG
PRIME RETAIL, INC.,
PRIME RETAIL, L.P.,
HORIZON GROUP, INC.,
SKY MERGER CORP.,
SKY NEWCO, L.P.
AND
HORIZON/GLEN OUTLET CENTERS LIMITED PARTNERSHIP
DATED AS OF NOVEMBER 12, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1 THE PARTNERSHIP MERGER . . . . . . . . . . . . . . . . . . . . . . 3
1.2 THE HORIZON/SUBSIDIARY MERGER. . . . . . . . . . . . . . . . . . . . 4
1.3 THE PRIME/HORIZON MERGER . . . . . . . . . . . . . . . . . . . . . . 4
1.4 CLOSING OF MERGERS . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.5 EFFECTIVE TIMES. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.6 EFFECT OF PRIME/HORIZON MERGER ON ARTICLES OF INCORPORATION
AND BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.7 EFFECT OF PARTNERSHIP MERGER ON AGREEMENT OF LIMITED PARTNERSHIP . . 6
1.8 DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.9 EFFECT ON SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.10 EFFECT ON PARTNERSHIP INTERESTS . . . . . . . . . . . . . . . . . . 6
1.11 MERGER CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . 6
1.12 REGISTRATION RIGHTS AGREEMENT. . . . . . . . . . . . . . . . . . . . 7
1.13 APPRAISAL RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.14 EXCHANGE OF CERTIFICATES; PRE-CLOSING DIVIDENDS; FRACTIONAL SHARES . 8
1.15 CONTRIBUTION AND DISTRIBUTION . . . . . . . . . . . . . . . . . . .14
1.16 INVESTMENT IN NEWCO . . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF HORIZON . . . . . . . . . . . . . . . .15
2.1 ORGANIZATION, STANDING AND POWER OF HORIZON. . . . . . . . . . . . .15
2.2 HORIZON SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . .16
2.3 CAPITAL STRUCTURE. . . . . . . . . . . . . . . . . . . . . . . . . .17
2.4 OTHER INTERESTS. . . . . . . . . . . . . . . . . . . . . . . . . . .18
2.5 AUTHORITY; NONCONTRAVENTION; CONSENTS. . . . . . . . . . . . . . . .18
2.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES . . . .20
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . . .21
2.8 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
2.9 PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
2.10 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
2.11 RENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
2.12 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . .26
2.13 RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . .27
2.14 EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . .27
2.15 LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . .29
2.16 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
2.17 NO PAYMENTS TO EMPLOYEES, OFFICERS OR DIRECTORS . . . . . . . . . .31
2.18 BROKER; SCHEDULE OF FEES AND EXPENSES . . . . . . . . . . . . . . .31
2.19 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . .31
<PAGE>
2.20 CONTRACTS; DEBT INSTRUMENTS. . . . . . . . . . . . . . . . . . . . .31
2.21 OPINION OF FINANCIAL ADVISOR . . . . . . . . . . . . . . . . . . . .33
2.22 STATE TAKEOVER STATUTES . . . . . . . . . . . . . . . . . . . . . .33
2.23 INVESTMENT COMPANY ACT OF 1940 . . . . . . . . . . . . . . . . . . .34
2.24 HORIZON NOT AN INTERESTED STOCKHOLDER . . . . . . . . . . . . . . .34
2.25 VOTE REQUIRED . . . . . . . . . . . . . . . . . . . . . . . . . . .34
2.26 TRADEMARKS, PATENTS AND COPYRIGHTS . . . . . . . . . . . . . . . . .34
2.27 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
2.28 DEFINITION OF KNOWLEDGE OF HORIZON . . . . . . . . . . . . . . . . .35
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PRIME . . . . . . . . . . . . . . . . .35
3.1 ORGANIZATION, STANDING AND POWER OF PRIME . . . . . . . . . . . . .35
3.2 PRIME SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . .35
3.3 CAPITAL STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . .36
3.4 OTHER INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . .38
3.5 AUTHORITY; NONCONTRAVENTION; CONSENTS . . . . . . . . . . . . . . .38
3.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES . . .39
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . .40
3.8 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
3.9 PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
3.10 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
3.11 RENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
3.12 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . .44
3.13 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
3.14 BROKERS; SCHEDULE OF FEES AND EXPENSES . . . . . . . . . . . . . . .46
3.15 COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . .47
3.16 CONTRACTS; DEBT INSTRUMENTS . . . . . . . . . . . . . . . . . . . .47
3.17 OPINION OF FINANCIAL ADVISOR . . . . . . . . . . . . . . . . . . . .47
3.18 STATE TAKEOVER STATUTES . . . . . . . . . . . . . . . . . . . . . .47
3.19 INVESTMENT COMPANY ACT OF 1940 . . . . . . . . . . . . . . . . . . .47
3.20 DEFINITION OF KNOWLEDGE OF PRIME . . . . . . . . . . . . . . . . . .47
3.21 VOTE REQUIRED . . . . . . . . . . . . . . . . . . . . . . . . . . .48
ARTICLE IV
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
4.1 CONDUCT OF HORIZON'S, HORIZON PARTNERSHIP'S AND SKY MERGER'S
BUSINESS PENDING MERGERS . . . . . . . . . . . . . . . . . . . . . .48
4.2 CONDUCT OF PRIME'S AND PRIME PARTNERSHIP'S BUSINESS
PENDING MERGERS . . . . . . . . . . . . . . . . . . . . . . . . . .52
4.3 NO SOLICITATION. . . . . . . . . . . . . . . . . . . . . . . . . . .53
4.4 AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
4.5 OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
ii
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ARTICLE V
ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . .56
5.1 PREPARATION OF THE REGISTRATION STATEMENT AND THE PROXY STATEMENT;
HORIZON SHAREHOLDERS AND PARTNERS MEETINGS AND PRIME SHAREHOLDERS
AND PARTNERS MEETINGS . . . . . . . . . . . . . . . . . . . . . . .56
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY . . . . . . . . . . . . . . .59
5.3 REASONABLE BEST EFFORTS; NOTIFICATION. . . . . . . . . . . . . . . .60
5.4 TAX TREATMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . .61
5.5 PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . . . . . .62
5.6 LISTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
5.7 TRANSFER AND GAINS TAXES . . . . . . . . . . . . . . . . . . . . . .63
5.8 BENEFIT PLANS AND OTHER EMPLOYEE ARRANGEMENTS. . . . . . . . . . . .63
5.9 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . .64
5.10 DECLARATION OF DIVIDENDS AND DISTRIBUTIONS . . . . . . . . . . . . .66
5.11 TRANSFER OF SHARES/INTERESTS IN NON-WHOLLY OWNED SUBSIDIARIES
OF HORIZON . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
5.12 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
5.13 RESIGNATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
5.14 THIRD PARTY MANAGEMENT AGREEMENTS . . . . . . . . . . . . . . . . .67
5.15 CONTRIBUTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . .67
5.16 NEWCO PREFERRED SECURITIES . . . . . . . . . . . . . . . . . . . . .67
5.17 ACTIONS UPON ISSUANCE OF INJUNCTION OR RESTRAINT . . . . . . . . . .67
ARTICLE VI
CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS. . . . .68
6.2 CONDITIONS TO OBLIGATIONS OF PRIME AND PRIME PARTNERSHIP . . . . . .69
6.3 CONDITIONS TO OBLIGATIONS OF HORIZON AND HORIZON PARTNERSHIP . . . .70
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . .72
7.1 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
7.2 CERTAIN FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . .73
7.3 EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . . .75
7.4 AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75
7.5 EXTENSION; WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . .75
ARTICLE VIII
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .75
8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . .75
iii
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8.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76
8.3 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . .77
8.4 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
8.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES . . . . . . . . . . .77
8.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . .77
8.7 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
8.8 ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
8.9 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
EXHIBITS
EXHIBIT A CONTRIBUTION AND DISTRIBUTION AGREEMENT
EXHIBIT B DELAWARE CERTIFICATE OF MERGER
EXHIBIT C-1 HORIZON/SUBSIDIARY ARTICLES OF MERGER (MARYLAND)
EXHIBIT C-2 HORIZON/SUBSIDIARY CERTIFICATE OF MERGER (MICHIGAN)
EXHIBIT D PRIME/HORIZON ARTICLES OF MERGER (MARYLAND)
EXHIBIT E SKY MERGER AMENDED AND RESTATED ARTICLES OF INCORPORATION
EXHIBIT F SKY MERGER BYLAWS
EXHIBIT G SECOND AMENDED AND RESTATED PRIME PARTNERSHIP AGREEMENT
EXHIBIT H AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
iv
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INDEX OF DEFINED TERMS
ACQUISITION PROPOSAL . . . . . . . . . . . . . . . . . . . . . . . 4.3(a)
AFFILIATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13
AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
AICPA STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(b)
AMENDED AND RESTATED PRIME PARTNERSHIP AGREEMENT . . . . . . . . . 1.7
BASE AMOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
BREAK-UP EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
BREAK-UP FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
BREAK-UP FEE TAX OPINION . . . . . . . . . . . . . . . . . . . . . 7.2
CALL AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . RECITAL Q
CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.14(c)(i)
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4
CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4
CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RECITAL K
COMMITMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(i)
COMMON EXCHANGE FUND . . . . . . . . . . . . . . . . . . . . . . . 1.14(b)(i)
CONFIDENTIALITY AGREEMENT . . . . . . . . . . . . . . . . . . . . . 5.2
CONTRIBUTED PRIME PROPERTIES . . . . . . . . . . . . . . . . . . . 1.16(b)
CONTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . RECITAL D
CONTRIBUTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . RECITAL D
CONTROLLED GROUP MEMBER . . . . . . . . . . . . . . . . . . . . . . 2.14
CORPORATE CONTRIBUTION . . . . . . . . . . . . . . . . . . . . . . RECITAL D
CORPORATE DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . RECITAL F
DELAWARE CERTIFICATE OF MERGER . . . . . . . . . . . . . . . . . . RECITAL H
DELAWARE SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . 1.5(a)
DISSENTING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 1.13(b)
DISTRIBUTED NEWCO PREFERRED SECURITIES . . . . . . . . . . . . . . 1.16(a)
DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . RECITAL F
DRULPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
EMPLOYEE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14
ENCUMBRANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9(a)
ENVIRONMENTAL LAWS . . . . . . . . . . . . . . . . . . . . . . . . 2.12
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14
EXCESS SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . .1.14(g)(ii)
EXCHANGE ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
EXCHANGE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . 1.14(a)
EXCHANGE FUND . . . . . . . . . . . . . . . . . . . . . . . . . .1.14(b)(ii)
EXCHANGE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . .1.14(g)(ii)
FINAL COMPANY DIVIDEND . . . . . . . . . . . . . . . . . . . . . . 1.14(d)(i)
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
GOVERNMENTAL ENTITY . . . . . . . . . . . . . . . . . . . . . . . . 2.5(d)
v
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HAZARDOUS SUBSTANCES . . . . . . . . . . . . . . . . . . . . . . . 2.12
HORIZON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
HORIZON ARTICLES OF INCORPORATION . . . . . . . . . . . . . . . . . 2.1
HORIZON BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
HORIZON CAPITAL BUDGET . . . . . . . . . . . . . . . . . . . . . . 4.1(i)
HORIZON COMMON SHARE . . . . . . . . . . . . . . . . . . . . . . . 1.2
HORIZON DIRECTOR STOCK OPTION PLAN . . . . . . . . . . . . . . . . 2.3(b)
HORIZON DISCLOSURE LETTER . . . . . . . . . . . . . . . . . . . . . 2.2(a)
HORIZON ECONOMIC LOSSES . . . . . . . . . . . . . . . . . . . . . . 6.2(a)
HORIZON ENVIRONMENTAL REPORTS . . . . . . . . . . . . . . . . . . . 2.12
HORIZON FINANCIAL STATEMENT DATE . . . . . . . . . . . . . . . . . 2.7
HORIZON LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . 2.10(b)
HORIZON LONG-TERM INCENTIVE PLAN . . . . . . . . . . . . . . . . . 2.3(b)
HORIZON MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . 2.7
HORIZON MATERIAL ADVERSE EFFECT . . . . . . . . . . . . . . . . . . 2.1
HORIZON/MERGER ARTICLES OF INCORPORATION . . . . . . . . . . . . . 2.1
HORIZON/MERGER BYLAWS . . . . . . . . . . . . . . . . . . . . . . . 2.1
HORIZON OP UNIT . . . . . . . . . . . . . . . . . . . . . . . . . . 1.14(d)(i)
HORIZON PARTNER APPROVALS . . . . . . . . . . . . . . . . . . . . . 5.1(g)
HORIZON PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
HORIZON PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . 2.19
HORIZON PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . 2.9(a)
HORIZON SEC DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . 2.6
HORIZON SHAREHOLDER APPROVALS . . . . . . . . . . . . . . . . . . . 2.5(a)
HORIZON SHAREHOLDERS MEETING . . . . . . . . . . . . . . . . . . . 5.1(d)
HORIZON STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)
HORIZON SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
HORIZON/SUBSIDIARY ARTICLES OF MERGER . . . . . . . . . . . . . . . RECITAL I
HORIZON/SUBSIDIARY CERTIFICATE OF MERGER . . . . . . . . . . . . . RECITAL I
HORIZON/SUBSIDIARY MERGER . . . . . . . . . . . . . . . . . . . . . RECITAL I
HORIZON/SUBSIDIARY MERGER EFFECTIVE TIME . . . . . . . . . . . . . 1.5(b)
HORIZON TITLE INSURANCE POLICIES . . . . . . . . . . . . . . . . . 2.9(b)
HORIZON 1993 STOCK OPTION PLAN . . . . . . . . . . . . . . . . . . 2.3(b)
HORIZON 1997 STOCK OPTION PLAN . . . . . . . . . . . . . . . . . . 2.3(b)
INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.20(b)
INDEMNIFIED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . 5.9(a)
INDEMNIFIED PARTIES . . . . . . . . . . . . . . . . . . . . . . . . 5.9(a)
INTERESTED STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . 2.24
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14(b)
KNOWLEDGE OF PRIME . . . . . . . . . . . . . . . . . . . . . . . . 3.20
KNOWLEDGE OF HORIZON . . . . . . . . . . . . . . . . . . . . . . . 2.28
LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5(d)
LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
MARYLAND DEPARTMENT . . . . . . . . . . . . . . . . . . . . . . . . 1.5(b)
vi
<PAGE>
MBCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
MERGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RECITAL A
MERGER CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . 1.11(e)
MGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
MICHIGAN DEPARTMENT . . . . . . . . . . . . . . . . . . . . . . . . 1.5(b)
NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RECITAL C
NEWCO LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
NEWCO OP UNIT . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.11(c)
NEWCO PARTNER APPROVALS . . . . . . . . . . . . . . . . . . . . . . 5.1(g)
NEWCO PREFERRED SECURITIES . . . . . . . . . . . . . . . . . . . . 1.16
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.14(g)(ii)
OUTSIDE PROPERTY MANAGEMENT AGREEMENTS . . . . . . . . . . . . . . 2.20(f)
PARTNER APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(g)
PARTNERSHIP CONTRIBUTION . . . . . . . . . . . . . . . . . . . . . RECITAL D
PARTNERSHIP DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . RECITAL E
PARTNERSHIP EXCHANGE FUND . . . . . . . . . . . . . . . . . . . . .1.14(b)(ii)
PARTNERSHIP MERGER . . . . . . . . . . . . . . . . . . . . . . . . RECITAL G
PARTNERSHIP MERGER CONSIDERATION . . . . . . . . . . . . . . . . . 1.11(e)
PARTNERSHIP MERGER EFFECTIVE TIME . . . . . . . . . . . . . . . . . 1.5(a)
PAYOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
PENSION PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14
PERSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
PRIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
PRIME ARTICLES OF INCORPORATION . . . . . . . . . . . . . . . . . . 3.1
PRIME BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
PRIME COMMON SHARES . . . . . . . . . . . . . . . . . . . . . . . . 3.3(a)
PRIME COMMON UNIT . . . . . . . . . . . . . . . . . . . . . . . . . 1.11(c)
PRIME DISCLOSURE LETTER . . . . . . . . . . . . . . . . . . . . . . 3.2(a)
PRIME ECONOMIC LOSSES . . . . . . . . . . . . . . . . . . . . . . . 6.3(a)
PRIME/HORIZON ARTICLES OF MERGER . . . . . . . . . . . . . . . . . RECITAL J
PRIME/HORIZON MERGER EFFECTIVE TIME . . . . . . . . . . . . . . . . 1.5(c)
PRIME/HORIZON MERGER . . . . . . . . . . . . . . . . . . . . . . . RECITAL J
PRIME/HORIZON MERGER CONSIDERATION . . . . . . . . . . . . . . . . 1.11(d)
PRIME FINANCIAL STATEMENT DATE . . . . . . . . . . . . . . . . . . 3.7
PRIME LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.10(b)
PRIME MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . 3.7
PRIME MATERIAL ADVERSE EFFECT . . . . . . . . . . . . . . . . . . . 3.1
PRIME NEWCO DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . 1.16(a)
PRIME OP UNITS . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(e)
PRIME PARTNER APPROVALS . . . . . . . . . . . . . . . . . . . . . . 5.1(g)
PRIME PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
PRIME PARTNERSHIP AGREEMENT . . . . . . . . . . . . . . . . . . . . 1.14(d)(i)
PRIME PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15
PRIME PREFERRED SHARES . . . . . . . . . . . . . . . . . . . . . . 3.3(a)
vii
<PAGE>
PRIME PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
PRIME REGULAR QUARTERLY DISTRIBUTIONS . . . . . . . . . . . . . . . 3.7
PRIME SEC DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . 3.6
PRIME SERIES A PREFERRED SHARES . . . . . . . . . . . . . . . . . . 3.3(a)
PRIME SERIES B PREFERRED SHARES . . . . . . . . . . . . . . . . . . 3.3(a)
PRIME SERIES C PREFERRED SHARES . . . . . . . . . . . . . . . . . . 3.3(a)
PRIME SERIES A PREFERRED UNITS . . . . . . . . . . . . . . . . . . 3.3(e)
PRIME SERIES B PREFERRED UNIT . . . . . . . . . . . . . . . . . . . 1.11(c)
PRIME SHAREHOLDER APPROVALS . . . . . . . . . . . . . . . . . . . . 3.5(a)
PRIME SHAREHOLDERS MEETING . . . . . . . . . . . . . . . . . . . . 5.1(c)
PRIME STOCK OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . 3.3(b)
PRIME SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . 3.1
PRIME TITLE INSURANCE POLICIES . . . . . . . . . . . . . . . . . . 3.9(b)
PROHIBITED TRANSACTION . . . . . . . . . . . . . . . . . . . . . . 2.14(c)
PROPERTY RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 2.9(a)
PROXY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(a)
QUALIFYING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
RECIPIENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
RECORD DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . RECITAL E
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . 5.1(a)
REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16(b)
REIT REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . 7.2
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5(d)
SECURITIES ACT . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
SERIES C PREFERRED UNITS . . . . . . . . . . . . . . . . . . . . . 3.3(e)
SHAREHOLDER APPROVALS . . . . . . . . . . . . . . . . . . . . . . . 3.5(a)
SKY MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
SKY MERGER ARTICLES OF INCORPORATION . . . . . . . . . . . . . . . 2.1
SKY MERGER BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
SKY MERGER COMMON SHARE . . . . . . . . . . . . . . . . . . . . . . 1.2
SKY MERGER SHAREHOLDER APPROVALS . . . . . . . . . . . . . . . . . 2.5(b)
STOCK PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . RECITAL P
SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
SUPERIOR ACQUISITION PROPOSAL . . . . . . . . . . . . . . . . . . . 4.3(d)
SURVIVING COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
SURVIVING COMPANY COMMON SHARE . . . . . . . . . . . . . . . . . . 1.11(d)
SURVIVING COMPANY SERIES B PREFERRED SHARE . . . . . . . . . . . . 1.11(d)
SURVIVING PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . 1.1
TAKEOVER STATUTE . . . . . . . . . . . . . . . . . . . . . . . . . 2.22
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.16(a)
TAX PROTECTION AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 2.20(j)
THIRD PARTY PROVISIONS . . . . . . . . . . . . . . . . . . . . . 8.5
TRANSFER AND GAINS TAXES . . . . . . . . . . . . . . . . . . . . . 5.7
WELFARE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14
viii
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1940 ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.23
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of November
12, 1997 by and among PRIME RETAIL, INC., a Maryland corporation ("Prime"),
PRIME RETAIL, L.P., a Delaware limited partnership ("Prime Partnership"),
HORIZON GROUP, INC., a Michigan corporation ("Horizon"), SKY MERGER CORP., a
Maryland corporation ("Sky Merger"), SKY NEWCO, L.P., a Delaware limited
partnership ("Newco LP"), and HORIZON/GLEN OUTLET CENTERS LIMITED
PARTNERSHIP, a Delaware limited partnership ("Horizon Partnership").
R E C I T A L S:
A. The Board of Directors of each of Prime and Horizon deems it
advisable and in the best interests of their respective shareholders, upon
the terms and subject to the conditions contained herein, that Prime acquire
certain of the assets and business of Horizon and operate under the name
"Prime Retail, Inc.", such acquisition to be effected by the consummation of
the transactions set forth herein, including without limitation, the
Contribution, the Distribution, the Partnership Merger, the
Horizon/Subsidiary Merger and the Prime/Horizon Merger (each as defined
below; the Partnership Merger, the Horizon/Subsidiary Merger and the
Prime/Horizon Merger are collectively referred to herein as the "Mergers").
B. Newco LP is a Delaware limited partnership which, prior to the date
hereof, has issued general partnership interests to Horizon and limited
partnership interests to Horizon Partnership.
C. Upon the terms and subject to the conditions set forth herein, as
soon as practicable following the date hereof and prior to the consummation
of the Mergers, Horizon shall form a new corporation to be organized as a
Maryland corporation (such new corporation to be referred to herein as
"Newco"), as its wholly-owned subsidiary.
D. Upon the terms and subject to the conditions set forth herein,
immediately prior to the consummation of the Mergers and after the formation
of Newco, it is contemplated that on the Closing Date (as hereinafter
defined) (i) Horizon Partnership shall contribute certain of its assets to
Newco LP, and that Newco LP shall assume certain obligations of Horizon
Partnership (collectively, the "Partnership Contribution"), and (ii) Horizon
shall contribute to Newco all of its partnership interests in Horizon
Partnership (the "Corporate Contribution", and together with the Partnership
Contribution, the "Contribution"), all as provided in the Contribution and
Distribution Agreement in substantially the form attached hereto as Exhibit A
(the "Contribution Agreement").
E. Upon the terms and subject to the conditions set forth herein, on
the Closing Date and immediately prior to the consummation of the Mergers and
after the consummation of the Contribution, Horizon Partnership shall declare
and make a distribution of all of its limited partnership interests in Newco
LP (the "Partnership Distribution") made on a pro rata basis to the record
holders of limited partnership interests in Horizon Partnership on the date
of consummation of the Mergers (the "Record Date"), as provided in the
Contribution Agreement.
<PAGE>
F. Upon the terms and subject to the conditions set forth herein, on
the Closing Date and immediately prior to the consummation of the Mergers and
after the consummation of the Partnership Distribution, Horizon shall declare
and make a distribution (the "Corporate Distribution" and together, with the
Partnership Distribution, the "Distribution") of the capital stock of Newco,
such Corporate Distribution to be made on a pro rata basis on the Closing
Date to the record holders of Horizon Common Shares (as defined below) on the
Record Date, all as provided in the Contribution Agreement.
G. Under the terms and subject to the conditions set forth herein,
after the consummation of the Corporate Distribution, Prime, as the sole
general partner of Prime Partnership, and Horizon, as the sole general
partner of Newco LP, deem it advisable and in the best interests of their
respective limited partners, subject to the conditions and other provisions
contained herein, that Newco LP shall merge with and into Prime Partnership,
with the holders of partnership interests in Newco LP receiving the
consideration set forth herein (the "Partnership Merger").
H. Upon the terms and subject to the conditions set forth herein, Prime
Partnership and Newco LP shall execute a Certificate of Merger (the "Delaware
Certificate of Merger") in substantially the form attached hereto as Exhibit
B and shall file such Delaware Certificate of Merger in accordance with
Delaware law to effectuate the Partnership Merger.
I. Upon the terms and subject to the conditions set forth herein,
immediately following the consummation of the Partnership Merger, Horizon and
Sky Merger shall execute (i) the Articles of Merger (the "Horizon/Subsidiary
Articles of Merger") in substantially the form attached hereto as Exhibit C-1
and shall file such Horizon/Subsidiary Articles of Merger in accordance with
Maryland law and (ii) the Certificate of Merger (the "Horizon/Subsidiary
Certificate of Merger") in substantially the form attached hereto as Exhibit
C-2 and file such Horizon/Subsidiary Certificate of Merger in accordance with
Michigan law, in each case to effectuate the merger of Horizon into Sky
Merger (the "Horizon/Subsidiary Merger") pursuant to which Sky Merger shall
survive as a Maryland corporation.
J. Upon the terms and subject to the conditions set forth herein,
immediately following the consummation of the Horizon/Subsidiary Merger,
Prime and Sky Merger shall execute the Articles of Merger (the "Prime/Horizon
Articles of Merger") in substantially the form attached hereto as Exhibit D
and shall file such Prime/Horizon Articles of Merger in accordance with
Maryland law in order to effectuate the merger of Prime and Sky Merger (the
"Prime/Horizon Merger") pursuant to which Sky Merger shall survive as a
Maryland corporation.
K. For federal income tax purposes, it is intended that the Partnership
Merger, regardless of form, be treated as a contribution by Newco LP of all
of its assets to Prime Partnership in exchange for partnership interests in
Prime Partnership, as provided for herein, under Section 721 of the Internal
Revenue Code of 1986, as amended (the "Code"), and a liquidating distribution
of such partnership interests by Newco LP to its partners under Section 731
of the Code.
2
<PAGE>
L. For federal income tax purposes, it is intended that the
Horizon/Subsidiary Merger shall qualify as a tax-free reorganization under
Section 368(a)(1)(F) of the Code, and that this Agreement shall constitute a
plan of reorganization under Section 368(a)(1)(F) of the Code.
M. For federal income tax purposes, it is intended that the
Prime/Horizon Merger shall qualify as a tax-free reorganization under Section
368(a)(1)(A) of the Code, and that this Agreement shall constitute a plan of
reorganization under Section 368(a)(1)(A) of the Code.
N. Prime, Prime Partnership, Horizon and Horizon Partnership have each
received a fairness opinion relating to the transactions contemplated hereby
as more fully described herein.
O. Prime, Prime Partnership, Horizon and Horizon Partnership desire to
make certain representations, warranties and agreements in connection with
the Mergers.
P. Concurrently with the execution of this Agreement and as an
inducement to Prime and Prime Partnership to enter into this Agreement,
Ronald Piasecki has entered into a Stock Purchase Agreement relating to the
voting capital stock of each of First HGI, Inc., HGI Perryville, Inc., MG
Third Party Services Corp., HGI Management Corp. and Second HGI, Inc., (the
"Stock Purchase Agreement"), providing for the sale by Ronald Piasecki of all
of the outstanding voting capital stock (other than any such voting capital
stock held by Horizon Partnership) of such companies to Prime Retail
Services, Inc. or its designees or assigns.
Q. Within five (5) days of the execution of this Agreement, each of
Cheryl McArthur and Alan Glen, each being a holder of Horizon OP Units (as
defined below), and Prime Partnership will enter into an agreement (each, a
"Call Agreement") under which Prime Partnership is granted the right to
purchase certain of their Horizon OP Units (as defined below), in accordance
with the terms of each Call Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGERS
1.1 THE PARTNERSHIP MERGER. Upon the terms and subject to the conditions
of this Agreement, and in accordance with Title 6, Chapter 17 of the Delaware
Code Annotated, as amended (the "DRULPA"), Newco LP shall be merged with and
into Prime Partnership with Prime Partnership as the surviving limited
partnership (the "Surviving Partnership"), with the holders of partnership
interests in Newco LP receiving the consideration set forth in Sections 1.10
and 1.11(c).
1.2 THE HORIZON/SUBSIDIARY MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Maryland
General Corporation Law ("MGCL") and the Michigan Business Corporation Act
("MBCA"), immediately following the Partnership
3
<PAGE>
Merger Effective Time (as defined below), Horizon shall be merged with and
into Sky Merger, with Sky Merger as the surviving company. Following the
Horizon/Subsidiary Merger, the separate corporate existence of Horizon shall
cease, and Sky Merger shall succeed to all the rights and obligations of
Horizon in accordance with the MGCL and the MBCA. The articles of
incorporation of Sky Merger and the bylaws of Sky Merger shall each be
amended and restated pursuant to the Horizon/Subsidiary Merger substantially
in the forms attached hereto as Exhibits E and F, respectively (the
"Horizon/Merger Articles of Incorporation" and the "Horizon/Merger Bylaws",
respectively), and shall continue in full force and effect thereafter until
further amended in accordance with applicable Maryland law. In the
Horizon/Subsidiary Merger, each outstanding share of common stock of Sky
Merger held by Horizon shall be canceled, and each issued and outstanding
share of common stock, $0.01 par value per share of Horizon (each, a "Horizon
Common Share") (other than Horizon Common Shares owned by Horizon or any
Horizon Subsidiary, which shall automatically be canceled and retired and all
rights with respect thereto shall cease to exist), shall be converted into
one share of common stock, $0.01 par value per share, of Sky Merger (each, a
"Sky Merger Common Share"). Each certificate representing issued and
outstanding Horizon Common Shares shall upon consummation of the
Horizon/Subsidiary be deemed to represent the same number of Sky Merger
Common Shares, until consummation of the Prime/Horizon Merger in accordance
with Section 1.3. There shall be no further registration of transfers on the
stock transfer books of Horizon of the Horizon Common Shares which were
outstanding immediately prior to the Horizon/Subsidiary Merger Effective Time
(as defined below). If, after the Horizon/Subsidiary Merger Effective Time,
Certificates (as defined below) are presented to the Surviving Company (as
defined below) for any reason, they shall be canceled and exchanged as
provided in Section 1.14. As of the Horizon/Subsidiary Merger Effective
Time, each outstanding Horizon Stock Option (as defined in Section 2.3(b))
shall be assumed by Sky Merger and shall be deemed to constitute an option to
acquire (each a "Sky Merger Stock Option"), on the same terms and conditions
applicable under such Horizon Stock Option, the same number of Sky Merger
Common Shares as the holder of such Horizon Stock Option would have been
entitled to receive pursuant to the Horizon/Subsidiary Merger had such holder
exercised such Horizon Stock Option in full immediately prior to the
Horizon/Subsidiary Merger Effective Time at a price per share equal to the
aggregate exercise price for the shares subject to such Horizon Stock Option
divided by the number of full Sky Merger Common Shares deemed to be
purchasable pursuant to such Horizon Stock Option.
1.3 THE PRIME/HORIZON MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the MGCL,
immediately following the Horizon/Subsidiary Merger Effective Time, Prime
shall be merged with and into Sky Merger with Sky Merger as the surviving
company (the "Surviving Company"). Following the Prime/Horizon Merger, the
separate corporate existence of Prime shall cease, and Sky Merger as
Surviving Company shall continue and shall succeed to assume all the rights
and obligations are in accordance with the MGCL. The name of the Surviving
Company shall be "Prime Retail, Inc."
1.4 CLOSING OF MERGERS. The closing of the Mergers (the "Closing") will
take place at 10:00 a.m., local time on the date to be specified by the
parties, which (subject to satisfaction or waiver of the conditions set forth
in Article 6) shall be no later than the third business day after
4
<PAGE>
satisfaction or waiver of the conditions set forth in Section 6.1(a) (the
"Closing Date"), at the offices of Winston & Strawn, 35 West Wacker Drive,
Chicago, Illinois 60601, unless another date or place is agreed to in writing
by the parties.
1.5 EFFECTIVE TIMES. As soon as practicable following the satisfaction
or waiver of the conditions set forth in Article 6:
(a) Prime Partnership and Newco LP shall execute and file the
Delaware Certificate of Merger, executed in accordance with the DRULPA, with
the Office of the Secretary of State of the State of Delaware (the "Delaware
Secretary"). The Partnership Merger shall become effective (the "Partnership
Merger Effective Time") at such time as shall be specified in the Delaware
Certificate of Merger.
(b) Immediately following the Partnership Merger Effective Time,
Horizon and Sky Merger shall execute and file (i) the Horizon/Subsidiary
Articles of Merger, executed in accordance with the MGCL, with the State
Department of Assessments and Taxation of Maryland (the "Maryland
Department"), and (ii) the Horizon/Subsidiary Certificate of Merger, executed
in accordance with the MBCA, with the Department of Commerce of the State of
Michigan (the "Michigan Department"). The Horizon/Subsidiary Merger shall
become effective (the "Horizon/Subsidiary Merger Effective Time") at such
time as shall be specified in the Horizon/Subsidiary Articles of Merger and
the Horizon/Subsidiary Certificate of Merger.
(c) Immediately following the Horizon/Subsidiary Merger Effective
Time, Sky Merger and Prime shall execute and file the Prime/Horizon Articles
of Merger, executed in accordance with the MGCL, with the Maryland
Department. The Prime/Horizon Merger shall become effective (the
"Prime/Horizon Merger Effective Time") at such time as shall be specified in
the Prime/Horizon Articles of Merger.
Prime, Prime Partnership, Horizon, Sky Merger, Newco LP, Horizon Partnership
and the Surviving Company shall execute and file all other filings and
recordings required, with respect to the Horizon/Subsidiary Merger and the
Prime/Horizon Merger, under the MGCL or the MBCA or, with respect to the
Partnership Merger, under the DRULPA. Unless otherwise agreed, the parties
shall cause the each Prime/Horizon Merger Effective Time, the Horizon
Subsidiary Effective Time and the Partnership Merger Effective Time to occur
on the Closing Date in the sequence provided for in the Recitals hereto.
1.6 EFFECT OF PRIME/HORIZON MERGER ON ARTICLES OF INCORPORATION AND
BYLAWS. The Articles of Incorporation and the Bylaws as in effect immediately
after the Horizon/Subsidiary Merger, shall continue in full force and effect
after the Prime/Horizon Merger until further amended in accordance with
applicable Maryland law.
1.7 EFFECT OF PARTNERSHIP MERGER ON AGREEMENT OF LIMITED PARTNERSHIP.
The Second Amended and Restated Agreement of Limited Partnership of Prime
Partnership in substantially the form of Exhibit G attached hereto (the
"Second Amended and Restated Prime Partnership
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Agreement"), shall continue in full force and effect after the Partnership
Merger until further amended in accordance with applicable Delaware law.
1.8 DIRECTORS. At the Prime/Horizon Merger Effective Time, the
directors of the Surviving Company shall consist of twelve persons, including
those nine persons named in the Prime/Horizon Articles of Merger (or such
other persons as shall be designated by Prime prior to the Closing), each of
whom shall serve for the terms specified in the Prime/Horizon Articles of
Merger or until their earlier death, resignation or removal, as the case may
be, together with three persons to be designated by Horizon prior to Closing,
each of whom shall, on the third business day after the Prime/Horizon Merger
Effective Time (or such earlier time as shall be required in order to comply
with applicable disclosure requirements of the Securities Act of 1933, as
amended (the "Securities Act") and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), become a director of the Surviving Company with
one of such three persons having terms expiring at the third, second and
first annual meeting of shareholders of the Surviving Company held following
the Prime/Horizon Merger Effective Time. The names of the three persons
designated by Horizon and their respective terms of office shall be furnished
to Prime prior to the time the Proxy Statement (as hereinafter defined) is
mailed to the shareholders of Prime and Horizon. Prime and Horizon agree to
take whatever action may be necessary to accomplish the foregoing.
1.9 EFFECT ON SHARES. The effect of the Horizon/Subsidiary Merger on the
shares of capital stock of Horizon and Sky Merger shall be as provided in the
Horizon/Subsidiary Articles of Merger and the Horizon/Subsidiary Certificate
of Merger. The effect of the Prime/Horizon Merger on the shares of capital
stock of Prime and Sky Merger shall be as provided in Section 1.14 and in the
Prime/Horizon Articles of Merger.
1.10 EFFECT ON PARTNERSHIP INTERESTS. The effect of the Partnership
Merger on the partnership interests of Newco LP shall be as provided in
Section 1.11(c) and in the Delaware Certificate of Merger. The Partnership
Merger shall not change the partnership interests of Prime Partnership
outstanding immediately prior to the Partnership Merger.
1.11 MERGER CONSIDERATION.
(a) In connection with the Horizon/Subsidiary Merger, each issued
and outstanding Horizon Common Shares and each outstanding Horizon Stock
Option shall be treated as set forth in Section 1.2.
(b) As of the Prime/Horizon Merger Effective Time, each Horizon
Common Share and Sky Merger Common Share that is owned by Horizon or any
Horizon Subsidiary (as defined below) shall in each case automatically be
canceled and retired and all rights with respect thereto shall cease to
exist, and no Prime/Horizon Merger Consideration (as defined below) shall be
delivered in exchange therefor. As of the Partnership Merger Effective Time,
the Newco OP Units (as defined below) that are owned by Horizon shall convert
into the right to receive that number of Prime Common Units and Prime Series
B Preferred Units equal to the number of Surviving Company Common Shares and
Surviving Company Series B Preferred Shares,
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respectively, into which the Horizon Common Shares are converted pursuant to
the Prime/Horizon Merger Consideration.
(c) Subject to Section 1.14(g), each issued and outstanding common
unit of Newco LP (each a "Newco OP Unit") (other than units held by Horizon
or any Horizon Subsidiary) shall be converted by the Partnership Merger into
the right to receive, at the election of each holder of Newco OP Units,
either (i) 0.20 of a convertible Series B preferred unit of Prime Partnership
(each a "Prime Series B Preferred Unit") and 0.597 of a common unit of Prime
Partnership (each a "Prime Common Unit") or (ii) $7.125 in cash and 0.4595 of
a Prime Common Unit (the "Partnership Merger Consideration"). As of the
Partnership Merger Effective Time, all such Newco OP Units shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of record of Newco OP Units shall cease to have any
rights thereto, except the right to receive the Partnership Merger
Consideration, any dividend or other distribution to which such holder is
entitled pursuant to Section 1.14(d) and any cash in lieu of fractional units
to be issued or paid in consideration therefor upon surrender of such Newco
OP Units in accordance with Section 1.14(g), without interest.
(d) Subject to Section 1.14(g), each issued and outstanding Sky
Merger Common Share (other than shares held by Horizon or any Horizon
Subsidiary) shall be converted by the Prime/Horizon Merger into the right to
receive 0.20 of a share of 8.5% Series B Cumulative Participating Convertible
Preferred Stock, $.0.01 par value per share, of the Surviving Company (the
"Surviving Company Series B Preferred Share") and 0.597 of a share of common
stock, $0.01 par value per share, of the Surviving Company (the "Surviving
Company Common Share") (the "Prime/Horizon Merger Consideration"). As of the
Prime/Horizon Merger Effective Time, all such Sky Merger Common Shares shall
no longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any such
Sky Merger Common Shares shall cease to have any rights thereto, except the
right to receive the Prime/Horizon Merger Consideration, any dividend or
other distribution to which such holder is entitled pursuant to Section
1.14(d) and any cash in lieu of fractional shares to be issued or paid in
consideration therefor upon surrender of such certificate in accordance with
Section 1.14(g), without interest.
(e) "Merger Consideration" shall mean either the Partnership Merger
Consideration or the Prime/Horizon Merger Consideration, as the context may
require.
1.12 REGISTRATION RIGHTS AGREEMENT. On the Closing Date, the Surviving
Company will enter into the Amended and Restated Registration Rights
Agreement substantially in the form of Exhibit H attached hereto under which
Surviving Company will assume in writing and succeed to all rights and
obligations of Horizon and Prime pursuant to the Registration Rights
Agreements listed on Schedule 2.3(g) to the Horizon Disclosure Letter and
pursuant to the Registration Rights Agreements listed on Schedule 3.3(h) to
the Prime Disclosure Letter, respectively.
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1.13 APPRAISAL RIGHTS.
(a) NO APPRAISAL RIGHTS. The holders of Horizon Common Shares,
Prime Common Shares, Prime Series B Preferred Shares, Sky Merger Common
Shares, Newco OP Units, Sky Partnership OP Units and Prime OP Units (as
defined in Section 3.3(e)) are not entitled under applicable law to appraisal
rights as a result of the Mergers.
(b) PRIME SERIES A AND SERIES C PREFERRED SHARES. Notwithstanding
anything in this Agreement to the contrary, holders of Prime Series A
Preferred Shares and Prime Series C Preferred Shares (each as defined in
Section 3.3(a)) that have, as of the Effective Time, complied with all
procedures necessary to assert appraisal rights in accordance with the MGCL,
if applicable, shall have such rights, if any, as they may have pursuant to
Section 3-202 of the MGCL and such Prime Series A Preferred Shares and Prime
Series C Preferred Shares shall not be converted or be exchangeable as
provided in this Article I, but such holders shall be entitled to receive
such payment as may be determined to be due to such holders pursuant to the
MGCL; PROVIDED, HOWEVER, that if such holder shall have failed to perfect or
shall have effectively withdrawn or lost his right to appraisal and payment
under the MGCL, such holder's Prime Series A Preferred Shares and Prime
Series C Preferred Shares shall thereupon be deemed to have been converted
and to have become exchangeable, as of the Prime/Horizon Merger Effective
Time, into the Prime/Sky Merger Consideration. The Prime Series A Preferred
Shares and Prime Series C Preferred Shares described in this Section 1.13(b)
held by holders who exercise and perfect appraisal rights are referred to
herein as "Dissenting Shares." Sky Merger shall give Prime prompt notice of
any demands for appraisal of shares received by Sky Merger (and shall also
give Prime prompt notice of any withdrawals of such demands for appraisal
rights) and Prime shall have the opportunity and right to participate in and
direct all negotiations with respect to such demands. Sky Merger shall not,
except with the prior written consent of Prime, make any payment with respect
to, settle or otherwise negotiate or offer to settle any such demand for
appraisal rights. Prime agrees that it shall make all payments with respect
to appraisal rights and that the funds therefor shall not come, directly or
indirectly, from Sky Merger.
1.14 EXCHANGE OF CERTIFICATES; PRE-CLOSING DIVIDENDS; FRACTIONAL SHARES.
(a) EXCHANGE AGENT. Prior to the Closing Date, Prime shall appoint
American Stock Transfer and Trust Company, or another bank or trust company
reasonably acceptable to Horizon, to act as exchange agent (the "Exchange
Agent") for the exchange of the Prime/Horizon Merger Consideration upon
surrender of certificates representing issued and outstanding Sky Merger
Common Shares and the exchange of the Partnership Merger Consideration in
connection with the Partnership Merger.
(b) MERGER CONSIDERATION.
(i) The Surviving Company shall provide or cause to be provided
to the Exchange Agent on or before the Partnership Merger Effective Time, for
the benefit of those Persons who are holders of Sky Merger Common Shares after
the Horizon/Subsidiary Merger Effective
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Time, Surviving Company Common Shares and Surviving Company Series B
Preferred Shares (the "Common Exchange Fund") issuable in exchange for the
issued and outstanding Horizon Common Shares pursuant to Section 1.11.
Horizon shall provide to the Exchange Agent on or before the Partnership
Merger Effective Time, for the benefit of the holders of Horizon Common
Shares, cash payable in respect of any dividends required pursuant to Section
1.14(d)(i) or (ii).
(ii) Prime Partnership shall provide to the Exchange Agent, for
the benefit of the holders of Newco OP Units, cash payable for, or any Prime
Common Units and Prime Series B Preferred Units (the "Partnership Exchange
Fund", and together with the Common Exchange Fund, the "Exchange Fund")
issuable in exchange for, issued and outstanding Newco OP Units pursuant to
Section 1.11. Horizon shall provide to the Exchange Agent on or before the
Partnership Merger Effective Time, for the benefit of the holders of Newco OP
Units, cash payable in respect of any distributions required pursuant to
Section 1.14(d).
(c) EXCHANGE PROCEDURE.
(i) As soon as reasonably practicable after the Prime/Horizon
Merger Effective Time, the Exchange Agent shall mail to each holder of record
of a certificate or certificates which immediately prior to the Prime/Horizon
Merger Effective Time represented outstanding Sky Merger Common Shares (the
"Certificates") whose shares were converted into the right to receive the
Prime/Horizon Merger Consideration pursuant to Section 1.11 (d) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in a form and have such other
provisions as the Surviving Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for the Prime/Horizon Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by the Surviving Company, together with such
letter of transmittal, duly executed, 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 the Prime/Horizon Merger
Consideration into which the Sky Merger Common Shares theretofore represented
by such Certificate shall have been converted pursuant to Section 1.11, as
well as any dividends or other distributions to which such holder is entitled
pursuant to Section 1.14(d), and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Sky Merger
Common Shares which is not registered in the transfer records of Sky Merger,
payment may be made to a person other than the person in whose name the
Certificate so surrendered is registered if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer and the person
requesting such payment either shall pay any transfer or other taxes required
by reason of such payment being made to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Company that such tax or taxes have been paid or are not applicable. Until
surrendered as contemplated by this Section 1.14, each Certificate shall be
deemed at any time after the Prime/Horizon Merger Effective Time to represent
only the right to receive upon such surrender the Prime/Horizon Merger
Consideration, without interest, into which the Sky Merger Common Shares
theretofore represented by such Certificate shall have been converted
pursuant to Section 1.11, and any dividends or other distributions to which
such holder is entitled
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pursuant to Section 1.14(d). No interest will be paid or will accrue on the
Prime/Horizon Merger Consideration upon the surrender of any Certificate or
on any cash payable pursuant to Section 1.14(d) or Section 1.14(g).
(ii) Contemporaneous with or as soon as reasonably practicable
after the Partnership Merger Effective Time, Prime Partnership shall mail or
otherwise make available to each holder of record of Newco OP Units whose
interest in Newco LP was converted into the right to receive the Partnership
Merger Consideration a letter of transmittal with instructions for execution
and delivery of the Amended and Restated Prime Partnership Agreement which
shall specify that delivery of the Partnership Merger Consideration shall be
effected only upon execution and delivery of the Amended and Restated Prime
Partnership Agreement and such other documentation as Prime Partnership may
reasonably specify as necessary in connection with the consummation of the
transactions contemplated hereby. Upon execution and delivery of the Amended
and Restated Prime Partnership Agreement and such other documentation as is
reasonably specified by Prime Partnership in connection with the consummation
of the transactions contemplated hereby, each holder of Newco OP Units shall
be entitled to receive from Prime Partnership a copy of the Amended and
Restated Prime Partnership Agreement, duly amended to reflect the Partnership
Merger Consideration to be received by such holder pursuant to Section 1.11,
as well as any dividends or distributions to which such holder is entitled
pursuant to Section 1.14(d). Only holders of record on the books and records
of Newco LP shall be entitled to the Partnership Merger Consideration and to
become a limited partner in Prime Partnership pursuant to this Agreement.
Until the execution and delivery of the Amended and Restated Prime
Partnership Agreement by a holder of Newco OP Units, and the other
documentation reasonably specified by Prime, such Newco OP Units shall be
deemed at any time after the Partnership Merger Effective Time to represent
only the rights to receive the Partnership Merger Consideration into which
such Newco OP Units shall have been converted pursuant to Section 1.11
hereof, without interest, and any dividends or other distributions to which
such holder is entitled pursuant to Section 1.14(d), without interest.
(iii) To the extent permitted by law, (A) Horizon may
transmit the form of election to receive the Partnership Merger Consideration
in cash and Prime Common Units or in Prime Preferred Units and Prime Common
Units to the holders of Horizon Units concurrently with the delivery of the
Proxy Statement (as defined in Section 5.1 (a)), and (B) the period within
which the holders of Newco OP Units may deliver such election shall terminate
three (3) business days after the Closing.
(d) RECORD DATES FOR FINAL DIVIDENDS; DISTRIBUTIONS WITH RESPECT TO
UNEXCHANGED SHARES.
(i) To the extent necessary to satisfy the requirements of
Section 857(a)(1) of the Code for the taxable year of Prime ending at the
Closing Date (and avoid the payment of tax with respect to undistributed
income), Prime shall (i) declare a dividend (the "Final Company Dividend") first
to holders of Prime Preferred Shares (as defined below) and then, and only to
the extent necessary, to holders of Prime Common Shares (as defined below), the
record date for which shall be the close of business on the last business day
prior to the Closing Date, in an
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amount equal to the minimum dividend sufficient to permit Prime to satisfy
such requirements and (ii) Prime Partnership shall pay a corresponding
distribution to holders of Prime OP Units (as defined in Section 3.3(e))
pursuant to Section 6.2 of the Amended and Restated Agreement of Limited
Partnership of Prime Retail, L.P. dated as of September 8, 1997, as amended
(the "Prime Partnership Agreement"). If Prime determines it necessary to
declare a portion of the Final Company Dividend to holders of Prime Common
Shares, it shall notify Horizon at least ten (10) days prior to the date for
the Prime Shareholders Meeting (as defined in Section 5.1), and Horizon shall
(i) declare a dividend per share to holders of Horizon Common Shares, the
record date for which shall be the close of business on the last business day
prior to the Closing Date, in an amount per Horizon Common Share equal to the
product obtained by multiplying (x) the Final Company Dividend per Prime
Common Share paid by Prime by (y) 0.9193. Horizon Partnership shall pay a
corresponding distribution to the holders of issued and outstanding common
units of Horizon Partnership (the "Horizon OP Units") pursuant to the Horizon
Partnership Agreement. The dividends payable hereunder to holders of Horizon
Common Shares shall be paid upon presentation of the certificates of Horizon
Common Shares for exchange in accordance with this Section 1.14 and the
distributions payable to holders of Horizon OP Units shall be paid upon
delivery of the executed Second Amended and Restated Prime Partnership
Agreement in accordance with this Section 1.14.
(ii) (A) No dividends or other distributions with respect to
Surviving Company Common Shares or Surviving Company Series B Preferred
Shares with a record date after the Closing Date shall be paid to the holder
of any unsurrendered Certificate with respect to the Surviving Company Common
Shares or Surviving Company Series B Preferred Shares represented thereby,
and no cash payment in lieu of fractional shares shall be paid to any such
holder pursuant to Section 1.14(g), in each case until the surrender of such
Certificate in accordance with this Section 1.14. Subject to the effect of
applicable escheat laws, following surrender of any such Certificate there
shall be paid to the holder of such Certificate, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of any
fractional Surviving Company Common Shares or Surviving Company Series B
Preferred Shares to which such holder is entitled pursuant to Section 1.14(g)
and (ii) if such Certificate is exchangeable for one or more whole Surviving
Company Common Shares or Surviving Company Series B Preferred Shares, (x) at
the time of such surrender the amount of dividends or other distributions
with a record date after the Closing Date theretofore paid with respect to
such whole Surviving Company Common Shares or Surviving Company Series B
Preferred Shares and (y) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Closing Date
but prior to such surrender and with a payment date subsequent to such
surrender payable with respect to such whole Surviving Company Common Shares
or Surviving Company Series B Preferred Shares.
(B) No dividends or distributions with respect to Surviving
Company Common Units or Surviving Company Series B Preferred Units with a record
date after the Closing Date shall be paid to any holder of Newco OP Units, and
no cash payable in lieu of fractional units shall be paid to any such holder
pursuant to Section 1.14(g), in each case until such holder has executed and
delivered the Amended and Restated Prime Partnership Agreement and other
documentation in accordance with this Section 1.14. Subject to the effect of
the applicable escheat laws, following execution and delivery of requisite
documents as contemplated by this
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Section 1.14, there shall be paid to a holder of Newco OP Units, without
interest, (i) at the time of such delivery, the amount of any cash payable in
lieu of any fractional Prime Common Units or Prime Series B Preferred Units
to which such holder is entitled pursuant to Section 1.14(g) and (ii) if such
Newco OP Units are exchangeable into one or more whole Prime Common Units or
Prime Series B Preferred Units, (x) the amount of any dividend or other
distributions with a record date after the Closing Date theretofore paid with
respect to such whole Prime Common Units or Prime Series B Preferred Units,
and (y) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Closing Date but prior to such
date and with a payment date subsequent to such date, which are payable with
respect to such whole Prime Common Units or Prime Series B Preferred Units.
(e) NO FURTHER OWNERSHIP RIGHTS IN HORIZON COMMON SHARES, SKY
MERGER COMMON SHARES AND NEWCO OP UNITS.
(i) All Prime/Horizon Merger Consideration paid upon the
surrender of Certificates in accordance with the terms of this Section 1.14
(and any cash paid pursuant to Section 1.14(g)) shall be deemed to have been
paid in full satisfaction of all rights pertaining to the Horizon Common
Shares and Sky Merger Common Shares, theretofore represented by such
Certificates; provided, however, that Horizon shall transfer to the Exchange
Agent cash sufficient to pay any dividends or make any other distributions
with a record date prior to the Closing Date which may have been declared or
made by Horizon on such Horizon Common Shares which were converted into Sky
Merger Common Shares pursuant to the Horizon/Subsidiary Merger in accordance
with the terms of this Agreement or prior to the date of this Agreement and
which remain unpaid at the Closing Date and have not been paid prior to such
surrender, and there shall be no further registration of transfers on the
stock transfer books of Sky Merger of the Sky Merger Common Shares which were
outstanding immediately prior to the Closing Date. If, after the Closing
Date, Certificates are presented to the Surviving Company for any reason,
they shall be canceled and exchanged as provided in this Section 1.14.
(ii) All Partnership Merger Consideration payable to
holders of Newco OP Units pursuant to the terms of this Section 1.14 (and any
cash payable pursuant to Section 1.14(g)) shall be payable, and when paid
shall be deemed to have been paid, in full satisfaction of all rights
pertaining to Newco OP Units.
(f) NO LIABILITY. None of Horizon, Prime, the Surviving Company,
Prime Partnership, Horizon Partnership, Newco, Newco LP or the Exchange Agent
shall be liable to any person in respect of any Prime/Horizon Merger
Consideration or dividends or distributions delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. Any
portion of the Exchange Fund delivered to the Exchange Agent pursuant to this
Agreement that remains unclaimed for six (6) months after the Closing Date shall
be redelivered by the Exchange Agent to Prime, upon demand, and any holders of
Certificates or Newco OP Units who have not theretofore complied with Section
1.14(c) shall thereafter look only to Prime for delivery of the Partnership
Merger Consideration and any unpaid dividends or distributions, subject to
applicable escheat and other similar laws.
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(g) NO FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional Surviving
Company Common Shares or Surviving Company Series B Preferred Shares shall be
issued upon the surrender for exchange of Certificates, and such fractional
share interests will not entitle the owner thereof to vote, to receive dividends
or to any other rights of a shareholder of Surviving Company.
(ii) Notwithstanding any other provision of this Agreement, each
holder of Sky Merger Common Shares exchanged pursuant to the Prime/Horizon
Merger who would otherwise have been entitled to receive a fraction of a
Surviving Company Common Share or a Surviving Company Series B Preferred Share
(after taking into account all Certificates delivered by such holder) shall
receive, from the Exchange Agent in accordance with the provisions of this
Section 1.14(g), a cash payment in lieu of such fractional shares, as
applicable, representing such holder's proportionate interest, if any, in the
net proceeds from the sale by the Exchange Agent in one or more transactions
(which sale transactions shall be made at such times, in such manner and on such
terms as the Exchange Agent shall determine in its reasonable discretion) on
behalf of all such holders of the aggregate of the fractional Surviving Company
Common Shares and Surviving Company Series B Preferred Shares, as applicable,
which would otherwise have been issued (the "Excess Shares"). The sale of the
Excess Shares by the Exchange Agent shall be executed on the New York Stock
Exchange (the "NYSE") through one or more member firms of the NYSE and shall be
executed in round lots to the extent practicable. Until the net proceeds of
such sale or sales have been distributed to the holders of Certificates, the
Exchange Agent will hold such proceeds in trust (the "Exchange Trust") for the
holders of Certificates. Prime shall pay all commissions, transfer taxes and
other out-of-pocket transaction costs, including the expenses and compensation
of the Exchange Agent, incurred in connection with this sale of the Excess
Shares. As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of Certificates in lieu of any fractional
Surviving Company Common Shares or Surviving Company Series B Preferred Shares,
as applicable, the Exchange Agent shall make available such amounts to such
holders of Certificates without interest.
(iii) No fractional Prime Common Units or Prime Series B
Preferred Units shall be issued in exchange for Newco OP Units, and no
fractional interests shall entitle any holder thereof to vote, receive
distributions or have any other rights in, from or to Prime Partnership. In
lieu of the issuance of any fractional Prime Common Units or Prime Series B
Preferred Units, each holder of Newco OP Units who does not elect to receive the
Partnership Merger Consideration in cash, upon execution and delivery of the
documentation contemplated by this Section 1.14, shall be paid an amount in cash
(without interest), rounded to the nearest cent, equal to the sum of (A) the
product of (1) the average price at which Surviving Company Common Shares
constituting Excess Shares sold by the Exchange Agent pursuant to the foregoing
clause (ii) and (2) the fractional amount of Prime Common Units which such
holder would otherwise be entitled to receive under this Section 1.14 and (B)
the product of (1) the average price at which Series B Preferred Shares
constituting Excess Shares are sold by the Exchange Agent pursuant to the
foregoing clause (ii) and (2) the fractional amount of Prime Series B Preferred
Units which such holder could otherwise be entitled to receive under this
Section 1.14.
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(h) WITHHOLDING RIGHTS. (A) The Surviving Company or the Exchange
Agent shall be entitled to deduct and withhold from the Prime/Horizon Merger
Consideration otherwise payable pursuant to this Agreement to any holder of Sky
Merger Common Shares such amounts as the Surviving Company or the Exchange Agent
is required to deduct and withhold with respect to the making of such payment
under the Code, or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by Surviving Company or the Exchange Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Sky Merger Common Stock in
respect of which such deduction and withholding was made by Surviving Company or
the Exchange Agent.
(B) Prime Partnership shall be entitled to deduct and withhold
from the Partnership Merger Consideration otherwise payable pursuant to this
Agreement to a holder of Newco OP Units such amounts as Prime Partnership is
required to deduct and withhold with respect to the making of such payment under
the Code or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by Prime Partnership, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of such Newco OP Units in respect of which such deduction and withholding was
made by Prime Partnership.
(i) At the Prime/Horizon Merger Effective Time, each certificate
representing an outstanding Prime Common Share, Prime Series A Preferred Share,
Prime Series B Preferred Share and Prime Series C Preferred Share will, without
any action on the part of the holder thereof, thereafter represent one Surviving
Company Common Share, one share of Surviving Company 10.5% Series A Senior
Cumulative Preferred Stock, $.01 par value per share, one Surviving Company
Series B Preferred Share or one share of Surviving Company Series C Cumulative
Convertible Redeemable Preferred Stock, $0.01 par value per share, as the case
may be, pursuant to the terms of the Prime/Horizon Articles of Merger.
1.15 CONTRIBUTION AND DISTRIBUTION. As provided in the Contribution
Agreement, (a) prior to the consummation of the Partnership Merger, and subject
to receipt of all necessary consents and approvals, Horizon Partnership and
Newco LP shall effect the Partnership Contribution and Horizon shall effect the
Corporate Contribution, and (b) prior to the Partnership Merger and after
consummation of the Contribution, Horizon Partnership shall declare and make the
Partnership Distribution and Horizon shall declare and make the Corporate
Distribution.
1.16 INVESTMENT IN NEWCO. (a) Horizon hereby acknowledges and agrees that
(i) on or prior to the Closing Date Prime and/or Prime Partnership may make an
investment in Horizon Partnership and/or Newco in the form of cash, extensions
of credit and/or its interests in any other assets or properties; provided that
such contribution of other assets or properties does not prohibit Winston &
Strawn or Rudnick & Wolfe from delivering the opinions referred to in Sections
6.2(e) and 6.3(e), respectively, (ii) as inducement to Prime and Prime
Partnership to enter into this Agreement, Prime and/or Prime Partnership shall
receive 10% Series A Preferred Stock of Newco (the "Newco Preferred Securities")
having an aggregate par value and liquidation preference (exclusive of
dividends) equal to $43,700,000 and with such other terms, preferences and
rights, including conversion rights, as Prime, in its sole discretion, shall
determine, except that, subject to
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the right to designate a minority of the members of the Board of Directors of
Newco, the requirements of applicable law and certain conditions to be set
forth in the instruments governing the Newco Preferred Securities, the Newco
Preferred Securities shall be non-voting; and (iii) the Newco Preferred
Securities will dilute up to substantially all of the economic interest in
Newco and Horizon Partnership, including the economic interest evidenced by
the shares of Common Stock of Newco distributed in the Corporate Distribution
and the Horizon OP Units held by the limited partners of Horizon Partnership.
Prime and/or Prime Partnership shall have the right to distribute (the
"Prime Newco Distribution") all or a portion of the Newco Preferred
Securities (the "Distributed Newco Preferred Securities") to its shareholders
and partners, respectively, of record on or prior to the date immediately
preceding the consummation of the Mergers.
(b) In the event that Prime and/or Prime Partnership transfers any
Prime Properties (the "Contributed Prime Properties") or interest therein to
Horizon Partnership and/or Newco, then Prime shall receive in consideration
thereof a non-recourse debt obligation secured by the Contributed Prime
Properties in an aggregate principal amount equal to the net asset value of the
Contributed Prime Properties, which determination of net asset value shall be
made in good faith by the Board of Directors of Prime based on a written opinion
in form and substance reasonably satisfactory to Horizon of an investment
banking or appraisal firm selected by Prime.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF HORIZON
Horizon and Horizon Partnership represent and warrant to Prime and Prime
Partnership as follows:
2.1 ORGANIZATION, STANDING AND POWER OF HORIZON. Horizon and Sky Merger
are each a corporation duly organized, validly existing and in good standing
under the laws of Michigan and Maryland, respectively. Horizon has all requisite
corporate power and authority to own, operate, lease and encumber its properties
and carry on its business as now being conducted. Horizon is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a material adverse effect on
the business, properties, assets, financial condition or results of operations
of Horizon and the Horizon Subsidiaries (as defined below), taken as a whole (a
"Horizon Material Adverse Effect"). Horizon has delivered to Prime complete and
correct copies of the Amended and Restated Articles of Incorporation of Horizon
(the "Horizon Articles of Incorporation") and the Amended and Restated Bylaws of
Horizon (the "Horizon Bylaws"), in each case, as amended or supplemented to the
date of this Agreement. Sky Merger has delivered to Prime complete and correct
copies of the Sky Merger Articles of Incorporation (the "Sky Merger Articles of
Incorporation") and the Sky Merger Bylaws (the "Sky Merger Bylaws"), in each
case, as amended or supplemented to the date of this Agreement.
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2.2 HORIZON SUBSIDIARIES.
(a) Schedule 2.2 to the letter of even date herewith signed by each
of the chief executive officer and chief financial officer of Horizon and
delivered to Prime prior to the execution hereof (the "Horizon Disclosure
Letter") sets forth (i) each Subsidiary (as defined below) of Horizon (the
"Horizon Subsidiaries"), (ii) the ownership interest therein of Horizon (other
than, as of the Closing Date, changes thereto between November 11, 1997 and the
Closing Date which result from the conversion of Horizon OP Units into Horizon
Common Shares pursuant to the terms of the Horizon Partnership Agreement), (iii)
if not wholly owned by Horizon, the identity and ownership interest of each of
the other owners of such Horizon Subsidiary (other than, as of the Closing
Date, changes thereto between November 11, 1997 and the Closing Date which
result from the conversion of Horizon OP Units into Horizon Common Shares
pursuant to the terms of the Horizon Partnership Agreement) and (iv) each
factory outlet center and other commercial property owned by such Subsidiary.
As used in this Agreement, "Subsidiary" of any Person (as defined below) means
any corporation, partnership, limited liability company, joint venture, trust or
other legal entity of which such Person owns (either directly or through or
together with another Subsidiary of such Person) either (i) a general partner,
managing member or other similar interest, or (ii)(A) 10% or more of the voting
power of the voting capital stock or other equity interests, or (B) 10% or more
of the outstanding voting capital stock or other voting equity interests of such
corporation, partnership, limited liability company, joint venture or other
legal entity. As used herein, "Person" means an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity. Schedule 2.2 to the Horizon
Disclosure Letter sets forth a true and complete list of the equity securities
owned by Horizon, directly or indirectly, in any corporation, partnership,
limited liability company, joint venture or other legal entity, excluding
Horizon Subsidiaries.
(b) Except as set forth in Schedule 2.2 to the Horizon Disclosure
Letter, (i) all of the outstanding shares of capital stock of each Horizon
Subsidiary that is a corporation have been duly authorized, validly issued and
are (A) fully paid and nonassessable and not subject to preemptive rights, (B)
owned by Horizon or by another Horizon Subsidiary and (C) owned free and clear
of all pledges, claims, liens, charges, encumbrances and security interests of
any kind or nature whatsoever (collectively, "Liens") and (ii) all equity
interests in each Horizon Subsidiary that is a partnership, joint venture,
limited liability company or trust which are owned by Horizon, by another
Horizon Subsidiary or by Horizon and another Horizon Subsidiary are owned free
and clear of all Liens. Each Horizon Subsidiary that is a corporation is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the requisite corporate power and
authority to own, operate, lease and encumber its properties and carry on its
business as now being conducted, and each Horizon Subsidiary that is a
partnership, limited liability company or trust is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has the requisite power and authority to own, operate, lease and encumber
its properties and carry on its business as now being conducted. Each Horizon
Subsidiary is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed,
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individually or in the aggregate, would not have a Horizon Material Adverse
Effect. Complete and correct copies of the articles of incorporation, bylaws,
organization documents and partnership, joint venture and operating agreements
of each Horizon Subsidiary, as amended to the date of this Agreement, have been
previously delivered or made available to Prime. No effective amendment has been
made to the Horizon Partnership Agreement since the date of this Agreement.
2.3 CAPITAL STRUCTURE.
(a) The authorized shares of capital stock of Horizon consist of
3,000,000 shares of preferred stock, $0.01 par value per share, none of which
are issued and outstanding on the date of this Agreement, 10,000,000 shares
of excess stock, $0.01 par value per share, none of which are issued or
outstanding on the date of this Agreement, and 47,000,000 Horizon Common
Shares, 24,066,635 of which were issued and outstanding as of November 12,
1997. The authorized shares of capital stock of Sky Merger consist of
50,000,000 shares of common stock, $0.01 par value per share, 1,000 of which
are issued or outstanding as of November 12, 1997.
(b) Set forth in Schedule 2.3(b) to the Horizon Disclosure Letter
is a true and complete list of the following: (i) each qualified or
nonqualified option to purchase shares of Horizon's capital stock granted
under Horizon's Amended and Restated 1993 Stock Option Plan (the "Horizon
1993 Stock Option Plan"), Horizon's 1997 Stock Option Plan (the "Horizon 1997
Stock Option Plan"), the Horizon 1993 Long-Term Incentive Plan (the "Horizon
Long-Term Incentive Plan"), Horizon's Director Stock Option Plan (the
"Horizon Director Stock Option Plan") or any other formal or informal
arrangement (collectively, the "Horizon Stock Options") and (ii) all other
warrants or other rights to acquire shares of Horizon's capital stock, all
limited stock appreciation rights, phantom stock, dividend equivalents,
performance units and performance shares. Schedule 2.3(b) to the Horizon
Disclosure Letter sets forth for each Horizon Stock Option the name of the
grantee, the date of the grant, status of the option as qualified or
nonqualified under Section 422 of the Code, the number and type of shares of
Horizon's capital stock subject to such option, the number and type of shares
subject to options that are currently exercisable, the exercise price per
share, and the number and type of such shares subject to share appreciation
rights. On the date of this Agreement, except as set forth in this Section
2.3 or in Schedule 2.3(b) to the Horizon Disclosure Letter, no shares of
Horizon's capital stock were outstanding or reserved for issuance.
(c) All outstanding shares of Horizon's and Sky Merger's capital
stock are duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. There are no bonds, debentures, notes or
other indebtedness of Horizon or Sky Merger having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote)
on any matters on which shareholders of Horizon may vote.
(d) Except (i) as set forth in this Section 2.3 or in Schedule
2.3(d) to the Horizon Disclosure Letter or as otherwise contemplated by this
Agreement, and (ii) for Horizon OP Units, which may be redeemed for cash or,
at the option of Horizon, Horizon Common Shares in accordance with the
Horizon Partnership Agreement, as of the date of this Agreement, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or
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undertakings of any kind to which Horizon, Sky Merger or any Horizon
Subsidiary is a party or by which such entity is bound, obligating Horizon,
Sky Merger or any Horizon Subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock, voting
securities or other ownership interests of Horizon, Sky Merger or any Horizon
Subsidiary or obligating Horizon, Sky Merger or any Horizon Subsidiary to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking (other than to
Horizon, Sky Merger or a Horizon Subsidiary).
(e) As of November 12, 1997, 28,293,699 units of Horizon
Partnership are duly and validly issued, of which 24,066,635 are owned by
Horizon and 28,293,699 units of Newco LP are duly and validly issued, of
which 24,066,635 are owned by Horizon. Schedule 2.3(e) to the Horizon
Disclosure Letter sets forth the name of each holder of Horizon OP Units and
Newco OP Units and the number of Horizon OP Units and Newco OP Units owned by
each such holder in each case as of the date of this Agreement. The Horizon
OP Units are subject to no restrictions except as set forth in the Horizon
Partnership Agreement. Except as provided in the Horizon Partnership
Agreement or in Schedule 2.3(e) to the Horizon Disclosure Letter, neither
Horizon Partnership nor Newco LP has issued or granted and neither is a party
to any outstanding commitments of any kind relating to, or any presently
effective agreements or understandings with respect to, the issuance or sale
of interests in Horizon Partnership or Newco LP, whether issued or unissued,
or securities convertible or exchangeable into interests in Horizon
Partnership or Newco LP, except as contemplated by this Agreement.
(f) All dividends on Horizon Common Shares, and all distributions
on Horizon OP Units and Newco OP Units, which have been declared prior to the
date of this Agreement have been paid in full.
(g) Set forth on Schedule 2.3(g) to the Horizon Disclosure Letter
is a list of each Registration Rights Agreement pursuant to which Horizon or
any of the Horizon Subsidiaries is obligated to register any securities.
2.4 OTHER INTERESTS. Neither Horizon nor any Horizon Subsidiary owns
directly or indirectly any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust or other entity
(other than investments in short-term investment securities or an interest in
a Horizon Subsidiary).
2.5 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) Horizon has the requisite corporate power and authority to enter
into this Agreement and, subject to the requisite shareholder approval of the
Mergers and the other transactions contemplated hereby requiring shareholder
approval (the "Horizon Shareholder Approvals"), to consummate the transactions
contemplated by this Agreement to which Horizon is a party. The execution and
delivery of this Agreement by Horizon and the consummation by Horizon of the
transactions contemplated by this Agreement to which Horizon is a party have
been duly authorized by all necessary action on the part of Horizon, except for
and subject to the Horizon
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Shareholder Approvals and the Horizon Partner Approvals (as defined in
Section 5.1(g)). This Agreement has been duly executed and delivered by
Horizon and constitutes a valid and binding obligation of Horizon,
enforceable against Horizon in accordance with and subject to its terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity.
(b) Sky Merger has the requisite corporate power and authority to
enter into this Agreement and, subject to the requisite shareholder approval
of the Horizon/Subsidiary Merger and the Prime/Horizon Merger and the other
transactions contemplated hereby requiring shareholder approval (the "Sky
Merger Shareholder Approvals"), to consummate the transactions contemplated
by this Agreement to which Sky Merger is a party. The execution and delivery
of this Agreement by Sky Merger and the consummation by Sky Merger of the
transactions contemplated by this Agreement to which Sky Merger is a party
have been duly authorized by all necessary action on the part of Sky Merger,
except for and subject to the Sky Merger Shareholder Approval. This
Agreement has been duly executed and delivered by Sky Merger and constitutes
a valid and binding obligation of Sky Merger, enforceable against Sky Merger
in accordance with and subject to its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
(c) Horizon Partnership and Newco LP each has the requisite
partnership power and authority to enter into this Agreement and, subject to
the requisite Horizon Partner Approvals and Newco LP Partner Approvals (as
defined in Section 5.1(g)), to consummate the transactions contemplated by
this Agreement to which Horizon Partnership or Newco LP is a party. The
execution and delivery of this Agreement by Horizon Partnership and Newco LP
and the consummation by Horizon Partnership and Newco LP of the transactions
contemplated by this Agreement to which Horizon Partnership or Newco LP is a
party have been duly authorized by all necessary action on the part of
Horizon Partnership and Newco LP, except for and subject to the Horizon
Shareholder Approvals, the Horizon Partner Approvals and Newco LP Partner
Approvals. This Agreement has been duly executed and delivered by Horizon
Partnership and Newco LP and constitutes a valid and binding obligation of
Horizon Partnership and Newco LP, enforceable against Horizon Partnership and
Newco LP in accordance with and subject to its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
(d) Except as set forth in Schedule 2.5(d)(1) to the Horizon
Disclosure Letter, the execution and delivery of this Agreement by Horizon
and Sky Merger do not, and the consummation of the transactions contemplated
by this Agreement to which Horizon or Sky Merger is a party and compliance by
Horizon and Sky Merger with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or to
material loss of a benefit under, or result in the creation of any Lien upon
any of the properties or assets of Horizon, Sky Merger or any Horizon
Subsidiary under, (i) the Horizon or Sky Merger Articles of Incorporation or
the Horizon or Sky Merger Bylaws or the comparable charter or organizational
documents or partnership, operating, or similar agreement (as the case may
be) of any
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Horizon Subsidiary, each as amended or supplemented, (ii) any loan
or credit agreement, note, bond, mortgage, indenture, reciprocal easement
agreement, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Horizon or any Horizon Subsidiary or their
respective properties or assets or (iii) subject to the governmental filings
and other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation (collectively, "Laws")
applicable to Horizon or any Horizon Subsidiary, or their respective
properties or assets, other than, in the case of clause (ii) or (iii), any
such conflicts, violations, defaults, rights, loss or Liens that individually
or in the aggregate would not (x) have a Horizon Material Adverse Effect or
(y) prevent the consummation of the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or registration,
declaration or filing with, any federal, state or local government or any
court, administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign (a "Governmental
Entity"), is required by or with respect to Horizon or any Horizon Subsidiary
in connection with the execution and delivery of this Agreement by Horizon or
the consummation by Horizon of the transactions contemplated by this
Agreement, except for (i) the filing with the Securities and Exchange
Commission (the "SEC") of the Proxy Statement (as defined in Section 5.1) and
such reports under Section 13(a) of the Exchange Act, (ii) the acceptance for
record of the Horizon/Subsidiary Articles of Merger by the Maryland
Department and the Horizon/Subsidiary Certificate of Merger with the Michigan
Department, (iii) the filing of the Delaware Certificate of Merger with the
Delaware Secretary, (iv) the filing of the Prime/Horizon Articles or Merger
with the Maryland Department, (v) such filings with and approvals of the NYSE
to permit the Surviving Company Common Shares and/or Surviving Company Series
B Preferred Shares that are to be issued pursuant to the Prime/Horizon Merger
and the Horizon Stock Options to be listed on the NYSE, (vi) such filings as
may be required in connection with the payment of any transfer and gains
taxes and (vii) such other consents, approvals, orders, authorizations,
registrations, declarations and filings (A) as are set forth in Schedule
2.5(d)(2) to the Horizon Disclosure Letter, (B) as may be required under (x)
laws requiring transfer, recordation or gains tax filings, (y) federal, state
or local environmental laws or (z) the "blue sky" laws of various states, to
the extent applicable or (C) which, if not obtained or made, would not
prevent or delay the consummation of any of the transactions contemplated by
this Agreement or otherwise prevent Horizon from performing its obligations
under this Agreement in any respect or have, individually or in the
aggregate, a Horizon Material Adverse Effect. None of Sky Merger, Newco or
Newco LP has entered into an agreement of any kind, including, but not
limited to, any loan, credit or other debt agreements, employment agreements,
benefit plans or stock option agreements, or pledge agreements except as
contemplated by this Agreement.
2.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Horizon
and Horizon Partnership have filed all required reports, schedules, forms,
statements and other documents with the SEC since November 2, 1993 and March 13,
1995, respectively, through the date hereof (together, the "Horizon SEC
Documents"). Schedule 2.6(a) to the Horizon Disclosure Letter contains a
complete list of all Horizon SEC Documents filed by Horizon with the SEC since
January 1, 1997 and on or prior to the date of this Agreement. All of the
Horizon SEC Documents (other than preliminary material), as of their respective
filing dates, complied in all material respects with all applicable requirements
of the Securities Act and the Exchange Act, and, in each case, the rules and
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regulations promulgated thereunder applicable to such Horizon SEC Documents.
None of the Horizon SEC Documents at the time of filing contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, except to the
extent such statements have been modified or superseded by later Horizon SEC
Documents filed and publicly available prior to the date of this Agreement. The
consolidated financial statements of Horizon and its Subsidiaries or Horizon
Partnership and its Subsidiaries, as the case may be, included in the Horizon
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") (except, in the case of unaudited statements, as
permitted by the applicable rules and regulations of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presented, in accordance with the applicable
requirements of GAAP and the applicable rules and regulations of the SEC, the
consolidated financial position of Horizon and its Subsidiaries or Horizon
Partnership and its Subsidiaries, as the case may be, in each case taken as a
whole, as of the dates thereof and the consolidated results of operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in
Schedule 2.6(b) to the Horizon Disclosure Letter, Horizon has no Subsidiaries
which are not consolidated for accounting purposes. Except for liabilities and
obligations set forth or reflected in the Horizon SEC Documents or in Schedule
2.6(c) to the Horizon Disclosure Letter, as of the date hereof neither Horizon
nor any of the Horizon Subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by GAAP to
be set forth on a consolidated balance sheet of Horizon or in the notes thereto
and which, individually or in the aggregate, would have a Horizon Material
Adverse Effect.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Horizon SEC Documents or in Schedule 2.7 to the Horizon Disclosure Letter, since
the date of the most recent audited financial statements included in Horizon SEC
Documents (the "Horizon Financial Statement Date") and to the date of this
Agreement, Horizon and its Subsidiaries have conducted their business only in
the ordinary course (taking into account prior practices, including the
acquisition of properties and issuance of securities) and there has not been (a)
any material adverse change in the business, financial condition or results of
operations of Horizon and its Subsidiaries taken as a whole (a "Horizon Material
Adverse Change"), nor has there been any occurrence or circumstance that with
the passage of time would reasonably be expected to result in a Horizon Material
Adverse Change, (b) except for regular quarterly distributions not in excess of
$0.35 declared in each of the first, second and third quarter of 1997 per
Horizon Common Share or Horizon OP Unit, respectively (or, with respect to the
period commencing on the date hereof and ending on the Closing Date,
distributions permitted pursuant to Section 5.10), in each case with customary
record and payment dates, any authorization, declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the Horizon Common Shares, Horizon OP Units or Newco
OP Units, (c) any split, combination or reclassification of the Horizon Common
Shares, the Horizon OP Units or Newco OP Units or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for, or giving the right to acquire by exchange or exercise,
shares of stock of Horizon or partnership interests in Horizon Partnership or
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Newco LP or any issuance of an ownership interest in, any Horizon Subsidiary,
(d) any damage, destruction or loss, whether or not covered by insurance, that
has or would have a Horizon Material Adverse Effect, (e) any change in
accounting methods, principles or practices by Horizon or any Horizon Subsidiary
materially affecting its assets, liabilities or business, except insofar as may
have been disclosed in Horizon SEC Documents or required by a change in GAAP, or
(f) any amendment of any employment, consulting, severance, retention or any
other agreement between Horizon and any current or former officer, director,
employee or consultant of Horizon.
2.8 LITIGATION. Except as disclosed in the Horizon SEC Documents or in
Schedule 2.8 to the Horizon Disclosure Letter, there is no suit, action or
proceeding pending (in which service of process has been received by an employee
of Horizon or a Horizon Subsidiary) or, to the Knowledge of Horizon (as
hereinafter defined), threatened in writing against or affecting Horizon or any
Horizon Subsidiary that, individually or in the aggregate, could reasonably be
expected to (i) have a Horizon Material Adverse Effect or (ii) prevent the
consummation of any of the transactions contemplated by this Agreement, nor is
there any judgment, decree, injunction, rule or order of any court or
Governmental Entity or arbitrator outstanding against Horizon or any of its
Subsidiaries having, or which, insofar as reasonably can be foreseen, in the
future would have, any such effect. Notwithstanding the foregoing, (y) Schedule
2.8 to the Horizon Disclosure Letter sets forth each and every uninsured claim
including but not limited to claims relating to the employment of labor, such as
claims relating to wages, hours, collective bargaining, unemployment insurance,
workers' compensation, equal employment opportunity, payment and withholding of
taxes, the Immigration Reform and Control Act, the Worker Adjustment and
Retraining Notification Act, and the Drug-Free Workplace Act pending or, to the
Knowledge of Horizon, threatened as of the date hereof which, if adversely
determined, could reasonably be expected to result in a Horizon Material Adverse
Effect, in each case with a brief summary of such claim or threatened claim, and
(z) except as set forth on Schedule 2.8 to the Horizon Disclosure Letter, no
claim has been made under any directors' and officers' liability insurance
policy maintained at any time by Horizon or any of the Horizon Subsidiaries.
2.9 PROPERTIES.
(a) Schedule 2.9(a) to the Horizon Disclosure Letter sets forth a
list of all real property outlet centers owned or leased by Horizon or one of
the Horizon Subsidiaries and sets forth the name of the owner or lessee, as
applicable, of each such property. Horizon or a Horizon Subsidiary owns fee
simple title or has a valid leasehold interest in all real property owned or
leased by Horizon or one of the Horizon Subsidiaries (the "Horizon Properties"),
which are all of the real estate properties owned or leased by them. Other than
as shown on the Horizon Title Insurance Policies (as defined in Section 2.9(b)),
each of the Horizon Properties is owned or leased, as applicable, free and clear
of liens, mortgages or deeds of trust, claims against title, charges which are
liens, security interests or other encumbrances on title ("Encumbrances") except
for those Encumbrances which, individually or in the aggregate with any other
condition or omission resulting in a breach of the representations and
warranties set forth in this Section 2.9, could not be reasonably be expected to
result in a Horizon Material Adverse Effect. Except as set forth in Schedule
2.9(a) to the Horizon Disclosure Letter, none of the Horizon Properties is
subject to any restriction on the
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sale or other disposition thereof or on the financing or release of financing
thereon except those which, individually or in the aggregate with any other
condition or omission resulting in a breach of the representations and
warranties set forth in this Section 2.9, could not be reasonably be expected
to result in a Horizon Material Adverse Effect. The Horizon Properties are
not subject to any rights of way, written agreements, laws, ordinances and
regulations affecting building use or occupancy, or reservations of an
interest in title (collectively, "Property Restrictions") or Encumbrances,
except for (i) Property Restrictions and Encumbrances set forth in Schedule
2.9(a) to the Horizon Disclosure Letter, and (ii) Property Restrictions for
which the Horizon Properties comply or for which non-compliance, individually
or in the aggregate with any other condition or omission resulting in a
breach of the representations and warranties set forth in this Section 2.9,
could not be reasonably expected to result in a Horizon Material Adverse
Effect. Schedule 2.9(a) to the Horizon Disclosure Letter lists each of the
Horizon Properties which are under development as of the date of this
Agreement and describes the status of such development as of the date hereof.
(b) Except as provided in Schedule 2.9(b) to the Horizon Disclosure
Letter, valid policies of title insurance (the "Horizon Title Insurance
Policies") have been issued insuring Horizon Partnership or the other
applicable Horizon Subsidiary's fee simple title or leasehold estate, as the
case may be, to the Horizon Properties owned by it. Such policies are, at
the date hereof, in full force and effect. Except as set forth in Schedule
2.9(b) to the Horizon Disclosure Letter, no claim has been made against any
such policy. A true and correct copy of each Horizon Title Insurance Policy
has previously been delivered to Prime.
(c) Except as provided in Schedule 2.9(c) to the Horizon Disclosure
Letter, Horizon has no Knowledge (i) that, any certificate, permit or license
from any governmental authority having jurisdiction over any of the Horizon
Properties or any agreement, easement or other right which is necessary to
permit the lawful use and operation of the buildings and improvements on any
of the Horizon Properties or which is necessary to permit the lawful use and
operation of all driveways, roads and other means of egress and ingress to
and from any of the Horizon Properties has not been obtained and is not in
full force and effect, or of any pending threat of modification or
cancellation of any of same which failure to obtain, modification or
cancellation would have a Horizon Material Adverse Effect, or (ii) of any
violation of any federal, state or municipal law, ordinance, order,
regulation or requirement affecting any of the Horizon Properties issued by
any governmental authority, or of any structural defects relating to any
Horizon Property, or of any Horizon Property whose building systems are not
in working order, or of any physical damage to any Horizon Property which in
any such case under this clause (ii) could, individually or in the aggregate
with any other condition or omission resulting in a breach of the
representations and warranties set forth in this Section 2.9, reasonably be
expected to result in a Horizon Material Adverse Effect.
(d) Neither Horizon nor any Horizon Subsidiary has received any
written or published notice to the effect that (i) any condemnation or rezoning
proceedings are pending or threatened with respect to any of the Horizon
Properties or (ii) any zoning, building or similar law, code, ordinance, order
or regulation is or will be violated by the continued maintenance, operation or
use of any buildings or other improvements on any of the Horizon Properties or
by the continued
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maintenance, operation or use of the parking areas, except for such
violations which, individually or in the aggregate with any other condition
or omission resulting in a breach of the representations and warranties set
forth in this Section 2.9, could not be reasonably be expected to result in a
Horizon Material Adverse Effect.
(e) Except as set forth in Schedule 2.9(e) to the Horizon Disclosure
Letter, all work required to be performed, payments required to be made and
actions required to be taken prior to the date hereof pursuant to any agreement
entered into with a governmental body or authority in connection with a site
approval, zoning reclassification or other similar action relating to any
Horizon Properties (e.g., local improvement district, road improvement district,
environmental mitigation) have been performed, paid or taken, as the case may
be, other than those where, individually or in the aggregate with any other
condition or omission resulting in a breach of the representations and
warranties set forth in this Section 2.9, the failure would not have a Horizon
Material Adverse Effect, and Horizon has no Knowledge of any material work,
payments or actions that are required after the date hereof pursuant to such
agreements, except as set forth in development or operating budgets for such
Horizon Properties delivered to Prime and Prime Partnership prior to the date
hereof.
(f) Horizon and each of the Horizon Subsidiaries have good and
sufficient title to all their personal and non-real properties and assets
reflected in their books and records as being owned by them (including those
reflected in the consolidated balance sheet of Horizon as of December 31, 1996,
except as since sold or otherwise disposed of in the ordinary course of
business), free and clear of all liens and encumbrances, except such as are
reflected on the consolidated balance sheet of Horizon as of December 31, 1996,
and the notes thereto, and except for liens for current taxes not yet due and
payable, and liens or encumbrances which are normal to the business of Horizon
and the Horizon Subsidiaries and are not, in the aggregate, material in relation
to the assets of Horizon on a consolidated basis and except also for such
imperfections of title, easement and encumbrances, if any, as do not materially
interfere with the present use of the properties subject thereto or affected
thereby, or otherwise materially impair the consolidated business operations of
Horizon.
2.10 LEASES.
(a) The rent roll for the Horizon Properties as of November 1, 1997
previously delivered by Horizon to Prime is correct and complete in all material
respects as of the date thereof.
(b) Except as provided in Schedule 2.10(b) to the Horizon Disclosure
Letter, (i) each of the leases and tenancies for all or any portion of the
Horizon Properties (the "Horizon Leases") is valid and subsisting and in full
force and effect except where the failure thereof, individually with respect to
any Horizon Lease or in the aggregate with more than one Horizon Leases, could
not be reasonably be expected to result in a Horizon Material Adverse Effect,
and has not been amended, modified or supplemented since the date of the rent
roll described in Section 2.10(a); and (ii) neither Horizon nor any of the
Horizon Subsidiaries has received any written notice from any tenant of any
intention to vacate which vacation would have a Horizon Material Adverse
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Effect. Except as provided in Schedule 2.10(b) to the Horizon Disclosure
Letter neither Horizon nor any of the Horizon Subsidiaries has collected
payment of rent (other than security deposits) accruing for a period which is
more than one month beyond the date of collection.
(c) Horizon has previously delivered or made available to Prime a
true and correct copy of all Horizon Leases.
(d) Except as shown in Schedule 2.10(d) to the Horizon Disclosure
Letter, as of the last day of the calendar month immediately preceding the
date hereof, none of the lessees of Horizon Properties set forth on Schedule
2.10(d) to the Horizon Disclosure Letter has asserted any claim of which
Horizon or any of the Horizon Subsidiaries has received written notice which
would materially affect the collection of rent from such tenant and neither
Horizon nor any of the Horizon Subsidiaries has received written notice of
any material default or breach on the part of Horizon or any of the Horizon
Subsidiaries under any of the Horizon Leases with such a tenant which has not
been cured.
(e) Schedule 2.10(e) to the Horizon Disclosure Letter sets forth a
complete and correct list as of November 3, 1997, of all written commitments
made by Horizon or any of the Horizon Subsidiaries to lease any of the
Horizon Properties which has not yet been reduced to a written lease, and
provides with respect to each such commitment the principal terms of such
commitment, including, if applicable, (i) the space to be occupied, (ii) the
name of the tenant, (iii) the length of the original term thereof and any
right or option to renew or extend the lease term, (iv) the monthly minimum
rental, (v) rental escalations, (vi) the terms with respect to percentage
rent or other overage rent, (vii) any provisions for tenant allowances and
(viii) the right of any third-party broker to any outstanding brokerage or
other commission incident thereto. Horizon has previously delivered or made
available to Prime a true and correct copy of each such commitment.
(f) Any material leases pursuant to which Horizon or any Horizon
Subsidiary, as lessee, leases real or personal property are in good standing,
valid and effective in accordance with their respective terms, and there is
not, under any of such leases, any material existing default or any event
which with notice or lapse of time or both would constitute such a default,
nor do any of such leases contain any provision which would preclude the
Surviving Company, Prime Partnership or Horizon Partnership, as applicable,
from occupying and using the leased premises for the same purposes and upon
substantially the same rental and other terms as are applicable to the
occupation and use by Horizon and the Horizon Subsidiaries, or which would
have a Horizon Material Adverse Effect.
2.11 RENTS. The rents and other income and charges set forth in the rent
roll described in Section 2.10(a) are the actual rents, income and charges
presently being charged by Horizon or the Subsidiaries, as applicable, under the
Horizon Leases as of November 1, 1997. Other than set forth on Schedule 2.11 to
the Horizon Disclosure Letter, no tenant under any of the Horizon Leases is
entitled to any purchase option. None of the Horizon Leases and none of the
rents or other amounts payable thereunder have been assigned, pledged or
encumbered, other than to lenders, as described on Schedule 2.11 to the Horizon
Disclosure Letter. No brokerage or leasing commission or other
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compensation will be due or payable to any person, firm, corporation or other
entity with respect to or on account of any of the Horizon Leases or any
extensions or renewals thereof as of the Prime/Horizon Merger Effective Time
except in the ordinary course of business consistent with past practice,
except as set forth on Schedule 2.11 to the Horizon Disclosure Letter.
2.12 ENVIRONMENTAL MATTERS. Horizon has delivered to Prime a true and
complete copy of the environmental reports listed on Schedule 2.12 of the
Horizon Disclosure Letter (the "Horizon Environmental Reports"). To Horizon's
Knowledge, the Horizon Environmental Reports constitute all final environmental
reports (including without limitation all final versions of environmental
investigations and testing or analysis made by or on behalf of Horizon or any of
the Horizon Subsidiaries) with respect to the Horizon Properties in the
possession of Horizon or any Horizon Subsidiary. With respect to each Horizon
Property, since the day of the most recent Environmental Report relating to such
Horizon Property, except for any condition that individually or in the aggregate
would not be reasonably likely to have a Horizon Material Adverse Effect, (a) no
Hazardous Substances (as defined below) have been used, stored, manufactured,
treated, processed or transported to or from any such Horizon Property except as
necessary to the conduct of business and in compliance with Environmental Laws
(as defined below); (b) there have been no spills, releases, discharges or
disposal of Hazardous Substances to have occurred or be presently occurring on
or from such Horizon Property; (c) such Horizon Property and the business
conducted thereon are not in violation of Environmental Laws; (d) Horizon and
its Subsidiaries have not received and do not reasonably expect to receive any
notice of potential responsibility, letter of inquiry or notice of alleged
liability from any Person regarding such Horizon Property or the business
conducted thereon. For the purposes of this Paragraph 2.12 only, "Horizon
Properties" shall include property currently or formerly owned, operated or
leased by Horizon or its Subsidiaries.
"Environmental Laws" shall mean any applicable statute, code, enactment,
ordinance, rule, regulation, permit, consent, approval, authorization, judgment,
order, common law rule (including without limitation the common law respecting
nuisance and tortious liability), decree, injunction, or other requirement
having the force and effect of law, whether local, state, territorial or
national, at any time in force or effect relating to:
(a) emissions, discharges, spills, releases or threatened releases of
Hazardous Substances into ambient air, surface water, groundwater, watercourses,
publicly or privately owned treatment works, drains, sewer systems, wetlands,
septic systems or onto land;
(b) the use, treatment, storage, disposal, handling, manufacturing,
transportation or shipment of Hazardous Substances;
(c) the regulation of storage tanks; or
(d) otherwise relating to pollution or the protection of human health
or the environment.
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"Hazardous Substances" shall mean all substances, wastes, pollutants,
contaminants and materials regulated or defined or designated as hazardous,
extremely or imminently hazardous, dangerous, or toxic pursuant to any law, by
any local, state, territorial or federal governmental authority, or with respect
to which such a governmental authority otherwise requires environmental
investigation, monitoring, reporting, or remediation; including but not limited
to,
(a) all substances, wastes, pollutants, contaminants and materials
regulated, or defined or designated as hazardous, extremely or imminently
hazardous, dangerous or toxic, under the following federal statutes and their
state counterparts, as well as their statutes' implementing regulations: the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
section 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
section 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. section 2601
et seq., the Clean Water Act, 33 U.S.C. section 1251 et seq., the Clean Air Act,
42 U.S.C. section 7401 et seq., the Emergency Planning and Community Right to
Know Act, 42 U.S.C. section 11011 et seq., the Safe Drinking Water Act, 33
U.S.C. section 300f et seq., the Federal Insecticide, Fungicide, and Rodenticide
Act, 7 U.S.C. section 136 et seq., the Atomic Energy Act, 42 U.S.C. section
22011 et seq., and the Hazardous Materials Transportation Act, 42 U.S.C. section
1801 et seq.;
(b) petroleum and petroleum products including crude oil and any
fractions thereof;
(c) natural gas, synthetic gas, and any mixtures thereof; and
(d) radon, radioactive substances, asbestos, urea formaldehyde,
polychlorinated biphenyls and electromagnetic field radiation.
2.13 RELATED PARTY TRANSACTIONS. Except as discussed in the Horizon SEC
Documents, set forth in Schedule 2.13 to the Horizon Disclosure Letter is a
list of all material arrangements, agreements and contracts entered into by
Horizon or any of the Horizon Subsidiaries under which there are continuing
obligations on the part of Horizon or any Horizon Subsidiary that will
continue on and after the Closing Date with (a) any investment banker or
financial advisor, (b) any person who is a current or former officer,
director or Affiliate (as defined below) of Horizon or any of its
Subsidiaries or any entity of which any of the foregoing is an Affiliate
except arrangements available to employees generally or (c) any person who
acquired Horizon Common Shares or Horizon OP Units in a private placement.
Such documents, copies of all of which have previously been delivered or made
available to Prime, are listed in Schedule 2.13 to the Horizon Disclosure
Letter. As used in this Agreement, the term "Affiliate" shall have the same
meaning as such term is defined in Rule 405 promulgated under the Securities
Act.
2.14 EMPLOYEE BENEFITS. As used herein, the term "Employee Plan" includes
any pension, retirement, savings, disability, medical, dental, health, life,
death benefit, group insurance, profit sharing, deferred compensation, stock
option, bonus, incentive, vacation pay, tuition reimbursement, severance pay, or
other employee benefit plan, trust, agreement, contract, agreement, policy or
commitment (including, without limitation, any pension plan, as defined in
Section 3(2) of the
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Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder ("ERISA") ("Pension Plan"), and any
welfare plan as defined in Section 3(1) of ERISA ("Welfare Plan")), whether
any of the foregoing is funded, insured or self-funded, written or oral, (i)
sponsored or maintained by Horizon or its Subsidiaries (each a "Controlled
Group Member") and covering any Controlled Group Member's active or former
employees (or their beneficiaries), (ii) to which any Controlled Group Member
is a party or by which any Controlled Group Member (or any of the rights,
properties or assets thereof) is bound or (iii) with respect to which any
current Controlled Group Member may otherwise have any material liability
(whether or not such Controlled Group Member still maintains such Employee
Plan). Each Employee Plan is listed on Schedule 2.14 to the Horizon
Disclosure Letter. With respect to the Employee Plans:
(a) Except as disclosed in Schedule 2.14(a) to the Horizon Disclosure
Letter, no Controlled Group Member has any continuing liability under any
Welfare Plan which provides for continuing benefits or coverage for any
participant or any beneficiary of a participant after such participant's
termination of employment, except as may be required by Section 4980B of the
Code or Section 601 (et seq.) of ERISA, or under any applicable state law, and
at the expense of the participant or the beneficiary of the participant.
(b) Each Employee Plan complies with the applicable requirements of
ERISA and any other applicable law governing such Employee Plan, and, to the
best Knowledge of Horizon, each Employee Plan has at all times been properly
administered in accordance with all such requirements of law, and in accordance
with its terms and the terms of any applicable collective bargaining agreement
to the extent consistent with all such requirements of law, except when the
failure to comply or improper administration could not reasonably be expected to
result in a Material Adverse Effect. Each Pension Plan which is intended to be
qualified is qualified under Section 401(a) of the Code, has received a
favorable determination letter from the Internal Revenue Service ("IRS") stating
that such plan meets the requirements of Section 401(a) of the Code and that the
trust associated with such plan is tax-exempt under Section 501(a) of the Code
and, to the best Knowledge of Horizon, no event has occurred which would
jeopardize the qualified status of any such plan or the tax exempt status of any
such trust under Sections 401(a) and Section 501(a) of the Code, respectively.
No lawsuits, claims (other than routine claims for benefits) or complaints to,
or by, any person or governmental entity have been filed, are pending, to the
best Knowledge of Horizon, threatened with respect to any Employee Plan and, to
the best Knowledge of Horizon, there is no fact or contemplated event which
would be expected to give rise to any such lawsuit, claim (other than routine
claims for benefits) or complaint with respect to any Pension Plan. Without
limiting the foregoing, the following are true with respect to each Employee
Plan:
(i) all Controlled Group Members have complied with the
reporting and disclosure requirements of ERISA, the Code, or both,
with respect to each Employee Plan and no Controlled Group Member has
incurred any material liability in connection with such reporting or
disclosure except when the failure to comply or when such liability
could not reasonably be expected to result in a Material Adverse
Effect;
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(ii) all contributions and payments with respect to Employee
Plans that are required to be made by a Controlled Group Member with
respect to periods ending on or before the Closing Date (including
periods from the first day of the current plan or policy year to the
Closing Date) have been, or will be, made or accrued before the
Closing Date in accordance with the appropriate plan document,
actuarial report, collective bargaining agreements or insurance
contracts or arrangements or as otherwise required by ERISA or the
Code; and
(iii) with respect to each such Employee Plan, to the extent
applicable, Horizon has delivered to or has made available to Prime
true and complete copies of (A) plan documents, or any and all other
documents that establish the existence of the plan, trust,
arrangement, contract, policy or commitment and all amendments
thereto, (B) the most recent determination letter, if any, received
from the IRS, (C) the three most recent Form 5500 Annual Reports (and
all schedules and reports relating thereto) and actuarial reports and
(D) all related trust agreements, insurance contract or other funding
agreements that implement each such Employee Plan.
(c) With respect to each Employee Plan, to the best Knowledge of
Horizon, there has not occurred, and no person or entity is contractually bound
to enter into, any "prohibited transaction" within the meaning of Section
4975(c) of the Code or Section 406 of ERISA, which transaction is not exempt
under Section 4975(d) of the Code or Section 408 of ERISA and which could
subject Horizon or any Controlled Group Member to material liability.
(d) Except as disclosed in Schedule 2.14(d) to the Horizon Disclosure
Letter, no Controlled Group Member has maintained or been obligated to
contribute to any Employee Plan subject to Code Section 412 or Section 302 or
Title IV of ERISA. No Employee Plan subject to Code Section 412 or Section 302
or Title IV of ERISA has been terminated.
(e) With respect to each pension plan maintained by any Controlled
Group Member, such plans provide the plan sponsor the authority to amend or
terminate the Plan at any time, subject to applicable requirements of ERISA and
the Code.
2.15 LABOR MATTERS. Neither Horizon nor any of the Horizon Subsidiaries is
a party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or other labor organization, nor
has Horizon or any of the Horizon Subsidiaries agreed that any unit of their
employees is appropriate for collective bargaining. No union or other labor
organization has been certified as bargaining representative for any of
Horizon's employees. To the Knowledge of Horizon there are no organizational
efforts with respect to the formation of a collective bargaining unit presently
being made or threatened involving employees of Horizon or any of the Horizon
Subsidiaries. During the past five (5) years, Horizon has not experienced any
strikes, work stoppages, work slowdowns, grievances or arbitration proceedings,
unfair labor practice charges or complaints or other significant labor
difficulties of any nature, nor have any such labor difficulties been
threatened. The employee handbook of Horizon was previously delivered in its
entirety to Prime and fairly and accurately summarizes all material employee
policies, including
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but not limited to policies concerning vacations, payroll practices, leaves
of absence, affirmative action, equal employment opportunity, and policies
relating to employee counseling, discipline and discharge.
2.16 TAXES.
(a) Each of Horizon and the Horizon Subsidiaries (A) has filed all
tax returns and reports required to be filed by it (after giving effect to any
filing extension properly granted by a Governmental Entity having authority to
do so) and all such returns and reports are accurate and complete in all
material respects, and (B) has paid (or Horizon has paid on its behalf) all
Taxes (as defined below) shown on such returns and reports as required to be
paid by it, except those where the failure to file such tax returns and reports
or pay such Taxes would not have a Horizon Material Adverse Effect. The most
recent audited financial statements contained in the Horizon SEC Documents
reflect an adequate reserve for all material Taxes payable by Horizon and the
Horizon Subsidiaries for all taxable periods and portions thereof through the
date of such financial statements. Since the Horizon Financial Statement Date,
Horizon has incurred no liability for Taxes under Sections 857(b), 860(c) or
4981 of the Code, including without limitation any tax arising from a prohibited
transaction described in Section 857(b)(6) of the Code, and neither Horizon nor
any Horizon Subsidiary has incurred any material liability for Taxes other than
in the ordinary course of business. 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 Horizon. To the
Knowledge of Horizon, no deficiencies for any Taxes have been proposed, asserted
or assessed against Horizon or any of the Horizon Subsidiaries, and no requests
for waivers of the time to assess any such Taxes are pending. As used in this
Agreement, "Taxes" shall include all federal, state, local and foreign income,
property, sales, franchise, employment, excise and other taxes, tariffs or
governmental charges of any nature whatsoever, together with penalties, interest
or additions to tax with respect thereto.
(b) Horizon (i) for each of its taxable years ending after December
31, 1993, and before the Closing Date, has been subject to taxation as a real
estate investment trust (a "REIT") within the meaning of Section 856 of the Code
and has satisfied all requirements to qualify as a REIT for such years, (ii) has
operated since the end of its latest taxable year, ending before the Closing
Date, to the date of this representation, and will continue to operate, in such
a manner as to qualify as a REIT for each taxable year ending on or immediately
following the Closing Date, and (iii) has not taken or omitted to take any
action which would reasonably be expected to result in a challenge to its status
as a REIT and, to Horizon's Knowledge, no such challenge is pending or
threatened. Each Horizon Subsidiary which has been formed as a partnership,
joint venture or limited liability company has been since its formation and
continues to be for federal income tax purposes as a partnership and not a
corporation or an association or publicly traded partnership taxable as a
corporation and has not since the later of its formation or the acquisition by
Horizon of a direct or indirect interest therein, owned any assets (including,
without limitation, securities) that would cause Horizon to violate Section
856(c)(5) of the Code. Except as provided in Schedule 2.16 hereto, neither
Horizon nor any Horizon Subsidiary holds any asset (x) the disposition of which
would be subject to rules similar to Section 1374 of the Code as a result of a
notice under IRS Notice
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88-19 or (y) which is subject to a consent filed pursuant to Section 341(f)
of the Code and the regulations thereunder.
2.17 NO PAYMENTS TO EMPLOYEES, OFFICERS OR DIRECTORS. Schedule 2.17 to the
Horizon Disclosure Letter contains a true and complete list of all material
arrangements, agreements or plans pursuant to which cash and non-cash payments
(other than consideration issued pursuant to any of the Mergers) which will
become payable (and the maximum aggregate amount which may be payable
thereunder) to each employee, officer or director of Horizon or any Horizon
Subsidiary as a result of the Mergers or a termination of service subsequent to
the consummation of the Mergers, other than the Merger Consideration. Except as
described in Schedule 2.17 to the Horizon Disclosure Letter, or as otherwise
provided for in this Agreement, there is no employment or severance contract, or
other agreement requiring payments, cancellation of indebtedness or other
obligation to be made on a change of control or otherwise as a result of the
consummation of any of the transactions contemplated by this Agreement or as a
result of a termination of service subsequent to the consummation of any of the
transactions contemplated by this Agreement, with respect to any employee,
officer or director of Horizon or any Horizon Subsidiary.
2.18 BROKER; SCHEDULE OF FEES AND EXPENSES. No broker, investment banker,
financial advisor or other person, other than Lehman Brothers, the fees and
expenses of which are described in the engagement letter dated September 25,
1997, between Lehman Brothers and Horizon, a true, correct and complete copy of
which has previously been given to Prime, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Horizon or any Horizon Subsidiary.
2.19 COMPLIANCE WITH LAWS. Horizon and its Subsidiaries hold all permits,
licenses, variances, exceptions, orders, registrations and approvals of all
Governmental Entities which are required for the operation of the business of
Horizon and its Subsidiaries (the "Horizon Permits"), except where the failure
to have any such Horizon Permits individually or in the aggregate would not have
a Horizon Material Adverse Effect. Since November 12, 1992, neither Horizon nor
any of the Horizon Subsidiaries has violated or failed to comply with any
statute, law, ordinance, regulation, rule, judgment, decree or order of any
Governmental Entity applicable to its business, properties or operations (except
any Environmental Law, as to which the representation in Section 2.12 shall
apply), except to the extent that such violation or failure would not,
individually or in the aggregate, have a Horizon Material Adverse Effect.
2.20 CONTRACTS; DEBT INSTRUMENTS.
(a) To the Knowledge of Horizon, except as disclosed in the Horizon
SEC Documents or in Schedule 2.20(a) or (b) to the Horizon Disclosure Letter,
there is no contract or agreement that purports to limit in any material respect
the names or the geographic location in which Horizon and its Subsidiaries
conduct or may conduct their business. Neither Horizon nor any Horizon
Subsidiary has received a written notice that Horizon or any Horizon Subsidiary
is in violation of or in default under (nor to the Knowledge of Horizon does
there exist any condition
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which upon the passage of time or the giving of notice or both would cause
such a violation of or default under) any material loan or credit agreement,
note, bond, mortgage, indenture, concession or any other similar type of
material contract, agreement, arrangement or understanding, to which it is a
party or by which it or any of its properties or assets is bound, nor to the
Knowledge of Horizon does such a violation or default exist, except to the
extent that such violation or default, individually or in the aggregate,
would not have a Horizon Material Adverse Effect.
(b) Except for any of the following expressly identified in Horizon
SEC Documents, Schedule 2.20(b) to the Horizon Disclosure Letter sets forth a
list of each material loan or credit agreement, note, bond, mortgage, indenture
and any other agreement or instrument pursuant to which any Indebtedness (as
defined below) of Horizon or any of the Horizon Subsidiaries is outstanding or
may be incurred. For purposes of this Section 2.20, "Indebtedness" shall mean
(i) indebtedness for borrowed money, whether secured or unsecured, (ii)
obligations under conditional sale or other title retention agreements relating
to property purchased by such person, (iii) capitalized lease obligations, (iv)
obligations under interest rate cap, swap, collar or similar transaction or
currency hedging transactions (valued at the termination value thereof) and (v)
guarantees of any such indebtedness of any other person.
(c) To the extent not set forth in response to the requirements of
Section 2.20(b), Schedule 2.20(c) to the Horizon Disclosure Letter sets forth
each interest rate cap, interest rate collar, interest rate swap, currency
hedging transaction, and any other agreement relating to a similar
transaction to which Horizon or any Horizon Subsidiary is a party or an
obligor with respect thereto.
(d) Except as set forth in Schedule 2.20(d) to the Horizon
Disclosure Letter, neither Horizon nor any of the Horizon Subsidiaries is a
party to any agreement which would restrict any of them from prepaying any of
their Indebtedness without penalty or premium at any time or which requires
any of them to maintain any amount of Indebtedness with respect to any of the
Horizon Properties.
(e) Except as set forth in Schedule 2.20(e) to the Horizon
Disclosure Letter, neither Horizon nor any Horizon Subsidiary is a party to
any agreement relating to the management of any Horizon Property by any
Person other than a Horizon Subsidiary.
(f) Neither Horizon nor any of the Horizon Subsidiaries is a party
to any agreement pursuant to which Horizon or any Horizon Subsidiary manages
or provides services with respect to any real properties other than Horizon
Properties, except for the agreements described in Schedule 2.20(f) to the
Horizon Disclosure Letter (the "Outside Property Management Agreements").
(g) Except for budgeted construction disclosed in the capital budget
attached as Schedule 2.20(g) to the Horizon Disclosure Letter, Schedule 2.20(g)
to the Horizon Disclosure Letter lists all material agreements entered into by
Horizon or any of the Horizon Subsidiaries relating to the development or
construction of, or additions or expansions to, any Horizon Properties (or any
properties with respect to which Horizon has executed as of the date of this
Agreement a
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purchase agreement or other similar agreement) which are currently in effect
and under which Horizon or any of the Horizon Subsidiaries currently has, or
expects to incur, an obligation in excess of $250,000. True, correct and
complete copies of such agreements have previously been delivered or made
available to Prime.
(h) Schedule 2.20(h) to the Horizon Disclosure Letter lists all
agreements entered into by Horizon or any Horizon Subsidiary providing for the
sale of, or option to sell, any Horizon Properties or the purchase of, or option
to purchase, by Horizon or any Horizon Subsidiary, on the one hand, or the other
party thereto, on the other hand, any real estate which are currently in effect.
(i) Except as set forth in Schedule 2.20(i) to the Horizon Disclosure
Letter, neither Horizon nor any Horizon Subsidiary has any material continuing
contractual liability (A) for indemnification or otherwise under any agreement
relating to the sale of real estate previously owned, whether directly or
indirectly, by Horizon or any Horizon Subsidiary or (B) to pay any additional
purchase price for any of the Horizon Properties.
(j) Except as set forth in Schedule 2.20(j) to the Horizon Disclosure
Letter, neither Horizon nor any Horizon Subsidiary has entered into or is
subject, directly or indirectly, to any "Tax Protection Agreements." As used
herein, a Tax Protection Agreement is an agreement, oral or written, (A) that
has as one of its purposes to permit a person or entity to take the position
that such person or entity could defer federal taxable income that otherwise
might have been recognized upon a transfer of property to the Horizon
Partnership or any other Horizon Subsidiary that is treated as a partnership for
federal income tax purposes, and (B) that (i) prohibits or restricts in any
manner the disposition of any assets of Horizon or any Horizon Subsidiary,
(including, without limitation, requiring Horizon or any Horizon Subsidiary to
indemnify any person for any tax liabilities resulting from any such
disposition), (ii) requires that Horizon or any Horizon Subsidiary maintain, or
put in place, or replace, indebtedness, whether or not secured by one or more of
the Horizon Properties, or (iii) requires that Horizon or any Horizon Subsidiary
offer to any person or entity at any time the opportunity to guarantee or
otherwise assume, directly or indirectly, the risk of loss for federal income
tax purposes for indebtedness or other liabilities of Horizon or any Horizon
Subsidiary.
(k) Except as set forth in Schedule 2.20(k) to the Horizon Disclosure
Letter, there are no material outstanding contractual obligations of Horizon or
any Horizon Subsidiary to provide any funds to, or make any investment (in the
form of a loan, capital contribution or otherwise) in, any Horizon Subsidiary or
any other person.
2.21 OPINION OF FINANCIAL ADVISOR. Horizon has received the written
opinion of Lehman Brothers or an affiliate thereof, satisfactory to Horizon, a
signed version which has been provided to Prime, to the effect that the proposed
Prime/Horizon Merger Consideration and Partnership Merger Consideration to be
received by the holders of Horizon Common Shares and Newco OP Units,
respectively, pursuant to the Mergers is fair to such holders from a financial
point of view.
2.22 STATE TAKEOVER STATUTES. Horizon has taken all action necessary to
exempt the transactions contemplated by this Agreement between Prime and Horizon
and its Affiliates from the
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operation of any "fair price," "moratorium," "control share acquisition" or
any other anti-takeover statute or similar statute enacted under the state or
federal laws of the United States or similar statute or regulation (a
"Takeover Statute").
2.23 INVESTMENT COMPANY ACT OF 1940. Neither Horizon nor any of the
Horizon Subsidiaries is, or at the Partnership Merger Effective Time will be,
required to be registered under the Investment Company Act of 1940, as amended
(the "1940 Act").
2.24 HORIZON NOT AN INTERESTED STOCKHOLDER. Horizon is not an "interested
stockholder" of Prime pursuant to the Maryland "Business Combination" statute at
Sections 3-601 et seq. of the MGCL.
2.25 VOTE REQUIRED. The affirmative vote of at least two-thirds of the
outstanding Horizon Common Shares is the only vote of the holders of any
class or series of Horizon's capital stock necessary (under applicable law or
otherwise) to approve this Agreement and the transactions contemplated
hereby. The affirmative vote of the holders of a majority of the outstanding
Newco OP Units and Horizon OP Units, held by the limited partners of Newco LP
and Horizon Partnership, respectively, is the only vote by the holders of any
class or series of partnership interest therein necessary (under applicable
law or otherwise) to approve this Agreement and the translations contemplated
hereby.
2.26 TRADEMARKS, PATENTS AND COPYRIGHTS. Except as set forth in Schedule
2.26 to the Horizon Disclosure Letter, or to the extent the inaccuracy of any
of the following (or the circumstances giving rise to such inaccuracy)
individually or in the aggregate would not have a Horizon Material Adverse
Effect on Horizon and each of its Subsidiaries owns or possesses adequate
licenses or other legal rights to use all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, copyrights, service marks,
trade secrets, applications for trademarks and for service marks, know-how
and other proprietary rights and information used or held for use in
connection with the business of Horizon and its Subsidiaries as currently
conducted or as contemplated to be conducted, and Horizon of any assertion or
claim challenging the validity of any of the foregoing. The conduct of the
business of Horizon and the Horizon Subsidiaries as currently conducted and
as contemplated to be conducted did not, does not and will not infringe in
any way any patent, patent right, license, trademark, trademark right, trade
name, trade name right, service mark, or copyright of any third party that,
individually or in the aggregate, could have a Horizon Material Adverse
Effect. To Horizon's Knowledge, there are no infringements of any
proprietary rights owned by or licensed by or to Horizon or any Horizon
Subsidiary that individually or in the aggregate could have a Horizon
Material Adverse Effect.
2.27 INSURANCE. Except as set forth on Schedule 2.27 to the Horizon
Disclosure Letter, each of Horizon and its Subsidiaries is, and has been
continuously since January 1, 1994, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary for
companies conducting the business as conducted by Horizon and its Subsidiaries
during such time period. Except as set forth on Schedule 2.27 to the Horizon
Disclosure Letter, neither Horizon nor its Subsidiaries has received any notice
of cancellation or termination with
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respect to any material insurance policy of Horizon or its Subsidiaries. The
insurance policies of Horizon and each of its Subsidiaries are valid and
enforceable policies in all material respects.
2.28 DEFINITION OF KNOWLEDGE OF HORIZON. As used in this Agreement, the
phrase "Knowledge of Horizon" (or words of similar import) means the actual
knowledge of the officers and directors of Horizon and Horizon Partnership
identified in Schedule 2.28 to the Horizon Disclosure Letter.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PRIME
Prime and Prime Partnership represent and warrant to Horizon and
Horizon Partnership as follows:
3.1 ORGANIZATION, STANDING AND POWER OF PRIME. Prime is a corporation
duly organized, validly existing and in good standing under the laws of
Maryland and has all requisite power and authority to own, operate, lease and
encumber its properties and carry on its business as now being conducted.
Prime is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where
the failure to be so qualified or licensed, individually or in the aggregate,
would not have a material adverse effect on the business, properties, assets,
financial condition or results of operations of Prime and the Subsidiaries of
Prime (collectively, "Prime Subsidiaries"), taken as a whole (a "Prime
Material Adverse Effect"). Prime has delivered to Horizon complete and
correct copies of the Prime Articles of Incorporation ("Prime Articles of
Incorporation") and the Prime Bylaws ("Prime Bylaws"), as amended or
supplemented to the date of this Agreement.
3.2 PRIME SUBSIDIARIES.
(a) Schedule 3.2(a) to the letter of even date herewith signed by
each of the chief executive officer and chief financial officer of Prime and
delivered to Horizon prior to the execution hereof (the "Prime Disclosure
Letter") sets forth (i) each Prime Subsidiary, (ii) the ownership interest
therein of Prime, (iii) if not wholly owned by Prime, the identity and
ownership interest of each of the other owners of such Prime Subsidiary and
(iv) each factory outlet center and other commercial property owned by such
Subsidiary.
(b) Except as set forth in Schedule 3.2(b) to the Prime Disclosure
Letter, (i) all the outstanding shares of capital stock of each Prime
Subsidiary that is a corporation have been duly authorized, validly issued
and are (A) fully paid and nonassessable and not subject to preemptive
rights, (B) owned by Prime or by another Prime Subsidiary and (C) owned free
and clear of all Liens and (ii) all equity interests in each Prime Subsidiary
that is a partnership, joint venture, limited liability company or trust
which are owned by Prime, by another Prime Subsidiary or by Prime and another
Prime Subsidiary are owned free and clear of all Liens. Each Prime Subsidiary
that is a
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corporation is duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has the requisite corporate
power and authority to own, operate, lease and encumber its properties and
carry on its business as now being conducted, and each Prime Subsidiary that
is a partnership, limited liability company or trust is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and has the requisite power and authority to own, operate, lease
and encumber its properties and carry on its business as now being conducted.
Each Prime Subsidiary is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed, individually or in the aggregate, would not have a
Prime Material Adverse Effect. Complete and correct copies of the articles of
incorporation, bylaws, organization documents and partnership, joint venture
and operating agreements of each Prime Subsidiary, as amended to the date of
this Agreement, have been previously delivered or made available to Horizon.
No effective amendment has been made to the Prime Partnership Agreement.
3.3 CAPITAL STRUCTURE.
(a) The authorized shares of capital stock of Prime consist of (i)
75,000,000 shares of common stock, $0.01 par value (the "Prime Common
Shares"), 27,294,951 of which are issued and outstanding as of the date of
this Merger Agreement, (ii) 24,315,000 shares of preferred stock, $0.01 par
value (the "Prime Preferred Shares"), (x) 2,300,000 of which are issued and
outstanding 10.5% Series A Senior Cumulative Preferred Stock (the "Prime
Series A Preferred Shares"), as of the date of this Agreement, (y) 2,981,800
of which are issued and outstanding 8.5% Series B Cumulative Participating
Convertible Preferred Stock, $.01 par value per share (the "Prime Series B
Preferred Shares"), as of the date of this Agreement, and (z) 727,273 shares
of Series C Cumulative Convertible Redeemable Preferred Stock (the "Prime
Series C Preferred Shares"), as of the date of this Agreement and (iii)
51,000,000 shares of Excess Stock, par value $0.01 per share, none of which
are issued or outstanding as of the date of this Agreement.
(b) Set forth in Schedule 3.3(b) to the Prime Disclosure Letter is
a true and complete list of the following: (i) each qualified or nonqualified
option to purchase Prime's shares of capital stock granted under Prime's 1994
Stock Incentive Plan and 1995 Stock Incentive Plan or any other formal or
informal arrangement (collectively, the "Prime Stock Options"); and (ii) all
other warrants or other rights to acquire Prime's shares of capital stock,
all limited share appreciation rights, phantom shares, dividend equivalents,
performance units and performance shares which are outstanding on the date of
this Agreement. On the date of this Agreement, except as set forth in this
Section 3.3 or in Schedule 3.3(b) to the Prime Disclosure Letter, no shares
of Prime's capital stock were outstanding or reserved for issuance (except
for Prime Common Shares reserved for issuance upon exchange of Prime OP Units
(as defined below) or conversion of Prime Preferred Shares).
(c) All outstanding shares of capital stock of Prime are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other indebtedness
of Prime having the right to vote (or convertible into, or
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exchangeable for, securities having the right to vote) on any matters on
which shareholders of Prime may vote.
(d) Except (i) as set forth in this Section 3.3 or in Schedule
3.3(d) to the Prime Disclosure Letter and (ii) Prime OP Units (as defined
below) or Prime Preferred Shares, which may be exchanged or converted, as the
case may be, for Prime Common Shares in accordance with the Prime Partnership
Agreement, as of the date of this Agreement, there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Prime or any Prime
Subsidiary is a party or by which such entity is bound, obligating Prime or
any Prime Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock voting securities or
other ownership interests of Prime or any Prime Subsidiary or obligating
Prime or any Prime Subsidiary to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking (other than to Prime or a Prime Subsidiary).
(e) As of the date hereof, (i) 35,800,423 Prime Common Units are
duly and validly issued of which 27,294,951 are owned by Prime, (ii)
2,300,000 preferred units of Prime Partnership (the "Prime Series A Preferred
Units") are duly and validly issued all of which are owned by Prime, (iii)
2,981,800 Prime Series B Preferred Units are duly and validly issued all of
which are owned by Prime and (iv) 727,273 Series C Preferred units of Prime
Partnership (the "Series C Preferred Units" and together with the Prime
Common Units, the Prime Series A Preferred Units and the Prime Series B
Preferred Units, the "Prime OP Units") are duly and validly issued none of
which are owned by Prime or Prime Subsidiaries. Schedule 3.3(e) to the Prime
Disclosure Letter sets forth the name of each holder of Prime OP Units and
the number of Prime OP Units owned by each such holder as of the date of this
Agreement. The Prime OP Units are subject to no restrictions except as set
forth in the Prime Partnership Agreement. Prime Partnership has not issued or
granted and is not a party to any outstanding commitments of any kind
relating to, or any presently effective agreements or understandings with
respect to, interests in Prime Partnership, whether issued or unissued, or
securities convertible or exchangeable into interests in Prime Partnership
except as set forth in Schedule 3.3(e) to the Prime Disclosure Letter.
(f) All dividends on the Prime/Horizon Merger Consideration and all
distributions on the Partnership Merger Consideration which have been
declared prior to the date of this Agreement have been paid in full, except
that the dividends payable on the Prime/Horizon Merger Consideration (along
with the corresponding distributions payable on the Partnership Merger
Consideration) which were declared on October 15, 1997 and are payable on
November 15, 1997 have not yet been paid.
(g) The Partnership Merger Consideration to be issued by Prime
Partnership pursuant to this Agreement has been duly authorized, and upon
issuance will be duly and validly issued.
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(h) Set forth on Schedule 3.3(h) to the Prime Disclosure Letter is a
list of each Registration Rights Agreement pursuant to which Prime or any of the
Prime Subsidiaries is obligated to register any securities.
3.4 OTHER INTERESTS. Except for interests in the Prime Subsidiaries,
neither Prime nor any of its Subsidiaries owns directly or indirectly any
interest or investment (whether equity or debt) in any corporation, partnership,
joint venture, business, trust or other entity (other than investments in
short-term investment securities). With respect to such other interests, Prime
or Prime Partnership is a partner or shareholder in good standing, and owns such
interests free and clear of all Liens.
3.5 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) Prime has the requisite power and authority to enter into this
Agreement and, subject to the requisite shareholder approval of the Mergers
and the other transactions contemplated hereby requiring shareholder approval
(the "Prime Shareholder Approvals" and, together with the Horizon Shareholder
Approvals, the "Shareholder Approvals"), to consummate the transactions
contemplated by this Agreement to which Prime is a party. The execution and
delivery of this Agreement by Prime and the consummation by Prime of the
transactions contemplated by this Agreement to which Prime is a party have
been duly authorized by all necessary action on the part of Prime, except for
and subject to the Prime Shareholder Approvals and the requisite approval, if
any is required, of the partners of Prime Partnership. This Agreement has
been duly executed and delivered by Prime and constitutes a valid and binding
obligation of Prime, enforceable against Prime in accordance with and subject
to its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
(b) Prime Partnership has the requisite partnership power and,
subject to the requisite Prime Partner Approvals (as defined in section
5.1(g)), if any, authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement to which Prime Partnership is a
party. The execution and delivery of this Agreement by Prime Partnership and
the consummation by Prime Partnership of the transactions contemplated by
this Agreement to which Prime Partnership is a party have been duly
authorized by all necessary action on the part of Prime Partnership, except
for and subject to the Prime Shareholder Approvals. This Agreement has been
duly executed and delivered by Prime Partnership and constitutes a valid and
binding obligation of Prime Partnership, enforceable against Prime
Partnership in accordance with and subject to its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating
to creditors' rights and general principles of equity.
(c) Except as set forth in Schedule 3.5(c)(1) to the Prime
Disclosure Letter, the execution and delivery of this Agreement by Prime and
Prime Partnership do not, and the consummation of the transactions
contemplated by this Agreement to which Prime or Prime Partnership is a party
and compliance by Prime or Prime Partnership with the provisions of this
Agreement will not, conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any material obligation
or to loss of a material benefit under, or result in the creation of any Lien
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upon any of the properties or assets of Prime or any Prime Subsidiary under,
(i) the Prime Articles of Incorporation or the Prime Bylaws or the comparable
charter or organizational documents or partnership, operating or similar
agreement (as the case may be) of any other Prime Subsidiary, each as amended
or supplemented to the date of this Agreement, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, reciprocal easement agreement,
lease or other agreement, instrument, permit, concession, franchise or
license applicable to Prime or any Prime Subsidiary or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any Laws applicable to Prime
or any Prime Subsidiary or their respective properties or assets, other than,
in the case of clause (ii) or (iii), any such conflicts, violations,
defaults, rights, loss or Liens that individually or in the aggregate would
not (x) have a Prime Material Adverse Effect or (y) prevent the consummation
of the transactions contemplated by this Agreement. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Prime or any Prime
Subsidiary in connection with the execution and delivery of this Agreement or
the consummation by Prime of any of the transactions contemplated by this
Agreement, except for (i) the filing with the SEC of (x) the Registration
Statement (as defined in Section 5.1) and (y) such reports under Section 13
(a) of the Exchange Act as may be required in connection with this Agreement
and the transactions contemplated by this Agreement, (ii) the acceptance for
record of the Prime/Horizon Articles of Merger by the Maryland Department and
Horizon/Subsidiary Certificate of Merger, (iii) the filing of the Delaware
Certificate of Merger with the Delaware Secretary, (iv) such filings with and
approvals of the NYSE to permit the Prime Common Shares and Prime Series B
Preferred Shares that are to be issued pursuant to the Prime/Horizon Merger
to be listed on the NYSE, (v) such filings as may be required in connection
with the payment of any transfer and gains taxes and (vi) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings (A) as are set forth in Schedule 3.5(c)(2) to the Prime Disclosure
Letter or (B) as may be required under (x) federal, state or local
environmental laws or (y) the "blue sky" laws of various states, to the
extent applicable, or (C) which, if not obtained or made, would not prevent
or delay in any material respect the consummation of any of the transactions
contemplated by this Agreement or otherwise prevent Prime from performing its
obligations under this Agreement in any material respect or have,
individually or in the aggregate, a Prime Material Adverse Effect.
3.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Prime
has filed all required reports, schedules, forms, statements and other documents
with the SEC since July 1993 through the date hereof (the "Prime SEC
Documents"). Schedule 3.6(a) to the Prime Disclosure Letter contains a complete
list of all Prime SEC Documents filed by Prime under the Exchange Act since
January 1, 1997 and on or prior to the date of this Agreement. All of the Prime
SEC Documents (other than preliminary material), as of their respective filing
dates, complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and, in each case, the rules and regulations
promulgated thereunder applicable to such Prime SEC Documents. None of the
Prime SEC Documents at the time of filing contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the extent
such statements have been modified or superseded by later Prime SEC Documents
filed and publicly available prior to the date of this Agreement. The
consolidated
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financial statements of Prime and the Prime Subsidiaries included
in the Prime SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by the applicable
rules and regulations of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented, in accordance with the applicable requirements of GAAP and the
applicable rules and regulations of the SEC, the consolidated financial position
of Prime and the Prime Subsidiaries, taken as a whole, as of the dates thereof
and the consolidated results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except for liabilities and obligations set forth or reflected in
the Prime SEC Documents or in Schedule 3.6(b) to the Prime Disclosure Letter, as
of the date hereof neither Prime nor any Prime Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of Prime or in
the notes thereto and which, individually or in the aggregate, would have a
Prime Material Adverse Effect.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Prime SEC Documents or in Schedule 3.7 to the Prime Disclosure Letter, since the
date of the most recent audited financial statements included in the Prime SEC
Documents (the "Prime Financial Statement Date"), Prime and the Prime
Subsidiaries have conducted their business only in the ordinary course (taking
into account prior practices, including the acquisition of properties and
issuance of securities) and there has not been (a) any material adverse change
in the business, financial condition or results of operations of Prime and the
Prime Subsidiaries taken as a whole (a "Prime Material Adverse Change"), nor has
there been any occurrence or circumstance that with the passage of time would
reasonably be expected to result in a Prime Material Adverse Change, (b) except
for regular quarterly distributions not in excess of (i) $0.295 per Prime Common
Share and $0.295 per Prime Common Unit, (ii) $0.65625 per Prime Series A
Preferred Share and $0.65625 per Prime Series A Preferred Unit, (iii) $0.53125
per Prime Series B Preferred Share and $0.53125 per Prime Series B Preferred
Unit, and (iv) $0.295 per Prime Series C Preferred Share and $0.295 per Prime
Series C Preferred Unit (together, the "Prime Regular Quarterly Distributions"),
subject to rounding adjustments as necessary and with customary record and
payment dates, any authorization, declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any of Prime's shares of capital stock, (c) any split, combination or
reclassification of any of Prime's shares of capital stock, (d) any damage,
destruction or loss, whether or not covered by insurance, that has or would have
a Prime Material Adverse Effect or (e) any change made prior to the date of this
Agreement in accounting methods, principles or practices by Prime or any Prime
Subsidiary materially affecting its assets, liabilities or business, except
insofar as may have been disclosed in the Prime SEC Documents or required by a
change in GAAP, or any amendment of any employment, consulting, severance,
retention or any other agreement between Prime and any current or former
officer, director, employee or consultant of Prime.
3.8 LITIGATION. Except as disclosed in the Prime SEC Documents or in
Schedule 3.8 to the Prime Disclosure Letter, there is no suit, action or
proceeding pending (in which service of process has been received by an employee
of Prime or a Prime Subsidiary) or, to the Knowledge of
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Prime (as hereinafter defined), threatened in writing against or affecting
Prime or any Prime Subsidiary that, individually or in the aggregate, could
reasonably be expected to (i) have a Prime Material Adverse Effect or (ii)
prevent the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of
any court or Governmental Entity or arbitrator outstanding against Prime or
any of its Subsidiaries having, or which, insofar as reasonably can be
foreseen, in the future would have, any such effect. Notwithstanding the
foregoing, (y) Schedule 3.8 to the Prime Disclosure Letter sets forth each
and every uninsured claim including but not limited to claims relating to the
employment of labor, such as claims relating to wages, hours, collective
bargaining, unemployment insurance, workers' compensation, equal employment
opportunity, payment and withholding of taxes, the Immigration Reform and
Control Act, the Workers' Adjustment and Restraining Notification Act, and
the Drug-Free Workplace Act pending or, to the Knowledge of Prime, threatened
as of the date hereof, in each case with a brief summary of such claim or
threatened claim which, if adversely determined, could reasonably be expected
to result in a Prime Material Adverse Effect and (z) except as set forth on
Schedule 3.8 to the Prime Disclosure Letter, no claim has been made under any
directors' and officers' liability insurance policy maintained at any time by
Prime or any of the Prime Subsidiaries.
3.9 PROPERTIES.
(a) Schedule 3.9(a) to the Prime Disclosure Letter sets forth a list
of all real property outlet centers owned or leased by Prime or one of the Prime
Subsidiaries and sets forth the name of the owner or lessee, as applicable, of
each such property. Prime or a Prime Subsidiary owns fee simple title or has a
valid leasehold interest in all real property owned or leased by Prime or one of
the Prime Subsidiaries (the "Prime Properties"), which are all of the real
estate properties owned or leased by them. Other than as shown on the Prime
Title Insurance Policies (as defined in Section 3.9(b)), each of the Prime
Properties is owned or leased, as applicable, free and clear of liens, mortgages
or deeds of trust, claims against title, charges which are liens, security
interests or other encumbrances on title ("Encumbrances") except for those
Encumbrances which, individually or in the aggregate with any other condition
resulting in a breach of the representations and warranties set forth in this
Section 3.9, could not reasonably be expected to result in a Prime Material
Adverse Effect. Except as set forth in Schedule 3.9(a) to the Prime Disclosure
Letter, none of the Prime Properties is subject to any restriction on the sale
or other disposition thereof or on the financing or release of financing thereon
except those which, individually or in the aggregate with any other condition
resulting in a breach of the representations and warranties set forth in this
Section 3.9, could not be reasonably be expected to result in a Prime Material
Adverse Effect. The Prime Properties are not subject to any rights of way,
written agreements, laws, ordinances and regulations affecting building use or
occupancy, or reservations of an interest in title (collectively, "Property
Restrictions") or Encumbrances, except for (i) Property Restrictions and
Encumbrances set forth in Schedule 3.9(a) to the Prime Disclosure Letter, and
(ii) Property Restrictions for which the Prime Properties so comply or for which
non-compliance, individually or in the aggregate with any other condition
resulting in a breach of the representations and warranties set forth in this
Section 3.9, could not be reasonably expected to result in a Prime Material
Adverse Effect. Schedule 3.9(a) to the Prime Disclosure Letter lists each of
the Prime Properties which are under development as of the date of this
Agreement and describes the status of such development as of the date hereof.
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(b) Except as provided in Schedule 3.9(b) to the Prime Disclosure
Letter, valid policies of title insurance (the "Prime Title Insurance Policies")
have been issued insuring the applicable Prime Subsidiary's fee simple title or
leasehold estate, as the case may be, to the Prime Properties owned by it. Such
policies are, at the date hereof, in full force and effect. Except as set forth
in Schedule 3.9(b) to the Prime Disclosure Letter, no claim has been made
against any such policy.
(c) Except as provided in Schedule 3.9(c) to the Prime Disclosure
Letter, Prime has no Knowledge (i) that, any certificate, permit or license from
any governmental authority having jurisdiction over any of the Prime Properties
or any agreement, easement or other right which is necessary to permit the
lawful use and operation of the buildings and improvements on any of the Prime
Properties or which is necessary to permit the lawful use and operation of all
driveways, roads and other means of egress and ingress to and from any of the
Prime Properties has not been obtained and is not in full force and effect, or
of any pending threat of modification or cancellation of any of same which
failure to obtain, modification or cancellation would have a Prime Material
Adverse Effect, or (ii) of any violation of any federal, state or municipal law,
ordinance, order, regulation or requirement affecting any of the Prime
Properties issued by any governmental authority, or of any structural defects
relating to any Prime Property, or of any Prime Property whose building systems
are not in working order, or of any physical damage to any Prime Property which
in any such case under this clause (ii) could, individually or in the aggregate
with any other condition resulting in a breach of the representations and
warranties set forth in this Section 3.9, reasonably be expected to result in a
Prime Material Adverse Effect.
(d) Neither Prime nor any Prime Subsidiary has received any written
or published notice to the effect that (i) any condemnation or rezoning
proceedings are pending or threatened with respect to any of the Prime
Properties or (ii) any zoning, building or similar law, code, ordinance, order
or regulation is or will be violated by the continued maintenance, operation or
use of any buildings or other improvements on any of the Prime Properties or by
the continued maintenance, operation or use of the parking areas, except for
such violations which, individually or in the aggregate with any other condition
resulting in a breach of the representations and warranties set forth in this
Section 3.9, could not be reasonably be expected to result in a Prime Material
Adverse Effect.
(e) Except as set forth in Schedule 3.9(e) to the Prime Disclosure
Letter, all work required to be performed, payments required to be made and
actions required to be taken prior to the date hereof pursuant to any agreement
entered into with a governmental body or authority in connection with a site
approval, zoning reclassification or other similar action relating to any Prime
Properties (e.g., local improvement district, road improvement district,
environmental mitigation) have been performed, paid or taken, as the case may
be, other than those where, individually or in the aggregate with any other
condition resulting in a breach of the representations and warranties set forth
in this Section 3.9, the failure would not have a Prime Material Adverse Effect,
and Prime has no Knowledge of any material work, payments or actions that are
required after the date hereof pursuant to such agreements, except as set forth
in development or operating budgets for such Prime Properties delivered to
Horizon and Horizon Partnership prior to the date hereof.
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(f) Prime and each of the Prime Subsidiaries have good and sufficient
title to all their personal and non-real properties and assets reflected in
their books and records as being owned by them (including those reflected in the
consolidated balance sheet of Prime as of December 31, 1996, except as since
sold or otherwise disposed of in the ordinary course of business), free and
clear of all liens and encumbrances, except such as are reflected on the
consolidated balance sheet of Prime as of December 31, 1996, and the notes
thereto, and except for liens for current taxes not yet due and payable, and
liens or encumbrances which are normal to the business of Prime and the Prime
Subsidiaries and are not, in the aggregate, material in relation to the assets
of Prime on a consolidated basis and except also for such imperfections of
title, easement and encumbrances, if any, as do not materially interfere with
the present use of the properties subject thereto or affected thereby, or
otherwise materially impair the consolidated business operations of Prime.
3.10 LEASES.
(a) The rent roll for the Prime Properties as of November 11, 1997
previously delivered by Prime to Horizon is correct and complete in all material
respects as of the date thereof.
(b) Except as provided in Schedule 3.10 to the Prime Disclosure
Letter, (i) each of the leases and tenancies for all or any portion of the Prime
Properties (the "Prime Leases") is valid and subsisting and in full force and
effect except where the failure thereof, individually with respect to any Prime
Lease or in the aggregate with more than one Prime Lease, could not be
reasonably be expected to result in a Prime Material Adverse Effect, and has not
been amended, modified or supplemented since the date of the rent roll described
in Section 3.10(a); and (ii) neither Prime nor any of the Prime Subsidiaries has
received any written notice from any tenant of any intention to vacate which
vacation would have a Prime Material Adverse Effect. Except as provided in
Schedule 3.10 to the Prime Disclosure Letter neither Prime nor any of the Prime
Subsidiaries has collected payment of rent (other than security deposits)
accruing for a period which is more than one month beyond the date of
collection.
(c) Prime has previously delivered or made available to Horizon a
true and correct copy of all Prime Leases.
(d) Except as shown in Schedule 3.10 to the Prime Disclosure Letter,
as of the last day of the calendar month immediately preceding the date hereof,
none of the lessees set forth on Schedule 3.10(d) to the Prime Disclosure Letter
has asserted any claim of which Prime or any of the Prime Subsidiaries has
received written notice which would materially affect the collection of rent
from such tenant and neither Prime nor any of the Prime Subsidiaries has
received written notice of any material default or breach on the part of Prime
or any of the Prime Subsidiaries under any of the Prime Leases with such a
tenant which has not been cured.
(e) Schedule 3.10 to the Prime Disclosure Letter sets forth a
complete and correct list as of November 11, 1997, of all written commitments
made by Prime or any of the Prime Subsidiaries to lease any of the Prime
Properties which has not yet been reduced to a written lease, and provides with
respect to each such commitment the principal terms of such commitment,
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including, if applicable, (i) the space to be occupied, (ii) the name of the
tenant, (iii) the length of the original term thereof and any right or option to
renew or extend the lease term, (iv) the monthly minimum rental, (v) rental
escalations, (vi) the terms with respect to percentage rent or other overage
rent, (vii) any provisions for tenant allowances and (viii) the right of any
third-party broker to any outstanding brokerage or other commission incident
thereto. Prime has previously delivered or made available to Horizon a true and
correct copy of each such commitment.
(f) Any material leases pursuant to which Prime or any Prime
Subsidiary, as lessee, leases real or personal property are in good standing,
valid and effective in accordance with their respective terms, and there is not,
under any of such leases, any material existing default or any event which with
notice or lapse of time or both would constitute such a default, nor do any of
such leases contain any provision which would preclude the Surviving Company or
the Prime Partnership from occupying and using the leased premises for the same
purposes and upon substantially the same rental and other terms as are
applicable to the occupation and use by Prime and the Prime Subsidiaries, or
which would have a Prime Material Adverse Effect.
3.11 RENTS. The rents and other income and charges set forth in the rent
roll described in Section 3.10(a) are the actual rents, income and charges
presently being charged by Prime Subsidiaries under the Prime Leases. Other
than set forth on Schedule 3.10 to the Prime Disclosure Letter, no tenant under
any of the Prime Leases is entitled to any purchase option. None of the Prime
Leases and none of the rents or other amounts payable thereunder have been
assigned, pledged or encumbered, other than to lenders as set forth in the Prime
SEC Documents. No brokerage or leasing commission or other compensation will be
due or payable to any person, firm, corporation or other entity with respect to
or on account of any of the Prime Leases or any extensions or renewals thereof
as of the Horizon/Prime Effective Time except in the ordinary course of business
consistent with past practices.
3.12 ENVIRONMENTAL MATTERS. To the knowledge of Prime, except as disclosed
in the Prime SEC Documents and on the environmental reports listed on Schedule
3.12 to the Prime Disclosure Letter, and except what would not be reasonably
likely to have a Material Adverse Effect, (a) no Hazardous Substances have been
used, stood, manufactured, treated, processed or transported to or from any of
the Prime Properties except as necessary to the conduct of business and in
compliance with Environmental Laws; (b) there have been no spills, releases,
discharges or disposal of Hazardous Substances to have occurred or be presently
occurring on or from the Prime Properties; (c) the Prime Properties and the
business conducted thereon are not in violation of Environmental Laws; (d) Prime
and its Subsidiaries have not received and do not reasonably expect to receive
any notice of potential responsibility, letter of inquiry or notice of alleged
liability from any Person regarding the Prime Properties or the business
conducted thereon. Prime has previously delivered or made available to Horizon
complete copies of all final versions of environmental investigations and
testing or analysis made by or on behalf of Prime or any of the Prime
Subsidiaries that are in the possession of any of them with respect to the
environmental condition of the Prime Properties. For the purposes of this
Paragraph 3.12 only, "Prime Properties" shall include property currently or
formerly owned, operated or leased by Prime or its Subsidiaries.
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"Environmental Laws" shall mean any applicable statute, code, enactment,
ordinance, rule, regulation, permit, consent, approval, authorization, judgment,
order, common law rule (including without limitation the common law respecting
nuisance and tortious liability), decree, injunction, or other requirement
having the force and effect of law, whether local, state, territorial or
national, at any time in force or effect relating to:
(a) emissions, discharges, spills, releases or threatened releases of
Hazardous Substances into ambient air, surface water, groundwater, watercourses,
publicly or privately owned treatment works, drains, sewer systems, wetlands,
septic systems or onto land;
(b) the use, treatment, storage, disposal, handling, manufacturing,
transportation or shipment of Hazardous Substances;
(c) the regulation of storage tanks; or
(d) otherwise relating to pollution or the protection of human health
or the environment.
"Hazardous Substances" shall mean all substances, wastes, pollutants,
contaminants and materials regulated or defined or designated as hazardous,
extremely or imminently hazardous, dangerous, or toxic pursuant to any law, by
any local, state, territorial or federal governmental authority, or with respect
to which such a governmental authority otherwise requires environmental
investigation, monitoring, reporting, or remediation; including but not limited
to,
(a) all substances, wastes, pollutants, contaminants and materials
regulated, or defined or designated as hazardous, extremely or imminently
hazardous, dangerous or toxic, under the following federal statutes and their
state counterparts, as well as their statutes' implementing regulations: the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
section 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
section 6901 et seq., the Toxic Substances Control Act, 15 U.S.C. section 2601
et seq., the Clean Water Act, 33 U.S.C. section 1251 et seq., the Clean Air Act,
42 U.S.C. section 7401 et seq., the Emergency Planning and Community Right to
Know Act, 42 U.S.C. section 11011 et seq., the Safe Drinking Water Act, 33
U.S.C. section 300f et seq., the Federal Insecticide, Fungicide, and Rodenticide
Act, 7 U.S.C. section 136 et seq., the Atomic Energy Act, 42 U.S.C. section
22011 et seq., and the Hazardous Materials Transportation Act, 42 U.S.C. section
1801 et seq.;
(b) petroleum and petroleum products including crude oil and any
fractions thereof;
(c) natural gas, synthetic gas, and any mixtures thereof; and
(d) radon, radioactive substances, asbestos, urea formaldehyde,
polychlorinated biphenyls and electromagnetic field radiation.
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3.13 TAXES.
(a) Each of Prime and the Prime Subsidiaries (i) has filed all tax
returns and reports required to be filed by it (after giving effect to any
filing extension properly granted by a Governmental Entity having authority to
do so), and all such returns and reports are accurate and complete in all
material respects, and (ii) has paid (or Prime has paid on its behalf) all Taxes
shown on such returns and reports as required to be paid by it except where the
failure to file such tax returns or reports and failure to pay such Taxes would
not have a Prime Material Adverse Effect. The most recent audited financial
statements contained in the Prime SEC Documents reflect an adequate reserve for
all material Taxes payable by Prime and the Prime Subsidiaries for all taxable
periods and portions thereof through the date of such financial statements.
Since the Prime Financial Statement Date, Prime has incurred no liability for
Taxes under Sections 857(b), 860(c) or 4981 of the Code, including without
limitation any tax arising from a prohibited transaction described in Section
857(b)(6) of the Code, and neither Prime nor any Prime Subsidiary has incurred
any material liability for Taxes other than in the ordinary course of business.
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 Prime. To the Knowledge of Prime, no deficiencies for any Taxes
have been proposed, asserted or assessed against Prime or any of the Prime
Subsidiaries, and no requests for waivers of the time to assess any such Taxes
are pending.
(b) Prime (i) has operated in such a manner as to qualify as a REIT
within the meaning of Section 856 of the Code for each of its taxable years
ending on or before December 31, 1996, and intends to continue to operate in
such a manner as to qualify as a REIT for the taxable year that ends on the
Closing Date, and (ii) has not taken or omitted to take any action which would
reasonably be expected to result in a challenge to its status as a REIT, and to
Prime's Knowledge, no such challenge is pending or threatened. Each Prime
Subsidiary which is a partnership, joint venture or limited liability company
(x) has been since its formation and continues to be for federal income tax
purposes as a partnership and not as a corporation or as an association or
publicly traded partnership taxable as a corporation and (y) has not since the
later of its formation or the acquisition by Prime of a direct or indirect
interest therein, owned any assets (including, without limitation, securities)
that would cause Prime to violate Section 856(c)(5) of the Code. Each Prime
Subsidiary which is a corporation (other than Prime Retail Services, Inc.) has
been since its formation a qualified REIT subsidiary under Section 856(i) of the
Code. Except as set forth in Schedule 3.13 to the Prime Disclosure Letter
neither Prime nor any Prime Subsidiary holds any asset (x) the disposition of
which would be subject to rules similar to Section 1374 of the Code as a result
of a notice under IRS Notice 88-19 or (y) which is subject to a consent filed
pursuant to Section 341(f) of the Code and the regulations thereunder.
3.14 BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker, investment banker,
financial advisor or other person, other than Friedman, Billings, Ramsey & Co.,
Inc., the fees and expenses of which will be paid by Prime and are described in
the engagement letter with Friedman, Billings, Ramsey & Co., Inc., a true,
correct and complete copy of which has previously been given to Horizon, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission
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in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Prime or any Prime Subsidiary.
3.15 COMPLIANCE WITH LAWS. Prime and its Subsidiaries hold all permits,
licenses, variances, exceptions, orders, registrations and approvals of all
Governmental Entities which are required for the operation of the business of
Prime and its Subsidiaries (the "Prime Permits"), except where the failure to
have any such Prime Permits individually or in the aggregate would not have a
Prime Material Adverse Effect. Since March 22, 1994, neither Prime nor any of
the Prime Subsidiaries has violated or failed to comply with any statute, law,
ordinance, regulation, rule, judgment, decree or order of any Governmental
Entity applicable to its business, properties or operations (except any
Environmental Law, as to which the representations in Section 3.12 shall apply),
except to the extent that such violation or failure would not, individually or
in the aggregate, have a Prime Material Adverse Effect.
3.16 CONTRACTS; DEBT INSTRUMENTS.
(a) To the Knowledge of Prime, except as disclosed in the Prime SEC
Documents or in Schedule 3.16 to the Prime Disclosure Letter, there is no
contract or agreement that purports to limit in any material respect the names
or the geographic location in which Prime and its Subsidiaries conduct or may
conduct their business. Neither Prime nor any Prime Subsidiary has received a
written notice that Prime or any Prime Subsidiary is in violation of or in
default under (nor to the Knowledge of Prime does there exist any condition
which upon the passage of time or the giving of notice or both would cause such
a violation of or default under) any material loan or credit agreement, note,
bond, mortgage, indenture, concession or any other similar type of material
contract, agreement, arrangement or understanding, to which it is a party or by
which it or any of its properties or assets is bound, nor to the Knowledge of
Prime does such a violation or default exist, except to the extent that such
violation or default, individually or in the aggregate, would not have a Prime
Material Adverse Effect.
3.17 OPINION OF FINANCIAL ADVISOR. Prime has received the written opinion
of Friedman, Billings, Ramsey & Co., Inc., satisfactory to Prime, to the effect
that proposed Prime/Horizon Merger Consideration and Partnership Merger
Consideration to be paid by Prime and Prime Partnership in connection with the
Mergers is fair, from a financial point of view, to Prime and Prime Partnership.
3.18 STATE TAKEOVER STATUTES. Prime has taken all action necessary to
exempt transactions between Prime and Horizon and its Affiliates from the
operation of Takeover Statutes.
3.19 INVESTMENT COMPANY ACT OF 1940. Neither Prime nor any of the Prime
Subsidiaries is, or at the Partnership Merger Effective Time will be, required
to be registered under the 1940 Act.
3.20 DEFINITION OF KNOWLEDGE OF PRIME. As used in this Agreement, the
phrase "Knowledge of Prime" (or words of similar import) means the actual
knowledge of officers and directors of Prime and Prime Partnership identified on
Schedule 3.20 to the Prime Disclosure Letter.
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3.21 VOTE REQUIRED. The affirmative vote of at least (i) a majority of the
outstanding Prime Series A Preferred Shares and Prime Series B Preferred Shares
each voting separately as a class, (ii) 66-2/3% of the outstanding Prime Series
C Preferred Shares and (iii) two-thirds of the outstanding Prime Common Shares
are the only votes of the holders of any class or series of Prime's capital
stock necessary (under applicable law or otherwise) to approve this Agreement
and the transactions contemplated hereby. The affirmative vote of the holders
of at least (i) fifty percent of the outstanding Prime Common Units and (ii) the
outstanding Prime Series C Preferred Units, held by the limited partners of
Prime Partnership are the only votes by the holders of any class or series of
partnership interest therein necessary (under applicable law or otherwise) to
approve this Agreement and the transactions contemplated hereby.
ARTICLE IV
COVENANTS
4.1 CONDUCT OF HORIZON'S, HORIZON PARTNERSHIP'S AND SKY MERGER'S BUSINESS
PENDING MERGERS. During the period from the date of this Agreement to the
Prime/Horizon Merger Effective Time, except as consented to in writing by Prime
or as expressly provided for in this Agreement, Horizon, Horizon Partnership and
Sky Merger shall, and shall cause (or, in the case of Horizon Subsidiaries that
Horizon, Horizon Partnership or Sky Merger do not control, shall use reasonable
best efforts to cause) each of the Horizon Subsidiaries to:
(a) conduct its business only in the usual, regular and ordinary
course and in substantially the same manner as heretofore conducted;
(b) use commercially reasonable efforts to preserve intact its
business organizations, goodwill and ongoing businesses and keep available the
services of its officers and employees;
(c) confer on a regular basis with one or more representatives of
Prime to report operational matters of materiality and any proposals to engage
in material transactions (except with respect to Acquisition Proposals, as to
which the provisions of Section 4.3 shall apply);
(d) promptly notify Prime of any material emergency or other material
change in the condition (financial or otherwise), business, properties, assets,
liabilities or the normal course of its businesses or in the operation of its
properties, or of any material governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated);
(e) promptly deliver to Prime true and correct copies of any report,
statement or schedule filed with the SEC subsequent to the date of this
Agreement;
(f) maintain its books and records in accordance with GAAP
consistently applied and not change in any material manner any of its methods,
principles or practices of accounting in
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effect at the Horizon Financial Statement Date, except as may be required by
the SEC, applicable law or GAAP;
(g) duly and timely file all reports, tax returns and other documents
required to be filed with federal, state, local and other authorities, subject
to extensions permitted by law, provided Horizon notifies Prime that it is
availing itself of such extensions and provided such extensions do not adversely
affect Horizon's status as a qualified REIT under the Code;
(h) not make any Tax election (unless required by law or necessary to
preserve Horizon's status as a REIT or the status of any Horizon Subsidiary as a
partnership for federal income tax purposes, as the case may be) and not make or
rescind any express or deemed election relative to Taxes;
(i) make all capital expenditures, and expenditures relating to
leasing, in accordance with a capital budget of Horizon delivered prior to the
date hereof to Prime (the "Horizon Capital Budget") and will not (A) acquire,
enter into any option to acquire, or exercise an option or other right or
election or enter into any other commitment or contractual obligation (each, a
"Commitment") for the acquisition of any real property or other transaction
involving in excess of $100,000 which is not included in the Horizon Capital
Budget approved by Prime, encumber assets or commence construction of, or enter
into any Commitment to develop or construct other real estate projects, except
in the ordinary course of its retail property business or (B) incur or enter
into any Commitment to incur additional indebtedness (secured or unsecured)
except for working capital under its revolving line(s) of credit and Commitments
for indebtedness described on Schedule 4.1(i) to the Horizon Disclosure Letter;
(j) not amend its Articles of Incorporation, or its Bylaws, or the
articles or certificate of incorporation, bylaws, code of regulations,
partnership agreement, operating agreement or joint venture agreement or
comparable charter or organization document of any Horizon Subsidiary;
(k) not split, combine or reclassify any capital stock, partnership
or other ownership interests and make no change in the number of shares of
capital stock, membership interests or units of limited partnership interest
issued and outstanding, other than pursuant to the redemption of Horizon OP
Units pursuant to the Horizon Partnership Agreement or the exercise of Horizon
Stock Options;
(l) grant no options or other right or commitment relating to its
shares of capital stock, membership interests or units of limited partnership
interest or any security convertible into its shares of capital stock,
membership interests or units of limited partnership interest, or any security
the value of which is measured by shares of capital stock, or any security
subordinated to the claim of its general creditors and, except as contemplated
by this Agreement, not amend or waive any rights under any of the Horizon Stock
Options;
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(m) except as provided in Section 5.10 and in connection with the use
of Horizon Common Shares to pay the exercise price or tax withholding in
connection with equity-based employee benefit plans by the participants therein,
not (i) authorize, declare, set aside or pay any dividend or make any other
distribution or payment with respect to any Horizon Common Shares or Horizon OP
Units or (ii) directly or indirectly redeem, purchase or otherwise acquire any
shares of capital stock, membership interests or units of partnership interest
or any option, warrant or right to acquire, or security convertible into, shares
of capital stock, membership interests, or units of partnership interest of
Horizon, except for (A) exchanges of Horizon Common Shares required under
Section 5.4 of the Horizon Articles of Incorporation in order to preserve the
status of Horizon as a REIT under the Code, and (B) redemptions of Horizon OP
Units, whether or not outstanding on the date of this Agreement, under the
Horizon Partnership Agreement in which Horizon Common Shares are utilized;
(n) not sell, lease, mortgage, subject to Lien or otherwise dispose
of any of the Horizon Properties, except in connection with a transaction that
is made in the ordinary course of business and is the subject of a binding
contract in existence on the date of this Agreement and disclosed in Schedule
2.20 to the Horizon Disclosure Letter; provided, however, without the prior
written consent of Prime, leases of space in all Horizon Properties which are
not to be contributed to Newco LP pursuant to the Partnership Contribution may
be made in accordance with the leasing plans or parameters which shall be agreed
from time to time between Horizon Partnership and Prime. Notwithstanding any
provision of this Agreement to the contrary, a Horizon Subsidiary shall be
permitted to enter into any lease for any space in any property owned by it if
such Horizon Subsidiary provides written notice to Prime with respect to the
terms of a proposed lease and Prime does not object in writing by notice to such
Horizon Subsidiary to the terms of such lease within one business day after the
receipt of the aforesaid notice from such Horizon Subsidiary.
(o) not sell, lease, mortgage, subject to Lien or otherwise dispose
of any of its personal property or intangible property, except in connection
with a transaction that is permitted by Section 4.1(n) or that is made in the
ordinary course of business and is not material, individually or in the
aggregate;
(p) not make any loans, advances or capital contributions to, or
investments in, any other Person, (whether by the purchase, redemption or other
acquisition of the equity or debt of such Person or otherwise) other than loans,
advances and capital contributions to Horizon Subsidiaries in existence on the
date hereof and advances to employees in the ordinary course of business
consistent with past practice;
(q) not incur, pay, discharge, satisfy or settle any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) furnished to Prime or incurred in the ordinary course of business
consistent with past practice;
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(r) not guarantee the indebtedness of another Person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another Person or enter into any arrangement having the economic effect of any
of the foregoing;
(s) not enter into any Commitment with any officer, director or
Affiliate of Horizon or any of the Horizon Subsidiaries or any material
Commitment with any consultant;
(t) except as set forth in Schedule 4.1(t) to the Horizon Disclosure
Letter, not increase any compensation or enter into or amend any employment
agreement described in Schedule 2.17 to the Horizon Disclosure Letter with any
of its officers, directors or employees, other than as required by any contract
or Plan or in accordance with waivers by employees of benefits under such
agreements and other than normal year end bonuses in keeping consistent with
past practice and annual salary increases not exceeding 5%; provided, however,
that for any officer or employee earning an annual salary in excess of $75,000,
Horizon may provide such employee with an annual salary increase only after
consulting with Prime before effecting such increase.
(u) not adopt any new employee benefit plan, incentive plan,
severance plan, stock option or similar plan or amend any existing plans or
rights, except for changes to severance benefits to provide that an employee
whose position is transferred to a location outside the standard metropolitan
statistical area in which such employee is currently employed shall not forfeit
severance benefits by reason of failure to accept such transfer, and changes
which are required by law;
(v) not settle any shareholder derivative, class action claims or
other suit or claims arising out of or in connection with any of the
transactions contemplated by this Agreement;
(w) not change the ownership of any of its Subsidiaries, except
changes which arise as a result of the acquisition of Horizon OP Units in
exchange for Horizon Common Shares pursuant to exercise of the Horizon OP Unit
redemption right under Section 8.6 of the Horizon Partnership Agreement;
(x) not accept a promissory note in payment of the exercise price
payable under any option to purchase Horizon Common Shares;
(y) not enter into or amend or otherwise modify any agreement or
arrangement for the persons that are affiliates, or as of the date hereof, all
officers, directors or employees, of Horizon, Horizon Partnership or any Horizon
Subsidiary not approved by a majority of the "independent" members of the Board
of Directors of Horizon;
(z) not directly or indirectly or through a subsidiary, merge or
consolidate with, acquire all or substantially all of the assets of, or acquire
the beneficial ownership of a majority of the outstanding capital stock or other
equity interest in any person or entity unless such transaction has been
approved by Prime; and.
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(aa) Notwithstanding any provision of this Agreement to the contrary,
including but not limited to the provisions of this Section 4.1, (i) on or prior
to the Closing, Horizon or Horizon Partnership shall be permitted to make any or
all of the payments on Schedule 4.1(aa) to the Horizon Disclosure Schedule
without the consent of Prime and (ii) Horizon and Horizon Partnership shall be
permitted to take any and all actions expressly set forth in a quarterly
operating budget, prepared by Horizon and approved by Prime in writing prior to
the commencement of each quarter.
4.2 CONDUCT OF PRIME'S AND PRIME PARTNERSHIP'S BUSINESS PENDING MERGERS.
During the period from the date of this Agreement to the Prime/Horizon Merger
Effective Time, except as (i) contemplated by this Agreement including as
contemplated by the Contribution Agreement, or (ii) consented to in writing by
Horizon, Prime and Prime Partnership shall, and shall cause (or, in the case of
Prime Subsidiaries that Prime or Prime Partnership do not control, use
reasonable best efforts to cause) each of the Prime Subsidiaries to:
(a) use commercially reasonable efforts to preserve intact its
business organizations and goodwill and keep available the services of its
officers and employees;
(b) confer on a regular basis with one or more representatives of
Horizon to report operational matters of materiality which would have a Prime
Material Adverse Effect;
(c) promptly notify Horizon of any material emergency or other
material change in the condition (financial or otherwise), business, properties,
assets, liabilities, prospects or the normal course of its businesses or in the
operation of its properties, or of any material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated);
(d) promptly deliver to Horizon true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of this
Agreement;
(e) maintain its books and records in accordance with GAAP
consistently applied and not change in any material manner any of its methods,
principles or practices of accounting in effect at the Prime Financial Statement
Date, except as may be required by the SEC, applicable law or GAAP;
(f) duly and timely file all reports, tax returns and other documents
required to be filed with federal, state, local and other authorities, subject
to extensions permitted by law, provided such extensions do not adversely affect
Prime's status as a qualified REIT under the Code;
(g) not make or rescind any express or deemed election relative to
Taxes (unless required by law or necessary to preserve Prime's status as a REIT
or the status of any Prime Subsidiary as a partnership for federal income tax
purposes or as a qualified REIT subsidiary under Section 856(i) of the Code, as
the case may be);
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(h) not amend the Prime Articles of Incorporation or the Prime
Bylaws, or the articles or certificate of incorporation, bylaws, code of
regulations, partnership agreement, operating agreement or joint venture
agreement or comparable charter or organization document of any Prime
Subsidiary, including the Prime Partnership Agreement (except to the extent
necessary to reflect the admission of additional limited partners and other
amendments in connection therewith that can be made by Prime without a vote of
limited partners and that will not, individually or in the aggregate, materially
adversely affect the rights or obligations of holders of Prime OP Units);
(i) except as provided in Section 5.10 hereof and in connection with
the use of Prime Common Shares to pay the exercise price or tax withholding in
connection with equity-based employee benefit plans by the participants therein,
not (i) authorize, declare, set aside or pay any dividend or make any other
distribution or payment with respect to any Prime Common Shares or Prime Common
Units or (ii) directly or indirectly redeem, purchase or otherwise acquire any
shares of capital stock, membership interests or units of partnership interest
or any option, warrant or right to acquire, or security convertible into, shares
of capital stock, membership interests, or units of partnership interest of
Prime, except for (A) conversions of Prime Common Shares required under Section
4.9.5 or Section 4.5.7, respectively, of the Prime Articles of Incorporation in
order to preserve the status of Prime as a REIT under the Code, and (B)
exchanges of Prime Common Units, whether or not outstanding on the date of this
Agreement, under the Prime Partnership Agreement in which Prime Common Shares
are utilized;
(j) not sell, lease, mortgage, subject to Lien or otherwise dispose
of any of the Prime Properties, except in connection with a transaction that
would not reasonably be expected to have a Prime Material Adverse Effect;
(k) not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or otherwise)
if it would reasonably be expected to have a Prime Material Adverse Effect; and
(l) except as contemplated by Section 1.16, not directly or
indirectly through a subsidiary, merge or consolidate with, or acquire all or
substantially all of the assets of, or the beneficial ownership of a majority of
the outstanding capital stock or other equity interests in any person or entity
whose securities are registered under the Exchange Act unless such transaction
has been approved by Horizon.
4.3 NO SOLICITATION. Prior to the Prime/Horizon Merger Effective Time,
Horizon agrees, for itself and in its capacity as general partner of Horizon
Partnership, that:
(a) neither it nor any of the Horizon Subsidiaries shall, directly
or indirectly, whether through a Horizon representative specified in Section
4.3(b) or otherwise, invite, initiate, solicit (including by way of
furnishing non-public information or assistance) or encourage any inquiries,
proposals, discussions or negotiations or the making or implementation of any
proposal or offer (including, without limitation, any proposal or offer to
its shareholders) that constitutes or may reasonably be expected to lead to,
or otherwise with respect to, (i) a merger, acquisition,
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consolidation, share exchange, business combination or similar transaction,
(ii) any tender offer or exchange offer for 10% or more of the outstanding
Horizon Common Shares or the filing of a registration statement under the
Securities Act in connection therewith, (iii) a transaction resulting in the
issuance of securities representing 10% or more of the outstanding equity
securities of Horizon, (iv) the sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 10% or more of the assets or equity
securities (including, without limitation, partnership interests and units)
of Horizon or Horizon Partnership or (v) any public announcements of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing, other than the transactions contemplated by
this Agreement (any such proposal or offer being hereinafter referred to as
an "Acquisition Proposal") or engage in any discussions or negotiations
concerning or provide any confidential or non-public information or data to,
or have any discussions with, any person relating to an Acquisition Proposal,
or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal;
(b) neither it nor any of the Horizon Subsidiaries will authorize or
permit any of its officers, directors, employees, affiliates, agents, investment
bankers, financial advisors, attorneys, accountants, brokers, finders or other
representative of Horizon to engage in any of the activities described in
Section 4.3(a);
(c) it and the Horizon Subsidiaries will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing
and will take the necessary steps to inform the individuals or entities
referred to in Section 4.3(b) of the obligations undertaken in this Section
4.3; and
(d) it will notify Prime immediately if Horizon or any of the
Horizon Subsidiaries receives any such inquiries or proposals, or any
requests for such information, or if any such negotiations or discussions are
sought to be initiated or continued with it and provide all relevant details
related thereto;
provided, however, that nothing contained in this Section 4.3 shall prohibit the
Board of Directors of Horizon (including with respect to Horizon's capacity as
general partner of Horizon Partnership) from (i) furnishing information to or
entering into discussions or negotiations with, any person or entity that makes
an unsolicited Acquisition Proposal, if, and only to the extent that (A) a
majority of the Board of Directors of Horizon determines in good faith that such
action is required for the Board of Directors of Horizon to comply with its
duties to shareholders imposed by applicable law and (B) prior to furnishing
such information to, or entering into discussions or negotiations with, such
person or entity, Horizon provides written notice to Prime to the effect that it
is furnishing information to, or entering into discussions with, such person or
entity; and (ii) making any disclosure required by applicable law with regard to
an Acquisition Proposal. Nothing in this Section 4.3 shall (x) permit Horizon to
terminate this Agreement (except as specifically provided in Article 7 hereof),
(y) permit Horizon to enter into an agreement for an Acquisition Proposal during
the term of this Agreement or (z) affect any other obligation of Horizon under
this Agreement; provided, however, that a majority of the Board of Directors of
Horizon may approve and recommend a Superior Acquisition Proposal and, in
connection therewith, withdraw or modify its approval or
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recommendation of this Agreement and the Mergers in accordance with Section
5.1(e). Any disclosure that the Board of Directors of Horizon may be
compelled to make with respect to the receipt of an Acquisition Proposal in
order to comply with its duties to shareholders imposed by applicable law or
Rule 14d-9 or 14e-2 of the Exchange Act will not constitute a violation of
this Section 4.3. As used herein, "Superior Acquisition Proposal" means a
bona fide Acquisition Proposal made by a third party which a majority of the
members of the Board of Directors of Horizon resolves in good faith to be
more favorable to Horizon's shareholders than the Mergers and which the Board
of Directors of Horizon determines is reasonably capable of being consummated.
4.4 AFFILIATES. Prior to the Partnership Merger Effective Time, Horizon
and Prime shall cause to be prepared and delivered to the other a list
(reasonably satisfactory to counsel for Prime and Horizon) identifying all
persons who, at the time of the Horizon, Prime Shareholders Meetings, may be
deemed to be "affiliates" of Horizon or Prime, respectively, as that term is
used under Rule 145 under the Securities Act (the "Affiliates"). Horizon and
Prime each shall use its reasonable best efforts to cause each person who is
identified by it as an Affiliate in such list to deliver to the other on or
prior to the Prime/Horizon Merger Effective Time a written agreement, in the
form to be approved by the parties hereto prior to the Prime/Horizon Merger
Effective Time, that such Affiliate will not sell, pledge, transfer or
otherwise dispose of any Surviving Company Common Shares issued to such
Affiliate pursuant to the Prime/Horizon Merger, except pursuant to an
effective registration statement under the Securities Act or in compliance
with paragraph (d) of Rule 145 or as otherwise permitted by the Securities
Act. The Surviving Company shall be entitled to place legends as specified in
such written agreements on the certificates representing any Surviving
Company Common Shares to be received pursuant to the terms of this Agreement
by such Affiliates who have executed such agreements and to issue appropriate
stop transfer instructions to the transfer agent for the Surviving Company
Common Shares issued to such Affiliates, consistent with the terms of such
agreements. The Surviving Company shall timely file the reports required to
be filed by it under the Exchange Act and the rules and regulations adopted
by the SEC thereunder, and it will take such further action as any Affiliate
of Horizon or Prime may reasonably request, all to the extent required from
time to time to enable such Affiliate to sell shares of the Surviving Company
received by such Affiliate in the Prime/Horizon Merger without registration
under the Securities Act pursuant to (i) Rule 145(d)(1) under the Securities
Act, as such rule may be amended from to time, or (ii) any successor rule or
regulation hereafter adopted by the SEC.
4.5 OTHER ACTIONS. Each of Horizon, Horizon Partnership and Newco LP,
on the one hand, and Prime and Prime Partnership, on the other hand, shall
not, and shall use commercially reasonable efforts to cause their respective
subsidiaries and joint ventures not to take, any action that would result in
(i) any of the representations and warranties of such party (without giving
effect to any "knowledge" qualification) set forth in this Agreement that are
qualified as to materiality becoming untrue, (ii) any of such representations
and warranties (without giving effect to any "knowledge" qualification) that
are not so qualified becoming untrue in any material respect or (iii) except
as contemplated by Section 4.3, any of the conditions to the Mergers or that
would materially impair the ability of the parties hereto to consummate the
transactions contemplated by the Contribution Agreement set forth in Article
6 not being satisfied.
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ARTICLE V
ADDITIONAL COVENANTS
5.1 PREPARATION OF THE REGISTRATION STATEMENT AND THE PROXY STATEMENT;
HORIZON SHAREHOLDERS AND PARTNERS MEETINGS AND PRIME SHAREHOLDERS AND PARTNERS
MEETINGS.
(a) As promptly as practicable after execution of this Agreement,
(i) each of Horizon, Prime and, to the extent required, Prime Partnership,
Horizon Partnership, Sky Merger and Newco LP shall prepare and file with the
SEC (with appropriate requests for confidential treatment, unless the parties
hereto otherwise agree) under the Exchange Act, one or more joint proxy
statements/prospectuses and forms of proxies (such joint proxy
statement(s)/prospectus(es) together with any amendments to supplements
thereto, the "Proxy Statement") relating to the shareholder meetings, and, if
applicable, partners meetings, of each of Horizon, Horizon Partnership, Sky
Merger, Newco LP, Prime and Prime Partnership and the vote of the
shareholders of Horizon, Sky Merger and Prime and, if applicable, Horizon
Partnership, Newco LP, and Prime Partnership, with respect to the Mergers,
the Contribution and the Distribution and such registration statements,
(collectively and together with any amendments or supplements thereto, the
"Registration Statement"), in which the Proxy Statement above will be
included, as may be required in connection with the registration under the
Securities Act of the securities to be distributed in connection with the
Mergers or the Distribution. The respective parties will cause the Proxy
Statement and the Registration Statement to comply as to form in all material
respects with the applicable provisions of the Securities Act, the Exchange
Act and the rules and regulations thereunder. Each of Horizon, Horizon
Partnership, Sky Merger, Newco LP, Prime and Prime Partnership shall furnish
all information about itself and its business and operations and all
necessary financial information to the other as the other may reasonably
request in connection with the preparation of the Proxy Statement and the
Registration Statement. Each such party shall use its reasonable best
efforts, to have the Registration Statement declared effective by the SEC as
promptly as practicable (including clearing the Proxy Statement with the
SEC). Each of Horizon, Horizon Partnership, Newco LP and Sky Merger, on the
one hand, and Prime and Prime Partnership, on the other hand, agree promptly
to correct any information provided by it for use in the Proxy Statement and
the Registration Statement if and to the extent that such information shall
have become false or misleading in any material respect, and each of the
parties hereto further agrees to take all steps necessary to amend or
supplement the Proxy Statement and the Registration Statement and to cause
the Proxy Statement and the Registration Statement as so amended or
supplemented to be filed with the SEC (with copies provided to the other
parties hereto) and to be disseminated to their respective shareholders and
partners, in each case as and to the extent required by applicable federal
and state securities laws. Each of Horizon, Horizon Partnership, Sky Merger,
Newco LP, Prime and Prime Partnership agrees that the information provided by
it for inclusion in the Proxy Statement or the Registration Statement and
each amendment or supplement thereto, at the time of mailing thereof and at
the time of the respective meetings of shareholders of Horizon, Sky Merger
and Prime and at the time of the respective taking of consents, if any, of
partners of Horizon Partnership, Newco LP, and Prime Partnership, will not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the
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circumstances under which they were made, not misleading. Each party will
notify the other promptly and will advise and deliver copies (if any) to the
other parties hereto, promptly after it receives notice thereof, of any
request by the SEC for amendment of the Proxy Statement or the Registration
Statement or comments thereon and responses thereto or requests by the SEC
for additional information (regardless whether such requests relate to Prime
or Prime Partnership, on the one hand, or Horizon, Sky Merger, Horizon
Partnership or Newco LP on the other hand), and each of Prime and Prime
Partnership, on the other hand, and Horizon, Horizon Partnership, Newco LP
and Sky Merger, on the other hand, shall promptly notify the other of (i) the
time when the Registration Statement has become effective, (ii) or any
supplement or amendment thereto has been filed, (iii) the issuance of any
stop order, and (iv) the suspension of the qualification and registration of
the securities issuable in connection with the Mergers and the Distribution.
The Proxy Statement shall include the recommendations of the Board of
Directors of each Prime and Horizon; provided, that the recommendation of the
Board of Directors of Horizon may not be included or may be withdrawn if the
Board of Directors of Horizon has accepted a proposal for Superior
Acquisition Proposal in accordance with the terms of Section 4.3. Each party
shall also take any action required to be taken under any applicable state
securities or "blue sky" laws in connection with the issuance of securities
pursuant to the Mergers and the Distribution, and shall furnish all
information as may be reasonably requested in connection with any such
action. Each party will use its best efforts to obtain prior to the
effective date of the Registration Statement, all necessary state securities
or "blue sky" permits or approvals required to carry out the transactions
contemplated by this Agreement. In connection with the preparation of the
Proxy Statement and the Registration Statement, Horizon shall use reasonable
efforts to cause to be delivered to Prime prior to the mailing of the Proxy
Statement, the opinion of Rudnick & Wolfe, dated the date of the Proxy
Statement, that (i) Horizon was organized and has operated in conformity with
the requirements for qualification as a REIT within the meaning of the Code
in each of its taxable years or other periods ending after December 31, 1993
and on or before the Closing Date and (ii) Horizon Partnership, Newco LP, and
each other Horizon Subsidiary has been since formation, and continues to be,
as of such date, for federal income tax purposes, a partnership and not a
corporation or an association taxable as a corporation or publicly traded
partnership. In connection with the preparation of the Proxy Statement and
the Registration Statement, Prime shall use reasonable efforts to cause to be
delivered to Horizon prior to the mailing of the Proxy Statement, the opinion
of Winston & Strawn, dated the date of the Proxy Statement, that (i) Prime
was organized and has operated in conformity with the requirements for
qualification as a REIT within the meaning of the Code in each of its taxable
years or other periods ending on or before the Closing Date and (ii) the
Prime Partnership, and each other Prime Subsidiary that is a partnership,
joint venture or limited liability company has been since formation, and
continues to be, as of such date, for federal income tax purposes, a
partnership and not a corporation or an association taxable as a corporation
or publicly traded partnership.
(b) Each of Horizon, Horizon Partnership, Sky Merger, Newco LP, Prime
and Prime Partnership shall use its reasonable best efforts to timely mail the
joint proxy statement/prospectus contained in the Registration Statements to its
shareholders. It shall be a condition to the mailing of the joint proxy
statement/prospectus that (i) Prime and Prime Partnership shall have received a
"comfort" letter from Ernst & Young LLP, independent public accountants for
Horizon and Horizon Partnership, of the kind contemplated by the Statement of
Auditing Standards
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with respect to Letters to Underwriters promulgated by the American Institute
of Certified Public Accountants (the "AICPA Statement"), dated as of the date
on which the Registration Statement shall become effective and as of the
Closing Date, addressed to Prime and Prime Partnership, in form and substance
reasonably satisfactory to Prime and Prime Partnership, concerning the
procedures undertaken by Ernst & Young LLP, with respect to the financial
statements and information of Horizon, Horizon Partnership and their
subsidiaries contained or incorporated by reference in the Registration
Statement and the other matters contemplated by the AICPA Statement and
otherwise customary in scope and substance or letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement, (ii) Horizon shall have received a "comfort"
letter from Ernst & Young LLP, independent public accountants for Prime and
Prime Partnership, of the kind contemplated by the AICPA Statement, dated as
of the date on which the Registration Statement shall become effective and as
of the Effective Time, addressed to Horizon and Horizon Partnership, in form
and substance reasonably satisfactory to Horizon, concerning the procedures
undertaken by Ernst & Young LLP with respect to the financial statements and
information of Prime, Prime Partnership and their subsidiaries contained or
incorporated by reference in the Registration Statement and the other matters
contemplated by the AICPA Statement and otherwise customary in scope and
substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement,
(iii) Prime shall have received reasonable assurance that the conditions set
forth in Section 6.2(f) will be satisfied on or prior to the Closing Date and
(iv) Horizon shall have received reasonable assurance that the conditions set
forth in Section 6.3(f) will be satisfied on or prior to the Closing Date.
(c) Prime will duly call and as soon as practicable following the
date of this Agreement (but in no event sooner than 20 business days
following the date the Proxy Statement is mailed to the shareholders of
Prime), give notice of, convene and hold a meeting of its shareholders (the
"Prime Shareholders Meeting") for the purpose of obtaining the Prime
Shareholder Approvals. Prime will, through its Board of Directors, recommend
to its shareholders approval of this Agreement, the Horizon/Prime Merger and
the other transactions contemplated by this Agreement.
(d) Horizon will duly call and give notice of and, as soon as
practicable following the date of this Agreement (but in no event sooner than
20 business days following the date the Proxy Statement is mailed to the
shareholders of Horizon), convene and hold a meeting of its shareholders (the
"Horizon Shareholders Meeting") for the purpose of obtaining Horizon
Shareholder Approvals. Horizon will, through its Board of Directors,
recommend to its shareholders approval of this Agreement, the Prime/Horizon
Merger, the Horizon/Subsidiary Merger and the other transactions contemplated
by this Agreement and include such recommendation in the Proxy Statement;
provided, however, that prior to the Horizon Shareholders Meeting, such
recommendation may be withdrawn, modified or amended with respect to a
Superior Acquisition Proposal if a majority of the Board of Directors of
Horizon determines in good faith, based upon the advice of its outside
counsel, that such action is required for the Board of Directors of Horizon
to comply with its duties to its shareholders pursuant to Section 4.3.
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(e) Prime and Horizon shall use their best efforts to cause the
Proxy Statements to be mailed to their respective shareholders on the same
day and to convene their respective shareholder meetings on the same day,
which day, subject to the provisions of Sections 5.1(c), 5.1(d) and 5.3,
shall be a day not later than forty-five days after the date the Proxy
Statement is mailed.
(f) If on the date for the Prime Shareholders Meeting and Horizon
Shareholders Meeting established pursuant to Section 5.1(e) of this
Agreement, either Prime or Horizon has not received duly executed proxies for
a sufficient number of votes to approve the respective Mergers (but less than
a majority of the outstanding Horizon Common Shares or Prime Common Shares,
as the case may be, have voted against the respective Mergers), then both
parties shall recommend the adjournment of their respective shareholders
meetings until one or more dates not later than the date ten (10) days after
the originally scheduled date of the shareholders meetings.
(g) Horizon shall use commercially reasonable efforts to obtain the
written consents for approval by the limited partners of Horizon Partnership
to the transactions contemplated hereby to the extent required by the Horizon
Partnership Agreement and any other matters reasonably requested by Prime
which are reasonably determined by Prime to be required to effect the
transactions contemplated by this Agreement (collectively, the "Horizon
Partner Approvals") on or prior to the Horizon Shareholder Meeting
established pursuant to Section 5.1(d). Horizon shall use commercially
reasonable efforts to obtain the written consents for approval by the limited
partners of Newco LP to the transactions contemplated hereby, including the
Partnership Merger, to the extent required by the Newco LP partnership
agreement and any other matters reasonably requested by Prime which are
reasonably determined by Prime to be required to effect the transactions
contemplated by this Agreement (collectively, the "Newco Partner Approvals")
on or prior to the Horizon Shareholder Meeting established pursuant to
Section 5.1(d). Horizon hereby agrees to vote in favor of such matters and to
recommend to the limited partners of Horizon Partnership and Newco LP that
they approve such matters. Prime shall use commercially reasonable efforts to
obtain written consents for approval by the limited partners of Prime
Partnership to the transactions contemplated hereby to the extent required by
the Prime Partnership Agreement and any other matters reasonably requested by
Horizon which are reasonably determined by Horizon to be required to effect
the transactions contemplated by this Agreement (collectively, the "Prime
Partner Approvals", and together with the Horizon Partner Approvals and the
Newco Partner Approvals, the "Partner Approvals") on or prior to the Prime
Shareholder Meeting established pursuant to Section 5.1(c). Prime hereby
agrees to vote in favor of such matters and to recommend to the limited
partners of Prime Partnership that they approve such matters.
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY. Subject to the requirements
of confidentiality agreements with third parties, each of the parties hereto
shall, and shall cause each of its Subsidiaries to, afford to the other parties
and to the officers, employees, accountants, counsel, financial advisors and
other representatives of such other parties, reasonable access during normal
business hours prior to the Prime/Horizon Merger Effective Time to all their
respective properties, books, contracts, commitments, personnel and records and,
during such period, each of the parties shall, and shall cause each of its
Subsidiaries to, furnish promptly to the other parties (a) a copy of each
report, schedule, registration statement and other document filed by it during
such period pursuant to the
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requirements of federal or state securities laws and (b) all other
information concerning its business, properties and personnel as such other
party may reasonably request. Each of the parties shall, and shall cause its
Subsidiaries to, use commercially reasonable efforts to cause its officers,
employees, accountants, counsel, financial advisors and other representatives
and affiliates to, hold any nonpublic information in confidence to the extent
required by, and in accordance with, and will comply with the provisions of
the letter agreement dated as of September 18, 1997 by and among Prime,
Horizon and Lehman Brothers (the "Confidentiality Agreement"), as amended.
5.3 REASONABLE BEST EFFORTS; NOTIFICATION.
(a) Subject to the terms and conditions herein provided, each of
the parties shall: (i) use all reasonable best efforts to cooperate with one
another in (A) determining which filings are required to be made prior to the
Prime/Horizon Merger Effective Time with, and which consents, approvals,
permits or authorizations are required to be obtained prior to the
Prime/Horizon Merger Effective Time from, governmental or regulatory
authorities of the United States, the several states and foreign
jurisdictions and any third parties in connection with the execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby including without limitation confirmation of the
transactions under the Contribution Agreement and (B) timely making all such
filings and timely seeking all such consents, approvals, permits and
authorizations; (ii) use all reasonable best efforts (other than the payment
of money) to obtain in writing any consents required from third parties to
effectuate the Mergers, such consents to be in form reasonably satisfactory
to each of the parties; and (iii) use all reasonable best efforts to take, or
cause to be taken, all other action and do, or cause to be done, all other
things necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. If at any time after the
Prime/Horizon Merger Effective Time any further action is necessary or
desirable to carry out the purpose of this Agreement, each party shall take
all such necessary action.
(b) Horizon and Horizon Partnership shall use all reasonable best
efforts to obtain from Ernst & Young LLP access to all work papers relating
to audits of Horizon and Horizon Partnership performed by Ernst & Young LLP,
and the continued cooperation of Ernst & Young LLP with regard to the
preparation of consolidated financial statements for the Surviving Company.
(c) Horizon and Horizon Partnership shall give prompt notice to
Prime and Prime Partnership, and Prime and Prime Partnership shall give
prompt notice to Horizon and Horizon Partnership, (i) if any representation
or warranty made by it contained in this Agreement that is qualified as to
materiality becomes untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becomes untrue or
inaccurate in any material respect or (ii) of the failure by it 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.
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5.4 TAX TREATMENT.
(a) Each of Prime and Horizon shall use its reasonable best efforts
before the Prime/Horizon Merger Effective Time to cause each of the
Horizon/Subsidiary Merger and the Prime/Horizon Merger to qualify as a
reorganization under the provisions of Sections 368(a) of the Code, and to
obtain the opinions of counsel referred to in Sections 6.2(e) and 6.3(e).
(b) Immediately upon the Partnership Merger Effective Time, Horizon
Partnership will be treated as terminating for purposes of Code Section
708(b)(2)(A). Immediately following the Partnership Merger Effective Time,
the Surviving Partnership will elect to use the "traditional method with
curative allocations" under Treasury Regulations Section 1.704-3(c) for
purposes of making allocations under Section 704(c) of the Code with respect
to the properties of or interests held by the Horizon Partnership immediately
before the Partnership Merger Effective Time. Prime Partnership and Horizon
Partnership shall negotiate in good faith to agree upon the "Section 704(c)
values" of the properties of Horizon Partnership, effective as of the
Partnership Merger Effective Time, in accordance with Treasury Regulations
Section 1.704-3(a)(3). The Surviving Partnership shall not, in connection
with the Prime/Horizon Merger (and any termination of Prime Partnership
pursuant thereto under Code Section 708(b)(1)(B)), adjust the capital
accounts of the Prime Partnership pursuant to section 1.704-1(b)(2)(iv)(f) of
the Treasury Regulations.
(c) Following the Partnership Merger Effective Time, the Surviving
Partnership shall allocate "excess nonrecourse liabilities" under Treasury
Regulations Section 1.752-3(a)(3) among the partners of the Surviving
Partnership as follows:
(i) First, assuming that the assets of the Surviving
Partnership are sold for their relative fair market values, the Surviving
Partnership shall determine for each of its partners the sum of (i) the
amount Code Section 704(c) gain allocable to such partner (taking into
account the relative Code Section 704(c) method elected by the Surviving
Partnership in respect of each contributed asset under Treasury Regulation
Section 1.704-3, and less the amount already allocated to such partner under
Treasury Regulations Section 1.752-3(a)(2)), plus (ii) the amount, if any, of
remaining income and gain which would be further allocated to such Surviving
Partnership partner under the Surviving Partnership Agreement, after all
income and gain allocable to partners under Code Section 704(c) has been
taken into account;
(ii) Second, the Surviving Partnership shall determine a
percentage (the "Tier Three Percentage") for each of its partners equal to
the fraction of the sum computed for such partner in paragraph (i) above,
over the aggregate amount of such sums for all partners of the Surviving
Partnership; and
(iii) Third, the Surviving Partnership shall allocate the
excess nonrecourse liabilities of the Surviving Partnership to each of its
partners, pro rata, in accordance with each partner's Tier Three Percentage.
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(d) In the event that Ernst & Young LLP determines that Prime
Partnership will be treated terminating for purposes of Code Section
708(b)(1)(B) upon the Prime/Horizon Merger Effective Time, and the proposed
Treasury Regulations under Code Section 368 have been made final and
effective to the Prime/Horizon Merger in substantially their present form,
then the Surviving Partnership may elect to use the "traditional method"
under Treasury Regulations Section 1.704-3(b) for purposes of making
allocations under Section 704(c) of the Code with respect to the properties
of or interests in the Prime Partnership immediately before the Partnership
Merger Effective Time.
(e) In the event that Ernst & Young LLP determines that Prime
Partnership would be treated terminating for purposes of Code Section
708(b)(1)(B) upon the Prime/Horizon Merger Effective Time, and the proposed
Treasury Regulations under Code Section 368 have not been made final and
effective to the Prime/Horizon Merger in substantially their present form,
then, consistent with subsection (a) above, Prime and Horizon otherwise shall
use their reasonable best efforts to take such actions as are necessary to
obtain the opinions of counsel referred to in Sections 6.2(e) and 6.3(e).
(f) For any taxable year of the Surviving Partnership that ends
within the period ending on the seventh anniversary of the Partnership Merger
Effective Time, the Surviving Partnership shall use good faith, commercially
reasonable efforts (i) to avoid or minimize any gain recognized by the
partners of the Surviving Partnership, as a result of the refinancing or
repayment of the Surviving Partnership's liabilities, and (ii) in any case in
which a Horizon Property of the Surviving Partnership is to be disposed of,
to engage in a transaction that defers, to the extent possible, the
recognition of gain by such partners under the Code, including, but not
limited to, structuring such disposition as part of a tax-free exchange under
Code Section 1031.
5.5 PUBLIC ANNOUNCEMENTS. Each party will consult with each other party
before issuing, and provide each other the opportunity to review and comment
upon, any press release or other written public statements which address in
any manner the transactions contemplated by this Agreement, and shall not
issue any such press release or make any such written public statement prior
to such consultation, except as may be required by applicable law, court
process or by obligations pursuant to any listing agreement with any national
securities exchange. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement will
be in the form agreed to by the parties concurrent with the execution of this
Agreement.
5.6 LISTING. Prime shall use all reasonable best efforts to cause the
Surviving Company Common Shares and Surviving Company Series B Preferred
Shares to be issued in the Prime/Horizon Merger and the Surviving Company
Common Shares and Surviving Company Series B Preferred Shares reserved for
issuance upon redemption of Prime Common Units and Prime Series B Preferred
Units issued in the Partnership Merger, to be approved for listing on the
NYSE, subject to official notice of issuance, prior to the Prime/Horizon
Merger Effective Time.
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5.7 TRANSFER AND GAINS TAXES. Each party 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 and stamp taxes, any
transfer, recording, registration and other fees and any similar taxes which
become payable in connection with the transactions contemplated by this
Agreement (together with any related interests, penalties or additions to
tax, "Transfer and Gains Taxes"). From and after the Prime/Horizon Merger
Effective Time, Surviving Company shall pay or cause Prime Partnership, as
appropriate, to pay or cause to be paid, without deduction or withholding
from any amounts payable to the holders of Surviving Company Common Shares or
Surviving Company Series B Preferred Shares or Prime OP Units or Prime Series
B Preferred Units, as applicable, all Transfer and Gains Taxes (which term
shall not in any event be construed to include for these purposes any tax
imposed under the Code or any applicable state or local tax imposed upon net
or gross income).
5.8 BENEFIT PLANS AND OTHER EMPLOYEE ARRANGEMENTS.
(a) BENEFIT PLANS. After the Prime/Horizon Merger Effective Time,
all employees of Prime who are employed by the Surviving Company shall, at
the option of the Surviving Company, either continue to be eligible to
participate in an "employee benefit plan", as defined in Section 3(3) of
ERISA, of Prime which is, at the option of the Surviving Company, continued
by the Surviving Company, or alternatively shall be eligible to participate
in the same manner as other similarly situated employees of the Surviving
Company who were formerly employees of Horizon in any "employee benefit
plan," as defined in Section 3(3) of ERISA, sponsored or maintained by the
Surviving Company after the Prime/Horizon Merger Effective Time. With respect
to each such employee benefit plan, service with Horizon, any Horizon
Subsidiary, Prime or any Prime Subsidiary (as applicable) and the predecessor
of any of them shall be included for purposes of determining eligibility to
participate, vesting (if applicable) and entitlement to benefits.
(b) STOCK OPTIONS.
(i) As of the Prime/Horizon Merger Effective Time, each
outstanding Prime Stock Option shall be assumed by Surviving Company and
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Prime Stock Option, the same number
of Surviving Company Common Shares as the holder of such Prime Stock Option
would have been entitled to receive pursuant to the Prime/Horizon Merger had
such holder exercised such Prime Stock Option in full immediately prior to
the Prime/Horizon Merger Effective Time at a price per share equal to the
aggregate exercise price for the shares subject to such Prime Stock Option
divided by the number of full Surviving Company Common Shares deemed to be
purchasable pursuant to such Prime Stock Option.
(ii) As of the Prime/Horizon Merger Effective Time, each Sky
Merger Stock Option outstanding under (a) the Horizon 1993 Stock Option
Plan and (b) the Horizon Long Term Incentive Plan (to the extent permitted
under the terms of such plan and the terms of the Horizon Options outstanding
under such plan) (in each case, as assumed by Sky Merger pursuant to the
Horizon/Subsidiary Merger) shall in each case automatically be canceled and
all rights with
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respect thereto shall cease to exist (other than the Sky Merger Stock Options
outstanding and held by Jeffrey Kerr). As of the Prime/Horizon Merger
Effective Time, each Sky Merger Stock Option outstanding under the Horizon
1997 Stock Option Plan or the Horizon Director/Stock Option Plan and each
other outstanding Sky Merger Option not canceled pursuant to the immediately
preceding sentence shall constitute an option to acquire, on the same terms
and conditions as were applicable under such Sky Merger Stock Option, that
number of Surviving Company Common Shares equal to the product of (A) 0.9193
times (B) the number of Sky Merger Common Shares subject to such Horizon
Stock Option at an aggregate exercise price per share equal to the aggregate
exercise price per share set forth in such Sky Merger Stock Option; provided,
however, that the number of Surviving Company Common Shares that may be
purchased upon exercise of such Sky Merger Stock Option shall not include any
fractional shares and, upon the first such exercise of such Sky Merger Stock
Option, a cash payment shall be made for any fractional shares calculated in
accordance with and in the manner provided for calculations as to be paid in
lieu of fractional shares as part of the Prime/Horizon Merger Consideration
under Section 1.17(g).
(iii) As soon as practical after the Closing Date, Prime
shall file a registration statement under the Securities Act covering the
shares issuable pursuant to the stock options assumed by the Surviving
Company pursuant to the provisions of Section 5.8(b).
(c) WITHHOLDING. To the extent required by applicable law, Horizon
shall require each employee who exercises a Horizon Stock Option or who
receives Horizon Common Shares or Sky Merger Common Shares pursuant to any
existing commitment to pay to Horizon in cash or Horizon Common Shares or Sky
Merger Common Shares an amount sufficient to satisfy in full Horizon's
obligation to withhold Taxes incurred by reason of such exercise or issuance.
(d) RETENTION PROGRAM. Prior to the Closing Date, Horizon may
implement a retention program for key employees pursuant to which up to an
aggregate of $650,000 may be paid to such key employees who continue to be
employed through a date certain (to be approved by Prime) or who are
terminated without cause prior to such date certain.
5.9 INDEMNIFICATION.
(a) From and after the Prime/Horizon Merger Effective Time the
Surviving Company shall indemnify, defend and hold harmless each person who is
now, or has been at any time prior to the date of this Agreement or who becomes
prior to the Prime/Horizon Merger Effective Time, an officer, director or
employee of Horizon or any Horizon Subsidiary (including, without limitation,
Newco and Newco LP) (the "Indemnified Parties") against all losses, claims,
damages, costs, expenses, liabilities or judgments, or amounts that are paid in
settlement with the approval of the indemnifying party (which approval shall not
be unreasonably withheld) of, or in connection with, any claim, action, suit,
proceeding or investigation to the extent related to, or to the extent arising
in whole or in part directly or indirectly out of the fact that such person is
or was a director, officer or employee of Horizon or any Horizon Subsidiary
(including, without limitation, Newco), whether pertaining to any matter
existing or occurring at or prior to the Prime/Horizon Merger Effective Time
(including, without limitation, any and all transactions resulting directly or
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indirectly from the transactions contemplated hereby or the documents delivered
hereunder) and whether asserted or claimed prior to, or at or after, the
consummation of the transactions contemplated hereby or any document
contemplated hereunder ("Indemnified Liabilities"), in each case to the full
extent a corporation is permitted under the MGCL (and the Surviving Company will
pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent permitted by law upon
receipt of any affirmation and undertaking required by the MGCL arising from the
investigation, defense or settlement of such Indemnification Liabilities).
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Party (whether
arising before or after the Prime/Horizon Merger Effective Time), (i) the
Indemnified Parties may retain counsel satisfactory to them with the consent of
the Surviving Company which consent may not be unreasonably withheld, (ii) the
Surviving Company shall pay all reasonable fees and expenses of such counsel for
the Indemnified Parties promptly as statements therefor are received, and (iii)
the Surviving Company will use all reasonable efforts to assist in the defense
of any such matter, provided that the Surviving Company shall not be liable for
any settlement of any claim effected without its written consent, which consent,
however, shall not be unreasonably withheld. Any Indemnified Party wishing to
claim indemnification under this Section 5.9(a), upon learning of any such
claim, action, suit, proceeding or investigation, shall notify the Surviving
Company (but the failure so to notify shall not relieve the Company or the
Surviving Company from any liability which it may have under this Section 5.9(a)
except to the extent such failure materially prejudices such party), and shall
deliver to the Surviving Company any affirmation and undertaking contemplated by
the MGCL. The Indemnified Parties as a group may retain only one law firm to
represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties. The
provisions for the indemnification and advancement of expenses set forth in this
Agreement are not exclusive of any rights an Indemnified Party may have under
any contract, law or otherwise.
(b) The Surviving Company shall obtain and maintain in effect at the
Prime/Horizon Merger Effective Time and continuing until the sixth anniversary
thereof "run-off" directors and officers liability insurance with a coverage
amount and other terms and conditions comparable to Horizon's current directors
and officers liability insurance policy covering the directors and officers of
Horizon with respect to their service as such prior to the Prime/Horizon Merger
Effective Time.
(c) This Section 5.9 is intended for the irrevocable benefit of, and
to grant third party rights to, the Indemnified Parties and their successors,
assigns and heirs and shall be binding on all successors and assigns of
Surviving Company. Each of the Indemnified Parties shall be entitled to enforce
the covenants contained in this Section 5.9 and Surviving Company acknowledges
and agrees that each Indemnified Party would suffer irreparable harm and that no
adequate remedy at law exists for a breach of such covenants and such
Indemnified Party shall be entitled to injunctive relief and specific
performance in the event of any breach of any provision in this Section.
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(d) In the event that the Surviving Company or any of its
respective successors or assigns (i) 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 (ii) transfers all or substantially
all of its properties and assets to any person, then, and in each such case
the successors and assigns of such entity shall assume the obligations set
forth in this Section 5.9, which obligations are expressly intended to be for
the irrevocable benefit of, and shall be enforceable by, each director and
officer covered hereby.
(e) At the Closing, the Surviving Company shall deliver to each
Indemnified Party a written acknowledgment of the Surviving Company's
indemnity obligations to such Indemnified Party pursuant to this Agreement
5.10 DECLARATION OF DIVIDENDS AND DISTRIBUTIONS. From and after the date
of this Agreement, neither Horizon nor Horizon Partnership, on the one hand, nor
Prime nor Prime Partnership, on the other hand, shall declare or pay any
dividend or distribution to its shareholders or partners, as the case may be,
without the prior written consent of Prime or Horizon, respectively; provided,
however, that such written consent shall not be required for the declaration and
payment of (i) a distribution with respect to each Horizon Common Share or
Horizon OP Unit in the first quarter of 1998 in an amount equal to the product
of (A) 0.3575 times (B) the dividend or distribution declared in respect of each
Prime Common Share or Prime OP Unit in such quarterly period, (ii) a quarterly
distribution with respect to each Horizon Common Share or Horizon OP Unit in any
quarterly period ending after March 31, 1998 in an amount equal to the product
of (A) 0.9193 times (B) the dividend or distribution declared in respect of each
Prime Common Share or Prime OP Unit in such quarterly period, (iii) Prime
Regular Quarterly Distributions, (iv) the Prime Newco Distribution, (v) any
distribution contemplated by the Contribution Agreement and (vi) any
distribution contemplated by Section 1.14(d); provided, however, that, except
for distributions described in the foregoing clauses (iv) and (v), the record
date for each distribution with respect to the Horizon Common Shares and the
Horizon OP Units, on the one hand, shall be the same date as the record date for
the quarterly distributions for the Prime Common Shares and the Prime Common
Units, on the other hand, as provided to Horizon by notice not less than fifteen
(15) days prior to the record date for any quarterly distribution by Prime or
Prime Partnership.
The foregoing restrictions shall not apply, however, to the extent a
distribution by Horizon or Prime is necessary for Horizon or Prime, as
applicable, to maintain REIT status.
5.11 TRANSFER OF SHARES/INTERESTS IN NON-WHOLLY OWNED SUBSIDIARIES OF
HORIZON. At the Closing and pursuant to the Stock Purchase Agreement, Ronald
Piasecki shall transfer to Prime Retail Services, Inc. or such person or persons
as Prime Retail Services, Inc. shall designate by written notice delivered to
him prior to the Closing, all of the shares of First HGI, Inc., HGI Perryville,
Inc., MG Third Party Services Corp., HGI Management Corp. and Second HGI, Inc.
owned by him, constituting all the outstanding shares of such companies which
are not owned by Horizon Partnership, for an aggregate consideration in an
amount equal to the fair market value of such shares, as determined in
accordance with the provisions of the Stock Purchase Agreement. Prior to
Closing, Prime shall use commercially reasonably efforts to acquire from FLOC,
L.L.C. all
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of the outstanding membership interests (other than such interests held by
Horizon Partnership) of Finger Lakes Outlet Center L.L.C. held by FLOC,
L.L.C. on the terms and conditions set forth on Schedule 5.11 to the Prime
Disclosure Letter.
5.12 NOTICES. Prime and Horizon shall provide such notice to its
shareholders of the Mergers as is required under Maryland and Michigan law.
5.13 RESIGNATIONS. On the Closing Date, Horizon shall cause the directors
and officers of each of the Horizon Subsidiaries to submit their resignations
from such positions, effective as of the Partnership Merger Effective Time as
requested by Prime.
5.14 THIRD PARTY MANAGEMENT AGREEMENTS. Horizon will not, and will not
permit any of its Subsidiaries to, amend the management agreements pursuant
to which Horizon, directly or indirectly, manages buildings in which Horizon
does not own a 100% interest. Horizon will not, and will not permit any
Horizon Subsidiary to, renew such management agreements except on terms which
permit its cancellation by Horizon or the applicable Horizon Subsidiary on
thirty days' notice or less without any charge, penalty or other cost for
such cancellation.
5.15 CONTRIBUTION AGREEMENT. (a) Horizon shall cause Newco to execute
the transactions contemplated hereby to which Newco is a party provided that
Horizon has obtained all material consents required to be obtained by Horizon
and the Horizon Subsidiaries from third parties in order to perform their
respective obligations under the Contribution Agreement and the other
agreements contemplated hereby to which Newco is a party, except for those
consents set forth on Schedule 5.15 to the Horizon Disclosure Letter.
Horizon shall diligently seek and use commercially reasonable efforts to
obtain such consents prior to the Closing Date. Horizon shall keep Prime
currently apprised of its progress in obtaining such consents. Horizon shall
inform Prime promptly if it appears unlikely that any given consent will be
obtained. Horizon shall cooperate with Prime in taking any action to either
obtain such consents or to put Horizon and the Horizon Subsidiaries in a
position so that such consents are no longer required; provided such action
does not cost Horizon a material amount.
(b) In the event that Newco does not have a net worth of
$28,300,000 on the Closing Date, then Prime shall contribute cash or, at
Prime's discretion, other property to Newco to ensure that the net worth of
Newco on the Closing Date is equal to or in excess of $28,300,000. The
determination of net worth of Newco as of the Closing Date shall be made in
good faith by the Board of Directors of Prime based on a written opinion in
form and substance reasonably satisfactory to Horizon of an accounting,
investment banking or appraisal firm selected by Prime.
5.16 NEWCO PREFERRED SECURITIES. Horizon and Horizon Subsidiary shall take
any action reasonably requested by Prime and/or Prime Partnership to consummate
the investment in Horizon Partnership and/or Newco and the Prime Newco
Distribution permitted by Section 1.16.
5.17 ACTIONS UPON ISSUANCE OF INJUNCTION OR RESTRAINT. In the event that
the transactions contemplated by this Agreement cannot be consummated by the
parties hereto on the Closing Date
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due to the failure to satisfy the condition contained in Section 6.1(d), then
the parties hereto shall use their commercially reasonable efforts to
restructure the transactions contemplated hereby in a manner that would (i)
enable the condition contained in Section 6.1(d) to be satisfied or (ii)
provide the same economic and other material benefits to the parties hereto
in a manner satisfactory to all parties hereto. Notwithstanding the
foregoing, the obligations contained in this Section 5.17 shall not affect,
alter or in any way supersede the rights of the parties hereto under Article
VII hereof if such restructuring cannot be accomplished prior to June 15,
1997.
ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS. The
respective obligations of each party to effect the Mergers and to consummate the
other transactions contemplated by this Agreement to occur on the Closing Date
shall be subject to the fulfillment or written waiver at or prior to the Closing
Date of the following conditions:
(a) SHAREHOLDER AND PARTNER APPROVALS. This Agreement, the Mergers
and all other matters necessary to consummate the other transactions
contemplated to occur on the Closing Date and the transactions contemplated by
this Agreement shall have been approved and adopted by the Shareholder Approvals
and all required Partner Approvals shall have been obtained.
(b) LISTING OF SHARES. The NYSE shall have approved for listing the
Surviving Company Common Shares and Surviving Company Series B Preferred Shares
to be issued in the Prime/Horizon Merger and the Surviving Company Common Shares
reserved for issuance upon exchange of Prime Common Units and Prime Series B
Preferred Units issued in the Partnership Merger, subject to official notice of
issuance.
(c) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings by the SEC seeking a stop order.
(d) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Mergers or any of the other transactions contemplated hereby
shall be in effect.
(e) BLUE SKY LAWS. Prime shall have received all state securities or
"blue sky" permits and other authorizations necessary to issue the Merger
Consideration.
(f) GOVERNMENTAL ENTITY ACTIONS AND CONSENTS. All material actions
by or in respect of or filings with any Governmental Entity required for the
consummation of the transactions contemplated hereby shall have been obtained or
made.
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6.2 CONDITIONS TO OBLIGATIONS OF PRIME AND PRIME PARTNERSHIP. The
obligations of Prime and Prime Partnership to effect the Mergers and to
consummate the other transactions contemplated to occur on the Closing Date are
further subject to the following conditions, any one or more of which may be
waived by Prime:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Horizon and Horizon Partnership (without giving effect to any
"materiality" qualification or limitation) set forth in this Agreement shall be
true and correct as of the date of this Agreement and as of the Closing Date, as
though made on and as of the Closing Date, except to the extent such
representation or warranty is expressly limited by its terms to another date,
and Prime shall have received a certificate (which certificate may be qualified
by knowledge to the same extent as the representations and warranties of Horizon
and Horizon Partnership contained herein are so qualified) signed on behalf of
Horizon by the chief executive officer or the chief financial officer of
Horizon, in such capacity, to such effect. This condition shall be deemed
satisfied notwithstanding any failure of a representation or warranty of Horizon
or Horizon Partnership to be true and correct as of the Closing Date (without
giving effect to any materiality qualification or limitation) if the aggregate
amount of Horizon Economic Losses (as defined below) that would reasonably be
expected to arise as a result of the failures of such representations and
warranties to be true and correct as of the Closing Date does not exceed
$50,000,000 (such amount to be calculated by counting in all cases from the
first dollar of such Horizon Economic Losses). "Horizon Economic Losses" shall
mean any and all net damage, net loss, net liability or expenses suffered by
Horizon and the Horizon Subsidiaries taken as a whole, but shall not include any
claims, damages, loss, expense or other liability resulting from any class
action or shareholders' derivative lawsuits relating to the Mergers against
Horizon or the Horizon Subsidiaries, if any, filed subsequent to the date of
this Agreement or any amounts paid or expenses incurred by Horizon or its
Subsidiaries in obtaining non-governmental third party consents.
(b) PERFORMANCE OF OBLIGATIONS OF HORIZON, SKY MERGER AND HORIZON
PARTNERSHIP. Horizon and Horizon Partnership shall have performed in all
material respects all obligations required to be performed by them under this
Agreement at or prior to the Prime/Horizon Merger Effective Time, and Prime
shall have received a certificate signed on behalf of Horizon by the chief
executive officer or the chief operating officer of Horizon, in such capacity,
to such effect.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall have been no Horizon Material Adverse Change taken as a whole, that have
resulted or would result individually or in the aggregate, in Horizon Economic
Losses of $50,000,000 or more and Prime shall have received a certificate of the
chief executive officer or operating officer of Horizon, in such capacity,
certifying to such effect.
(d) TAX OPINIONS RELATING TO REIT STATUS AND PARTNERSHIP STATUS.
Prime shall have received an opinion of Rudnick & Wolfe or other counsel to
Horizon reasonably satisfactory to Prime, dated as of the Closing Date, to the
effect that, subject to customary exceptions, assumptions, certificates and
qualifications and based upon customary representations, (x) for each of its
taxable years ending after December 31, 1993, Horizon has operated and complied
with the
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requirements for qualification as a REIT under the Code, and (y) each Horizon
Subsidiary which has been formed as a partnership, joint venture or limited
liability company is, for federal income tax purposes, a partnership and not
a corporation or association or publicly traded partnership taxable as a
corporation.
(e) TAX OPINION RELATING TO THE MERGERS. Prime shall have received
an opinion dated the Closing Date from Winston & Strawn or other counsel
reasonably satisfactory to Prime, dated as of the Closing Date, to the
effect that, subject to customary exceptions, assumptions, certificates and
qualifications and the opinion of counsel to Horizon described in clause
Section 6.2(d)(i) above, and based upon customary representations, to the
effect that each of the Horizon/Prime Merger and the Horizon/Subsidiary
Merger will qualify as a reorganization under the provisions of Section
368(a) of the Code.
(f) "COMFORT" LETTER. Prime and Prime Partnership shall have
received a "comfort" letter from Ernst & Young LLP, as described in Section
5.1(b).
(g) SHARES OF NON WHOLLY-OWNED COMPANIES. All of the voting shares
of First HGI, Inc., HGI Perryville, Inc., MG Third Party Services Corp., HGI
Management Corp. and Second HGI, Inc. (other than any such shares owned by
Horizon Partnership) shall have been transferred to Prime Retail Services,
Inc., or its designees or assigns, in accordance with the Stock Purchase
Agreement.
(h) CONTRIBUTION AGREEMENT. Horizon, Horizon Partnership, Newco
and Newco LP shall have entered into the Contribution Agreement and all of
the conditions to the consummation of the transactions contemplated thereby
shall have been satisfied and each of the transactions contemplated thereby
shall have been completed to the extent required to be completed thereunder
as of such time.
(i) CALL AGREEMENTS. The Call Agreements shall be in full force
and effect on the Closing Date.
6.3 CONDITIONS TO OBLIGATIONS OF HORIZON AND HORIZON PARTNERSHIP. The
obligations of Horizon and Horizon Partnership to effect the Mergers and to
consummate the other transactions contemplated to occur on the Closing Date
is further subject to the following conditions, any one or more of which may
be waived in writing by Horizon:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Prime and Prime Partnership (without giving effect to any
"materiality" qualification or limitation) set forth in this Agreement shall be
true and correct as of the date of this Agreement and as of the Closing Date, as
though made on and as of the Closing Date, except to the extent the
representation or warranty is expressly limited by its terms to another date,
and Horizon shall have received a certificate (which certificate may be
qualified by knowledge to the same extent as such representations and warranties
of Prime and Prime Partnership contained herein are so qualified) signed on
behalf of Prime by the chief executive officer or the chief financial officer of
such party,
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in such capacity, to such effect. This condition shall be deemed satisfied
notwithstanding any failure of a representation or warranty of Prime or Prime
Partnership to be true and correct as of the Closing Date (without giving
effect to any materiality qualification) if the aggregate amount of Prime
Economic Losses (as defined below) that would reasonably be expected to arise
as a result of the failures of such representations and warranties to be true
and correct as of the Closing Date does not exceed $50,000,000 (such amount
to be calculated by counting in all cases from the first dollar of such Prime
Economic Losses). "Prime Economic Losses" shall mean any and all net damage,
net loss, net liability or expenses suffered by Prime and the Prime
Subsidiaries taken as a whole, but shall not include any claims, damages,
loss, expense or other liability resulting from any class action or
shareholders' derivative lawsuits relating to the Mergers against Prime or
the Prime Subsidiaries, if any, filed subsequent to the date of this
Agreement or any amounts paid or expenses incurred by Prime or its
Subsidiaries in obtaining non-governmental third party consents.
(b) PERFORMANCE OF OBLIGATIONS OF PRIME AND PRIME PARTNERSHIP.
Prime and Prime Partnership shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Prime/Horizon Merger Effective Time, and Horizon shall have received a
certificate of Prime signed on behalf of Prime by the chief executive officer
or the chief financial officer of Prime, in such capacity, to such effect.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no Prime Material Adverse Change taken as a whole, that
have resulted or would result individually or in the aggregate, in Prime
Economic Losses of $50,000,000 or more and Horizon shall have received a
certificate of the chief executive officer or operating officer of Prime, in
such capacity, certifying to such effect.
(d) TAX OPINIONS RELATING TO REIT STATUS AND PARTNERSHIP STATUS.
Horizon shall have received an opinion of Winston & Strawn or other counsel
to Prime reasonably satisfactory to Horizon, dated as of the Closing Date, to
the effect that, subject to customary exceptions, assumptions, certificates
and qualifications and based upon customary representations, (x) for each of
its taxable years since formation, Prime has operated and complied with the
requirements for qualification as a REIT under the Code, and (y) Prime
Partnership is, for federal income tax purposes, a partnership and not a
corporation or association or publicly traded partnership taxable as a
corporation.
(e) TAX OPINION RELATING TO MERGERS. Horizon shall have received an
opinion dated the Closing Date from Rudnick & Wolfe or other counsel
reasonably satisfactory to Horizon, dated as of the Closing Date, to the
effect that, subject to customary exceptions, assumptions, certificates and
qualifications and the opinion of counsel to Prime described in Section
6.3(i) above, and based upon customary representations, to the effect that
each of the Horizon/Prime Merger and the Horizon/Subsidiary Merger will
qualify as a reorganization under the provisions of Section 368(a) of the
Code.
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(f) "COMFORT" LETTER. Horizon and Horizon Partnership shall have
received a "comfort" letter from Ernst & Young LLP, as described in Section
5.1(b).
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the filing of the Delaware Certificate of Merger with the Delaware Secretary,
whether before or after either of the Shareholder Approvals are obtained:
(a) by mutual written consent duly authorized by the Board of
Directors of Prime and the Board of Directors of Horizon;
(b) by Prime, upon (i) a breach of any representation, warranty,
covenant, obligation or agreement on the part of Horizon or Horizon
Partnership set forth in this Agreement, or (ii) if any representation or
warranty of Horizon or Horizon Partnership shall become untrue, in the case
of either (i) or (ii), such that the conditions set forth in Section 6.2(a)
or Section 6.2(b), as the case may be, would be incapable of being satisfied
by June 15, 1998 (or as otherwise extended);
(c) by Horizon, upon (i) a breach of any representation, warranty,
covenant obligation or agreement on the part of Prime or Prime Partnership
set forth in this Agreement, or (ii) if any representation or warranty of
Prime or Prime Partnership shall become untrue, in the case of either (i) or
(ii), such that the conditions set forth in Section 6.3(a) or Section 6.3(b),
as the case may be, would be incapable of being satisfied by June 15, 1998
(or as otherwise extended);
(d) by either Prime or Horizon, if any judgment, injunction, order,
decree or action by any Governmental Entity of competent authority preventing
the consummation of any of the Mergers shall have become final and
non-appealable;
(e) by either Prime or Horizon, if the Mergers shall not have been
consummated before June 15, 1998; provided, however, that a party may not
terminate pursuant to this clause (e) if the terminating party shall have
breached in any material respect its obligations under this Agreement in such
a manner that shall have proximately contributed to the failure to close;
(f) by either Prime or Horizon (unless Horizon or Horizon
Partnership is in breach of its obligations under Section 5.1) if, upon a
vote at a duly held Horizon Shareholders Meeting or any adjournment thereof,
the Horizon Shareholder Approvals shall not have been obtained as
contemplated by Section 5.1 (excluding Section 5.1(d)) or the Horizon Partner
Approvals or Newco LP Partner Approvals shall not have been obtained;
(g) by either Horizon or Prime (unless Prime or Prime Partnership is
in breach of its obligations under Section 5.1 (excluding Section 5.1(d)) if,
upon a vote at a duly held Prime Shareholders Meeting or any adjournment
thereof, the Prime Shareholder Approvals shall not have
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been obtained as contemplated by Section 5.1 (excluding Section 5.1(d)) or
the Prime Partner Approvals shall not have been obtained;
(h) by Horizon, upon payment to Prime of the amounts referred to in
Section 7.2, if prior to the Horizon Shareholders Meeting, the Board of
Directors of Horizon shall have withdrawn or modified in any manner adverse
to Prime its approval or recommendation of the Mergers or this Agreement in
connection with, or approved or recommended, a Superior Acquisition Proposal;
and
(i) by Prime, if (A) prior to the Horizon Shareholders Meeting, the
Board of Directors of Horizon shall have withdrawn or modified in any manner
adverse to Prime its approval or recommendation of the Mergers or this
Agreement in connection with, or approved or recommended, any Superior
Acquisition Proposal, (B) Horizon shall have entered into any agreement for
any Acquisition Proposal, or (C) the Board of Directors of Horizon or any
committee thereof shall have resolved to do any of the foregoing.
7.2 CERTAIN FEES AND EXPENSES. If this Agreement shall be terminated (i)
pursuant to Section 7.1(h) or 7.1(i), then Horizon and Horizon Partnership
thereupon shall pay to Prime Partnership a fee equal to the Break-Up Fee (as
defined below) and Break-Up Expenses (as defined below), and (ii) pursuant to
Section 7.1(b) or 7.1(f), then Horizon and Horizon Partnership shall pay to
Prime Partnership (provided that Horizon was not entitled to terminate this
Agreement pursuant to Section 7.1(c) at the time of such termination) an amount
equal to the Break-Up Expenses (as defined below). If this Agreement shall be
terminated pursuant to Section 7.1(c) or 7.1(g), then Prime and Prime
Partnership shall pay Horizon Partnership (provided that Prime was not entitled
to terminate this Agreement pursuant to Section 7.1(b) at the time of such
termination) an amount equal to the Break-Up Expenses. If this Agreement shall
be terminated pursuant to Section 7.1(b), 7.1(d) (if primarily resulting from
any action or inaction of Horizon or any Horizon Subsidiary), 7.1(e) or 7.1(f)
and prior to the time of such termination an Acquisition Proposal has been
received by Horizon or any Horizon Subsidiary, and either prior to the
termination of this Agreement or within twelve (12) months thereafter, Horizon
or any Horizon Subsidiary enters into any written Acquisition Proposal which is
subsequently consummated (whether or not any such Acquisition Proposal is the
same Acquisition Proposal which had been received at the time of the termination
of this Agreement), then Horizon and Horizon Partnership shall pay the Break-Up
Fee and Break-Up Expenses to Prime Partnership. If prior to the Horizon
Shareholders Meeting the Board of Directors of Horizon shall have withdrawn or
modified in any manner adverse to Prime its approval or recommendation of the
Mergers or this Agreement and, within twelve (12) months after termination of
this Agreement, Horizon or Horizon Partnership enters into any written
Acquisition Proposal which is subsequently consummated (whether or not any
Acquisition Proposal had been received prior to the time of the termination of
this Agreement), then Horizon and Horizon Partnership shall pay the Break-Up Fee
to Prime Partnership. The payment of the Break-Up Fee shall be compensation for
the loss suffered by Prime and Prime Partnership as a result of the failure of
the Mergers to be consummated (including, without limitation, opportunity costs
and out-of-pocket costs and expenses) and to avoid the difficulty of determining
damages under the circumstances. The Break-Up Fee shall be paid by Horizon and
Horizon Partnership to Prime Partnership, or the
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Break-Up Expenses shall be paid by Horizon and Horizon Partnership to Prime
Partnership or Prime Partnership to Horizon Partnership (as applicable), in
immediately available funds within fifteen (15) calendar days after the date
the event giving rise to the obligation to make such payment occurred (except
as otherwise provided in Section 7.1(h)). As used in this Agreement,
"Break-Up Fee" shall be an amount equal to the lesser of (i) $20,000,000 (the
"Base Amount") and (ii) the sum of (A) the maximum amount that can be paid to
Prime Partnership without causing Prime to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code determined as if the payment of such
amount did not constitute income described in Sections 856(c)(2)(A)-(H) and
856(c)(3)(A)-(I) of the Code ("Qualifying Income"), as determined by
independent accountants to Prime, and (B) in the event Prime receives a
letter from outside counsel (the "Break-Up Fee Tax Opinion") indicating that
Prime has received a ruling from the IRS holding that Prime Partnership's
receipt of the Base Amount would either constitute Qualifying Income or would
be excluded from gross income of Prime within the meaning of Sections
856(c)(2) and (3) of the Code (the "REIT Requirements") or that the receipt
by Prime Partnership of the remaining balance of the Base Amount following
the receipt of and pursuant to such ruling would not be deemed constructively
received prior thereto, the Base Amount less the amount payable under clause
(A) above. Horizon's and Horizon Partnership's obligation to pay any unpaid
portion of the Break-Up Fee shall terminate three years from the date of this
Agreement. In the event that Prime Partnership is not able to receive the
full Base Amount, Horizon and Horizon Partnership shall place the unpaid
amount in escrow and shall not release any portion thereof to Prime
Partnership unless and until Horizon receives either one of the following:
(i) a letter from Prime's independent accountants indicating the maximum
amount that can be paid at that time to Prime Partnership without causing
Prime to fail to meet the REIT Requirements or (ii) a Break-Up Fee Tax
Opinion, in either of which events Horizon and Horizon Partnership shall pay
to Prime Partnership the lesser of the unpaid Base Amount or the maximum
amount stated in the letter referred to in (i) above. The "Break-Up Expenses"
payable to Prime Partnership or Horizon Partnership, as the case may be (the
"Recipient"), shall be an amount equal to the lesser of (i) $3,000,000, (ii)
the Recipient's out-of-pocket expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, all attorneys', accountants' and investment bankers' fees and
expenses) or (iii) the sum of (A) the maximum amount that can be paid to the
Recipient without causing Prime or Horizon, as the case may be, 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, as
determined by independent accountants to the Prime or Horizon, as the case
may be, and (B) in the event Prime or Horizon, as the case may be, receives a
Break-Up Fee Tax Opinion indicating that it has received a ruling from the
IRS holding that the Recipient's receipt of the Break-Up Expenses would
either constitute Qualifying Income or would be excluded from gross income of
Prime or Horizon, as the case may be, within the meaning of the REIT
Requirements or that receipt by the Recipient of the remaining balance of the
Break-Up Expenses following the receipt of and pursuant to such ruling would
not be deemed constructively received prior thereto, the Break-Up Expenses
less the amount payable under clause (A) above. The obligation of Prime and
Prime Partnership or Horizon and Horizon Partnership, as applicable
("Payor"), to pay any unpaid portion of the Break-Up Expenses shall terminate
three years from the date of this Agreement. In the event that the Recipient
is not able to receive the full Break-Up Expenses, the Payor shall place the
unpaid amount in escrow and shall not release any portion thereof to the
Recipient unless and until the Payor receives either one of the following:
(i) a letter
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from the independent accountants of Prime or Horizon, as the
case may be, indicating the maximum amount that can be paid at that time to
the Recipient without causing it to fail to meet the REIT Requirements or
(ii) a Break-Up Expense Tax Opinion, in either of which events the Payor
shall pay to the Recipient the lesser of the unpaid Break-Up Expenses or the
maximum amount stated in the letter referred to in (i) above.
7.3 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either Horizon or Prime as provided in Section 7.1, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of Prime, Prime Partnership, Newco LP, Horizon or Horizon Partnership,
other than the last sentence of Section 5.2, Section 7.2, this Section 7.3 and
Article 8, and except to the extent that such termination results from a
material breach by any party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
7.4 AMENDMENT. This Agreement may be amended by the parties in writing by
action of the respective Board of Directors of Prime and Horizon at any time
before or after any Shareholder Approvals are obtained and prior to the filing
of the Delaware Certificate with the Delaware Secretary; provided, however,
that, after the Shareholder Approvals and Partner Approvals are obtained, no
such amendment, modification or supplement shall be made which by law requires
the further approval of shareholders without obtaining such further approval.
The parties agree to amend this Agreement in the manner provided in the
immediately preceding sentence to the extent required to (a) continue the status
of each of Prime and Horizon (and its successor Horizon Subsidiary) as a REIT,
or (b) preserve each of the Prime/Horizon Merger and the Horizon/Subsidiary
Merger as a tax-free reorganization under Section 368 of the Code.
7.5 EXTENSION; WAIVER. At any time prior to the Partnership Merger
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other party, (b) waive any inaccuracies
in the representations and warranties of the other party contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 7.4, waive compliance with any of the agreements or
conditions of the other party contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement confirming the representations and warranties in this
Agreement shall survive the Prime/Horizon Merger Effective Time. This Section
8.1 shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Prime/Horizon Merger Effective Time.
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8.2 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally, sent by overnight courier (providing proof of delivery) to the
parties or sent by telecopy (providing confirmation of transmission) at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a party as shall be specified by like notice):
(a) if to Prime, to:
Prime Retail, Inc.
100 East Pratt Street
19th Floor
Baltimore, Maryland 21202
Attention: Michael W. Reschke
C. Alan Schroeder
Fax No.: (410) 234-1703
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg
Steven J. Gavin
Fax No.: (312) 558-5700
(b) if to Horizon, to:
Horizon Group, Inc.
5000 Hakes Drive
Norton Shores, MI 49441
Attention: Norman Perlmutter
James Wassel
Fax.: (616) 798-5100
with a copy to:
Rudnick & Wolfe
203 North LaSalle Street
Suite 1500
Chicago, IL 60601-1293
Attention: Errol R. Halperin
Hal M. Brown
Fax No.: (312) 236-7516
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All notices shall be deemed given only when actually received.
8.3 INTERPRETATION. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation."
8.4 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.
8.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement, the
Confidentiality Agreement, the Call Agreements, the Stock Purchase Agreement
and the other agreements entered into in connection with the Mergers (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral between the parties with respect to the
subject matter of this Agreement and (b) except as provided in Sections 1.7,
1.11, 5.8, 5.9, and 8.5 ("Third Party Provisions"), are not intended to
confer upon any person other than the parties hereto any rights or remedies.
8.6 GOVERNING LAW. THE PARTNERSHIP MERGER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS
OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF
CONFLICT OF LAWS THEREOF. EXCEPT AS PROVIDED IN THE IMMEDIATELY PRECEDING
SENTENCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF MARYLAND, REGARDLESS OF THE LAWS THAT MIGHT
OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
8.7 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned or delegated, in whole
or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and
be enforceable by, the parties and their respective successors and assigns.
8.8 ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any federal court located in
Maryland or in any state court located in Maryland this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself (without making such
submission exclusive) to the personal jurisdiction of any federal court located
in Maryland or any state court
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located in Maryland in the event any dispute arises out of this Agreement or
any of the transactions contemplated by this Agreement and (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court.
8.9 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Prime, Prime Partnership, Horizon, Sky Merger, Newco
LP and Horizon Partnership have caused this Agreement to be signed by their
respective officers (or general partners) thereunto duly authorized all as of
the date first written above.
PRIME RETAIL, INC.
By: /S/ Abraham Rosenthal
Name: Abraham Rosenthal
Title: C.E.O.
PRIME RETAIL, L.P.
By: Prime Retail, Inc., its sole
general partner
By: /S/ William H. Carpenter
Name: William H. Carpenter
Title: President
HORIZON GROUP, INC.
By: /S/ James S. Wassel
Name: James S. Wassel
Title: President
SKY MERGER CORP.
By: /S/ James S. Wassel
Name: James S. Wassel
Title: President
HORIZON/GLEN OUTLET CENTERS
LIMITED PARTNERSHIP
By: Horizon Group, Inc.,
its sole general partner
By: /S/ James S. Wassel
Name: James S. Wassel
Title: President
SKY NEWCO, L.P.
By: Horizon Group, Inc.,
its sole general partner
By: /S/ James S. Wassel
Name: James S. Wassel
Title: President
<PAGE>
EXHIBIT A
CONTRIBUTION AND DISTRIBUTION AGREEMENT
CONTRIBUTION AND DISTRIBUTION AGREEMENT, dated as of ______, 1997 (this
"Agreement"), by and between Horizon Group, Inc., a Michigan corporation
("Horizon"), Sky Merger Corp., a Maryland corporation ("Sky Merger"),
Horizon/Glen Outlet Centers Limited Partnership, a Delaware limited
partnership ("Horizon Partnership"), [Newco, Inc.], a Maryland corporation
("Newco") and Sky Newco, L.P., a Delaware limited partnership ("Newco LP").
RECITALS
A. THE MERGER TRANSACTIONS. Prime Retail, Inc. ("Prime"), Prime
Retail, L.P. ("Prime Partnership") and the parties hereto have entered into
an Agreement and Plan of Merger, dated as of November 12, 1997 (the "Merger
Agreement"), providing for, among other things, (i) the merger of Newco LP
with and into Prime Partnership, with Prime Partnership as the surviving
partnership (the "Partnership Merger"), (ii) the reincorporation of Horizon
as a Maryland corporation through the merger of Horizon with and into Sky
Merger, with Sky Merger as the surviving corporation (the "Horizon/Subsidiary
Merger"), and (iii) the merger of Prime with and into Sky Merger, with Sky
Merger as the surviving corporation (the "Prime/Horizon Merger") (the
Partnership Merger, the Horizon/Subsidiary Merger and the Prime/Horizon
Merger being, collectively, the "Mergers"). Pursuant to the foregoing, Sky
Merger will become subject to all of the rights and obligations of Horizon
under this Agreement, and Prime Partnership will become subject to all of the
rights and obligations of Newco LP under this Agreement.
B. THE CONTRIBUTION. Immediately prior to the Distribution, (i)
Horizon Partnership expects to cause Initial Horizon Partnership Group (as
hereinafter defined) to contribute the Contributed Assets (as hereinafter
defined) to Newco LP as a capital contribution, and to cause Newco LP to
assume the Assumed Liabilities (as hereinafter defined) (the "Partnership
Contribution"), and (ii) Horizon expects to contribute to Newco all of its
partnership interests in Horizon Partnership (the "Corporate Contribution",
and together with the Partnership Contribution, the "Contribution ").
C. THE DISTRIBUTION. Subject to the satisfaction or waiver of the
conditions set forth in Article VI of this Agreement, (i) immediately prior
to the Mergers and after the Time of Contribution (as hereinafter defined),
Horizon Partnership expects to declare and make a distribution of all of the
limited partnership interests in Newco LP ("Newco OP Units") on a pro rata
basis to the record holders of Horizon Partnership limited partnership
interests ("Horizon OP Units") on such date (the "Partnership Distribution"),
and (ii) after consummation of the Partnership Distribution and immediately
prior to the Mergers, Horizon, as the sole shareholder of Newco, expects to
declare a distribution of all of the Common Stock of Newco pro rata to the
record holders of Common Stock of Horizon on such date (the "Corporate
Distribution", and together with the Partnership Distribution, the
"Distribution").
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D. PURPOSE. The purpose of the Contribution and Distribution is to
facilitate the Merger by providing for the retention by Newco and Horizon
Partnership of the businesses and operations which Prime and Prime Partnership
are unwilling to acquire and operate on an ongoing basis. This Agreement sets
forth or provides for certain agreements among the parties hereto in connection
with such retention.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following respective meanings (capitalized terms used but not defined
herein shall have the respective meanings ascribed thereto in the Merger
Agreement):
"Action" shall mean any suit, claim, action, arbitration, inquiry,
proceeding or investigation by or before any court, arbitral tribunal,
administrative agency or commission or other governmental, regulatory or
administrative agency or commission.
"Assumed Liabilities" shall mean all Liabilities of Initial Horizon
Partnership Group, other than the Retained Liabilities, and shall include,
without limitation, (i) all obligations to indemnify present and former officers
and directors of Initial Horizon Partnership Group under certificates or
articles of incorporation, by-laws, partnership agreements, employment
agreements, indemnification agreements or otherwise, for any matter existing or
occurring at or prior to the Prime/Horizon Merger Effective Time (including,
without limitation, any and all transactions resulting directly or indirectly
from the transactions contemplated hereby and by the Merger Agreement or the
documents delivered hereunder or thereunder) and whether asserted or claimed
prior to, or at or after, the consummation of the transactions contemplated
hereby or by the Merger Agreement or any document contemplated hereunder or
thereunder, (ii) all Liabilities relating to the loans described on the Schedule
of Debt as secured by a Contributed Asset listed on Schedule 1.1(a), including
the Lehman Brothers loans to Third Horizon to the extent needed to obtain
requisite lender consent to the transfer of the Contributed Assets owned by
Third Horizon, and (iiii) all leases (whether as lessor, lessee, sublessee,
sublessor or otherwise) and related contracts, and service contracts, relating
to the Contributed Assets listed on Schedule 1.1(a).
"Contributed Assets" shall mean all business, assets, properties, interests
in property, and rights of Initial Horizon Partnership Group, except for the
Retained Assets, and shall include, without limitation:
(a) all real estate and interests in real estate, buildings,
fixtures, leases (whether as lessor, lessee, sublessee, sublessor or
otherwise), rights of way, and easements;
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(b) all current and fixed assets, including, but not limited to, all
machinery, equipment, furniture, fixtures and all other personal property;
(c) all contracts, purchase orders, leases, royalty agreements,
instruments, licenses, franchises and other agreements;
(d) all files wherever located, whether in the form of hard copies,
computer tape or otherwise, and all software;
(e) all licenses, authorizations and permits issued by any
governmental agency;
(f) all intangible property rights including, without limitation, all
trademarks, tradenames and copyrights, all capital stock of any Person, and
all partnership or membership interests in any Person;
(g) all trade secrets, customer lists, supplier lists, and all other
rights and documents, and all books and records incident thereto;
(h) all rights to insurance proceeds arising from any casualty,
security deposits, and deposits with utilities and governmental agencies;
(i) such rights as Horizon Partnership Group has to use their present
telephone numbers;
(j) all cash and cash equivalents;
(k) all membership and other interests in Finger Lakes Outlet
Center, L.L.C.; and
(l) any and all of the foregoing relating to its ownership and
operation of each of the retail outlet centers listed on Schedule 1.1(a)
hereto.
"Contributed Business" shall mean all business and operations of Initial
Horizon Partnership Group other than the Retained Business.
"Employee Benefits Agreement" shall have the meaning assigned thereto in
Section 5.7 hereof.
"Horizon Partnership Group" shall mean, collectively, Newco, Horizon
Partnership and their Subsidiaries (other than Newco LP Group) after giving
effect to the Contribution.
"Indemnified Loss" shall mean, with respect to any claim by an Indemnified
Party for indemnification pursuant to Article V hereof, any and all losses,
Liabilities, claims, damages, obligations, payments, costs and expenses
(including, without limitation, the costs and expenses of any and all actions,
demands, assessments, judgments, settlements and compromises relating thereto
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and reasonable costs of investigation and attorneys' fees and expenses in
connection therewith) suffered by such Indemnified Party with respect to such
claim.
"Initial Horizon Partnership Group" shall mean, collectively, Horizon
Partnership and its Subsidiaries prior to giving effect to the Contribution.
"Liabilities" shall mean, with respect to any Person, except as otherwise
provided herein, any and all liabilities and obligations of such Person, whether
absolute, accrued, contingent, reflected on a balance sheet (or in the notes
thereto) or otherwise, including, without limitation, those arising under any
law, rule, regulation, Action, order or consent decree of any governmental
entity or any judgment of any court of any kind or any award of any arbitrator
of any kind, and those arising under any contract, commitment or undertaking.
"Newco LP Group" shall mean, collectively, Newco LP and its Subsidiaries
after giving effect to the Contribution.
"Retained Assets" shall mean, collectively, (i) all business, assets,
properties, interests in property and rights of Initial Horizon Partnership
Group solely related to the ownership and operation of the retail outlet
centers listed on Schedule 1.1(b) hereto; (ii) all capital stock, partnership
interests and membership interests of Initial Horizon Partnership Group in
Horizon Partnership, MG Long Island Limited Partnership, MG Patchogue Limited
Partnership, MG Patchogue II Limited Partnership, Third HGI, Inc., Third HGI,
L.L.C. and Third Horizon; (iii) the Retained Proprietary Name Rights (as
hereinafter defined); and (iv) Horizon's administrative offices located at
5000 Hakes Drive, Norton Shores, Michigan and the office equipment and
computer software used therein. Retained Assets shall not include any cash
or cash equivalents of Initial Horizon Partnership Group.
"Retained Business" shall mean all business and operations of Initial
Horizon Partnership Group primarily related to the Retained Assets.
"Retained Liabilities" shall mean all Liabilities primarily related to
the Retained Assets and Retained Business and shall include, without
limitation, (i) all obligations to indemnify present and former officers and
directors of Horizon Partnership Group under certificates or articles of
incorporation, by-laws, partnership agreements, employment agreements,
indemnification agreements or otherwise arising from any matter occurring
after the Closing Date (ii) all Liabilities relating to the loans described
on the Schedule of Debt as secured by a Retained Asset listed on Schedule
1.1(b), and any other mortgage loans secured by a Retained Asset listed on
Schedule 1.1(b) incurred after the date hereof, but not the loans from Lehman
Brothers to Third Horizon to the extent the same are Assumed Liabilities, and
(iii) all leases (whether as lessor, lessee, sublessee, sublessor or
otherwise) and related contracts, and service contracts, relating to the
Retained Assets listed on Schedule 1.1(b).
"Schedule of Debt" shall mean the Horizon Schedule of Debt attached as
Schedule 1.1(c) hereto.
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"Securities Act" shall mean the Securities Act of 1933, as amended.
"Tax Disaffiliation Agreement" shall have the meaning assigned thereto in
Article III hereof.
"Third Horizon" shall mean Third Horizon Group Limited Partnership.
"Time of Contribution" shall mean the time of consummation of the
Contribution.
"Time of Distribution" shall mean the time as of which the Distribution is
effective.
"Transfer Agent" shall mean the transfer agent for the Horizon Common
Stock.
ARTICLE II
CAPITALIZATION OF NEWCO; MECHANICS OF DISTRIBUTION
2.1 CAPITALIZATION OF NEWCO AND NEWCO LP. The authorized capital stock
of Newco currently consists of 50,000,000 shares of Newco Common Stock, 1,000
shares of which are issued and outstanding to, and owned beneficially and of
record by, Horizon. The outstanding limited partnership interests of Newco
LP currently consist of 4,227,064 Newco OP Units, all of which are issued and
outstanding to, and owned beneficially and of record by, Horizon Partnership.
Horizon is the sole general partner of Newco LP. As of the date hereof, and
prior to effecting the transactions contemplated hereby, Newco and Newco LP
have no assets or liabilities.
2.2 MECHANICS OF DISTRIBUTION.
(a) The Partnership Distribution shall be effected by the
distribution to each holder of record of Horizon OP Units as of the close of
the transfer books immediately prior to the Mergers of one (1) Newco OP Unit
multiplied by the number of Horizon OP Units held by such holder.
(b) The Corporate Distribution shall be effected by the
distribution to each holder of record of Horizon Common Stock as of the close
of the Horizon Common Stock transfer books immediately prior to the Mergers
of one (1) share of Newco Common Stock multiplied by the number of shares of
Horizon Common Stock held by such holder.
2.3 TIMING OF DISTRIBUTION.
(a) After the Time of Contribution and immediately prior to the
Partnership Merger Effective Time, Horizon Partnership shall formally declare
the Partnership Distribution, which declaration shall be subject to the
satisfaction or waiver of the conditions set forth in Article VI of this
Agreement. The Partnership Distribution shall be deemed to be effective upon
notification by Horizon Partnership to Newco LP that such conditions have been
satisfied or waived.
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Payment of the Partnership Distribution shall be made to the holders of
Horizon OP Units entitled thereto through appropriate amendment to the Newco
LP partnership agreement.
(b) After consummation of the Partnership Distribution and
immediately prior to the Partnership Merger Effective Time, Horizon shall
formally declare the Corporate Distribution, which declaration shall be
subject to the satisfaction or waiver of the conditions set forth in Article
VI of this Agreement. The Corporate Distribution shall be deemed to be
effective upon notification by Horizon to the Transfer Agent that such
conditions have been satisfied or waived and that the Transfer Agent is
authorized to proceed with the Corporate Distribution. Payment of the
Corporate Distribution shall be made by delivery of certificates for Newco
Common Stock to the Transfer Agent for delivery to the holders of Horizon
Common Stock entitled thereto or by any other permitted form of transfer.
ARTICLE III
TAX MATTERS
Prior to the Time of Contribution, Horizon and Newco shall enter into an
agreement relating to past and future tax sharing and certain issues
associated therewith (the "Tax Disaffiliation Agreement").
ARTICLE IV
CONTRIBUTION AND ASSUMPTION
4.1 CONTRIBUTION OF ASSETS.
(a) Subject to Section 4.1(c) and to the satisfaction or waiver of
the conditions set forth in Article VI of this Agreement, immediately prior
to the Distribution Horizon Partnership shall cause Initial Horizon
Partnership Group to transfer, assign and convey to Newco LP as a capital
contribution all of its respective right, title and interest in and to the
Contributed Assets. If a retail outlet center listed on Schedule 1.1(a) has
been sold prior to the Time of Contribution, the proceeds of such sale shall
be contributed in lieu thereof. To the extent 100% ownership of any entity
that owns Contributed Assets is transferred to Newco LP pursuant to this
Agreement, the Contributed Assets owned by such entity shall be deemed
transferred to Newco LP.
(b) Immediately prior to the Distribution, Horizon shall
contribute to Newco all of its partnership interests in Horizon Partnership.
(c) Notwithstanding Sections 4.1(a) and (b), Horizon Partnership
Group shall retain and not contribute to Newco LP any of its respective
right, title, or interest in and to the Retained Assets.
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(d) At the Time of Contribution, Horizon Partnership shall issue
and contribute to Newco LP an unsecured negotiable recourse promissory note,
payable to the order of Newco LP on demand, in the principal amount of the
Retained Mortgage Loan Deficiency, if any. The unpaid balance of such note
shall bear interest daily at a rate per annum equal to 10% until paid in
full. As used herein, "Retained Mortgage Loan Deficiency" shall mean the
excess, if any, of (i) an amount equal to $160,000,000 less the aggregate
amount of proceeds from sales of retail outlet centers included in the
definition of Retained Assets applied between November 12, 1997 and the Time
of Contribution to reduce the principal balance of mortgage loans included in
the definition of Retained Liabilities, over (ii) the aggregate unpaid
principal balance of mortgage loans included in the definition of Retained
Liabilities and outstanding at the Time of Contribution. If a retail outlet
center listed on Schedule 1.1(b) has been sold prior to the Time of
Contribution, the net proceeds of such sale shall be applied to any mortgage
loans secured thereby, and any remainder to any other mortgage loans
included in the definition of Retained Liabilities.
4.2 ASSUMPTION OF LIABILITIES.
(a) Subject to Section 4.2(b) and effective as of the Time of
Contribution, Newco LP, in partial consideration for the Contribution, hereby
unconditionally assumes and undertakes to pay, satisfy and discharge when due
in accordance with their terms the Assumed Liabilities.
(b) Notwithstanding Section 4.2(a), Horizon Partnership Group
shall retain, and Newco LP shall not assume and shall have no liability with
respect to, the Retained Liabilities.
4.3 TRANSFER AND ASSUMPTION DOCUMENTATION. In furtherance of the
contribution, grant, conveyance, assignment, transfer and delivery of the
Contributed Assets and the assumption of the Assumed Liabilities set forth in
this Article IV, at the Time of Contribution or as promptly as practicable
thereafter (i) Horizon Partnership shall execute and deliver, and cause its
Subsidiaries to execute and deliver, such deeds, bills of sale, stock powers,
certificates of title, assignments of leases and contracts and other
instruments of contribution, grant, conveyance, assignment, transfer and
delivery necessary to evidence such contribution, grant, conveyance,
assignment, transfer and delivery and (ii) Newco LP shall execute and deliver
such instruments of assumption as and to the extent necessary to evidence
such assumption.
4.4 NONASSIGNABLE CONTRACTS. Anything contained herein to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign
any lease, license agreement, contract, agreement, sales order, purchase
order, open bid or other commitment or asset if an assignment or attempted
assignment of the same without the consent of the other party or parties
thereto would constitute a breach thereof or in any way impair the rights
after the Contribution of Horizon Partnership Group or Newco LP Group
thereunder. Horizon Partnership shall, prior to the Time of Contribution,
use reasonable best efforts (it being understood that such efforts shall not
include any requirement of the Initial Horizon Partnership Group to expend
money or offer or grant any financial accommodation) as requested by Newco
LP, and Newco LP shall cooperate in all reasonable respects with Initial
Horizon Partnership Group, to obtain all consents and waivers and to resolve
all impracticalities of assignments or transfers necessary to convey to Newco
LP the Contributed
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Assets. If any such consent is not obtained or if an attempted assignment
would be ineffective or would impair either group's rights under any such
lease, license agreement, contract, agreement, sales order, purchase order,
open bid or other commitment or asset so that Newco LP would not receive all
such rights, then (x) Horizon Partnership shall use reasonable best efforts
(it being understood that such efforts shall not include any requirement of
Initial Horizon Partnership Group to expend money or offer or grant any
financial accommodation) to provide or cause to be provided to Newco LP, to
the extent permitted by law, the benefits of any such lease, license
agreement, contract, agreement, sales order, purchase order, open bid or
other commitment or asset.
4.5 USE OF NAMES.
(a) Prior to the Contribution, Horizon Partnership Group and Newco
LP shall determine which of the names, trademarks, trade names and other
proprietary rights related to the Retained Assets Horizon Partnership shall
have the sole and exclusive ownership of and right to use, as between Newco
LP Group, on the one hand, and Horizon Partnership Group, on the other hand
(the "Retained Proprietary Name Rights"). Following the Contribution, Newco
LP Group shall have the sole and exclusive ownership of and right to use, as
between the Newco LP Group on the one hand, and the Horizon Partnership Group
on the other hand, all names, trade marks, trade names, service marks and
other proprietary rights owned or used by Horizon Partnership Group
immediately prior to the Contribution other than the Retained Proprietary
Name Rights (the "Contributed Proprietary Name Rights").
(b) Following the Contribution (i) Newco and Horizon Partnership
shall, and shall cause their Subsidiaries and other affiliates (other than
the Newco LP Group) to, take all action necessary to cease using, and change
as promptly as practicable (including by amending any charter documents), any
corporate or other names which are the same as or confusingly similar to any
of the Newco LP Proprietary Name Rights, and (ii) Contributed Proprietary
Name Rights shall, and shall cause its Subsidiaries and other affiliates to,
take all action necessary to cease using, and change as promptly as
practicable (including by amending any charter documents), any corporate or
other names which are the same as or confusingly similar to any of the
Retained Proprietary Name Rights. From and after the Closing Date, Newco and
Horizon Partnership shall cause the Horizon Partnership Group to cease
holding itself out as having an affiliation with Newco LP.
4.6 NEWCO BOARD OF DIRECTORS. At the Time of Contribution, the board
of directors of Newco shall consist of five (5) individuals, three (3)
appointed by Horizon and two (2) appointed by Prime.
ARTICLE V
CERTAIN COVENANTS
5.1 INDEMNITY AS BETWEEN NEWCO LP AND HORIZON PARTNERSHIP FROM ASSUMED
LIABILITIES.
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(a) Effective upon the Contribution, Newco LP agrees to indemnify
and hold Horizon Partnership Group, its affiliates, successors and assigns
and the officers, directors, employees, agents, advisors and representatives
of any of them, harmless from and against any and all Indemnified Losses
arising out of or related to the Assumed Liabilities.
(b) Effective upon the Contribution, Horizon Partnership agrees to
indemnify and hold Newco LP Group, its affiliates, successors and assigns and
the officers, directors, employees, agents and representatives of any of
them, harmless from and against any and all Indemnified Losses arising out
of or related to the Retained Liabilities.
5.2 PROCEDURE FOR THIRD PARTY INDEMNIFICATION.
(a) If a party entitled to be indemnified hereunder (an
"Indemnified Party") shall receive notice of the assertion by a person who is
not a party to this Agreement of any claim or of the commencement by any such
person of any Action (a "Third Party Claim") with respect to which a party
hereto is obligated to provide indemnification (an "Indemnifying Party"),
such Indemnified Party shall give such Indemnifying Party prompt notice
thereof after becoming aware of such Third Party Claim; provided that the
failure of any Indemnitee to give notice as provided in this Section 5.3
shall not relieve the related Indemnifying Party of its obligations under
this Article V, except to the extent that such Indemnifying Party is actually
prejudiced by such failure to give notice. Such notice shall describe the
Third Party Claim in reasonable detail, and, if practicable, shall indicate
the estimated amount of the Indemnified Loss that has been or may be
sustained by such Indemnified Party.
(b) An Indemnifying Party may elect to defend, at such
Indemnifying Party's own expense and by such Indemnifying Party's own
counsel, any Third Party Claim. If an Indemnifying Party elects to defend a
Third Party Claim, it shall, within 30 days of notice of such Third Party
Claim (or sooner, if the nature of such Third Party Claim so requires),
notify the related Indemnified Party of its intent to do so and acknowledge
its liability therefor, and such Indemnified Party shall cooperate in the
defense of such Third Party Claim. After notice from an Indemnifying Party to
an Indemnified Party of its election to assume the defense of a Third Party
Claim, such Indemnifying Party shall not be liable to such Indemnified Party
under this Article V for any legal or other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof as long as the
Indemnifying Party pursues such defense diligently and in good faith;
provided that if, under applicable standards of professional conduct (as
advised by counsel to the Indemnifying Party), a conflict on any significant
issue between such Indemnified Party and such Indemnifying Party or between
any two or more Indemnified Parties may exist in respect of such claim, then
the Indemnifying Party shall pay the reasonable fees and expenses of one such
additional counsel as may be required to be retained in light of such
conflict. If an Indemnifying Party elects not to defend against a Third
Party Claim, or fails to notify an Indemnified Party of its election as
provided in this Section 5.2 within the time period specified, or fails to
pursue the defense of a Third Party Claim diligently and in good faith, such
Indemnified Party may defend, compromise and settle such Third Party Claim.
Notwithstanding the foregoing, (i) neither an Indemnifying Party nor an
Indemnified Party, as the party controlling the defense of a Third Party
Claim, may compromise or
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settle any claim or consent to the entry of any judgment for other than
monetary damages without the prior written consent of the other; provided
that (upon reasonable notice thereof) consent to compromise or settlement or
the entry of a judgment shall not be unreasonably withheld or delayed, and
(ii) no Indemnifying Party shall consent to the entry of any judgment or
enter into any compromise or settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party and all other Indemnified Parties, as the case may be,
subject to such Third Party Claim of a full and final release from all
liability in respect of such claim or litigation.
5.3 ADJUSTMENT FOR INSURANCE AND TAXES. The amount which either Newco LP
or Horizon Partnership is required to pay to, for or on behalf of the other
pursuant to Sections 5.1 and 5.2, shall be adjusted (including, without
limitation, retroactively) (i) by any insurance proceeds actually recovered by
or on behalf of Newco LP Group, Horizon Partnership Group or the Indemnified
Party, as the case may be, in reduction of the related Indemnified Loss or Third
Party Claim and (ii) reduced by the net difference between (A) the present
value of the amount of any Tax savings resulting from any tax benefit to Newco
LP Group, Horizon Partnership Group or the Indemnified Party, as the case may be
as a result of the Indemnified Loss or Third Party Claim, and (B) the present
value of the amount of any Tax due with respect to the receipt of the
indemnification payment itself. Amounts required to be paid, as so adjusted,
are hereafter sometimes called an "Indemnified Payment." If Newco LP Group,
Horizon Partnership Group or the Indemnified Party, as the case may be, shall
have received or shall have had paid on its behalf an Indemnified Payment in
respect of an Indemnified Loss or Third Party Claim and shall subsequently
receive insurance proceeds in respect of such Indemnified Loss or Third Party
Claim, or realize any net tax benefit (as computed in clause (ii) above) as a
result of such Indemnified Party or Third Party Claim, then Newco LP, Horizon
Partnership or the Indemnified Party, as the case may be, shall pay to Newco LP,
Horizon Partnership or the Indemnified Party, as the case may be, the amount of
such insurance proceeds or net tax benefit, or if lesser, the amount of the
Indemnified Payment.
5.4 RISK OF CONTRIBUTED ASSETS. Each party understands and agrees that,
except as otherwise specifically provided herein, no party nor any of its
Subsidiaries is, in this Agreement or any other agreement or document
representing or warranting to such party in any way as to the assets, business
or Liabilities transferred or assumed as contemplated hereby or as to any
consents or approvals required in connection with the consummation of the
transactions contemplated by this Agreement, it being agreed and understood that
each party shall take or keep all of its assets "as is" and that it shall bear
the economic and legal risk that conveyance of such assets shall prove to be
insufficient or that the title to any assets shall be other than good and
marketable and free from encumbrances. All implied warranties are hereby
expressly disclaimed.
5.5 TRANSFER OF EMPLOYEES. With respect to the personnel employed on-site
at the centers included in the Retained Business and such other employees of the
Contributed Business designated by Horizon Partnership not later than the
Closing Date as employees who will remain with Horizon Partnership Group
(collectively, the "Retained Employees"), except as otherwise specifically
provided in this Agreement, Horizon Partnership Group shall retain the
liabilities and obligations with respect to, and continue to be responsible for,
all liabilities and obligations whatsoever in
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connection with, claims made by or on behalf of such persons in respect of
salary, wages, benefits, severance pay, salary continuation, COBRA
continuation and similar obligations relating to the continued employment, or
the termination or alleged termination of such persons' employment with
Horizon Partnership Group by reason of the consummation of the transactions
contemplated in this Agreement or the Merger Agreement or otherwise and
neither Newco LP nor any member of Newco LP Group shall assume such
liability. Effective as of the Partnership Merger Effective Time, Horizon
Partnership and Newco LP shall cooperate to transfer to the employ of Newco
LP Group, each person employed by Horizon Partnership Group, other than the
Retained Employees (such employees and other persons who become employees of
the Newco LP Group after the Partnership Merger Effective Time in accordance
with this Section 5.5 shall be hereinafter referred to as the "Transferred
Employees"). With respect to the Transferred Employees, Newco LP Group shall
assume the liabilities and obligations with respect to, and continue to be
responsible for all liabilities and obligations whatsoever in connection
with, claims made by or on behalf of such persons in respect of salary,
wages, benefits, severance pay, salary continuation, COBRA continuation and
similar obligations relating to the continued employment, or the termination
or alleged termination of such persons' employment with the Newco LP Group by
reason of consummation of the transactions contemplated in this Agreement or
the Merger Agreement or otherwise and Horizon Partnership Group shall have no
such liability.
5.6 CERTAIN EMPLOYEE BENEFITS PLANS. Prior to Partnership Merger
Effective Time, Newco LP and Horizon Partnership shall enter into an agreement
relating to the parties' responsibilities with respect to certain employee
benefit liabilities and obligations (the "Employee Benefits Agreement").
5.7 INSURANCE. The parties agree to cooperate with each other with
respect to the processing of any claims which are covered by any insurance
policy in existence prior to the Partnership Merger Effective Time. Without
limiting the generality of the foregoing, Horizon Partnership Group shall have
the right to process and pursue any claim for insurance (including negotiating
with the company issuing the insurance policy) in connection with any liability
of Horizon Partnership Group, regardless of whether the insurance policy under
which such claim is made is transferred pursuant to Section 4.1(a), and Newco LP
Group shall have the right to process and pursue any claim for insurance
(including negotiating with the company issuing the insurance policy) in
connection with any liability of Newco LP Group, regardless of whether the
insurance policy under which such claim is made is retained by Horizon
Partnership Group pursuant to Section 4.1(b).
5.8 TRANSFER TAXES. Newco LP shall pay or cause to be paid the Transfer
Taxes (as defined in the Tax Disaffiliation Agreement) imposed in connection
with or as a result of the Contribution or the Distribution.
ARTICLE VI
CONDITIONS
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The obligations of the parties to consummate the Contribution and
Distribution shall be subject to the fulfillment or waiver in accordance with
the Merger Agreement of each condition to the closing of the Merger set forth
in Article VI of the Merger Agreement, other than the condition to each
party's obligations set forth in Section 6.2 (h) thereof as to the
consummation of the transactions contemplated by this Agreement.
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
7.1 PROVISION OF CORPORATE RECORDS. At the Time of Contribution,
Horizon Partnership shall cause Initial Horizon Partnership Group to deliver,
or cause to be delivered, to Newco LP Group all corporate books and records
which relate primarily to Newco LP Group, the Contributed Assets or the
Assumed Liabilities, including, without limitation, all active agreements,
active litigation files and government filings. From and after the Time of
Contribution, all such books, records and copies shall be the property of
Newco LP Group.
7.2 ACCESS TO INFORMATION. From and after the Time of Contribution (i)
Horizon Partnership shall cause Horizon Partnership Group to afford to Newco
LP Group and its authorized accountants, counsel and other designated
representatives reasonable access (including, without limitation, using
reasonable efforts to give access to persons or firms possessing Information
(as defined below)) and duplicating rights during normal business hours to
all records, books, contracts, instruments, computer data and other data and
information (collectively, "Information") within Horizon Partnership Group's
possession relating to the Contributed Assets or the Assumed Liabilities,
insofar as such access is reasonably required by Newco LP Group, and (ii)
Newco LP shall cause Newco LP Group to afford to Horizon Partnership Group
and its authorized accountants, counsel and other designated representatives
reasonable access (including, without limitation, using reasonable efforts to
give access to persons or firms possessing Information) and duplicating
rights during normal business hours to all Information within Newco LP
Group's possession relating to the Initial Horizon Partnership Group, the
assets of Horizon Partnership Group (including without limitation, the
Contributed Assets or the Assumed Liabilities), insofar as such access is
reasonably required by Horizon Partnership Group. Information may be
requested under this Section 7.2 for, without limitation, audit, accounting,
claims, litigation and tax purposes, as well as for purposes of fulfilling
disclosure and reporting obligations.
7.3 PRODUCTION OF WITNESSES. From and after the Time of Contribution,
each party shall use reasonable efforts to make available to the other party,
upon written request, its officers, directors, employees and agents as
witnesses to the extent that any such person may reasonably be required in
connection with any legal, administrative or other proceedings in which the
requesting party may from time to time be involved.
7.4 RETENTION OF RECORDS. Except as otherwise required by law or agreed
to in writing, Horizon Partnership shall cause Horizon Partnership Group, and
Newco LP shall cause Newco LP Group each to retain, for a period of at least
five years following the Time of Contribution, all
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significant Information relating to the Contributed Assets or the Retained
Business. Notwithstanding the foregoing, either Horizon Partnership Group or
Newco LP Group may destroy or otherwise dispose of any of such Information at
any time, provided that, prior to such destruction or disposal (a) Horizon
Partnership or Newco LP, as the case may be, shall cause the Person seeking
to destroy or otherwise dispose of any Information to provide no less than 90
days or more than 120 days' prior written notice to the parties hereto,
specifying the Information proposed to be destroyed or disposed of and (b) if
any party shall request in writing prior to the scheduled date for such
destruction or disposal that any of the Information proposed to be destroyed
or disposed of be delivered to the other party, such Person shall promptly
arrange for the delivery of such of the Information as was requested, at the
expense of the requesting party.
7.5 CONFIDENTIALITY. Each party shall hold, and shall cause its officers,
employees, agents, consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law or in order to comply with the requirements of a binding
stock exchange listing application or agreement or applicable stock exchange
rules, all non-public Information concerning the other party furnished it by
such other party or its representatives or otherwise in its possession (except
to the extent that such Information can be shown to have been (a) available to
such party on a non-confidential basis prior to its disclosure by the other
party, (b) in the public domain through no fault of such party or (c) later
lawfully acquired from other sources by the party to which it was furnished),
and each party shall not release or disclose such Information to any other
person, except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors who have a need to know such Information and who agree
to be bound by the provisions of this Section 7.5.
ARTICLE VIII
MISCELLANEOUS AND GENERAL
8.1 MODIFICATION OR AMENDMENT. The parties hereto may modify or amend
this Agreement by written agreement executed and delivered by authorized
officers of the respective parties, provided Prime has consented in writing
to any such modification or amendment. The parties expressly agree that
Prime shall be a third party beneficiary of this Section 8.1.
8.2 COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed in separate counterparts, each such counterpart
being deemed to be an original instrument, and which counterparts shall
together constitute the same agreement.
8.3 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois, without reference to
its conflicts of law principles.
8.4 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party to the other shall be in writing and shall be
deemed to have been duly given (i) on the date of delivery if delivered by
facsimile (upon confirmation of receipt) or personally, (ii) on the first
business day following the date of dispatch if delivered by Federal Express
or other reputable next-
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day courier service or (iii) on the third business day following the date of
mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. On and after the Partnership Merger Effective
Date, all notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the
party to receive such notice.
If to Newco or Horizon Partnership:
Horizon Group, Inc.
5000 Hakes Drive
Norton Shores, MI 49441
Attention: James S. Wassel
Fax: No.: (616) 798-5100
with a copy to:
Rudnick & Wolfe
203 North LaSalle Street
Suite 1500
Chicago, IL 60601-1293
Attention: Errol R. Halperin, Esq.
Fax No.: (312) 236-7516
If to Horizon, Sky Merger, or Newco LP:
Prime Retail, Inc.
100 East Pratt Street
19th Floor
Baltimore, Maryland 21202
Attention: Michael W. Reschke
C. Alan Schroeder
Fax No.: (410) 234-1703
With a copy to:
Winston & Strawn
35 W. Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg
Steven J. Gavin
Fax No.: (312) 558-5700
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<PAGE>
8.5 CAPTIONS. All Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
8.6 ASSIGNMENT. Nothing contained in this Agreement or the agreements
referred to herein (except as otherwise expressly set forth therein) is
intended to confer on any person or entity other than the parties hereto and
their respective successors and permitted assigns any benefit, rights or
remedies under or by reason of this Agreement and such other agreements,
except that the provisions of Section 5.1 and 5.2 hereof shall inure to the
benefit of the Persons referred to therein.
8.7 FURTHER ASSURANCES. Subject to the terms and conditions hereof
and, as applicable, of the Merger Agreement, the parties will, and will cause
their respective Subsidiaries and affiliates to, do such additional things as
are necessary or proper to carry out and effectuate the intent of this
Agreement or any part hereof or the transactions contemplated hereby.
8.8 ATTORNEY-CLIENT PRIVILEGE; WORK PRODUCT. Anything herein or in the
Merger Agreement notwithstanding, the transactions contemplated hereby and by
the Merger Agreement shall not be deemed to transfer to or vest in Newco LP
Group any right to waive, nor shall they be deemed to waive, any
attorney-client privilege between Horizon Partnership Group and its legal
counsel, with respect to legal advice concerning the business or operations
of Horizon Partnership Group including, without limitation, the Retained
Liabilities or the transactions contemplated hereby and by the Merger
Agreement, in either case, concerning privileged communications (or work
product related thereto) at any time prior to the Closing Date (as defined in
the Merger Agreement). Newco and Horizon Partnership each shall assign to
Newco LP, and cause each member of Horizon Partnership Group to assign to
Newco LP Group, its rights (if any) to any attorney-client privilege with
respect to legal advice concerning the business or operations of Newco LP
Group including, without limitation, the Assumed Liabilities or the
transactions contemplated hereby concerning privileged communications (or
work product related thereto) at any time prior the Closing Date. Horizon
Partnership Group and their successors and assigns shall not be entitled to
waive or have access, nor shall they attempt to waive or seek access, to any
privileged communications (or work product related thereto) between Newco LP
Group and its legal counsel with respect to legal advice concerning the
business or operations of the Newco LP Group, including the Assumed
Liabilities or the transactions contemplated hereby.
8.9 NO THIRD-PARTY BENEFICIARIES. Except as provided in Section 5.1
and 8.1 hereof, this Agreement, the Tax Disaffiliation Agreement and the
Employee Benefits Agreement, are not intended to confer upon any person other
than the parties hereto and thereto any rights or remedies hereunder or
thereunder.
8.10 CONFLICT WITH TAX DISAFFILIATION AGREEMENT. In the event of any
conflict between this Agreement and the Tax Disaffiliation Agreement, the Tax
Disaffiliation Agreement shall control.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
hereinabove written.
HORIZON GROUP, INC.
By: __________________________________
Name:
Title:
[NEWCO, INC.]
By: ______________________________
Name:
Title:
HORIZON/GLEN OUTLET CENTERS LIMITED PARTNERSHIP
By: Horizon Group, Inc., its sole general partner
By: _______________________________________
Name:
Title:
SKY MERGER CORP.
By: ______________________________
Name:
Title:
SKY/NEWCO, LP
By: Horizon Group, Inc., its sole general partner
By: _________________________________
Name:
Title:
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<PAGE>
FORM OF
TAX DISAFFILIATION AGREEMENT
TAX DISAFFILIATION AGREEMENT, dated as _____________, 1998, among HORIZON
GROUP, INC., a Michigan corporation ("Horizon"), SKY MERGER CORP., a Maryland
corporation ("Sky Merger"), and [Newco], a Maryland corporation ("Newco").
WHEREAS, upon the terms and subject to the conditions set forth herein,
immediately prior to the consummation of the Mergers and after the formation
of Newco, it is contemplated that (i) Horizon Partnership shall contribute
certain of its assets to Newco LP, and that Newco LP shall assume certain
obligations of Horizon Partnership, and (ii) Horizon shall contribute to
Newco all of its partnership interests in Horizon Partnership, all as
provided in the Contribution and Distribution Agreement.
WHEREAS, upon the terms and subject to the conditions set forth herein on
the consummation date of the Mergers (the "Distribution Date") and
immediately prior to the consummation of the Mergers and after the
consummation of the Contribution, Horizon Partnership shall declare and make
a distribution of all of its limited partnership interests in Newco LP (the
"Partnership Distribution") made on a pro rata basis to the record holders of
limited partnership interests in Horizon Partnership on the date of
consummation of the Mergers (the "Record Date"), as provided in the
Contribution Agreement.
WHEREAS, upon the terms and subject to the conditions set forth herein,
on the Distribution Date and immediately prior to the consummation of the
Mergers and after the consummation of the Partnership Distribution, Horizon
shall declare and make a distribution (the "Corporate Distribution" and
together, with the Partnership Distribution, the "Distribution") of the
capital stock of Newco, such Corporate Distribution to be made on a pro rata
basis on the Distribution Date to the record holders of Horizon Common Shares
on the Record Date, all as provided in the Contribution Agreement.
WHEREAS, immediately following the consummation of the Partnership
Merger, Horizon and Sky Merger shall effectuate the merger of Horizon into
Sky Merger pursuant to which Sky Merger shall survive as a Maryland
corporation.
WHEREAS, Horizon, Sky Merger and Newco desire on behalf of themselves,
their Subsidiaries, and their successors to set forth their rights and
obligations with respect to matters affecting their reporting of, and
liability for, Taxes (as defined below).
Section 1. DEFINITIONS. Unless otherwise defined herein, for purposes of
this Tax Disaffiliation Agreement (the "Agreement") the following terms will
have the following definitions:
"Subsidiary" shall mean a current or former corporation, partnership,
joint venture, or other business entity in which 50 percent or more of the
outstanding equity or voting power is owned directly or indirectly by Newco
or Horizon; PROVIDED, HOWEVER, that Newco and any Subsidiary of Newco shall
not be considered a Subsidiary of Horizon.
<PAGE>
"Tax" shall mean all taxes, charges, fee, levies, imposts, duties and
other assessments imposed by any governmental authority, including, without
limitation, income, gross receipts, excise, property, sales, use, ad valorem,
value added, withholding, employment, payroll, occupation, license,
franchise, transfer, and windfall profits taxes, fees and charges, and any
interest, fines, penalties, additions to tax, or other additional amounts
imposed by any governmental authority with respect to any tax, charge, fee,
levy, impost, duty, or other assessment.
"Tax Return" shall mean all returns or reports to be filed or that may be
filed with respect to any Tax.
"Underpayment Rate" shall mean the rate specified in Section 6621(a)(2)
of the Code.
Other capitalized terms not defined herein, have the meaning set forth in
that certain Agreement and Plan of Merger, dated as of November 13, 1997 by
and among Prime Retail, Inc., a Maryland corporation, Prime Retail, L.P., a
Delaware limited partnership, Horizon Group, Inc., a Michigan corporation,
Sky Merger Corp., a Maryland corporation, Newco, LP, a Delaware limited
partnership, and Horizon/Glen Outlet Centers Limited Partnership, a Delaware
limited partnership.
Section 2. TAX RETURNS AND TAX PAYMENTS.
(a) Obligations to File Tax Returns.
(i) Newco shall timely file, or caused to be filed, all Tax Returns
that relate to Newco, or any of its Subsidiaries, for any taxable period that
ends after the Distribution Date.
(ii) Horizon shall timely filed, or caused to be filed, all Tax
Returns that relate to the Horizon, or any of its Subsidiaries, for any
taxable period.
(b) Obligations to Pay Taxes. Horizon and Newco shall remit, or caused
to be remitted, any Taxes due in respect of any Tax for which it is required
to file a Tax Return.
Section 3. TAX SHARING OBLIGATIONS.
(a) Obligations of Newco. Newco shall be liable and hold Horizon, and
any of its Subsidiaries, harmless against any liability for Taxes that
arising from its operations or because of Newco's ownership of any Subsidiary
or any other corporation, partnership, joint venture, or other business
entity.
(b) Obligations of Horizon. Horizon shall be liable and hold Newco, any
of its Subsidiaries harmless against any liability for Taxes arising from its
operations or because of the Horizon's ownership of any Subsidiary or any
other corporation, partnership, joint venture, or other business entity
(other than Newco).
(c) Payments. To the extent that either party (the "Payor") owes money
to another party (the "Payee") pursuant to this Section 3 of the Agreement,
the Payor shall pay the Payee no later than 15 days after the date the Payor
makes a demand for payment, which is accompanied with
<PAGE>
appropriate calculations, of the amount the Payor is required to indemnify
the Payee under this Section 3 of the Agreement.
(d) Interest. Any payments required by this Agreement that are not made
on or before the date provided shall bear interest after such date at the
Underpayment Rate.
Section 4. TAX AUDITS.
(a) Responsibility. Newco and Horizon shall have sole responsibility
for all audits or other proceedings with respect to Tax Returns that it is
required to file under Section 2 of this Agreement.
(b) Cooperation. Newco and Horizon shall cooperate with each other in
the conduct of any audit (and in the filing of any Tax Return) and each shall
execute and deliver such powers of attorney and make available such other
documents and employees as are necessary to carry out the intent of this
Agreement.
Section 5. RETENTION OF RECORDS.
(a) Maintenance. Newco and Horizon shall maintain until the expiration
of the relevant statute of limitations all records, documents, accounting
data, and other information necessary for the preparation and filing of all
Tax Returns of Newco and Horizon or for the audit of such Tax Returns.
(b) Access. Newco and Horizon shall provide each other reasonable
access to any records, documents, accounting date, and other information and
to its personnel and premises for purposes of a review or audit of such
information to the extent it is relevant to a obligation or liability of a
party under this Agreement.
Section 5. HORIZON/SUBSIDIARY MERGER.
Upon the Horizon/Subsidiary Merger, Sky Merger shall assume all
obligations of Horizon under this Agreement.
Section 6. MISCELLANEOUS PROVISIONS.
(a) Notices and Governing Law. All notices required to permitted to be
given pursuant to this Agreement shall be given, and the applicable law
governing the interpretation of this Agreement, shall be determined by
reference to the Distribution Agreement.
(b) Biding Effect. This Agreement shall be binding on, and shall inure
to the benefit of, the parties and their respective successors and assigns.
(c) Entire Agreement. This Agreement constitutes the entire agreement
of the parties concerning the subject matter hereof and supersedes all prior
agreements, whether or not written, concerning the subject matter. This
Agreement may not be amended expect by an agreement in writing, signed by all
parties.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
the date first written above.
HORIZON GROUP, INC
By:________________________
Its:________________________
SKY MERGER CORP.
By:________________________
Its:________________________
[NEWCO]
By:________________________
Its:________________________
