AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HIGHWOODS PROPERTIES, INC.,
JACKSON ACQUISITION CORP.,
AND
J.C. NICHOLS COMPANY
Dated as of December 22, 1997
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of December 22, 1997, by and among HIGHWOODS PROPERTIES, INC.
("Highwoods"), a Maryland corporation; JACKSON ACQUISITION CORP. ("Sub"), a
Maryland corporation; and J.C. Nichols Company ("JCN"), a Missouri corporation.
PREAMBLE
The respective Boards of Directors of JCN, Sub and Highwoods are of the
opinion that the transactions described herein are in the best interests of the
parties to this Agreement and their respective shareholders. This Agreement
provides for the acquisition of JCN by Highwoods pursuant to the merger of JCN
with and into Sub. At the effective time of such merger, the outstanding shares
of the capital stock of JCN shall be converted into the right to receive shares
of the common stock of Highwoods (except as provided herein). The transactions
described in this Agreement are subject to the approvals of the shareholders of
JCN and the satisfaction of certain other conditions described in this
Agreement. It is the intention of the parties to this Agreement that the Merger
for federal income tax purposes shall qualify as a "reorganization" within the
meaning of Section 368(a)(1)(A) of the Internal Revenue Code.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, JCN shall be merged with and into Sub in accordance with the
provisions of Section 351.440 of the GBCL and with the effect provided in
Section 351.450 of the GBCL and in accordance with Section 3-105 of the MGCL and
with the effect provided in Section 3-114 of the MGCL (the "Merger"). Sub shall
be the Surviving Corporation resulting from the Merger and shall remain a wholly
owned Subsidiary of Highwoods and shall continue to be governed by the Laws of
the State of Maryland. The Merger shall be consummated pursuant to the terms of
this Agreement, which has been approved and adopted by the respective Boards of
Directors of JCN, Sub and Highwoods and by Highwoods, as the sole shareholder of
Sub.
1.2 Time and Place of Closing. The closing of the transactions
contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date
that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their authorized officers, may mutually agree. The Closing shall
be held at such location as may be mutually agreed upon by the Parties.
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1.3 Effective Time. The Merger and other transactions contemplated by
this Agreement shall become effective on the later of the date and at the time
the Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Missouri and the Articles of Merger
reflecting the Merger become effective with the Department of Assessments and
Taxation of the State of Maryland (the "Effective Time"). Subject to the terms
and conditions hereof, unless otherwise mutually agreed upon in writing by the
authorized officers of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time to occur on the second business day
following the last to occur of (i) the effective date (including expiration of
any applicable waiting period) of the last required Consent referred to in
Section 9.1(b) hereof, and (ii) the date on which the shareholders of JCN
approve this Agreement to the extent such approval is required by applicable
Law; provided, however, in the event the Effective Time, as otherwise determined
hereunder, would be any date within 15 business days prior to the last day of a
calendar quarter, the Effective Time shall be the first business day of the next
calendar quarter.
ARTICLE 2
TERMS OF MERGER
2.1 Charter. The Articles of Incorporation of Sub in effect immediately
prior to the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation until duly amended or repealed.
2.2 Bylaws. The Bylaws of Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended or repealed.
2.3 Directors and Officers. The directors of Sub in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the directors of the Surviving Corporation
from and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation. The officers of Sub in office immediately prior to the Effective
Time, together with such additional persons as may thereafter be elected, shall
serve as the officers of the Surviving Corporation from and after the Effective
Time in accordance with the Bylaws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of Highwoods, JCN, Sub or the shareholders of any of the foregoing, the shares
of the constituent corporations shall be converted as follows:
(a) Each share of capital stock of Highwoods issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
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(b) Each share of Sub Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding from
and after the Effective Time.
(c) Subject to the rights granted in Section 3.2, each share of
JCN Common Stock (including any associated JCN Rights, but excluding shares held
by any JCN Entity or any Highwoods Entity, and excluding shares held by
shareholders who perfect their statutory dissenters' rights as provided in
Section 3.5) issued and outstanding immediately prior to the Effective Time
shall cease to be outstanding and shall be converted into and exchanged for the
right to receive 1.84 shares (the "Exchange Ratio") of Highwoods Common Stock
(the "Per Share Stock Consideration"). Pursuant to the Highwoods Rights
Agreement, each share of Highwoods Common Stock issued in connection with the
Merger upon conversion of JCN Common Stock shall be accompanied by a Highwoods
Right.
3.2 Cash Election. Holders of JCN Common Stock shall be provided with an
opportunity to elect to receive cash consideration in lieu of receiving
Highwoods Common Stock in the Merger, in accordance with the election procedures
set forth below in this Section 3.2. Holders who are to receive cash in lieu of
exchanging their shares of JCN Common Stock for Highwoods Common Stock as
specified below shall receive $65 per share of JCN Common Stock in cash (the
"Per Share Cash Consideration"). The amount determined by multiplying $65 by the
number of Dissenting Shares shall be defined herein as the "Dissenting Share
Amount." The aggregate Per Share Cash Consideration to be paid in the Merger,
plus the Dissenting Share Amount, shall be limited to 40% of the aggregate
consideration paid in exchange for shares of JCN Common Stock and shall be
defined herein as the "Cash Amount." Furthermore, in the event the aggregate Per
Share Stock Consideration to be paid for the JCN Common Stock is in excess of
75% of the aggregate consideration to be paid in exchange for shares of JCN
Common Stock, Highwoods shall have the option to limit the aggregate Per Share
Stock Consideration to as low as 75% of such consideration (such limiting amount
as may be elected by Highwoods shall be referred to as the "Maximum Share
Amount") and to make a corresponding increase in the aggregate Per Share Cash
Consideration. For purposes of calculating the aggregate consideration to be
paid in exchange for shares of JCN Common Stock for purposes of this Section
3.2, the aggregate Per Share Stock Consideration shall be determined by using
the price of Highwoods Common Stock used to calculate the Exchange Ratio in
Section 3.1 hereof.
A form for use by JCN shareholders to elect cash and to state their
intent to retain Highwoods Common Stock to be received pursuant to the Merger
and other appropriate and customary transmittal material (which shall specify
that delivery shall be effected only upon proper delivery of the certificates
theretofore representing JCN Common Stock ("Old Certificates") to an exchange
agent designated by Highwoods (the "Exchange Agent")) in such form as Highwoods
and JCN shall mutually agree ("Election Form") shall be mailed concurrently with
the mailing of the Proxy Statement required by Section 8.1 hereof, or on such
other date as Highwoods and JCN shall mutually agree ("Mailing Date") to each
holder of record of JCN Common Stock on the record date ("Record Date") for the
JCN shareholders entitled to vote at the shareholders' meeting to approve the
Merger as required by Section 8.1 (the "JCN Shareholders Meeting").
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Each Election Form shall permit a holder (or the beneficial owner through
appropriate and customary documentation and instructions) of JCN Common Stock to
elect to receive cash with respect to all or a portion of such holder's JCN
Common Stock and to state an intent to retain Highwoods Common Stock to be
received pursuant to the Merger.
Any shares of JCN Common Stock with respect to which the holder (or the
beneficial owner, as the case may be) elects to receive cash and does not
dissent shall be referred to herein as the "Cash Election Shares." Any shares of
JCN Common Stock with respect to which the holder (or the beneficial owner, as
the case may be) does not elect to receive cash, states an intention to retain
Highwoods Common Stock to be received pursuant to the Merger and does not
dissent shall be referred to herein as "Stock Retained Shares." Any shares of
JCN Common Stock with respect to which the holder (or the beneficial owner, as
the case may be) does not elect to receive cash, does not state an intention to
retain Highwoods Common Stock to be received pursuant to the Merger and does not
dissent shall be referred to herein as "Stock Non-Retained Shares." Any shares
of JCN Common Stock with respect to which the holder (or the beneficial owner,
as the case may be) shall not have submitted to the Exchange Agent an effective,
properly completed Election Form on or before 5:00 p.m. on the fifth business
day prior to the date of the JCN Shareholders Meeting (or such other time and
date as Highwoods and JCN may mutually agree) (the "Election Deadline") shall be
referred to herein as "No Election Shares."
Any of the elections set forth in the foregoing paragraph shall have been
properly made only if the Exchange Agent shall have actually received a properly
completed Election Form by the Election Deadline. Any Election Form may be
revoked or changed by the person submitting a subsequent Election Form at or
prior to the Election Deadline. In the event an Election Form is revoked prior
to the Election Deadline, the shares of JCN Common Stock represented by such
Election Form shall become No Election Shares. Subject to the terms of this
Agreement and of the Election Form, the Exchange Agent shall have reasonable
discretion to determine whether any election, revocation or change has been
properly or timely made and to disregard immaterial defects in the Election
Forms, and any good faith decisions of the Exchange Agent regarding such matters
shall be binding and conclusive. The Exchange Agent shall promptly notify JCN of
any defect in an Election Form other than an immaterial defect disregarded in
good faith by the Exchange Agent. Subject to the foregoing sentence, neither
Highwoods nor the Exchange Agent shall be under any obligation to notify any
person of any defect in an Election Form.
Within three business days after the Election Deadline, Highwoods shall
cause the Exchange Agent to effect the allocation among the holders of JCN
Common Stock in accordance with the Election Forms, subject to the following:
(i) Cash Elections More Than the Cash Amount. If the amount
of cash that would be issued upon the conversion of the Cash
Election Shares is greater than the amount by which the Cash
Amount exceeds the Dissenting Share Amount (the "Maximum Cash
Election Amount"), then the Exchange Agent shall convert a
sufficient number of Cash Election Shares (other than Dissenting
Shares) into the right to receive
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the Per Share Stock Consideration, which Cash Election Shares
shall be selected pro rata from among all of the holders thereof,
based upon the aggregate number of Cash Election Shares held by
each of such holders, such that the amount of cash that will be
issued in the Merger to satisfy the non-converted Cash Election
Shares equals as closely as practicable the Maximum Cash Election
Amount.
(ii) Stock Elections More than Maximum Share Amount. If the
value of Highwoods Common Stock that would be issued in the Merger
upon conversion of all shares of JCN Common Stock other than Cash
Election Shares and Dissenting Shares (whose value for purposes of
this determination is presumed to be $65 per share) is greater
than the Maximum Share Amount and Highwoods has elected to
exercise its option to limit the aggregate Per Share Stock
Consideration to an amount equal to the Maximum Share Amount, then
the Exchange Agent shall:
(1) convert a sufficient number of No Election
Shares (other than Dissenting Shares) into the right
to receive the Per Share Cash Consideration, which No
Election Shares shall be selected pro rata from among
all of the holders thereof, based upon the aggregate
number of No Election Shares held by each such
holder, such that the amount of Highwoods Common
Stock to be issued in the Merger equals as close as
practicable the Maximum Share Amount; and
(2) to the extent that such conversion of No
Election Shares does not reduce the value of
Highwoods Common Stock that would be issued in the
Merger to the Maximum Share Amount, convert a
sufficient number of Stock Non-Retained Shares into
the right to receive the Per Share Cash
Consideration, which Stock Non-Retained Shares shall
be selected pro rata from among all of the holders
thereof, based upon the aggregate number of Stock
Non-Retained Shares held by each such holder, such
that the amount of Highwoods Common Stock to be
issued in the Merger equals as close as practicable
the Maximum Share Amount; and
(3) to the extent that such conversions of the
No Election Shares and Stock Non-Retained Shares does
not reduce the value of Highwoods Common Stock that
would be issued in the Merger to the Maximum Share
Amount, convert a sufficient number of Stock Retained
Shares into the right to receive the Per Share Cash
Consideration, which Stock Retained Shares shall be
selected pro rata from among all of the holders
thereof, based upon the aggregate number of Stock
Retained Shares held by each such holder, such that
the amount of Highwoods Common Stock to be issued in
the Merger equals as close as practicable the Maximum
Share Amount.
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Highwoods shall, at least two business days prior to the date of
the JCN Shareholders Meeting, communicate to JCN the aggregate allocation
of stock and cash, the amount of stock and cash going to each of JCN's
shareholders, and the method in which such amounts were calculated.
3.3 Anti-Dilution Provisions. In the event Highwoods (i) changes the
number of shares of Highwoods Common Stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend, or similar
recapitalization with respect to such stock; (ii) makes any distribution to its
shareholders other than in the ordinary course (such as Highwoods regular
quarterly dividend in an amount generally consistent with past practices,
including typical annual increases); (iii) issues any Highwoods security or
other right to receive any Highwoods security except upon receipt of reasonably
equivalent value or pursuant to any Highwoods (or its Affiliates) stock option
or other benefit plans, and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted.
3.4 Shares Held by JCN or Highwoods. Each of the shares of JCN Common
Stock held by any JCN Entity or by any Highwoods Entity shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.5 Dissenting Shareholders. Any holder of shares of JCN Common Stock who
perfects his dissenters' rights in accordance with and as contemplated by
Section 351.455 of the GBCL shall be entitled to receive the value of such
shares in cash as determined pursuant to such provision of Law; provided, that
no such payment shall be made to any dissenting shareholder unless and until
such dissenting shareholder has complied with the applicable provisions of the
GBCL and surrendered to the Surviving Corporation the certificate or
certificates representing the shares for which payment is being made. In the
event that after the Effective Time a dissenting shareholder of JCN fails to
perfect, or effectively withdraws or loses, his right to appraisal and of
payment for his shares, Highwoods shall issue and deliver the consideration to
which such holder of shares of JCN Common Stock would have been entitled under
this Article 3 (without interest) had such shares been No Election Shares upon
surrender by such holder of the certificate or certificates representing shares
of JCN Common Stock held by him. If and to the extent required by applicable
Law, the Surviving Corporation will establish (or cause to be established) an
escrow account with an amount sufficient to satisfy the maximum aggregate
payment that may be required to be paid to dissenting shareholders. Upon
satisfaction of all claims of dissenting shareholders, the remaining escrowed
amount, reduced by payment of the fees and expenses of the escrow agent, will be
returned to the Surviving Corporation. In the event that the Surviving
Corporation is liquidated prior to the fulfillment of all obligations of the
Surviving Corporation under this Section 3.5, such obligations shall be assumed
by Highwoods.
3.6 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of JCN Common Stock exchanged pursuant to the
Merger who would otherwise
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have been entitled to receive a fraction of a share of Highwoods Common Stock
(after taking into account all certificates delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of Highwoods Common Stock multiplied by the market
value of one share of Highwoods Common Stock at the Effective Time. For purposes
of this Section 3.6, the market value of one share of Highwoods Common Stock at
the Effective Time shall be equal to the price of Highwoods Common Stock used to
calculate the Exchange Ratio in Section 3.1 hereof. No such holder will be
entitled to dividends, voting rights, or any other rights as a shareholder in
respect of any fractional shares.
3.7 Conversion of Stock Options.
(a) At the Effective Time, each option or other Equity Right to
purchase shares of JCN Common Stock pursuant to stock options or stock
appreciation rights ("JCN Options") granted by JCN under the JCN Stock Plans,
which are outstanding at the Effective Time, whether or not exercisable, shall
be converted into and become rights with respect to Highwoods Common Stock, and
Highwoods shall assume each JCN Option, in accordance with the terms of the JCN
Stock Plan and stock option agreement by which it is evidenced, except that from
and after the Effective Time, (i) Highwoods and its Compensation Committee shall
be substituted for JCN and the committee of JCN's Board of Directors (including,
if applicable, the entire Board of Directors of JCN) administering such JCN
Stock Plan, (ii) each JCN Option assumed by Highwoods may be exercised solely
for shares of Highwoods Common Stock (or cash, if so provided under the terms of
such JCN Option), (iii) the number of shares of Highwoods Common Stock subject
to such JCN Option shall be equal to the number of shares of JCN Common Stock
subject to such JCN Option immediately prior to the Effective Time multiplied by
the Exchange Ratio, (iv) the per share exercise price under each such JCN Option
shall be adjusted by dividing the per share exercise price under each such JCN
Option by the Exchange Ratio and rounding up to the nearest cent, (v) each JCN
Option that would have become fully exercisable under a JCN Stock Plan as a
result of a "change in control" will continue to be fully exercisable into
shares of Highwoods Common Stock upon consummation of the Merger, and (vi)
employment by Highwoods of a JCN employee upon consummation of the Merger will
not be deemed a termination of employment by JCN that would limit such
employee's rights to exercise any JCN Option under the provisions hereof.
Notwithstanding the provisions of clause (iii) of the preceding sentence,
Highwoods shall not be obligated to issue any fraction of a share of Highwoods
Common Stock upon exercise of JCN Options and any fraction of a share of
Highwoods Common Stock that otherwise would be subject to a converted JCN Option
shall represent the right to receive a cash payment upon exercise of such
converted JCN Option equal to the product of such fraction and the difference
between the market value of one share of Highwoods Common Stock at the time of
exercise of such Option and the per share exercise price of such Option. For
purposes of this Section 3.7, the market value of one share of Highwoods Common
Stock at the time of exercise of a JCN Option shall be the closing price of such
common stock on the NYSE-Composite Transactions List (as reported by The Wall
Street Journal or, if not reported thereby, any other authoritative source
selected by Highwoods) on the last trading day preceding the date of exercise.
In addition, notwithstanding the provisions of clauses (iii) and (iv) of the
first sentence of this Section 3.7,
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each JCN Option which is an "incentive stock option" shall be adjusted as
required by Section 424 of the Internal Revenue Code, and the regulations
promulgated thereunder, so as not to constitute a modification, extension or
renewal of the option, within the meaning of Section 424(h) of the Internal
Revenue Code. Each of JCN and Highwoods agrees to take all necessary steps to
effectuate the foregoing provisions of this Section 3.7, including using its
reasonable efforts to obtain from each holder of a JCN Option any reasonable
Consent or Contract that may be deemed reasonably necessary or advisable in
order to effect the transactions contemplated by this Section 3.7. Anything in
this Agreement to the contrary notwithstanding, Highwoods shall have the right,
in its sole discretion, not to deliver the consideration provided in this
Section 3.7 to a former holder of a JCN Option who has not delivered such
Consent or Contract.
(b) As soon as practicable after the Effective Time, Highwoods
shall deliver to the participants in each JCN Stock Plan an appropriate notice
setting forth such participant's rights pursuant thereto and the grants subject
to such JCN Stock Plan shall continue in effect on the same terms and conditions
(subject to the adjustments required by Section 3.7(a) after giving effect to
the Merger), and Highwoods shall comply with the terms of each JCN Stock Plan to
ensure, to the extent required by, and subject to the provisions of, such JCN
Stock Plan, that JCN Options which qualified as incentive stock options prior to
the Effective Time continue to qualify as incentive stock options after the
Effective Time. At or prior to the Effective Time, Highwoods shall take all
corporate action necessary to reserve for issuance sufficient shares of
Highwoods Common Stock for delivery upon exercise of JCN Options assumed by it
in accordance with this Section 3.7. As soon as practicable after the Effective
Time, Highwoods shall file a registration statement on Form S3 or Form S8, as
the case may be (or any successor or other appropriate forms), with respect to
the shares of Highwoods Common Stock subject to such options and shall use its
reasonable efforts to maintain the effectiveness of such registration statements
(and maintain the current status of the prospectus or prospectuses contained
therein) for so long as such options remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the 1934 Act, where applicable, Highwoods
shall administer the JCN Stock Plan assumed pursuant to this Section 3.7 in a
manner that complies with Rule 16b3 promulgated under the 1934 Act.
(c) All contractual restrictions or limitations on transfer with
respect to JCN Common Stock awarded under the JCN Stock Plan or any other plan,
program, Contract or arrangement of any JCN Entity, to the extent that such
restrictions or limitations shall not have already lapsed (whether as a result
of the Merger or otherwise), and except as otherwise expressly provided in such
plan, program, Contract or arrangement, shall remain in full force and effect
with respect to shares of Highwoods Common Stock into which such restricted
stock is converted pursuant to Section 3.1.
3.8 Extraordinary Dividend. In the event that the consolidated earnings
and profits of JCN (as defined in Section 312 of the Internal Revenue Code)
would otherwise exceed $20,000,000 as of the Effective Time, the directors of
JCN shall take all necessary action to cause the distribution of an
extraordinary dividend to the shareholders of JCN prior to the Effective Date
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in such amount that as of the Effective Date such consolidated earnings and
profits will be no more than $20,000,000. The amount of earnings and profits
shall be determined by an earnings and profits study to be performed by either
KPMG Peat Marwick or Ernst & Young, L.L.P. in consultation with the other,
including an estimate for the period beginning as of the day following the date
of the latest available JCN Financial Statements and ending on the probable
Effective Time. In making the earnings and profits study, the interest accrued
by the Company on the ESOT (as defined below) debt and the Bowser limited
partnership debt shall be excluded from taxable income. The per share amount of
the extraordinary dividend so distributed, if any, shall reduce the value of the
JCN Common Stock in an equivalent amount, and the Per Share Stock Consideration,
the Per Share Cash Consideration and the Exchange Ratio shall be proportionately
adjusted, as appropriate.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures.
(a) At or prior to the Effective Time, Highwoods shall deposit, or
shall cause to be deposited, with the Exchange Agent, for the benefit of the
holders of Old Certificates for exchange in accordance with this Article IV
certificates representing the shares of Highwoods Common Stock ("New
Certificates") and an estimated amount of cash (such cash and New Certificates,
together with any dividends or distributions with respect thereto (without any
interest thereon), being hereinafter referred to as the "Exchange Fund") to be
paid pursuant to this Article IV in exchange for outstanding shares of JCN
Common Stock.
(b) As promptly as practicable after the Effective Date, Highwoods
shall send or cause to be sent to each former holder of record of shares of JCN
Common Stock (other than Cash Election Shares, shares of JCN Common Stock held
in treasury by JCN or Dissenting Shares) of JCN Common Stock immediately prior
to the Effective Time transmittal materials for use in exchanging such
stockholder's Old Certificates for the consideration set forth in this Article
IV. Highwoods shall cause the New Certificates into which shares of a
stockholder's JCN Common Stock are converted on the Effective Date and/or any
check in respect of the Per Share Cash Consideration and any fractional share
interests or dividends or distributions which such person shall be entitled to
receive to be delivered to such stockholder upon delivery to the Exchange Agent
of Old Certificates representing such shares of JCN Common Stock (or indemnity
reasonably satisfactory to Highwoods and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned by such stockholder. No
interest will be paid on any such cash to be paid pursuant to this Article IV
upon such delivery.
(c) Notwithstanding the foregoing, neither the Exchange Agent nor
any party hereto shall be liable to any former holder of JCN Common Stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
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(d) No dividends or other distributions with respect to Highwoods
Common Stock with a record date occurring after the Effective Time shall be paid
to the holder of any unsurrendered Old Certificate representing shares of JCN
Common Stock converted in the Merger into shares of such Highwoods Common Stock
until the holder thereof shall surrender such Old Certificate in accordance with
this Article IV. After the surrender of an Old Certificate in accordance with
this Article IV, the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of Highwoods Common Stock
represented by such Old Certificates.
(e) To the extent permitted by Law, any portion of the Exchange
Fund that remains unclaimed by the stockholders of JCN for twelve months after
the Effective Time shall be paid to Highwoods. Any stockholders of JCN who have
not theretofore complied with this Article IV shall thereafter look only to
Highwoods for payment of the shares of Highwoods Common Stock, cash in lieu of
any fractional shares and unpaid dividends and distributions on the Highwoods
Common Stock deliverable in respect of each share of JCN Common Stock such
stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon.
4.2 Rights of Former JCN Shareholders. At the Effective Time, the stock
transfer books of JCN shall be closed as to holders of JCN Common Stock
immediately prior to the Effective Time and no transfer of JCN Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1, each Certificate
theretofore representing shares of JCN Common Stock (other than shares to be
canceled pursuant to Sections 3.4 and 3.5) shall from and after the Effective
Time represent for all purposes only the right to receive the consideration
provided in Sections 3.1 through 3.6 in exchange therefor, subject, however, to
the Surviving Corporation's obligation (or Highwoods' obligation following any
liquidation of the Surviving Corporation) to pay any dividends or make any other
distributions with a record date prior to the Effective Time which have been
declared or made by JCN in respect of such shares of JCN Common Stock in
accordance with the terms of this Agreement and which remain unpaid at the
Effective Time. To the extent permitted by Law, former shareholders of record of
JCN shall be entitled to vote after the Effective Time at any meeting of
Highwoods shareholders the number of whole shares of Highwoods Common Stock into
which their respective shares of JCN Common Stock are converted, regardless of
whether such holders have exchanged their Old Certificates for New Certificates
representing Highwoods Common Stock in accordance with the provisions of this
Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF JCN
JCN hereby represents and warrants to Highwoods as follows:
5.1 Organization, Standing, and Power. JCN is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Missouri, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its
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Assets. JCN is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have a JCN Material Adverse Effect. The minute book and
other organizational documents for JCN have been made available to Highwoods for
its review and, except as disclosed in Section 5.1 of the JCN Disclosure
Memorandum, are complete in all material respects as in effect as of the date of
this Agreement and accurately reflect in all material respects all amendments
thereto and all proceedings of the Board of Directors and shareholders thereof.
5.2 Authority of JCN; No Breach By Agreement.
(a) JCN has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of JCN, subject
to the approval of this Agreement by the holders of two-thirds of the
outstanding shares of JCN Common Stock, which is the only vote of JCN
shareholders required for approval of this Agreement and consummation of the
Merger by JCN. Subject to such requisite shareholder approval, this Agreement
represents a legal, valid, and binding obligation of JCN, enforceable against
JCN in accordance with its terms (except in all cases as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by JCN,
nor the consummation by JCN of the transactions contemplated hereby, nor
compliance by JCN with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of JCN's Articles of Incorporation or Bylaws
or the certificate or articles of incorporation or bylaws of any JCN Subsidiary
or any resolution adopted by the board of directors or the shareholders of any
JCN Entity, or (ii) except as disclosed in Section 5.2 of the JCN Disclosure
Memorandum, constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any JCN
Entity under, any Contract or Permit of any JCN Entity, where such Default or
Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a JCN Material Adverse Effect, or, (iii)
subject to receipt of the requisite Consents referred to in Section 9.1(b) and
9.1(c), constitute or result in a Default under, or require any Consent pursuant
to, any Law or Order applicable to any JCN Entity or any of their respective
material Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and rules
of the NASD, and other than
11
Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, or under the HSR Act,
and other than Consents, filings, or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a JCN
Material Adverse Effect, no notice to, filing with, or Consent of, any public
body or authority is necessary for the consummation by JCN of the Merger and the
other transactions contemplated in this Agreement.
5.3 Capital Stock.
(a) The authorized capital stock of JCN consists of (i) 10,000,000
shares of JCN Common Stock, of which 4,529,357 shares are issued and outstanding
as of the date of this Agreement and not more than 4,857,387 shares will be
issued and outstanding at the Effective Time. All of the issued and outstanding
shares of capital stock of JCN are duly and validly issued and outstanding and
are fully paid and nonassessable under the GBCL. None of the outstanding shares
of capital stock of JCN has been issued in violation of any preemptive rights of
the current or past shareholders of JCN.
(b) Except as set forth in Section 5.3(a), or as set forth in the
Call Right granted to KH/JCN LLC, or as disclosed in Section 5.3(b) of the JCN
Disclosure Memorandum, there are no shares of capital stock or other equity
securities of JCN outstanding and no outstanding Equity Rights relating to the
capital stock of JCN.
5.4 JCN Subsidiaries. JCN has disclosed in Section 5.4 of the JCN
Disclosure Memorandum all of the JCN Subsidiaries that are corporations
(identifying its jurisdiction of incorporation, each jurisdiction in which it is
qualified and/or licensed to transact business, and the number of shares owned
and percentage ownership interest represented by such share ownership) and all
of the JCN Subsidiaries that are general or limited partnerships, limited
liability companies, or other non-corporate entities (identifying the Law under
which such entity is organized, each jurisdiction in which it is qualified
and/or licensed to transact business, and the amount and nature of the ownership
interest therein). Except as disclosed in Section 5.4 of the JCN Disclosure
Memorandum, JCN or one of its Subsidiaries owns all of the issued and
outstanding shares of capital stock (or other equity interests) of each JCN
Subsidiary. No capital stock (or other equity interest) of any JCN Subsidiary is
or may become required to be issued (other than to another JCN Entity) by reason
of any Equity Rights, and there are no Contracts by which any JCN Subsidiary is
bound to issue (other than to another JCN Entity) additional shares of its
capital stock (or other equity interests) or Equity Rights or by which any JCN
Entity is or may be bound to transfer any shares of the capital stock (or other
equity interests) of any JCN Subsidiary (other than to another JCN Entity).
There are no Contracts relating to the rights of any JCN Entity to vote or to
dispose of any shares of the capital stock (or other equity interests) of any
JCN Subsidiary. All of the shares of capital stock (or other equity interests)
of each JCN Subsidiary held by a JCN Entity are fully paid and nonassessable
under the applicable corporation Law of the jurisdiction in which such
Subsidiary is incorporated or organized and are owned by
12
the JCN Entity free and clear of any Lien. Except as disclosed in Section 5.4 of
the JCN Disclosure Memorandum, each JCN Subsidiary is a corporation, and each
JCN Subsidiary is duly organized, validly existing, and (as to corporations) in
good standing under the Laws of the jurisdiction in which it is incorporated or
organized, and has the corporate power and authority necessary for it to own,
lease, and operate its Assets and to carry on its business as now conducted.
Each JCN Subsidiary is duly qualified or licensed to transact business as a
foreign corporation or organization, as the case may be, in good standing in the
States of the United States where the character of its Assets or the nature or
conduct of its business requires it to be so qualified or licensed, except for
such jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a JCN Material
Adverse Effect. The minute book and other organizational documents for each JCN
Subsidiary have been made available to Highwoods for its review, and, except as
disclosed in Section 5.4 of the JCN Disclosure Memorandum, are complete in all
material respects as in effect as of the date of this Agreement and accurately
reflect in all material respects all amendments thereto and all proceedings of
the Board of Directors and shareholders thereof; provided, however, that for
purposes of this sentence all representations relating to the period prior to
January 1, 1996, are based solely on the Knowledge of JCN.
5.5 SEC Filings; Financial Statements.
(a) JCN has timely filed and made available to Highwoods all SEC
Documents required to be filed by JCN since November 30, 1996 (the "JCN SEC
Reports"). The JCN SEC Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Laws and other
applicable Laws and (ii) did not, at the time they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such JCN SEC Reports or necessary in
order to make the statements in such JCN SEC Reports, in light of the
circumstances under which they were made, not misleading. No JCN Subsidiary is
required to file any SEC Documents.
(b) Each of the JCN Financial Statements (including, in each case,
any related notes) contained in the JCN SEC Reports, including any JCN SEC
Reports filed after the date of this Agreement until the Effective Time,
complied as to form in all material respects with the applicable published rules
and regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented in all material respects the consolidated financial position of JCN
and its Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in amount
or effect.
13
5.6 Absence of Undisclosed Liabilities. Except as set forth in Section
5.6 of the JCN Disclosure Memorandum, no JCN Entity has any Liabilities that are
reasonably likely to have a JCN Material Adverse Effect, except Liabilities
which are accrued or reserved against in the consolidated balance sheets of JCN
as of September 30, 1997 or December 31, 1996, included in the JCN Financial
Statements delivered prior to the date of this Agreement or reflected in the
notes thereto.
5.7 Absence of Certain Changes or Events. Since December 31, 1996, except
as disclosed in the JCN Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 5.7 of the JCN Disclosure Memorandum, there
have been no events, changes, or occurrences which have had, or are reasonably
likely to have a JCN Material Adverse Effect.
5.8 Tax Matters.
(a) To the Knowledge of JCN, no Tax Return is or has been
delinquent and, except as set forth in Section 5.8 of the JCN Disclosure
Memorandum, all Tax Returns filed are complete and accurate in all material
respects. All Taxes shown on filed Tax Returns have been paid. There is no audit
examination, deficiency, or refund Litigation with respect to any Taxes, except
as reserved against in the JCN Financial Statements delivered prior to the date
of this Agreement or as disclosed in Section 5.8 of the JCN Disclosure
Memorandum. The statute of limitations on JCN's federal income Tax Returns have
run for all periods prior to December 31, 1987. All Taxes and other Liabilities
due with respect to completed and settled examinations or concluded Litigation
have been paid. There are no Liens with respect to Taxes upon any of the Assets
of the JCN Entities, except for any such Liens which are not reasonably likely
to have a JCN Material Adverse Effect.
(b) Except as may result from the extension of JCN's federal
income Tax Returns described in Section 5.8 of the JCN Disclosure Memorandum or
from of an adjustment by the Internal Revenue Service of JCN's income, none of
the JCN Entities has executed an extension or waiver of any statute of
limitations on the assessment or collection of any Tax due to any State taxing
authority that is currently in effect.
(c) Except as set forth in Section 5.8 of the JCN Disclosure
Memorandum, the provision for any Taxes due or to become due for any of the JCN
Entities for the period or periods through and including the date of the
respective JCN Financial Statements that has been made and is reflected on such
JCN Financial Statements is sufficient to cover all such Taxes.
(d) Except as set forth in Section 5.8 of the JCN Disclosure
Memorandum, deferred taxes of the JCN Entities have been provided for in
accordance with GAAP.
(e) None of the JCN Entities is a party to any Tax allocation or
sharing agreement, none of the JCN Entities has been a member of an affiliated
group filing a consolidated federal income Tax Return (other than a group the
common parent of which was JCN), and none of the
14
JCN Entities has any Liability for Taxes of any Person (other than JCN and its
Subsidiaries) under Treasury Regulation Section 1.15026 (or any similar
provision of state, local or foreign Law) as a transferee or successor or by
Contract or otherwise.
(f) Each of the JCN Entities is in compliance with, and its
records contain all information and documents (including properly completed IRS
Forms W9) necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code, except for such instances of
noncompliance and such omissions as are not reasonably likely to have,
individually or in the aggregate, a JCN Material Adverse Effect.
(g) Except as disclosed in Section 5.8 of the JCN Disclosure
Memorandum, none of the JCN Entities has made any payments, is obligated to make
any payments, or is a party to any Contract that could obligate it to make any
payments that would be disallowed as a deduction under Section 280G or 162(m) of
the Internal Revenue Code.
(h) Except as disclosed in Section 5.8 of the JCN Disclosure
Memorandum, there has not been an ownership change, as defined in Internal
Revenue Code Section 382(g), of the JCN Entities that occurred during or after
any taxable period in which the JCN Entities incurred a net operating loss that
carries over to any taxable period ending after December 31, 1996.
(i) No JCN Entity has or has had in any foreign country a
permanent establishment, as defined in any applicable tax treaty or convention
between the United States and such foreign country.
5.9 Assets.
(a) Except as disclosed in Section 5.9 or 5.14 of the JCN
Disclosure Memorandum, or as disclosed or reserved against in the JCN Financial
Statement, the JCN Entities have good and marketable title, free and clear of
all Liens to all of their respective Assets, except for any such Liens or other
defects of title which are not reasonably likely to have a JCN Material Adverse
Effect. All material personal property used in the business of the JCN Entities
are in good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with such entities past practices.
(b) None of the JCN Entities has received notice from any
insurance carrier that (i) any policy of insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policy of insurance will be substantially increased. Except as
set forth in Section 5.9 of the JCN Disclosure Memorandum, there are presently
no claims for amounts exceeding in any individual case $50,000 pending under
such policies of insurance and no notices of claims in excess of such amounts
have been given by any JCN Entity under such policies.
(c) JCN will make available to Highwoods a true and correct copy
of all Leases.
(d) Except as set forth in Section 5.9 of the JCN Disclosure
Memorandum and except for such matters which would not reasonably be expected to
have a JCN Material Adverse Effect, as of the last day of the calendar month
immediately preceding the date hereof, no tenant under any of the Leases has
asserted any claim of which JCN or any Subsidiary has received written notice
which would materially affect the collection of rent from such tenant and
neither JCN nor any JCN Subsidiary has received written notice of any material
default or breach on the part of JCN or any
15
Subsidiary under any of the Leases which has not been cured.
(e) Section 5.9 of the JCN Disclosure Memorandum sets forth all
space leases under which JCN or any JCN Subsidiary is a lessee (except where the
underlying real property is owned by JCN). True and correct copies of such
leases have been delivered or made available to Highwoods.
5.10 Environmental Matters.
(a) Each JCN Entity, its Operating Properties and, to the
Knowledge of JCN, its Participation Facilities are, and have been, in compliance
with all Environmental Laws, except for violations which are not reasonably
likely to have, individually or in the aggregate, a JCN Material Adverse Effect.
(b) There is no Litigation pending or, to the Knowledge of JCN,
threatened before any court, governmental agency, or authority or other forum in
which any JCN Entity or any of its Operating Properties or Participation
Facilities (or JCN in respect of such Operating Property or Participation
Facility) has been or, with respect to threatened Litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release, discharge, spillage, or
disposal into the environment of any Hazardous Material, whether or not
occurring at, on, under, adjacent to, or affecting (or potentially affecting) a
site owned, leased, or operated by any JCN Entity or any of its Operating
Properties or Participation Facilities, except such as is not reasonably likely
to have, individually or in the aggregate, a JCN Material Adverse Effect.
(c) During the period of (i) any JCN Entity's ownership or
operation of any of their respective current properties, (ii)any JCN Entity's
participation in the management of any Participation Facility, or (iii) any JCN
Entity's holding of a security interest in an Operating Property, there have
been no releases, discharges, spillages, or disposals of Hazardous Material in,
on, under, adjacent to, or affecting (or potentially affecting) such properties,
except such as are not reasonably likely to have, individually or in the
aggregate, a JCN Material Adverse Effect. To the Knowledge of JCN, prior to the
period of (i) any JCN Entity's ownership or operation of any of their respective
current properties, (ii) any JCN Entity's participation in the management of any
Participation Facility, or (iii) any JCN Entity's holding of a security interest
in an Operating Property, there were no releases, discharges, spillages, or
disposals of Hazardous
16
Material in, on, under, or affecting any such property, Participation Facility
or Operating Property, except such as are not reasonably likely to have,
individually or in the aggregate, a JCN Material Adverse Effect.
5.11 Compliance with Laws. Each JCN Entity has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a JCN Material
Adverse Effect, and there has occurred no Default under any such Permit, other
than Defaults which are not reasonably likely to have a JCN Material Adverse
Effect. Except as disclosed in Section 5.11 of the JCN Disclosure Memorandum,
none of the JCN Entities:
(a) is in Default under any of the provisions of its Certificate
of Incorporation or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits applicable to
its business, except for Defaults which are not reasonably likely to have,
individually or in the aggregate, a JCN Material Adverse Effect; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
any JCN Entity is not in compliance with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have a JCN Material Adverse Effect, (ii)
threatening to revoke any Permits, the revocation of which is reasonably likely
to have a JCN Material Adverse Effect, or (iii) requiring any JCN Entity to
enter into or consent to the issuance of a cease and desist order, formal
agreement, directive, commitment or memorandum of understanding, or to adopt any
Board resolution or similar undertaking, which restricts materially the conduct
of its business.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to
Highwoods.
5.12 Labor Relations. No JCN Entity is the subject of any Litigation
asserting that it or any other JCN Entity has committed an unfair labor practice
(within the meaning of the National Labor Relations Act or comparable state law)
or seeking to compel it or any other JCN Entity to bargain with any labor
organization as to wages or conditions of employment, nor, except as disclosed
in Section 5.12 of the JCN Disclosure Memorandum, is any JCN Entity party to any
collective bargaining agreement, nor is there any strike or other labor dispute
involving any JCN Entity, pending or, to the Knowledge of JCN, threatened, or to
the Knowledge of JCN, is there any activity involving any JCN Entity's employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.
17
5.13 Employee Benefit Plans.
(a) JCN has disclosed in Section 5.13 of the JCN Disclosure
Memorandum, and has delivered or made available to Highwoods prior to the
execution of this Agreement copies in each case of, all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any JCN Entity or ERISA Affiliate
thereof for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "JCN Benefit
Plans"). Any of the JCN Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "JCN ERISA Plan." Each JCN ERISA Plan which is also a "defined benefit
plan" (as defined in Section 414(j) of the Internal Revenue Code) is referred to
herein as a "JCN Pension Plan." Except as disclosed in Section 5.13 of the JCN
Disclosure Memorandum, no JCN Pension Plan is or has been a multiemployer plan
within the meaning of Section 3(37) of ERISA.
(b) Except as disclosed in Section 5.13 of the JCN Disclosure
Memorandum, all JCN Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have a JCN Material Adverse Effect.
Each JCN ERISA Plan which is intended to be qualified under Section 401(a) of
the Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and JCN is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. To the
Knowledge of JCN, no JCN Entity has engaged in a transaction with respect to any
JCN Benefit Plan that, assuming the taxable period of such transaction expired
as of the date hereof, would subject any JCN Entity to a Tax imposed by either
Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA.
(c) Except as disclosed in Section 5.13 of the JCN Disclosure
Memorandum, no JCN Pension Plan has any "unfunded current liability," as that
term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value of
the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan terminated in accordance with all
applicable legal requirements. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position of
any JCN Pension Plan, (ii) no change in the actuarial assumptions with respect
to any JCN Pension Plan, and (iii) no increase in benefits under any JCN Pension
Plan as a result of plan amendments or changes in applicable Law which is
reasonably likely to have a JCN Material Adverse Effect or materially adversely
affect the funding status of any such plan. Neither any JCN Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any JCN Entity,
18
or the single-employer plan of any entity which is considered one employer with
JCN under Section 4001 of ERISA or Section 414 of the Internal Revenue Code or
Section 302 of ERISA (whether or not waived) (an "ERISA Affiliate") has an
"accumulated funding deficiency" within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA, which is reasonably likely to
have a JCN Material Adverse Effect. No JCN Entity has provided, or is required
to provide, security to a JCN Pension Plan or to any single-employer plan of an
ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by any JCN Entity with respect to any
ongoing, frozen, or terminated single-employer plan or the single-employer plan
of any ERISA Affiliate, which Liability is reasonably likely to have a JCN
Material Adverse Effect. No JCN Entity has incurred any withdrawal Liability
with respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate), which
Liability is reasonably likely to have a JCN Material Adverse Effect. No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any JCN Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) Except as disclosed in Section 5.13 of the JCN Disclosure
Memorandum, no JCN Entity has any Liability for retiree health and life benefits
under any of the JCN Benefit Plans and there are no restrictions on the rights
of such JCN Entity to amend or terminate any such retiree health or benefit Plan
without incurring any Liability.
(f) Except as disclosed in Section 5.13 of the JCN Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any JCN Entity from
any JCN Entity under any JCN Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any JCN Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any JCN Entity and their respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the JCN Financial Statements to the extent required
by and in accordance with GAAP.
5.14 Material Contracts. Except as disclosed in Section 5.14 of the JCN
Disclosure Memorandum or otherwise reflected in the JCN Financial Statements,
none of the JCN Entities, nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected
19
by, or receives benefits under, (i) any employment, severance, termination,
consulting, or retirement Contract providing for aggregate payments to any
Person in any calendar year in excess of $50,000, (ii) any Contract relating to
the borrowing of money by any JCN Entity or the guarantee by any JCN Entity of
any such obligation (other than Contracts evidencing trade payables and
Contracts relating to borrowings or guarantees made in the ordinary course of
business), (iii) any Contract which materially prohibits or restricts any JCN
Entity from engaging in any business activities in any geographic area, line of
business or otherwise in competition with any other Person, other than
restrictions in Leases intended to protect certain tenant interests, all of
which restrictions are normal and customary in the business of JCN, (iv) any
Material Contract between or among JCN Entities, (v) any Material Contract
involving Intellectual Property (other than Contracts entered into in the
ordinary course with customers and "shrink-wrap" software licenses), (vi) any
Contract relating to the provision of data processing, network communication, or
other technical services to or by any JCN Entity, (vii) any Contract relating to
the purchase or sale of any goods or services (other than Contracts entered into
in the ordinary course of business and involving payments under any individual
Contract not in excess of $50,000), (viii) any Material Contract for property
management or property operations, and (ix) any other Contract or amendment
thereto that would be required to be filed as an exhibit to a Form 10-K filed by
JCN with the SEC as of the date of this Agreement (together with all Contracts
referred to in Sections 5.9 and 5.13(a), the "JCN Contracts"). With respect to
each JCN Contract and except as disclosed in Section 5.14 of the JCN Disclosure
Memorandum: (i) the Contract is in full force and effect; (ii) no JCN Entity is
in Default thereunder, other than Defaults which are not reasonably likely to
have a JCN Material Adverse Effect; (iii) no JCN Entity has repudiated or waived
any material provision of any such Contract; and (iv) no other party to any such
Contract, to the Knowledge of JCN, is, in Default in any respect, other than
Defaults which are not reasonably likely to have a JCN Material Adverse Effect,
or has repudiated or waived any material provision thereunder.
5.15 Legal Proceedings. Except as disclosed in Section 5.15 of the JCN
Disclosure Memorandum, there is no Litigation instituted or pending, or, to the
Knowledge of JCN, threatened (or unasserted but considered probable of assertion
and which if asserted would have at least a reasonable probability of an
unfavorable outcome) against any JCN Entity, or against any director, employee
or employee benefit plan of any JCN Entity, or against any Asset, interest, or
right of any of them, that is reasonably likely to have a JCN Material Adverse
Effect, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any JCN Entity,
that are reasonably likely to have a JCN Material Adverse Effect. Section 5.15
of the JCN Disclosure Memorandum contains a summary of all Litigation as of the
date of this Agreement to which any JCN Entity is a party and which names a JCN
Entity as a defendant or cross-defendant or for which any JCN Entity has any
potential uninsured Liability in excess of $50,000.
5.16 Reports. Since January 1, 1993, or the date of organization if
later, each JCN Entity has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with Regulatory Authorities, except for those
20
which the failure to file are not reasonably likely to have a JCN Material
Adverse Effect). To the Knowledge of JCN, as of their respective dates, each of
such reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of its respective date, each such report and document did not, in all
material respects, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, except for those untrue statements or omissions not
reasonably expected to have a JCN Material Adverse Effect.
5.17 Statements True and Correct. No certificate or instrument furnished
by any JCN Entity or any officer, director or employee thereof to Highwoods
pursuant to this Agreement or pursuant to any other document, agreement, or
instrument referred to herein contains or will contain any untrue statement of
material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by any JCN
Entity or any officer, director or employee thereof for inclusion in the
Registration Statement to be filed by Highwoods with the SEC will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any JCN Entity or any officer, director or employee thereof for
inclusion in the Proxy Statement to be mailed to JCN's shareholders in
connection with the JCN Shareholders Meeting, and any other documents to be
filed by a JCN Entity or any officer, director or employee thereof with the SEC
or any other Regulatory Authority in connection with the transactions
contemplated hereby, will, at the respective time such documents are filed, and
with respect to the Proxy Statement, when first mailed to the shareholders of
JCN, be false or misleading with respect to any material fact, or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto, at the time of
the JCN Shareholders Meeting, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the JCN Shareholders Meeting. All documents that any JCN Entity is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable Law.
5.18 Tax and Regulatory Matters. No JCN Entity or any officer or director
thereof has taken or agreed to take any action or has any Knowledge of any fact
or circumstance that is reasonably likely to (i) prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b).
5.19 State Takeover Laws. Each JCN Entity has taken all necessary action
to exempt the transactions contemplated by this Agreement from, or, if
necessary, to challenge the validity or applicability of, any applicable
"moratorium," "fair price," "business combination," "control share," or other
anti-takeover Laws (collectively, "Takeover Laws"), including Section 351.459 of
the GBCL.
5.20 Charter Provisions. Each JCN Entity has taken all action so that the
entering into of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement do not and will not result in the
grant of any rights to any Person under the Certificate of Incorporation, Bylaws
or other governing instruments of any JCN Entity or restrict or impair the
ability of Highwoods or any of its Subsidiaries to vote, or otherwise to
exercise the rights of a shareholder with respect to, shares of any JCN Entity
that may be directly or indirectly acquired or controlled by them.
5.21 Rights Agreement. JCN has taken all necessary action (including, if
required, redeeming all of the outstanding JCN Rights or amending or terminating
the JCN Rights Agreement) so that
21
the entering into of this Agreement, the acquisition of shares pursuant to the
consummation of the Merger and the other transactions contemplated hereby do not
and will not result in any Person becoming able to exercise any JCN Rights under
the JCN Rights Agreement or enabling or requiring the JCN Rights to be separated
from the shares of JCN Common Stock to which they are attached or to be
triggered or to become exercisable.
5.22 Opinion of Financial Advisor. JCN has received the opinion of Morgan
Stanley, Dean Witter, Discover & Co., dated the date of this Agreement, to the
effect that the consideration to be received in the Merger by the holders of JCN
Common Stock is fair, from a financial point of view, to such holders, a signed
copy of which has been delivered to Highwoods.
5.23 Board Recommendation. The Board of Directors of JCN, at a meeting
duly called and held, has validly adopted resolutions (which resolutions have
not been withdrawn or revoked) stating that the Board of Directors of JCN has
(i) determined that this Agreement and the transactions contemplated hereby,
including the Merger and the transactions contemplated thereby, taken together,
are fair to and in the best interests of the shareholders and (ii) resolved to
recommend that the holders of the shares of JCN Common Stock approve this
Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF HIGHWOODS
Highwoods hereby represents and warrants to JCN as follows:
6.1 Organization, Standing, and Power. Highwoods is a corporation duly
organized, validly existing, and in good standing under the Laws of the State of
Maryland, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its material Assets. Highwoods is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so
22
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Highwoods Material Adverse Effect.
6.2 Authority; No Breach By Agreement.
(a) Highwoods has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Highwoods.
This Agreement represents a legal, valid, and binding obligation of Highwoods,
enforceable against Highwoods in accordance with its terms (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
(b) Neither the execution and delivery of this Agreement by
Highwoods, nor the consummation by Highwoods of the transactions contemplated
hereby, nor compliance by Highwoods with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of Highwoods' Amended and
Restated Articles of Incorporation or Bylaws, or (ii) constitute or result in a
Default under, or require any Consent pursuant to, or result in the creation of
any Lien on any Asset of any Highwoods Entity under, any Contract or Permit of
any Highwoods Entity, where such Default or Lien, or any failure to obtain such
Consent, is reasonably likely to have a Highwoods Material Adverse Effect, or,
(iii) subject to receipt of the requisite Consents referred to in Section
9.1(b), constitute or result in a Default under, or require any Consent pursuant
to, any Law or Order applicable to any Highwoods Entity or any of their
respective material Assets (including any Highwoods Entity or any JCN Entity
becoming subject to or liable for the payment of any Tax or any of the Assets
owned by any Highwoods Entity or any JCN Entity being reassessed or revalued by
any taxing authority).
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and rules
of the NYSE, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings, or notifications which,
if not obtained or made, are not reasonably likely to have a Highwoods Material
Adverse Effect, no notice to, filing with, or Consent of, any public body or
authority is necessary for the consummation by Highwoods of the Merger and the
other transactions contemplated in this Agreement.
6.3 Capital Stock.
(a) The authorized capital stock of Highwoods consists of (i)
100,000,000 shares of Highwoods Common Stock, of which 37,948,435 shares are
issued and outstanding as of the date of this Agreement, and (ii) 10,000,000
shares of Highwoods Preferred Stock, of which 7,025,000 shares are issued and
outstanding. All of the issued and outstanding shares of Highwoods Capital Stock
are, and all of the shares of Highwoods Common Stock to be issued in exchange
for shares of JCN Common Stock upon consummation of the Merger, when issued in
accordance with the terms of this Agreement, will be, duly and validly issued
and outstanding and fully paid and nonassessable under the MGCL. None of the
outstanding shares of Highwoods Capital Stock has been, and none of the shares
of Highwoods Common Stock to be issued in exchange for shares of JCN Common
Stock upon consummation of the Merger will be, issued in violation of any
preemptive rights of the current or past shareholders of Highwoods.
(b) Except as set forth in Section 6.3(a), or as provided pursuant
to the Highwoods Stock Plans or the Highwoods Rights Agreement, or as disclosed
in Section 6.3 of the Highwoods
23
Disclosure Memorandum, there are no shares of capital stock or other equity
securities of Highwoods outstanding and no outstanding Equity Rights relating to
the capital stock of Highwoods.
6.4 Highwoods Subsidiaries. Highwoods has disclosed in Section 6.4 of the
Highwoods Disclosure Memorandum all of the Highwoods Subsidiaries as of the date
of this Agreement that are corporations (identifying its jurisdiction of
incorporation and percentage ownership interest represented by such share
ownership) and all of the Highwoods Subsidiaries that are general or limited
partnerships or other non-corporate entities (identifying the Law under which
such entity is organized and the amount and nature of the ownership interest
therein). Except as disclosed in Section 6.4 of the Highwoods Disclosure
Memorandum, Highwoods and/or one of its Subsidiaries owns all of the issued and
outstanding shares of capital stock (or other equity interests) of each
Highwoods Subsidiary. No capital stock (or other equity interest) of any
Highwoods Subsidiary are or may become required to be issued (other than to
another Highwoods Entity) by reason of any Equity Rights, and there are no
Contracts (except for property acquisition contracts utilizing the issuance of
partnership interests in Highwoods/Forsyth Limited Partnership and for which the
partnership is receiving reasonable equivalent value or as otherwise disclosed
in Section 6.13 of the Highwoods Disclosure Memorandum) by which any Highwoods
Subsidiary is bound to issue (other than to another Highwoods Entity) additional
shares of its capital stock (or other equity interests) or Equity Rights or by
which any Highwoods Entity is or may be bound to transfer any shares of the
capital stock (or other equity interests) of any Highwoods Subsidiary (other
than to another Highwoods Entity). There are no Contracts relating to the rights
of any Highwoods Entity to vote or to dispose of any shares of the capital stock
(or other equity interests) of any Highwoods Subsidiary. All of the shares of
capital stock (or other equity interests) of each Highwoods Subsidiary held by a
Highwoods Entity are fully paid and nonassessable under the applicable
corporation Law of the jurisdiction in which such Subsidiary is incorporated or
organized and are owned by the Highwoods Entity free and clear of any Lien.
Except as disclosed in Section 6.4 of the Highwoods Disclosure Memorandum), each
Highwoods Subsidiary is a
24
corporation, and each Highwoods Subsidiary is duly organized, validly existing,
and (as to corporations) in good standing under the Laws of the jurisdiction in
which it is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease and operate its Assets and to carry on its
business as now conducted. Each Highwoods Subsidiary is duly qualified or
licensed to transact business as a foreign corporation or organization, as the
case may be, is in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have a Highwoods Material Adverse Effect.
6.5 SEC Filings; Financial Statements.
(a) Highwoods and Highwoods/Forsyth Limited Partnership has timely
filed and made available to JCN all SEC Documents required to be filed by
Highwoods or Highwoods/Forsyth Limited Partnership since June 14, 1994 (the
"Highwoods SEC Reports"). The Highwoods SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Laws and other applicable Laws and (ii) did not, at the time they
were filed (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
Highwoods SEC Reports or necessary in order to make the statements in such
Highwoods SEC Reports, in light of the circumstances under which they were made,
not misleading. Except for Highwoods/Forsyth Limited Partnership, no Highwoods
Subsidiary is required to file any SEC Documents.
(b) Each of the Highwoods Financial Statements (including, in each
case, any related notes) contained in the Highwoods SEC Reports, including any
Highwoods SEC Reports filed after the date of this Agreement until the Effective
Time, complied as to form in all material respects with the applicable published
rules and regulations of the SEC with respect thereto, was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited interim statements, as permitted by Form 10-Q of
the SEC), and fairly presented in all material respects the consolidated
financial position of Highwoods and its Subsidiaries as at the respective dates
and the consolidated results of operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount or effect.
6.6 Absence of Undisclosed Liabilities. No Highwoods Entity has any
Liabilities that are reasonably likely to have a Highwoods Material Adverse
Effect, except Liabilities which are accrued or reserved against in the
consolidated balance sheets of Highwoods as of September 30, 1997 or December
31, 1996, included in the Highwoods Financial Statements delivered prior to the
date of this Agreement or reflected in the notes thereto.
25
6.7 Absence of Certain Changes or Events. Since December 31, 1996, except
as disclosed in the Highwoods Financial Statements delivered prior to the date
of this Agreement or as disclosed in Section 6.7 of the Highwoods Disclosure
Memorandum, there have been no events, changes or occurrences which have had, or
are reasonably likely to have a Highwoods Material Adverse Effect.
6.8 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of any of
the Highwoods Entities have been timely filed or requests for extensions have
been timely filed, granted, and have not expired for periods ended on or before
September 30, 1997, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, and all Tax Returns filed are complete
and accurate in all material. All Taxes shown on filed Tax Returns have been
paid. As of the date of this Agreement, there is no audit examination,
deficiency, or refund Litigation with respect to any Taxes that is reasonably
likely to result in a determination that would have a Highwoods Material Adverse
Effect, except as reserved against in the Highwoods Financial Statements or as
disclosed in Section 6.8 of the Highwoods Disclosure Memorandum.
(b) Highwoods, based on its current and intended method of
operation, meets the requirements for qualification as a REIT under Sections
856-860 of the Internal Revenue Code.
6.9 Assets. Except as disclosed in Section 6.9 of the Highwoods
Disclosure Memorandum or as disclosed or reserved against in the Highwoods
Financial Statements, the Highwoods Entities have good and marketable title,
free and clear of all Liens, to all of their respective Assets, except for any
such Liens or other defects of title which are not reasonably likely to have a
Highwoods Material Adverse Effect. All Material personal properties used in the
businesses of the Highwoods Entities are in good condition, reasonable wear and
tear excepted, and are usable in the ordinary course of business consistent with
Highwoods' past practices.
6.10 Environmental Matters.
(a) Each Highwoods Entity, its Operating Properties, and, to the
Knowledge of Highwoods, its Participating Facilities are, and have been, in
compliance with all Environmental Laws, except for violations which are not
reasonably likely to have a Highwoods Material Adverse Effect.
(b) There is no Litigation pending or, to the Knowledge of
Highwoods, threatened before any court, governmental agency, or authority or
other forum in which any Highwoods Entity or any of its Operating Properties or
Participation Facilities (or Highwoods in respect of such Operating Property or
Participation Facility) has been or, with respect to threatened Litigation, may
be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release,
discharge, spillage, or disposal into the environment of any Hazardous Material,
whether or not occurring at, on, under,
26
adjacent to, or affecting (or potentially affecting) a site owned, leased, or
operated by any Highwoods Entity or any of its Operating Properties or
Participation Facilities, except such as is not reasonably likely to have a
Highwoods Material Adverse Effect.
(c) During the period of (i) any Highwoods Entity's ownership or
operation of any of their respective current properties, (ii) any Highwoods
Entity's participation in the management of any Participation Facility, or (iii)
any Highwoods Entity's holding of a security interest in an Operating Property,
there have been no releases, discharges, spillages, or disposals of Hazardous
Material in, on, under, adjacent to, or affecting (or potentially affecting)
such properties, except such as are not reasonably likely to have a Highwoods
Material Adverse Effect. To the Knowledge of Highwoods, prior to the period of
(i) any Highwoods Entity's ownership or operation of any of their respective
current properties, (ii) any Highwoods Entity's participation in the management
of any Participation Facility, or (iii) any Highwoods Entity's holding of a
security interest in an Operating Property, there were no releases, discharges,
spillages, or disposals of Hazardous Material in, on, under, or affecting any
such property, Participation Facility or Operating Property, except such as are
not reasonably likely to have a Highwoods Material Adverse Effect.
6.11 Compliance with Laws. Each Highwoods Entity has in effect all
Permits necessary for it to own, lease or operate its material Assets and to
carry on its business as now conducted, except for those Permits the absence of
which are not reasonably likely to have a Highwoods Material Adverse Effect, and
there has occurred no Default under any such Permit, other than Defaults which
are not reasonably likely to have a Highwoods Material Adverse Effect. Except as
disclosed in Section 6.11 of the Highwoods Disclosure Memorandum, none of the
Highwoods Entities:
(a) is in Default under its Amended and Restated Articles of
Incorporation or Bylaws (or other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to
its business or employees conducting its business, except for Defaults which are
not reasonably likely to have, individually or in the aggregate, a Highwoods
Material Adverse Effect; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
any Highwoods Entity is not in compliance with any of the Laws or Orders which
such governmental authority or Regulatory Authority enforces, where such
noncompliance is reasonably likely to have a Highwoods Material Adverse Effect,
(ii) threatening to revoke any Permits, the revocation of which is reasonably
likely to have a Highwoods Material Adverse Effect, or (iii) requiring any
Highwoods Entity to enter into or consent to the issuance of a cease and desist
order, formal agreement, directive, commitment or memorandum of understanding,
or to adopt any board resolution or similar undertaking, which restricts
materially the conduct of its business.
27
6.12 Labor Relations. No Highwoods Entity is the subject of any
Litigation asserting that it or any other Highwoods Entity has committed an
unfair labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it or any other Highwoods Entity to
bargain with any labor organization as to wages or conditions of employment, nor
is any Highwoods Entity party to any collective bargaining agreement, nor is
there any strike or other labor dispute involving any Highwoods Entity, pending
or threatened, or to the Knowledge of Highwoods, is there any activity involving
any Highwoods Entity's employees seeking to certify a collective bargaining unit
or engaging in any other organization activity.
6.13 Employee Benefit Plans.
(a) Highwoods has disclosed in Section 6.13 of the Highwoods
Disclosure Memorandum, and has delivered or made available to JCN prior to the
execution of this Agreement copies in each case of, all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any Highwoods Entity or ERISA
Affiliate thereof for the benefit of employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries and under which
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries are eligible to participate (collectively, the "Highwoods
Benefit Plans"). Any of the Highwoods Benefit Plans which is an "employee
pension benefit plan," as that term is defined in Section 3(2) of ERISA, is
referred to herein as a "Highwoods ERISA Plan." Each Highwoods ERISA Plan which
is also a "defined benefit plan" (as defined in Section 414(j) of the Internal
Revenue Code) is referred to herein as a "Highwoods Pension Plan." No Highwoods
Pension Plan is or has been a multiemployer plan within the meaning of Section
3(37) of ERISA.
(b) All Highwoods Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have a Highwoods
Material Adverse Effect. Each Highwoods ERISA Plan which is intended to be
qualified under Section 401(a) of the Internal Revenue Code has received a
favorable determination letter from the Internal Revenue Service, and Highwoods
is not aware of any circumstances likely to result in revocation of any such
favorable determination letter. To the Knowledge of Highwoods, no Highwoods
Entity has engaged in a transaction with respect to any Highwoods Benefit Plan
that, assuming the taxable period of such transaction expired as of the date
hereof, would subject any Highwoods Entity to a Tax imposed by either Section
4975 of the Internal Revenue Code or Section 502(i) of ERISA.
(c) No Highwoods Pension Plan has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA, and the
fair market value of the assets of any such
28
plan exceeds the plan's "benefit liabilities," as that term is defined in
Section 4001(a)(16) of ERISA, when determined under actuarial factors that would
apply if the plan terminated in accordance with all applicable legal
requirements. Since the date of the most recent actuarial valuation, there has
been (i) no material change in the financial position of any Highwoods Pension
Plan, (ii) no change in the actuarial assumptions with respect to any Highwoods
Pension Plan, and (iii) no increase in benefits under any Highwoods Pension Plan
as a result of plan amendments or changes in applicable Law which is reasonably
likely to have a Highwoods Material Adverse Effect or materially adversely
affect the funding status of any such plan. Neither any Highwoods Pension Plan
nor any "single-employer plan," within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any Highwoods Entity, or the
single-employer plan of any entity which is considered an ERISA Affiliate of
Highwoods has an "accumulated funding deficiency" within the meaning of Section
412 of the Internal Revenue Code or Section 302 of ERISA, which is reasonably
likely to have a Highwoods Material Adverse Effect. No Highwoods Entity has
provided, or is required to provide, security to a Highwoods Pension Plan or to
any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of
the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by any Highwoods Entity with respect to any
ongoing, frozen, or terminated single-employer plan or the single-employer plan
of any ERISA Affiliate, which Liability is reasonably likely to have a Highwoods
Material Adverse Effect. No Highwoods Entity has incurred any withdrawal
Liability with respect to a multiemployer plan under Subtitle B of Title IV of
ERISA (regardless of whether based on contributions of an ERISA Affiliate),
which Liability is reasonably likely to have a Highwoods Material Adverse
Effect. No notice of a "reportable event," within the meaning of Section 4043 of
ERISA for which the 30-day reporting requirement has not been waived, has been
required to be filed for any Highwoods Pension Plan or by any ERISA Affiliate
within the 12-month period ending on the date hereof.
(e) Except as disclosed in Section 6.13 of the Highwoods
Disclosure Memorandum, no Highwoods Entity has any Liability for retiree health
and life benefits under any of the Highwoods Benefit Plans and there are no
restrictions on the rights of such Highwoods Entity to amend or terminate any
such retiree health or benefit Plan without incurring any Liability.
(f) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any Highwoods Entity and their respective beneficiaries,
other than entitlements accrued pursuant to funded retirement plans subject to
the provisions of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, have been fully reflected on the Highwoods Financial Statements to the
extent required by and in accordance with GAAP.
6.14 Legal Proceedings. There is no Litigation instituted or pending, or,
to the Knowledge of Highwoods, threatened (or unasserted but considered probable
of assertion and which if
29
asserted would have at least a reasonable probability of an unfavorable outcome)
against any Highwoods Entity, or against any director, employee or employee
benefit plan of any Highwoods Entity, or against any Asset, interest, or right
of any of them, that is reasonably likely to have a Highwoods Material Adverse
Effect, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any Highwoods
Entity, that are reasonably likely to have a Highwoods Material Adverse Effect.
6.15 Reports. Since January 1, 1993, or the date of organization if
later, each Highwoods Entity has timely filed all reports and statements,
together with any amendments required to be made with respect thereto, that it
was required to file with Regulatory Authorities except for those which the
failure to file are not reasonably likely to have a Highwoods Material Adverse
Effect). To the Knowledge of Highwoods, as of their respective dates, each of
such reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of its respective date, each such report and document did not, in all
material respects, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, except for those untrue statements or omissions not
reasonably expected to have a Highwoods Material Adverse Effect.
6.16 Statements True and Correct. No statement, certificate, instrument
or other writing furnished or to be furnished by any Highwoods Entity or any
Affiliate thereof to JCN pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by any
Highwoods Entity or any Affiliate thereof for inclusion in the Registration
Statement to be filed by Highwoods with the SEC, will, when the Registration
Statement becomes effective, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the statements
therein not misleading. None of the information supplied or to be supplied by
any Highwoods Entity or any Affiliate thereof for inclusion in the Proxy
Statement to be mailed to JCN's shareholders in connection with the JCN
Shareholders Meeting, and any other documents to be filed by any Highwoods
Entity or any Affiliate thereof with the SEC or any other Regulatory Authority
in connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the shareholders of JCN, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the JCN Shareholders Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the JCN Shareholders Meeting. All documents
that any Highwoods Entity or any Affiliate thereof is responsible for filing
with any Regulatory Authority in connection with the transactions
30
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
6.17 Authority of Sub. Sub is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Maryland as a
wholly owned Subsidiary of Highwoods. The authorized capital stock of Sub
consists of 1,000 shares of Sub Common Stock, all of which is validly issued and
outstanding, fully paid and nonassessable and is owned by Highwoods free and
clear of any Lien. Sub has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Sub. This
Agreement represents a legal, valid, and binding obligation of Sub, enforceable
against Sub in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
6.18 Tax and Regulatory Matters. No Highwoods Entity or any Affiliate
thereof has taken or agreed to take any action or has any Knowledge of any fact
or circumstance that is reasonably likely to (i) prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) or result in
the imposition of a condition or restriction of the type referred to in the last
sentence of Section 9.1(b).
6.19 Rights Agreement. Execution of this Agreement and consummation of
the Merger and the other transactions contemplated by this Agreement will not
result in the grant of any rights to any Person under the Highwoods Rights
Agreement (other than as contemplated by Section 3.1) or enable or require the
Highwoods Rights to be exercised, distributed or triggered.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of JCN. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement, unless
the prior written consent of Highwoods shall have been obtained, and except as
otherwise expressly contemplated herein or as set forth in the capital budget
for JCN as detailed in Section 7.1 of the JCN Disclosure Memorandum, JCN shall
and shall cause each of its Subsidiaries to (a) operate its business only in the
usual, regular, and ordinary course, (b) preserve intact its business
organization and Assets and maintain its rights and franchises, (c) take no
action which would (i) adversely affect the ability of any Party to obtain any
Consents required for the transactions contemplated hereby without imposition of
a condition or restriction of the type referred to in the last sentences of
31
Section 9.1(b) or 9.1(c), or (ii) adversely affect the ability of any Party to
perform its covenants and agreements under this Agreement, and (d) aggressively
take such actions as may reasonably be necessary to prevent any violation of Law
by any Person suggesting a competing Acquisition Proposal without first
obtaining the endorsement of the JCN Board of Directors for such Acquisition
Proposal.
7.2 Negative Covenants of JCN. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of Highwoods shall have been obtained, and except as
otherwise expressly contemplated herein, JCN covenants and agrees that it will
not do or agree or commit to do, or permit any of its Subsidiaries to do or
agree or commit to do, any of the following:
(a) amend the Certificate of Incorporation, Bylaws or other
governing instruments of any JCN Entity; or
(b) other than as provided in Section 7.2(b) of the JCN Disclosure
Memorandum, incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a JCN Entity to another JCN Entity)
in excess of an aggregate of $250,000 (for the JCN Entities on a consolidated
basis) except in the ordinary course of the business of JCN Subsidiaries
consistent with past practices, or impose, or suffer the imposition, on any
Asset of any JCN Entity of any Lien or permit any such Lien to exist (other than
in connection with Liens in effect as of the date hereof that are disclosed in
the JCN Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other
than in settlement of obligations then owed by the ESOT (as defined below) to
JCN as reasonably approved by Highwoods and other than exchanges in the ordinary
course under employee benefit plans), directly or indirectly, any shares, or any
securities convertible into any shares, of the capital stock of any JCN Entity,
or declare or pay any dividend or make any other distribution in respect of
JCN's capital stock; or
(d) except for this Agreement, or pursuant to the exercise of
stock options outstanding as of the date hereof and pursuant to the terms
thereof in existence on the date hereof or as disclosed in Section 7.2(d) of the
JCN Disclosure Memorandum, issue, sell, pledge, encumber, authorize the issuance
of, enter into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of, or otherwise permit to become outstanding, any additional shares of
JCN Common Stock or any other capital stock of any JCN Entity, or any stock
appreciation rights, or any option, warrant, or other Equity Right; or
(e) except as provided in Section 7.2(e) of the JCN Disclosure
Memorandum, adjust, split, combine or reclassify any capital stock of any JCN
Entity or issue or authorize the issuance of any other securities in respect of
or in substitution for shares of JCN Common Stock, or sell, lease, mortgage or
otherwise dispose of or otherwise encumber (x) any shares of capital stock of
any JCN Subsidiary (unless any such shares of stock are sold or otherwise
transferred to another
32
JCN Entity) or (y) any Asset having a book value or gross lease value (with
respect to any new Lease of a JCN Property) in excess of $50,000 other than in
the ordinary course of business for reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less, purchase any securities or make any material investment, either
by purchase of stock of securities, contributions to capital, Asset transfers,
or purchase of any Assets, in any Person other than a wholly owned JCN
Subsidiary, or otherwise acquire direct or indirect control over any Person,
other than in connection with (i) foreclosures in the ordinary course of
business, or (ii) the creation of new wholly owned Subsidiaries organized to
conduct or continue activities otherwise permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the
employees or officers of any JCN Entity, except in accordance with past practice
disclosed in Section 7.2(g) of the JCN Disclosure Memorandum and as reasonably
approved by Highwoods or as required by Law; pay any severance or termination
pay or any bonus other than pursuant to written policies or written Contracts in
effect on the date of this Agreement and disclosed in Section 7.2(g) of the JCN
Disclosure Memorandum; enter into or amend any severance agreements with
officers of any JCN Entity; grant any material increase in fees or other
increases in compensation or other benefits to directors of any JCN Entity
except in accordance with past practice disclosed in Section 7.2(g) of the JCN
Disclosure Memorandum; or
(h) enter into or amend any employment Contract between any JCN
Entity and any Person (unless such amendment is required by Law) that the JCN
Entity does not have the unconditional right to terminate without Liability
(other than Liability for services already rendered), at any time on or after
the Effective Time; or
(i) except as provided in Section 7.2(i) of the JCN Disclosure
Memorandum, adopt any new employee benefit plan of any JCN Entity or terminate
or withdraw from, or make any material change in or to, any existing employee
benefit plans of any JCN Entity other than any such change that is required by
Law or that, in the opinion of counsel, is necessary or advisable to maintain
the tax qualified status of any such plan, or make any distributions from such
employee benefit plans, except as required by Law, the terms of such plans or
consistent with past practice; or
(j) make any significant change in any Tax or accounting methods
or systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any JCN Entity for
material money damages or restrictions
33
upon the operations of any JCN Entity without first providing notice thereof to
Highwoods and obtaining Highwoods consent, which consent shall not be
unreasonably withheld; or
(l) make any payments or accommodations to the Employee Stock
Ownership Trust of the J.C. Nichols Company ("ESOT") or any other shareholder
relating directly or indirectly to any of the costs, expenses or other charges
(including break-up fees owed to any third-party) of the ESOT or any other
shareholder related to or arising out of directly or indirectly any of the
transactions contemplated by this Agreement without first obtaining Highwoods
consent; or
(m) without first providing notice thereof to Highwoods and
obtaining Highwoods consent, which consent shall not be unreasonably withheld
and, except in the ordinary course of business, enter into, modify, amend or
terminate any material Contract (including any loan Contract with an unpaid
balance exceeding $50,000) or waive, release, compromise or assign any material
rights or claims.
7.3 Covenants of Highwoods. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of JCN shall have been obtained, and except as otherwise
expressly contemplated herein, Highwoods covenants and agrees that it shall (a)
continue to conduct its business and the business of its Subsidiaries in a
manner designed in its reasonable judgment, to continue it to meet the
requirements for qualification as a real estate investment trust under Sections
856-860 of the Internal Revenue Code and to enhance the long-term value of the
Highwoods Common Stock and the business prospects of the Highwoods Entities and
to the extent consistent therewith use all reasonable efforts to preserve intact
the Highwoods Entities' core businesses and goodwill with their respective
employees and the communities they serve, (b) take no action which would (i)
materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentences of
Section 9.1(b) or 9.1(c), or (ii) materially adversely affect the ability of any
Party to perform its covenants and agreements under this Agreement; provided,
that the foregoing shall not prevent any Highwoods Entity from acquiring any
Assets or other businesses or from discontinuing or disposing of any of its
Assets or business if such action is, in the judgment of Highwoods, desirable in
the conduct of the business of Highwoods and its Subsidiaries. Highwoods further
covenants and agrees that it will not, without the prior written consent of JCN,
which consent shall not be unreasonably withheld, amend the Amended and Restated
Articles of Incorporation or Bylaws of Highwoods, in each case, in any manner
adverse to the holders of JCN Common Stock as compared to rights of holders of
Highwoods Common Stock generally as of the date of this Agreement. Highwoods
shall take all action necessary under the MGCL prior to the Effective Time for
Sub to enter into and consummate the transactions contemplated hereunder,
including the Merger.
7.4 Adverse Changes in Condition.
34
(a) Each Party agrees to give written notice promptly to the other
Party upon becoming aware of the occurrence or impending occurrence of any event
or circumstance relating to it or any of its Subsidiaries which (i) is
reasonably likely to have, individually or in the aggregate, a JCN Material
Adverse Effect or a Highwoods Material Adverse Effect, as applicable, or (ii)
would cause or constitute a material breach of any of its representations,
warranties, or covenants contained herein, and to use its reasonable efforts to
prevent or promptly to remedy the same.
(b) Unless JCN, based upon the advice of tax counsel, is
reasonably satisfied that JCN shareholders receiving only Highwoods Common Stock
in the Merger will incur no income tax liability as a result of the Merger, the
parties shall develop a mutually acceptable plan that carries out as nearly as
possible the economic results provided herein without resulting in income tax
liability for JCN shareholders receiving only Highwoods Common Stock.
7.5 Reports. Each Party and its Subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in shareholders' equity, and cash flows for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not material). As of their
respective dates, such reports filed with the SEC will comply in all material
respects with the Securities Laws and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Any financial statements contained
in any other reports to another Regulatory Authority shall be prepared in
accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Shareholder Approval. As
soon as reasonably practicable after execution of this Agreement, Highwoods
shall prepare and file the Registration Statement with the SEC, and shall use
its reasonable efforts to cause the Registration Statement to become effective
under the 1933 Act and take any action required to be taken under the applicable
state Blue Sky or securities Laws in connection with the issuance of the shares
of Highwoods Common Stock upon consummation of the Merger. JCN shall cooperate
in the preparation and filing of the Registration Statement and shall furnish
all information concerning it and the holders of its capital stock as Highwoods
may reasonably request in connection with such action. JCN shall call the JCN
Shareholders Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and such other related matters as it
deems appropriate.
35
In connection with the JCN Shareholders Meeting, (i) JCN shall prepare and file
with the SEC a Proxy Statement and mail such Proxy Statement to its
shareholders, (ii) the Parties shall furnish to each other all information
concerning them that they may reasonably request in connection with such Proxy
Statement, (iii) the Board of Directors of JCN shall recommend to its
shareholders the approval of the matters submitted for approval (subject to the
Board of Directors of JCN, after having consulted with outside counsel,
reasonably determining in good faith that the making of such recommendation, or
the failure to withdraw or modify its recommendation, would be inconsistent with
the fiduciary duties of the members of such Board of Directors to JCN's
shareholders under applicable law), and (iv) the Board of Directors and officers
of JCN shall use their reasonable efforts to obtain such shareholders' approval
(subject to the Board of Directors of JCN, after having consulted with outside
counsel, reasonably determining in good faith the taking of such actions would
be inconsistent with the fiduciary duties of the members of such Board of
Directors to JCN's shareholders under applicable law). Highwoods and JCN shall
make all necessary filings with respect to the Merger under the Securities Laws.
8.2 Exchange Listing. Highwoods shall cause to be listed, prior to the
Effective Time, on the NYSE, subject to official notice of issuance, the shares
of Highwoods Common Stock to be issued to the holders of JCN Common Stock
pursuant to the Merger, and Highwoods shall give all notices and make all
filings with the NYSE required in connection with the transactions contemplated
herein.
8.3 Applications; Antitrust Notification. Highwoods shall promptly
prepare and file, and JCN shall cooperate in the preparation and, where
appropriate, filing of, applications with all Regulatory Authorities having
jurisdiction over the transactions contemplated by this Agreement seeking the
requisite Consents necessary to consummate the transactions contemplated by this
Agreement. To the extent required by the HSR Act, each of the Parties will
promptly file with the United States Federal Trade Commission and the United
States Department of Justice the notification and report form required for the
transactions contemplated hereby and any supplemental or additional information
which may reasonably be requested in connection therewith pursuant to the HSR
Act and will comply in all material respects with the requirements of the HSR
Act. The Parties shall deliver to each other copies of all filings,
correspondence and orders to and from all Regulatory Authorities in connection
with the transactions contemplated hereby. The Parties agree that the
consummation of the Merger does not require any filings or approvals under the
HSR Act.
8.4 Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, Sub shall execute and file the Articles of Merger
with the Secretary of State of the State of Missouri and the Articles of Merger
with the Department of Assessment and Taxation of the State of Maryland in
connection with the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary,
36
proper, or advisable under applicable Laws to consummate and make effective, as
soon as reasonably practicable after the date of this Agreement, the
transactions contemplated by this Agreement, including using its reasonable
efforts to lift or rescind any Order adversely affecting its ability to
consummate the transactions contemplated herein and to cause to be satisfied the
conditions referred to in Article 9; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement. Each
Party shall use, and shall cause each of its Subsidiaries to use, its reasonable
efforts to obtain all Consents necessary or desirable for the consummation of
the transactions contemplated by this Agreement.
8.6 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party shall keep the other
Party advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Party.
(b) In addition to the Parties' respective obligations under the
Confidentiality Agreement, which is hereby reaffirmed and adopted, and
incorporated by reference herein, each Party shall, and shall cause its advisers
and agents to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its and its Subsidiaries'
businesses, operations, and financial positions and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
or which has had or is reasonably likely to have a JCN Material Adverse Effect
or a Highwoods Material Adverse Effect, as applicable. Each party hereby
represents and warrants that it knows of no such fact or occurrence as of the
date of this Agreement.
8.7 Press Releases. Prior to the Effective Time, JCN and Highwoods shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
37
8.8 Certain Actions. (a) Except with respect to this Agreement and the
transactions contemplated hereby, no JCN Entity nor any officer or director
thereof nor any Representatives thereof retained by any JCN Entity shall
directly or indirectly solicit any Acquisition Proposal by any Person. Except to
the extent the Board of Directors of JCN, after having consulted with and
considered the advice of outside counsel, reasonably determines in good faith
that the failure to take such actions would constitute a breach of fiduciary
duties of the members of such Board of Directors to JCN's shareholders under
applicable law, no JCN Entity or any officer or director or Representative
thereof shall furnish any non-public information that it is not legally
obligated to furnish, negotiate with respect to, or enter into any Contract with
respect to, any Acquisition Proposal. JCN may communicate information about such
an Acquisition Proposal to its shareholders if and to the extent that it is
required to do so in order to comply with its legal obligations as advised by
outside counsel. JCN shall promptly advise Highwoods following the receipt of
any Acquisition Proposal or any inquiry concerning a possible Acquisition
Proposal and the details thereof, and advise Highwoods of any developments with
respect to such Acquisition Proposal or inquiry promptly upon the occurrence
thereof. JCN shall (i) immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Persons conducted heretofore
with respect to any of the foregoing, and (ii) use its reasonable efforts to
cause all of its Affiliates and Representatives not to engage in any of the
foregoing. JCN also agrees to take reasonable efforts to prevent any employee of
any JCN Entity from committing any of the foregoing acts.
(b) During the period from the date of this Agreement through the
Effective Time (or earlier termination hereof), none of the JCN Entities shall
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which it is a party. During such period, the JCN
Entities shall enforce, to the fullest extent permitted under applicable law,
the provisions of any such agreement, including, but not limited to, by
obtaining injunctions to prevent any breaches of any such agreements and to
enforce specifically the terms and provisions thereof in any court having
jurisdiction.
8.9 Tax Treatment. Each of the Parties undertakes and agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for or as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code for federal income tax purposes,
including obtaining letters or other written instruments evidencing investment
intent from the requisite number of JCN Shareholders.
8.10 State Takeover Laws. Each JCN Entity shall take all necessary steps
to exempt the transactions contemplated by this Agreement from, or if necessary
to challenge the validity or applicability of, any applicable Takeover Law,
including Section 351.459 of the GBCL.
8.11 Charter Provisions. Each JCN Entity shall take all necessary action
to ensure that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby do not and will not result
in the grant of any rights to any Person under the Certificate of Incorporation,
Bylaws or other governing instruments of any JCN Entity or restrict
38
or impair the ability of Highwoods or any of its Subsidiaries to vote, or
otherwise to exercise the rights of a shareholder with respect to, shares of any
JCN Entity that may be directly or indirectly acquired or controlled by them.
8.12 Agreement of Affiliates. JCN has disclosed in Section 8.12 of the
JCN Disclosure Memorandum all Persons it reasonably believes are an "affiliate"
of JCN for purposes of Rule 145 under the 1933 Act. JCN shall use its reasonable
efforts to cause each such Person to deliver to Highwoods not later than 30 days
prior to the Effective Time, a written agreement providing that such Person will
not sell, pledge, transfer, or otherwise dispose of the shares of Highwoods
Common Stock to be received by such Person upon consummation of the Merger
except in compliance with applicable provisions of the 1933 Act and the rules
and regulations thereunder. Highwoods shall not be required to maintain the
effectiveness of the Registration Statement under the 1933 Act for the purposes
of resale of Highwoods Common Stock by such affiliates who do not enter into
such written agreements.
8.13 Employee Benefits and Contracts. Following the Effective Time,
Highwoods shall provide generally to officers and employees of the JCN Entities
employee benefits under employee benefit and welfare plans (other than stock
option or other plans involving the potential issuance of Highwoods Common
Stock), on terms and conditions which when taken as a whole are substantially
similar to those currently provided by the Highwoods Entities to their similarly
situated officers and employees. For purposes of participation, vesting and
(except in the case of Highwoods retirement plans) benefit accrual under
Highwoods' employee benefit plans, the service of the employees of the JCN
Entities prior to the Effective Time shall be treated as service with a
Highwoods Entity participating in such employee benefit plans. Highwoods also
shall cause the Surviving Corporation and its Subsidiaries to honor in
accordance with their terms all employment, severance, consulting and other
compensation Contracts disclosed in Section 8.13 of the JCN Disclosure
Memorandum to Highwoods between any JCN Entity and any current or former
director, officer, or employee thereof, and all provisions for vested benefits
or other vested amounts earned or accrued through the Effective Time under the
JCN Benefit Plans.
8.14 Indemnification.
(a) For a period of six years after the Effective Time,
Highwoods shall, and shall cause the Surviving Corporation to, indemnify, defend
and hold harmless the present and former directors, officers, employees and
agents of the JCN Entities (each, an "Indemnified Party") against all
Liabilities arising out of actions or omissions arising out of the Indemnified
Party's service or services as directors, officers, employees or agents of any
JCN Entity or, at any JCN Entity's request, of another corporation, partnership,
joint venture, trust or other enterprise occurring at or prior to the Effective
Time (including the transactions contemplated by this Agreement) to the fullest
extent permitted under Missouri Law and by the Certificate of Incorporation and
Bylaws and any other organizational instruments of the applicable JCN Entity as
in effect on the date hereof, including provisions relating to advances of
expenses incurred in the defense of any Litigation and whether or not any
Highwoods Entity is insured against any such
39
matter. Without limiting the foregoing, in any case in which approval by the
Surviving Corporation is required to effectuate any indemnification, the
Surviving Corporation shall direct, at the election of the Indemnified Party,
that the determination of any such approval shall be made by independent counsel
mutually agreed upon between Highwoods and the Indemnified Party.
(b) Highwoods shall, or shall cause the Surviving
Corporation to, use its reasonable efforts (and JCN shall cooperate prior to the
Effective Time in these efforts) to maintain in effect for a period of three
years after the Effective Time JCN's existing directors' and officers' liability
insurance policy (provided that Highwoods may substitute therefor (i) policies
of at least the same coverage and amounts containing terms and conditions which
are substantially no less advantageous or (ii) with the consent of JCN given
prior to the Effective Time, any other policy) with respect to claims arising
from facts or events which occurred prior to the Effective Time and covering
persons who are currently covered by such insurance; provided, that neither
Highwoods nor the Surviving Corporation shall be obligated to make aggregate
premium payments for such three-year period in respect of such policy (or
coverage replacing such policy) which exceed, for the portion related to JCN's
directors and officers, 200% of the annual premium payments on JCN's current
policy in effect as of the date of this Agreement (the "Maximum Amount"). If the
amount of the premiums necessary to maintain or procure such insurance coverage
exceeds the Maximum Amount, Highwoods shall use its reasonable efforts to
maintain the most advantageous policies of directors' and officers' liability
insurance obtainable for a premium equal to the Maximum Amount.
(c) Any Indemnified Party wishing to claim indemnification
under paragraph (a) of this Section 8.14, upon learning of any such Liability or
Litigation, shall promptly notify Highwoods thereof. In the event of any such
Litigation (whether arising before or after the Effective Time), (i) Highwoods
or the Surviving Corporation shall have the right (but only subsequent to the
Effective Time) to assume the defense thereof and neither Highwoods nor the
Surviving Corporation shall be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if
Highwoods or the Surviving Corporation elects not to assume such defense or
counsel for the Indemnified Parties advises that there are substantive issues
which raise conflicts of interest between Highwoods or the Surviving Corporation
and the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them, and Highwoods or the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that Highwoods and the
Surviving Corporation shall be obligated pursuant to this paragraph (c) to pay
for only one firm of counsel for all Indemnified Parties in any jurisdiction,
(ii) the Indemnified Parties will cooperate in the defense of any such
Litigation, and (iii) neither Highwoods nor the Surviving Corporation shall be
liable for any settlement effected without its prior written consent, which
consent shall not be unreasonably withheld; and provided further that neither
Highwoods nor the Surviving Corporation shall have any obligation hereunder to
any Indemnified Party when and if a court of competent jurisdiction shall
determine, and such determination shall have become
40
final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable Law.
(d) If Highwoods or the Surviving Corporation or any
successors or assigns shall consolidate with or merge into any other Person and
shall not be the continuing or surviving Person of such consolidation or merger
or shall transfer all or substantially all of its assets to any Person, then and
in each case, proper provision shall be made so that the successors and assigns
of Highwoods or the Surviving Corporation shall assume the obligations set forth
in this Section 8.14.
(e) The provisions of this Section 8.14 are intended to be
for the benefit of and shall be enforceable by, each Indemnified Party and their
respective heirs and representatives.
8.15 Tenant Estoppels. JCN shall endeavor to use reasonable commercial
efforts to obtain prior to the Effective Date, tenant estoppel certificates for
the 100 largest Leases (based on gross rental payments) with respect to the JCN
Properties in form reasonably acceptable to Highwoods.
8.16 Maintenance of Organizational Structure. Highwoods acknowledges that
its present operating structure enables a level of operational flexibility that
facilitates the growth of Highwoods and its business. Highwoods shall not alter
its current operating structure in any material respect, except to the extent
the Board of Directors of Highwoods determines in good faith that such
alteration is in the best interests of the shareholders of Highwoods.
8.17 Maintenance of Plaza Redevelopment Plan. Highwoods acknowledges the
economic and social significance of the Country Club Plaza district (the
"Plaza") to Kansas City, Missouri and surrounding communities, and further
acknowledges the importance of the development and redevelopment of the Plaza by
the JCN Entities. From and after the Effective Time, Highwoods shall continue to
pursue each portion of the Plaza redevelopment plan unless the economics of any
single portion of the redevelopment plan, or changes in circumstances beyond the
reasonable control of Highwoods, causes the Board of Directors of Highwoods to
determine in good faith, after consideration of available alternatives, that
such redevelopment plan or portion thereof is contrary to the best interests of
the shareholders of Highwoods.
8.18 Maintenance of Charitable Contributions. From and after the
Effective Time, Highwoods shall make annual charitable contributions and provide
community support in the geographic areas in which the business of JCN is
currently operated, at levels substantially comparable to or greater than the
levels of charitable contributions and community support provided by JCN
Entities within such areas during calendar year 1996 and the period from January
1, 1997 through the date of this Agreement.
8.19 Maintenance of Merchant Support. From and after the Effective Time,
Highwoods shall provide annual financial assistance and marketing support to
merchants' associations relating to properties currently owned or operated by
any JCN Entity, at levels substantially comparable
41
to or greater than the levels of such support provided by JCN Entities during
calendar year 1996 and the period from January 1, 1997 through the date of this
Agreement.
8.20 Member of Board of Directors. Highwoods shall appoint to its Board
of Directors an individual (who would qualify as an independent director under
Highwoods' Articles of Incorporation and bylaws) designated by JCN's Board of
Directors, which designee shall be reasonably acceptable to the Highwoods Board
of Directors to serve until the next annual shareholders meeting, at which time
the Highwoods Board of Directors will nominate and recommend such designee for a
three-year term on Highwoods Board of Directors.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6:
(a) Shareholder Approval. The shareholders of JCN shall have
approved this Agreement, and the consummation of the transactions contemplated
hereby, including the Merger, as and to the extent required by Law, by the
provisions of any governing instruments, or by the rules of the NASD, if
applicable.
(b) Regulatory Approvals. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities required
for consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired.
(c) Third Party Consents and Approvals. Each Party shall have
obtained any and all Consents required for consummation of the Merger (other
than those referred to in Section 9.1(b)), which as to JCN, the parties agree
shall include only those Consents set forth in Section 9.1 of the JCN Disclosure
Memorandum. In the event such third party does not make such payment within ten
days of demand therefor by Highwoods, the payment shall be an obligation of JCN
and shall be paid by JCN within two business days of notice to JCN by Highwoods.
In addition to the Consents set forth in Section 9.1 to the JCN Disclosure
Memorandum, to the extent required by the applicable contract, mortgage,
document or other instrument, JCN shall use commercially reasonable efforts to
obtain the consent of (i) any lender to JCN and (ii) any other party reasonably
identified by Highwoods. No Consent so obtained which is necessary to consummate
the transactions contemplated hereby shall be conditioned or restricted in a
manner which in the reasonable judgment of the Board of Directors of Highwoods
would so materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement that, had such condition or
requirement been known, such Party would not, in its reasonable judgment, have
entered into this Agreement.
42
(d) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) or taken any other action which prohibits, restricts or makes illegal
consummation of the transactions contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or the 1934 Act relating to the issuance or trading of the
shares of Highwoods Common Stock issuable pursuant to the Merger shall have been
received.
(f) Exchange Listing. The shares of Highwoods Common Stock
issuable pursuant to the Merger shall have been approved for listing on the
NYSE, subject to official notice of issuance.
9.2 Conditions to Obligations of Highwoods. The obligations of Highwoods
to perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Highwoods pursuant to Section 11.6(a):
(a) Representations and Warranties. For purposes of this Section
9.2(a), the accuracy of the representations and warranties of JCN set forth in
this Agreement shall be assessed as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties set forth in
Section 5.3 shall be true and correct (except for inaccuracies which are de
minimus in amount). The representations and warranties set forth in Sections
5.18, 5.19, and 5.20 shall be true and correct in all material respects. No
representation or warranty of JCN set forth in this Agreement shall be deemed
untrue or incorrect, and no JCN Entity shall be deemed to have breached a
representation or warranty, as a consequence of the existence of any fact,
circumstance or event unless such fact, circumstance or event, individually or
taken together with other facts, circumstances or events inconsistent with any
other representation or warranty has had, or is expected to have, a JCN Material
Adverse Effect; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to "material"
or "Material Adverse Effect" or to the "Knowledge" of any Person shall be deemed
not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of JCN to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects, as of the Effective Time.
43
(c) Certificates. JCN shall have delivered to Highwoods (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.1 as relates to JCN and in Section 9.2(a) and
9.2(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by JCN's Board of Directors and shareholders evidencing the taking of
all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Highwoods and its counsel
shall request.
(d) Opinion of Counsel. Highwoods shall have received an opinion
of Blackwell Sanders Matheny Weary & Lombardi L.L.P., counsel to JCN, dated as
of the Closing, in form reasonably satisfactory to Highwoods, as to the matters
set forth in Exhibit 1.
(e) Accountant's Letters. Highwoods shall have received from KPMG
Peat Marwick LLP letters dated not more than five days prior to (i) the date of
the Proxy Statement and (ii) the Effective Time, with respect to certain
financial information regarding JCN, in form and substance reasonably
satisfactory to Highwoods, which letters shall be based upon customary specified
procedures undertaken by such firm in accordance with Statement of Auditing
Standard Nos. 72 and 75.
(f) Rights Agreement. Neither this Agreement and any agreements
related hereto nor consummation of the Merger shall have caused or shall cause
any of the JCN Rights to become non-redeemable or exercisable for capital stock
of Highwoods or JCN.
(g) Shareholders' Equity. JCN's shareholders' equity as of the
Closing shall not be less than JCN's shareholders' equity as of March 31, 1997,
excluding for purposes of the calculation of such shareholders' equity the
effects of (i) all costs, fees and charges, including fees and charges of JCN's
accountants, counsel and financial advisors, whether or not accrued or paid,
that are related to the transactions contemplated by this Agreement and (ii) any
reductions in JCN's shareholders' equity resulting from any actions or changes
in policies of JCN taken at the request of Highwoods.
9.3 Conditions to Obligations of JCN. The obligations of JCN to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by JCN pursuant to Section 11.6(b):
(a) Representations and Warranties. For purposes of this Section
9.3(a), the accuracy of the representations and warranties of Highwoods set
forth in this Agreement shall be assessed as of the date of this Agreement and
as of the Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of Highwoods set
forth in Section 6.15
44
shall be true and correct in all material respects. No representation or
warranty of Highwoods set forth in this Agreement shall be deemed untrue or
incorrect, and no Highwoods Entity shall be deemed to have breached a
representation or warranty, as a consequence of the existence of any fact,
circumstance or event unless such fact, circumstance or event, individually or
taken together with all other facts, circumstances or events inconsistent with
any other representation or warranty has had, or is expected to have, a
Highwoods Material Adverse Effect; provided that, for purposes of this sentence
only, those representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Highwoods to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) Certificates. Highwoods shall have delivered to JCN (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.1 as relates to Highwoods and in Section
9.3(a) and 9.3(b) have been satisfied, and (ii) certified copies of resolutions
duly adopted by Highwoods' Board of Directors and Sub's Board of Directors and
sole shareholder evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as JCN and its counsel shall request.
(d) Opinion of Counsel. JCN shall have received an opinion of (i)
Alston & Bird LLP, counsel to Highwoods, dated as of the Effective Time, in form
reasonably acceptable to JCN, as to the matters set forth in Exhibit 2 and (ii)
a tax opinion of Blackwell Sanders Matheny Weary & Lombardi, L.L.P., to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and that JCN shareholders receiving
only Highwoods Common Stock will incur no income tax liability.
(e) Fairness Opinion. JCN shall not have received notice from
Morgan Stanley, Dean Witter, Discover & Co. prior to the date of the Proxy
Statement, indicating withdrawal of its prior opinion that the consideration to
be received by JCN shareholders in connection with the Merger is fair, from a
financial point of view, to such shareholders and shall have received an update
to such opinion immediately prior to the shareholder meeting at which approval
of this Agreement will be considered.
(f) Exchange Agent Certification. The Exchange Agent shall have
delivered to JCN a certificate, dated as of the Effective Time, to the effect
that the Exchange Agent has received from Highwoods appropriate instructions and
authorization for the Exchange Agent to issue a sufficient number of shares of
Highwoods Common Stock in exchange for outstanding shares of JCN Common Stock
and that Highwoods has deposited with the Exchange Agent
45
sufficient funds to pay a reasonable estimate of the cash payments necessary to
make all fractional share payments as required by Section 3.6.
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the shareholders of JCN,
this Agreement may be terminated and the Merger abandoned at any time prior to
the Effective Time:
(a) By mutual consent of Highwoods and JCN; or
(b) By either Party (provided that the terminating Party is not
then in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by the
other Party of any representation or warranty contained in this Agreement which
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching Party of such breach and which breach is reasonably
likely, in the opinion of the non-breaching Party, to have, individually or in
the aggregate, a JCN Material Adverse Effect or a Highwoods Material Adverse
Effect, as applicable, on the breaching Party; or
(c) By either Party (provided that the terminating Party is not
then in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by the
other Party of any covenant or agreement contained in this Agreement which
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching Party of such breach; or
(d) By either Party (provided that the terminating Party is not
then in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event (i) any Consent of any
Regulatory Authority required for consummation of the Merger and the other
transactions contemplated hereby shall have been denied by final nonappealable
action of such authority or if any action taken by such authority is not
appealed within the time limit for appeal, or (ii) the shareholders of JCN fail
to vote their approval of the matters relating to this Agreement and the
transactions contemplated hereby at the JCN Shareholders Meeting where such
matters were presented to such shareholders for approval and voted upon; or
(e) By either Party in the event that the Merger shall not have
been consummated by June 30, 1998, if the failure to consummate the transactions
contemplated hereby on or before such date is not caused by any breach of this
Agreement by the Party electing to terminate pursuant to this Section 10.1(e);
or
(f) By Highwoods or JCN, in the event that the Board of Directors
of JCN shall have failed to recommend to its shareholders the approval of the
Merger and the transactions contemplated by this Agreement (to the exclusion of
any other Acquisition Proposal), or shall have resolved not to recommend to its
shareholders the approval of the Merger, or shall have affirmed, recommended or
authorized entering into any other Acquisition Proposal or other transaction
involving a merger, share exchange, consolidation or transfer of substantially
all of the Assets of JCN, or shall fail to call and hold a JCN Shareholders
Meeting for purposes of voting on the approval of the Merger and the transaction
contemplated hereby.
10.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article 11 and Section 8.6(b) shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 10.1(b) or 10.1(c)
shall not relieve the breaching Party from Liability for an uncured willful
breach of a representation, warranty, covenant, or agreement giving rise to such
termination.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 1, 2, 3, 4 and 11 and Sections 8.13 and 8.14.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as
amended.
"1934 Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Acquisition Proposal" with respect to a Party shall mean
any tender offer or exchange offer or any proposal for a merger, acquisition of
all of the stock or assets of, or other business combination involving the
acquisition of such Party or any of its Subsidiaries or the
46
acquisition of a substantial equity interest in, or a substantial portion of the
assets of, such Party or any of its Subsidiaries.
"Affiliate" of a Person shall mean: (i) any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person; (ii) any officer,
director, partner, employer, or direct or indirect beneficial owner of any 10%
or greater equity or voting interest of such Person.
"Agreement" shall mean this Agreement and Plan of Merger,
including the Exhibits delivered pursuant hereto and incorporated herein by
reference.
"Articles of Merger" shall mean, collectively, the Articles
of Merger to be executed by JCN and Sub and filed with the Secretary of State of
the State of Missouri relating to the Merger as contemplated by Section 1.1, and
the Articles of Merger to be executed by JCN and Sub and filed with the
Department of Assessments and Taxation of the State of Maryland relating to the
Merger as contemplated by Section 1.1.
"Assets" of a Person shall mean all of the assets,
properties, businesses and rights of such Person of every kind, nature,
character and description, whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or not
carried on the books and records of such Person, and whether or not owned in the
name of such Person or any Affiliate of such Person and wherever located.
"Cash Amount" shall have the meaning set forth in Section
3.2.
"Closing Date" shall mean the date on which the Closing
occurs.
"Confidentiality Agreement" shall mean that certain
Confidentiality Agreement, dated November 24, 1997, between JCN and Highwoods.
"Consent" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation required from any Person
pursuant to any Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of any
kind or character, or other document to which any Person is a party or that is
binding on any Person or its capital stock, Assets or business.
47
"Default" shall mean (i) any breach or violation of, default
under, contravention of, or conflict with, any Contract, Law, Order, or Permit,
(ii) any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time or
the giving of notice would give rise to a right of any Person to exercise any
remedy or obtain any relief under, terminate or revoke, suspend, cancel, or
modify or change the current terms of, or renegotiate, or to accelerate the
maturity or performance of, or to increase or impose any Liability under, any
Contract, Law, Order, or Permit.
"Dissenting Shares" shall mean those shares of JCN Common
Stock as to which the holders thereof elect to exercise their dissenter's rights
in accordance with and as contemplated by Section 351.455 of the GBCL and as
provided for in Section 3.5 hereof.
"Environmental Laws" shall mean all Laws relating to
pollution or protection of human health and the environment (including ambient
air, surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States Environmental
Protection Agency or state and local agencies with jurisdiction over, and
including published court decisions interpreting the foregoing pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
6901 et seq. ("RCRA"), and other Laws relating to emissions, discharges,
releases, or threatened releases of any Hazardous Material, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of any Hazardous Material.
"Equity Rights" shall mean all arrangements, calls,
commitments, Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, shares of the
capital stock of a Person or by which a Person is or may be bound to issue
additional shares of its capital stock or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"Exhibits" 1 through 2, inclusive, shall mean the Exhibits
so marked, copies of which are attached to this Agreement. Such Exhibits are
hereby incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCL" shall mean the General and Business Corporation Law
of Missouri.
48
"Hazardous Material" shall mean (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to any Environmental Law and any polychlorinated
biphenyls).
"Highwoods Capital Stock" shall mean, collectively, the
Highwoods Common Stock, the Highwoods Preferred Stock and any other class or
series of capital stock of Highwoods.
"Highwoods Common Stock" shall mean the $.01 par value
common stock of Highwoods.
"Highwoods Disclosure Memorandum" shall mean the written
information entitled "Highwoods Properties, Inc. Disclosure Memorandum"
delivered prior to the date of this Agreement to JCN describing in reasonable
detail the matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under which
such disclosure is being made. Information disclosed with respect to one Section
shall not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
"Highwoods Entities" shall mean, collectively, Highwoods and
all Highwoods Subsidiaries.
"Highwoods Financial Statements" shall mean (i) the
consolidated balance sheets (including related notes and schedules, if any) of
Highwoods as of September 30, 1997, and as of December 31, 1996 and 1995, and
the related statements of operations, changes in shareholders' equity, and cash
flows (including related notes and schedules, if any) for the nine months ended
September 30, 1997, and for each of the three fiscal years ended December 31,
1996, 1995 and 1994, as filed by Highwoods in SEC Documents, and (ii) the
consolidated balance sheets of Highwoods (including related notes and schedules,
if any) and related statements of operations, changes in shareholders' equity,
and cash flows (including related notes and schedules, if any) included in SEC
Documents filed with respect to periods ended subsequent to September 30, 1997.
"Highwoods Material Adverse Effect" shall mean an event,
change or occurrence which, individually or together with any other event,
change or occurrence, has a material adverse impact on (i) the financial
position, business, or results of operations of Highwoods and its Subsidiaries,
taken as a whole, or (ii) the ability of Highwoods to perform its obligations
under this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement.
"Highwoods Preferred Stock" shall mean, collectively, the 8
5/8% Series A Cumulative Redeemable Preferred Shares of which 125,000 shares are
outstanding and the 8% Series
49
B Cumulative Redeemable Preferred Shares of which 6,900,000 shares are
outstanding, of Highwoods.
"Highwoods Rights Agreement" shall mean that certain
Shareholders Rights Agreement, dated October 4, 1997, between Highwoods and
First Union National Bank, as Rights Agent.
"Highwoods Rights" shall mean the preferred stock purchase
rights issued pursuant to the Highwoods Rights Agreement.
"Highwoods Stock Plans" shall mean the existing stock option
and other stock-based compensation plans of Highwoods designated as follows: the
Amended and Restated 1994 Stock Option Plan; the Dividend Reinvestment Plan and
the 1997 Employee Stock Purchase Plan.
"Highwoods Subsidiaries" shall mean the Subsidiaries of
Highwoods, which shall include Highwoods/Forsyth Limited Partnership and the
other Highwoods Subsidiaries described in Section 6.4 and any corporation or
other organization acquired as a Subsidiary of Highwoods in the future and held
as a Subsidiary by Highwoods at the Effective Time.
"HSR Act" shall mean Section 7A of the Clayton Act, as added
by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
"Intellectual Property" shall mean copyrights, patents,
trademarks, service marks, service names, trade names, applications therefor,
technology rights and licenses, computer software (including any source or
object codes therefor or documentation relating thereto), trade secrets,
franchises, know-how, inventions, and other intellectual property rights.
"Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated thereunder.
"JCN Common Stock" shall mean the $.01 par value common
stock of JCN.
"JCN Disclosure Memorandum" shall mean the written
information entitled "J.C. Nichols Company Disclosure Memorandum" delivered
prior to the date of this Agreement to Highwoods describing in reasonable detail
the matters contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made. Information disclosed with respect to one Section
shall not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
50
"JCN Entities" shall mean, collectively, JCN and all JCN
Subsidiaries.
"JCN Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of JCN as of
September 30, 1997, and as of December 31, 1996 and 1995, and the related
statements of income, changes in shareholders' equity, and cash flows (including
related notes and schedules, if any) for the nine months ended September 30,
1997, and for each of the three fiscal years ended December 31, 1996, 1995, and
1994, as filed by JCN in SEC Documents, and (ii) the consolidated balance sheets
of JCN (including related notes and schedules, if any) and related statements of
operations, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to September 30, 1997.
"JCN Material Adverse Effect" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of JCN and its Subsidiaries, taken as a
whole, or (ii) the ability of JCN to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement.
"JCN Rights" shall mean the common stock purchase rights
issued pursuant to the JCN Rights Agreement.
"JCN Rights Agreement" shall mean that certain Shareholders
Rights Agreement, dated July 28, 1997, between JCN and American Stock Transfer &
Trust Company, as Rights Agent.
"JCN Stock Plans" shall mean the existing stock option and
other stock-based compensation plans of JCN designated as follows: the Amended
and Restated 1996 Stock Option Plans.
"JCN Subsidiaries" shall mean the Subsidiaries of JCN, which
shall include the JCN Subsidiaries described in Section 5.4 and any corporation
or other organization acquired as a Subsidiary of JCN in the future and held as
a Subsidiary by JCN at the Effective Time; provided, however, that neither
KH/JCN L.L.C., a Missouri limited liability company, nor the ESOT shall be
deemed a JCN Subsidiary.
"Knowledge" as used with respect to a Person (including
references to such Person being aware of a particular matter) shall mean those
facts that are known or should reasonably have been known after due inquiry by
the chairman, president, chief financial officer, chief accounting officer,
chief operating officer, general counsel, any assistant or deputy general
counsel, or any senior, executive or other vice president of such Person and the
Knowledge of any such persons obtained or which would have been obtained from a
reasonable investigation.
51
"Law" shall mean any code, law, ordinance, regulation,
reporting or licensing requirement, rule, or statute applicable to a Person or
its Assets, Liabilities, or business, including those promulgated, interpreted
or enforced by any Regulatory Authority.
"Lease" shall mean any lease of more than 10,000 rentable
square feet in effect as of the date hereof and as to which JCN is the lessor.
"Liability" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or expense
(including costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of notes,
bills, checks, and drafts presented for collection or deposit in the ordinary
course of business) of any type, whether accrued, absolute or contingent,
liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) liens for current property Taxes not yet due
and payable, and (iii) liens which do not materially impair the use of or title
to the Assets subject to such lien.
"Litigation" shall mean any action, arbitration, cause of
action, claim, complaint, criminal prosecution, governmental or other
examination or investigation, hearing, administrative or other proceeding to
which a Party is a party or of which a Party's, business or Assets (including
Contracts related to it) are the subject, or relating in any way to the
transactions contemplated by this Agreement.
"Material" for purposes of this Agreement shall be
determined in light of the facts and circumstances of the matter in question;
provided that any specific monetary amount stated in this Agreement shall
determine materiality in that instance.
"MGCL" shall mean the Maryland General Corporation Law.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Operating Property" shall mean any property owned, leased,
or operated by the Party in question or by any of its Subsidiaries and, where
required by the context, includes the owner or operator of such property, but
only with respect to such property.
52
"Order" shall mean any administrative decision or award,
decree, injunction, judgment, order, quasi-judicial decision or award, ruling,
or writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"Participation Facility" shall mean any facility or property
in which the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such facility or
property.
"Party" shall mean either JCN or Highwoods, and "Parties"
shall mean both JCN and Highwoods.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any Person or its securities,
Assets, or business.
"Per Share Cash Consideration" shall have the meaning set
forth in Section 3.2.
"Per Share Stock Consideration" shall have the meaning set
forth in Section 3.1.
"Person" shall mean a natural person or any legal,
commercial or governmental entity, such as, but not limited to, a corporation,
general partnership, joint venture, limited partnership, limited liability
company, trust, business association, group acting in concert, or any person
acting in a representative capacity.
"Proxy Statement" shall mean the proxy statement used by JCN
to solicit the approval of its shareholders of the transactions contemplated by
this Agreement, which shall include the prospectus of Highwoods relating to the
issuance of the Highwoods Common Stock to holders of JCN Common Stock.
"Registration Statement" shall mean the Registration
Statement on Form S4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by
Highwoods under the 1933 Act with respect to the shares of Highwoods Common
Stock to be issued to the shareholders of JCN in connection with the
transactions contemplated by this Agreement.
53
"Regulatory Authorities" shall mean, collectively, the SEC,
the NYSE, the NASD, the Federal Trade Commission, the United States Department
of Justice, and all other federal, state, county, local or other governmental or
regulatory agencies, authorities (including self-regulatory authorities),
instrumentalities, commissions, boards or bodies having jurisdiction over the
Parties and their respective Subsidiaries.
"Representative" shall mean any investment banker, financial
advisor, attorney, accountant, consultant, or other representative engaged by a
Person.
"SEC Documents" shall mean all forms, proxy statements,
registration statements, reports, schedules, and other documents filed, or
required to be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940,
as amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"Sub Common Stock" shall mean the $.01 par value common
stock of Sub.
"Subsidiaries" shall mean all those corporations,
associations, or other business entities of which the entity in question either
(i) owns or controls 50% or more of the outstanding equity securities either
directly or through an unbroken chain of entities as to each of which 50% or
more of the outstanding equity securities is owned directly or indirectly by its
parent (provided, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), (ii) in
the case of partnerships, serves as a general partner, (iii) in the case of a
limited liability company, serves as a managing member, or (iv) otherwise has
the ability to elect a majority of the directors, trustees or managing members
thereof.
"Surviving Corporation" shall mean Sub as the surviving
corporation resulting from the Merger.
"Tax Return" shall mean any report, return, information
return, or other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
"Tax" or "Taxes" shall mean any federal, state, county,
local, or foreign taxes, charges, fees, levies, imposts, duties, or other
assessments, including income, gross receipts, excise, employment, sales, use,
transfer, license, payroll, franchise, severance, stamp, occupation, windfall
profits, environmental, federal highway use, commercial rent, customs duties,
capital stock, paid-up capital, profits, withholding, Social Security, single
business and
54
unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposed or required to be withheld by
the United States or any state, county, local or foreign government or
subdivision or agency thereof, including any interest, penalties, and additions
imposed thereon or with respect thereto.
(b) The terms set forth below shall have the meanings
ascribed thereto in the referenced sections:
Business Combination Section 11.2
Cash Election Shares Section 3.2
Closing Section 1.2
Dissenting Share Amount Section 4.2
Effective Time Section 1.3
Election Deadline Section 3.2
Election Form Section 3.2
ERISA Affiliate Section 5.13(c)
ESOT Section 7.2(l)
Exchange Agent Section 3.2
Exchange Fund Section 4.1(a)
Exchange Ratio Section 3.1(c)
Highwoods Benefit Plans Section 6.13(a)
Highwoods ERISA Plan Section 6.13(a)
Highwoods Option Amount Section 3.2(ii)
Highwoods Pension Plan Section 6.13(a)
Highwoods SEC Reports Section 6.5(a)
JCN Benefit Plans Section 5.13(a)
JCN Contracts Section 5.14
JCN ERISA Plan Section 5.13(a)
JCN Options Section 3.7(a)
JCN Pension Plan Section 5.13(a)
JCN Retained Shares Section 3.2
JCN Non-Retained Shares Section 3.2
JCN Properties Section 5.9(a)
JCN Permitted Encumbrances Section 5.9(a)
JCN SEC Reports Section 5.5(a)
JCN Shareholders Meeting Section 3.2
Leases Section 5.9(b)
Mailing Date Section 3.2
Maximum Amount Section 8.14
Maximum Cash Election Amount Section 3.2(i)
Maximum Share Amount Section 3.2
55
Merger Section 1.1
New Certificates Section 4.1(a)
No Election Shares Section 3.2
Old Certificates Section 3.2
Record Date Section 3.2
Takeover Laws Section 5.19
(c) Any singular term in this Agreement shall be deemed to include
the plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses.
(a) Except as otherwise provided in this Section 11.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel.
(b) Notwithstanding the foregoing,
(i) if this Agreement is terminated by Highwoods
pursuant to any of Sections 10.1(b), 10.1(c) or 10.1(f); or
(ii) if the Merger is not consummated as a result of
the failure of JCN to satisfy any of the conditions set forth in
Section 9.2,
then JCN shall promptly pay Highwoods the sum of $2,500,000, which amount
represents the costs and expenses of Highwoods (including reasonable costs of
counsel, investment bankers, actuaries and accountants).
(c) Notwithstanding the foregoing,
(i) if this Agreement is terminated by JCN pursuant to
either of Sections 10.1(b) or 10.1(c); or
(ii) if the Merger is not consummated as a result of the
failure of Highwoods to satisfy any of the conditions set forth in
Section 9.3,
then Highwoods shall promptly pay JCN $2,500,000, which amount represents
the costs and expenses of JCN (including reasonable costs of counsel, investment
bankers, actuaries and accountants).
56
(d) In addition to the foregoing, if within twelve (12) months
following:
(i) any termination of this Agreement by Highwoods pursuant
to Sections 10.1(b), 10.1(c), or 10.1(f); or
(ii) failure to consummate the Merger by reason of any
failure of JCN to satisfy the conditions enumerated in Section
9.2; or
any third-party shall acquire, merge with, combine with, purchase more
than 40% of the Assets of, or engage in any other business combination with, or
purchase any equity securities involving the acquisition of 50% or more of the
voting stock of JCN or a transaction which results in a Person owning 50% or
more of the voting stock of JCN, or enter into any binding agreement to do any
of the foregoing (collectively, a "Business Combination"), such third-party that
is a party to the Business Combination shall pay to Highwoods, prior to the
earlier of consummation of the Business Combination or execution of any letter
of intent or definitive agreement with JCN or any JCN Entity relating to such
Business Combination, an amount in cash equal to the sum of
(x) $ 14,700,000, plus
(y) the amount described in subsection (b) of this Section 11.2
(if not previously paid to Highwoods);
provided, however, that in the event: (i) there has been no Business
Combination consummated or a letter of intent or definitive agreement relating
to a Business Combination entered into at or prior to the time of the JCN
Shareholders Meeting, (ii) this Agreement is terminated or terminable by
Highwoods under Section 10.1(f), and (iii) within 12 months of such meeting or
such termination, a Business Combination is consummated, then such third party
shall pay to Highwoods, at the time of consummation of the Business Combination,
an amount in cash equal to the sum of
(xx) $7,350,000; plus
(yy) the amount described in subsection (b) of this Section 11.2
(if not previously paid to Highwoods);
which payments represent additional compensation for Highwoods' loss as
the result of the transactions contemplated by this Agreement not being
consummated. In the event such third-party shall refuse to pay such amounts
within ten days of demand therefor by Highwoods, the amounts shall be an
obligation of JCN and shall be paid by JCN within two business days of notice to
JCN by Highwoods. Notwithstanding anything herein to the contrary, if: (i)
Highwoods would not have had the right to terminate this Agreement under Section
10.1(f) above, and (ii) JCN has not intentionally taken any action reasonably
likely to afford Highwoods the right to terminate this Agreement pursuant to
10.1(b) or 10.1(c) or JCN has not intentionally failed to
57
satisfy any of the conditions set forth in Section 9.2, then no payments shall
be due to Highwoods pursuant to this Section 11.2(d).
(e) Notwithstanding the foregoing, if
(i) this Agreement is not terminable by Highwoods pursuant to
Section 10.1(f); and
(ii) this Agreement is terminated by either Party pursuant to
Section 10.1(d)(ii);and
(iii) at the time of the JCN Shareholders Meeting there is public
knowledge of an identifiable third party's financially superior proposal to
purchase all of the then outstanding JCN Common Stock; and
(iv) the proposal by such third party referred to in clause (iii)
above is accepted and closes within 12 months of the date of this Agreement,
then the third party making such proposal shall pay to Highwoods,
upon consummation of the transaction, the sum of $2,500,000, which amount
represents the costs and expenses of Highwoods (including reasonable costs of
counsel, investment bankers, actuaries and accountants). In the event such third
party does not make such payment within ten days of demand therefor by
Highwoods, the payment shall be an obligation of JCN and shall be paid by JCN
within two business days of notice to JCN by Highwoods.
11.3 Brokers and Finders. Except for Morgan Stanley, Dean Witter,
Discover & Co. as to JCN and except for J.P. Morgan Securities Inc. as to
Highwoods, each of the Parties represents and warrants that neither it nor any
of its officers, directors or employees has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his or its representing or being retained by or
allegedly representing or being retained by JCN or by Highwoods, each of JCN and
Highwoods, as the case may be, agrees to indemnify and hold the other Party
harmless of and from any Liability in respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly provided herein,
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except, as to Section
8.6(b), for the Confidentiality Agreement). Nothing in this Agreement expressed
or implied, is intended to confer upon any Person, other than the Parties or
their respective successors, any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, other than as provided in Sections 8.13
and 8.14.
58
11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of each of the Parties, whether before or after shareholder approval of this
Agreement has been obtained; provided, that after any such approval by the
holders of JCN Common Stock, there shall be made no amendment that reduces or
modifies in any material respect the consideration to be received by holders of
JCN Common Stock.
11.6 Waivers.
(a) Prior to or at the Effective Time, Highwoods, acting through
its Board of Directors, chief executive officer or other authorized officer,
shall have the right to waive any Default in the performance of any term of this
Agreement by JCN, to waive or extend the time for the compliance or fulfillment
by JCN of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of Highwoods under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing signed
by a duly authorized officer of Highwoods.
(b) Prior to or at the Effective Time, JCN, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by Highwoods, to waive or extend the time for the compliance or
fulfillment by Highwoods of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of JCN
under this Agreement, except any condition which, if not satisfied, would result
in the violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of JCN.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. 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.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons
59
at the addresses set forth below (or at such other address as may be provided
hereunder), and shall be deemed to have been delivered as of the date so
delivered:
JCN:
J.C. Nichols Company
310 Ward Parkway
Kansas City, Missouri 64112
Telecopy Number: (816) 561-3456
Attention: Barrett Brady
Copy to Counsel:
Blackwell Sanders Matheny Weary & Lombardi L.L.P.
Two Pershing Square, Suite 1100
Kansas City, Missouri 64108
Telecopy Number: (816) 983-8080
Attention: Steve Carman
and to:
Weil, Gotshal & Manges L.L.P.
767 Fifth Avenue
New York, New York 10153
Telecopy Number: (212) 310-8007
Attention: Steve Jacobs
Highwoods:
Highwoods Properties, Inc.
3100 Smoketree Court, Suite 600
Raleigh, North Carolina 27604
Telecopy Number: (919) 876-6929
Attention: Mack D. Pridgen, III,
Vice President and General Counsel
Copy to Counsel:
Alston & Bird LLP
3605 Glenwood Avenue, Suite 310
Raleigh, North Carolina 27612
Telecopy Number: (919) 881-3175
Attention: Brad S. Markoff
60
11.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Missouri, without regard to any
applicable conflicts of Laws.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions; Articles and Sections. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
11.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
11.13 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was 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 hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
11.14 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.
61
IN WITNESS WHEREOF, each of the Parties has caused this Agreement
to be executed on its behalf by its duly authorized officers as of the day and
year first above written.
HIGHWOODS PROPERTIES, INC.
By: /s/ Ronald P. Gibson
______________________________
President
JACKSON ACQUISITION CORP.
By: /s/ Ronald P. Gibson
______________________________
President
J.C. NICHOLS COMPANY
By: /s/ Barrett Brady
______________________________
President
62
TABLE OF CONTENTS
Page
ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER......................................................................1
1.1 Merger..........................................................................................1
1.2 Time and Place of Closing.......................................................................1
1.3 Effective Time..................................................................................2
ARTICLE 2 TERMS OF MERGER.......................................................................................2
2.1 Charter.........................................................................................2
2.2 Bylaws..........................................................................................2
2.3 Directors and Officers..........................................................................2
ARTICLE 3 MANNER OF CONVERTING SHARES...........................................................................2
3.1 Conversion of Shares............................................................................2
3.2 Cash Election...................................................................................3
3.3 Anti-Dilution Provisions........................................................................6
3.4 Shares Held by JCN or Highwoods.................................................................6
3.5 Dissenting Shareholders.........................................................................6
3.6 Fractional Shares...............................................................................7
3.7 Conversion of Stock Options.....................................................................7
3.8 Extraordinary Dividend..........................................................................8
ARTICLE 4 EXCHANGE OF SHARES......................................................................................9
4.1 Exchange Procedures.............................................................................9
4.2 Rights of Former JCN Shareholders..............................................................10
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF JCN..................................................................10
5.1 Organization, Standing, and Power..............................................................11
5.2 Authority of JCN; No Breach By Agreement.......................................................11
5.3 Capital Stock..................................................................................12
5.4 JCN Subsidiaries...............................................................................12
5.5 SEC Filings; Financial Statements..............................................................13
5.6 Absence of Undisclosed Liabilities.............................................................14
5.7 Absence of Certain Changes or Events...........................................................14
5.8 Tax Matters....................................................................................14
5.9 Assets.........................................................................................15
5.10 Environmental Matters..........................................................................16
5.11 Compliance with Laws...........................................................................17
5.12 Labor Relations................................................................................17
5.13 Employee Benefit Plans.........................................................................18
5.14 Material Contracts.............................................................................19
5.15 Legal Proceedings..............................................................................20
5.16 Reports........................................................................................20
i
5.17 Statements True and Correct....................................................................21
5.18 Tax and Regulatory Matters.....................................................................21
5.19 State Takeover Laws............................................................................22
5.20 Charter Provisions.............................................................................22
5.21 Rights Agreement...............................................................................22
5.22 Opinion of Financial Advisor...................................................................22
5.23 Board Recommendation...........................................................................22
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF HIGHWOODS..........................................................22
6.1 Organization, Standing, and Power..............................................................22
6.2 Authority; No Breach By Agreement..............................................................23
6.3 Capital Stock..................................................................................24
6.4 Highwoods Subsidiaries.........................................................................24
6.5 SEC Filings; Financial Statements..............................................................25
6.6 Absence of Undisclosed Liabilities.............................................................25
6.7 Absence of Certain Changes or Events...........................................................26
6.8 Tax Matters....................................................................................26
6.9 Assets.........................................................................................26
6.10 Environmental Matters..........................................................................26
6.11 Compliance with Laws...........................................................................27
6.12 Labor Relations................................................................................28
6.13 Employee Benefit Plans.........................................................................28
6.14 Legal Proceedings..............................................................................29
6.15 Reports........................................................................................30
6.16 Statements True and Correct....................................................................30
6.17 Authority of Sub...............................................................................31
6.18 Tax and Regulatory Matters.....................................................................31
6.19 Rights Agreement...............................................................................31
ARTICLE 7 CONDUCT OF BUSINESS PENDING CONSUMMATION.............................................................31
7.1 Affirmative Covenants of JCN...................................................................31
7.2 Negative Covenants of JCN......................................................................32
7.3 Covenants of Highwoods.........................................................................34
7.4 Adverse Changes in Condition...................................................................34
7.5 Reports........................................................................................35
ARTICLE 8 ADDITIONAL AGREEMENTS................................................................................35
8.1 Registration Statement; Proxy Statement; Shareholder Approval..................................35
8.2 Exchange Listing...............................................................................36
8.3 Applications; Antitrust Notification...........................................................36
8.4 Filings with State Offices.....................................................................36
8.5 Agreement as to Efforts to Consummate..........................................................36
8.6 Investigation and Confidentiality..............................................................37
ii
8.7 Press Releases.................................................................................37
8.8 Certain Actions................................................................................38
8.9 Tax Treatment..................................................................................38
8.10 State Takeover Laws............................................................................38
8.11 Charter Provisions.............................................................................38
8.12 Agreement of Affiliates........................................................................39
8.13 Employee Benefits and Contracts................................................................39
8.14 Indemnification................................................................................39
8.15 Tenant Estoppels...............................................................................41
8.16 Maintenance of Organizational Structure........................................................41
8.17 Maintenance of Plaza Redevelopment Plan........................................................41
8.18 Maintenance of Charitable Contributions........................................................41
8.19 Maintenance of Merchant Support................................................................41
8.20 Member of Board of Directors...................................................................42
ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE....................................................42
9.1 Conditions to Obligations of Each Party........................................................42
9.2 Conditions to Obligations of Highwoods.........................................................43
9.3 Conditions to Obligations of JCN...............................................................44
ARTICLE 10 TERMINATION.........................................................................................46
10.1 Termination....................................................................................46
10.2 Effect of Termination..........................................................................47
10.3 Non-Survival of Representations and Covenants..................................................47
ARTICLE 11 MISCELLANEOUS.......................................................................................47
11.1 Definitions....................................................................................47
11.2 Expenses.......................................................................................57
11.3 Brokers and Finders............................................................................59
11.4 Entire Agreement...............................................................................59
11.5 Amendments.....................................................................................60
11.6 Waivers........................................................................................60
11.7 Assignment.....................................................................................60
11.8 Notices........................................................................................60
11.9 Governing Law..................................................................................62
11.10 Counterparts...................................................................................62
11.11 Captions; Articles and Sections................................................................62
11.12 Interpretations................................................................................62
11.13 Enforcement of Agreement.......................................................................62
11.14 Severability...................................................................................62
iii
LIST OF EXHIBITS
Exhibit Number Description
-------------- -----------
1. Matters as to which Blackwell Sanders
Matheny Weary & Lombardi will opine (ss.
9.2(d)).
2. Matters as to which Alston & Bird LLP will
opine (ss.9.3(d)).
Exhibit 1
MATTERS AS TO WHICH BLACKWELL SANDERS MATHENY WEARY &
LOMBARDI LLP WILL OPINE
1. JCN is a corporation duly organized, validly existing and in good
standing under the laws of the State of Missouri, with full corporate power and
authority to carry on the business in which it is engaged and to own and use its
Assets.
2. The authorized capital stock of JCN consists of shares of
________________________ JCN Common Stock, of which __________________ shares
were issued and outstanding as of ____________________, 19__. Subsequent to
September 1995, no shares of JCN Common Stock have been issued in violation of
any statutory preemptive rights of shareholders, and all shares issued since
such date were duly issued and are fully paid and nonassessable under the
Missouri Business Corporation Act. To our knowledge, except as set forth above
or as disclosed in Section 5.3 of the JCN Disclosure Memorandum, as of , 19___
there were no shares of capital stock or other equity securities of JCN
outstanding and no outstanding Equity Rights relating to the capital stock of
JCN.
3. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Articles of
Incorporation or Bylaws of JCN or, to our knowledge but without any independent
investigation, result in any conflict with, breach of, or default or
acceleration under any Law or Order to which JCN is a party or by which JCN is
bound, except as may be disclosed in the JCN Disclosure Memorandum.
4. The Agreement has been duly and validly executed and delivered by
JCN and, assuming valid authorization, execution and delivery by Highwoods and
Sub, constitutes a valid and binding agreement of JCN enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, provided, however, that we express no opinion as to the availability
of the equitable remedy of specific performance.
Exhibit 2
MATTERS AS TO WHICH ALSTON & BIRD LLP WILL OPINE
1. Highwoods is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland with full corporate power
and authority to carry on the business in which it is engaged, and to own and
use its Assets.
2. Sub is a corporation duly organized and validly existing and in good
standing under the laws of the State of Maryland with full corporate power and
authority to carry on the business in which it is engaged, and to own and use
its Assets.
3. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Amended and
Restated Articles of Incorporation or Bylaws of Highwoods or, to our knowledge
but without any independent investigation, any Law or Order to which Highwoods
is a party or by which Highwoods is bound. The adoption of the Agreement and
compliance with its terms do not and will not violate or contravene any
provision of the Articles of Incorporation or Bylaws of Sub or, to our knowledge
but without any independent investigation, any Law or Order to which Sub is a
party or by which Sub is bound.
4. The Agreement has been duly and validly executed and delivered by
Highwoods and Sub, and assuming valid authorization, execution and delivery by
JCN, constitutes a valid and binding agreement of Highwoods and Sub enforceable
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or similar laws affecting creditors'
rights generally, provided, however, that we express no opinion as to the
availability of the equitable remedy of specific performance.
5. The shares of Highwoods Common Stock to be issued to the
shareholders of JCN as contemplated by the Agreement have been registered under
the Securities Act of 1933, as amended, and when properly issued and delivered
following consummation of the Merger will be fully paid and non-assessable under
the General Corporation Law of Maryland.