AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
by and between
FAC REALTY TRUST, INC.
and
PROMETHEUS SOUTHEAST RETAIL LLC
dated as of
March 23, 1998
THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT (this
"Agreement"), dated as of March 23, 1998, is made by and between FAC Realty
Trust, Inc., a Maryland corporation (the "Company") and Prometheus Southeast
Retail LLC ("Buyer"), an affiliate of Lazard Freres Real Estate Investors, LLC,
a Delaware limited liability company ("LFREI").
RECITALS:
WHEREAS, the Company and Buyer entered into that certain stock purchase
agreement, dated as of February 24, 1998 (the "First Agreement");
WHEREAS, the Company and Buyer desire to amend and restate in its
entirety the First Agreement as set forth herein;
WHEREAS, the First Agreement, as amended and restated as set forth
herein shall be referred to as the "Agreement";
WHEREAS, Buyer wishes to purchase from the Company, and the Company
wishes to sell to Buyer, (i) an aggregate of 21,052,632 shares of the Company's
common stock, par value $0.01 per share (the "Company Common Stock"), at a
purchase price of $9.50 per share and (ii) contingent value rights (the
"Contingent Value Rights") of the Company as further described in the Contingent
Value Right Agreement (as defined herein); and
WHEREAS, the Company and Buyer believe that the combination in a
strategic alliance of the leadership, expertise and experience in retail
development and operations of the Company and the proven investment and capital
markets expertise and access to capital of Buyer and its affiliates will
significantly enhance the Company's ability to pursue its growth and operating
strategies;
NOW, THEREFORE, in consideration of the promises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
Section 1.1 "Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any Government Authority.
Section 1.2 "ADA" shall have the meaning set forth in Section 3.11(e).
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Section 1.3 "Affiliate" shall have the meaning ascribed thereto in Rule
12b-2 promulgated under the Exchange Act, and as in effect on the date hereof.
Section 1.4 "Agreement" shall mean this Stock Purchase Agreement as
amended and restated, together with all schedules and exhibits referenced
herein.
Section 1.5 "Army Corps of Engineers" shall have the meaning set forth
in Section 3.11(d).
Section 1.6 "Benefit Arrangements" shall have the meaning set forth in
Section 3.13(h).
Section 1.7 "Blue Sky Laws" shall have the meaning set forth in Section
3.4(e).
Section 1.8 "Board" shall mean the Board of Directors of the Company.
Section 1.9 "Break-up Fee" shall have the meaning set forth in Section
9.3(b).
Section 1.10 "Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which the New York Stock Exchange is closed.
Section 1.11 "Buyer" shall have the meaning set forth in the first
paragraph hereof.
Section 1.12 "Capital Expenditure Budget and Schedule" shall have the
meaning set forth in Section 3.11(i).
Section 1.13 "CERCLA" shall have the meaning set forth in Section
3.12(e).
Section 1.14 "Claim" shall have the meaning set forth in Section
3.12(g)(i).
Section 1.15 "Closing" shall mean the consummation of any Stock
Purchase.
Section 1.16 "Closing Date" shall mean, with respect to the
consummation of any Stock Purchase, the date on which the conditions set forth
herein with respect thereto shall be satisfied or duly waived, or if the Company
and Buyer mutually agree on a different date, the date upon which they have
mutually agreed.
Section 1.17 "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto, including all of the rules and regulations
promulgated thereunder.
Section 1.18 "Commitment" shall have the meaning set forth in Section
3.7.
Section 1.19 "Company" shall have the meaning set forth in the first
paragraph hereof.
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Section 1.20 "Company Charter" shall mean the Amended and Restated
Articles of Incorporation of FAC Realty Trust, Inc. and any amendment or
supplement thereto, as in effect on the date hereof.
Section 1.21 "Company Common Stock" shall have the meaning set forth in
the second paragraph hereof.
Section 1.22 "Company Environmental Reports" shall have the meaning set
forth in Section 3.12(f).
Section 1.23 "Company Excess Stock" shall have the meaning set forth in
Section 3.3(a).
Section 1.24 "Company Leases" shall have the meaning set forth in
Section 3.11(f).
Section 1.25 "Company Plans" shall have the meaning set forth in
Section 3.13(b).
Section 1.26 "Company Preferred Stock" shall have the meaning set forth
in Section 3.3(a).
Section 1.27 "Company Properties" shall have the meaning set forth in
Section 3.11(a).
Section 1.28 "Company Registration Statement" shall have the meaning
set forth in Section 3.5(a).
Section 1.29 "Company Reports" shall have the meaning set forth in
Section 3.5(a).
Section 1.30 "Company Stock" shall mean, collectively, the Company
Common Stock and any other shares of capital stock of the Company.
Section 1.31 "Company Stock Equivalents" shall have the meaning set
forth in Section 5.3(e).
Section 1.32 "Competing Transaction" shall mean (i) any acquisition in
any manner, directly or indirectly (including through any option, right to
acquire or other beneficial ownership), of more than 15% of the equity
securities, on a Fully Diluted basis, of the Company by a single person or a
group of related persons, or assets representing a material portion of the
assets of the Company, other than any of the transactions contemplated by this
Agreement or (ii) any merger, consolidation, sale of assets, share exchange,
recapitalization, other business combination, liquidation, or other action out
of the ordinary course of business of the Company (it being understood that
acquisitions of real property in exchange for OP Units is in the ordinary course
of business), other than any of the transactions contemplated by this Agreement.
Section 1.33 "Contingent Value Rights" shall have the meaning set forth
in the first paragraph of the recitals hereto.
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Section 1.34 "Contingent Value Right Agreement" shall have the meaning
set forth in Section 2.6(a).
Section 1.35 "Controlled Group Liability" shall have the meaning set
forth in Section 3.13(h).
Section 1.36 "Debt Instruments" shall mean all notes, loan agreements,
mortgages, deeds of trust or similar instruments which evidence or secure any
indebtedness owing by the Company or any of its Subsidiaries.
Section 1.37 "Development Budget and Schedule" shall have the meaning
set forth in Section 3.11(j).
Section 1.38 "Development Properties" shall have the meaning set forth
in Section 3.11(j).
Section 1.39 "Employee Benefit Plans" shall have the meaning set forth
in Section 3.13(h).
Section 1.40 "Employees" shall have the meaning set forth in Section
3.13(h).
Section 1.41 "Employment Agreements" shall have the meaning set forth
in Section 3.13(a).
Section 1.42 "Environmental Claim" shall have the meaning set forth in
Section 3.12(g)(ii).
Section 1.43 "Environmental Laws" shall have the meaning set forth in
Section 3.12(g)(iii).
Section 1.44 "Environmental Permits" shall have the meaning set forth
in Section 3.12(a).
Section 1.45 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, and any successor thereto.
Section 1.46 "ERISA Affiliates" shall mean any entity which is under
"common control" with the Company, within the meaning of Section 4001(b)(1) of
ERISA.
Section 1.47 "Exchange Act" shall have the meaning set forth in Section
3.4(e).
Section 1.48 "Fair Market Value" shall have the meaning given to it in
the Stockholders Agreement.
Section 1.49 "Final Schedules" shall have the meaning set forth in
Section 5.7.
Section 1.50 "Fully Diluted" shall mean, with respect to the Company
Stock, the total number of outstanding shares of Company Stock (for such
purposes, treating as outstanding Company Stock all options or warrants to
purchase and securities convertible into (or exchangeable
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or redeemable for) Company Stock including, without limitation, OP Units),
outstanding as of the relevant measurement date, assuming exercise, conversion,
exchange or redemption of such other securities.
Section 1.51 "GAAP" shall have the meaning set forth in Section 3.5(b).
Section 1.52 "Governing Documents" shall mean this Agreement, the
Registration Rights Agreement, the Stockholders Agreement and the Contingent
Value Right Agreement.
Section 1.53 "Government Authority" shall mean any government or state
(or any subdivision thereof) of or in the United States, or any agency,
authority, bureau, commission, department or similar body or instrumentality
thereof, or any governmental court or tribunal.
Section 1.54 "Ground Leases" shall have the meaning set forth in
Section 3.11(k).
Section 1.55 "Indemnified Party" shall mean Buyer or the Company, as
the context may require.
Section 1.56 "Initial Closing" shall mean the first Closing, which
shall occur on the Target Date.
Section 1.57 "Initial Number of Shares" shall mean the number of shares
of Company Common Stock equal to 19.9% of the aggregate number of outstanding
shares of Company Common Stock on the date of the Initial Closing (prior to the
issuance of the Initial Number of Shares of Company Common Stock).
Section 1.58 "Initial Public Offering" shall mean the initial public
offering of the common stock of FAC Realty, Inc.
Section 1.59 "Insurance Policies" shall have the meaning set forth in
Section 3.16.
Section 1.60 "Investor" shall have the meaning giving to it in the
Stockholders Agreement.
Section 1.61 "Investor Nominee" shall have the meaning given to such
term in the Stockholders Agreement.
Section 1.62 "IRS" shall mean the Internal Revenue Service.
Section 1.63 "▇▇▇▇" shall mean ▇▇▇▇ Realty Corporation.
Section 1.64 "▇▇▇▇ and ▇▇▇▇▇▇▇ Properties" shall mean the properties to
be purchased after the date hereof by the Company pursuant to the ▇▇▇▇ Purchase
Agreement and the Konover Purchase Agreement.
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Section 1.65 "▇▇▇▇ and ▇▇▇▇▇▇▇ Schedules" shall have the meaning set
forth in Section 5.8.
Section 1.66 "▇▇▇▇ Purchase Agreement" shall mean, collectively, those
certain Exchange Option Agreements, Master Agreements and other related
documents by and among FAC Realty Trust, Inc., FAC Properties, L.P., Carolina
FAC L.P., ▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇. ▇▇▇▇▇▇, Atlantic Realty LLC, Effell Pembroke, LLC, Park Place FAC LLC and
Atlantic RealVest LLC relating to the acquisition by FAC Properties, L.P. of the
partnership or other ownership interests in the entities which own title to
and/or the shopping center real properties and improvements located at (i)
Celebration, Raleigh, NC, (ii) Shoreside, ▇▇▇▇▇ ▇▇▇▇, ▇▇, (▇▇▇) ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇, (iv) Parkwest, Durham, NC, (v) Brookneal, Brookneal, VA, and
(vi) Keysville, Keysville, VA.
Section 1.67 "Konover" shall mean Konover Associates South, Inc.
Section 1.68 "Konover Purchase Agreement" shall mean that certain
Master Agreement and other related documents by and among FAC Realty Trust,
Inc., FAC Properties, L.P. and the owners of the properties and interests listed
therein relating to the acquisition by FAC Properties, L.P. of the title to the
shopping center real properties and improvements located at (i) Mobile Festival
Centre, Mobile, AL, (ii) The Plaza Shopping Center, Davie, FL, (iii) Square ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇, (iv) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇, (v) Hollywood
Festival Centre, Hollywood, FL, (vi) Lenoir Festival Centre, Lenoir, NC, (vii)
Oakland Park Festival Centre, Oakland Park, FL, (viii) Tampa Festival Centre,
Tampa, FL, (ix) Food Lion Plaza, Petersburg, VA and (x) ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇, and of certain management and leasing agreements of Konover
Management South.
Section 1.69 "Kick Out Properties" shall have the meaning set forth in
Section 5.8.
Section 1.70 "Liabilities" shall mean, as to any person, all debts,
adverse claims, liabilities and obligations, direct, indirect, absolute or
contingent of such person, whether known or unknown, accrued, vested or
otherwise, whether in contract, tort, strict liability or otherwise and whether
or not actually reflected, or required by GAAP to be reflected, in such person's
or entity's balance sheets or other books and records, including without
limitation (i) obligations arising from non-compliance with any law, rule or
regulation (including Environmental Laws) of any Government Authority or imposed
(including, without limitation, under any Environmental Laws or in connection
with Environmental Claims) by any court or any arbitrator of any kind, (ii) all
indebtedness or liability of such person for borrowed money, or for the purchase
price of property or services (including trade obligations), (iii) all
obligations of such person as lessee under leases, capital or other, (iv)
liabilities of such person in respect of plans covered by Title IV of ERISA, or
otherwise arising in respect of plans for Employees or former Employees or their
respective families or beneficiaries, (v) reimbursement obligations of such
person in respect of letters of credit, (vi) all obligations of such person
arising under acceptance facilities, (vii) all liabilities of other persons or
entities, directly or indirectly, guaranteed, endorsed (other than for
collection or deposit in the ordinary course of business) or discounted with
recourse by such person or with respect to which the person in question
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is otherwise directly or indirectly liable, (viii) all obligations secured by
any Lien on property of such person, whether or not the obligations have been
assumed, and (ix) all other items which have been, or in accordance with GAAP
would be, included in determining total liabilities on the liability side of the
balance sheet.
Section 1.71 "LFREI" shall have the meaning set forth in the first
paragraph hereof.
Section 1.72 "Liens" shall mean all liens, mortgages, deeds of trust,
deeds to secure debt, security interests, pledges, claims, charges, easements
and other encumbrances of any nature whatsoever.
Section 1.73 "Loss and Expenses" shall have the meaning set forth in
Section 8.2(a).
Section 1.74 "Material Adverse Effect" shall mean a material adverse
effect on the financial condition, results of operations, business or prospects
of the Company and its Subsidiaries (to the extent of the Company's interests
therein) taken as a whole.
Section 1.75 "Material Company Leases" shall have the meaning set forth
in Section 3.11(f).
Section 1.76 "Materials of Environmental Concern" shall have the
meaning set forth in Section 3.12(g)(iv).
Section 1.77 "19.9% Sale Transaction" shall mean the sale by Investor
of the Initial Number of Shares to a person in connection with a Competing
Transaction entered into on any date on or prior to the one year anniversary of
the date this Agreement is terminated.
Section 1.78 "19.9% Sale Transaction Profit" shall mean, on any date,
the dollar amount equal to (i) the Initial Number of Shares MULTIPLIED BY the
price per share actually paid in cash by another person for the shares of
Company Common Stock pursuant to a 19.9% Sale Transaction, LESS (ii) $9.50
MULTIPLIED BY the Initial Number of Shares.
Section 1.79 "1998 and 1999 Preliminary Capital Expenditure Budgets and
Schedules" shall have the meaning set forth in Section 3.11(i).
Section 1.80 "OP Units" shall mean the limited partnership interests in
FAC Properties, L.P.
Section 1.81 "Other Filings" shall have the meaning set forth in
Section 5.1(b).
Section 1.82 "Pension Plans" shall have the meaning set forth in
Section 3.13(h).
Section 1.83 "Per Share Purchase Price" shall mean the price of $9.50
per share for the Company Common Stock.
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Section 1.84 "Permitted Liens" shall mean (i) Liens (other than Liens
imposed under ERISA or any Environmental Law or in connection with any
Environmental Claim) for taxes or other assessments or charges of Government
Authorities that are not yet delinquent or that are being contested in good
faith by appropriate proceedings, in each case, with respect to which adequate
reserves are being maintained by the Company or its Subsidiaries to the extent
required by GAAP, (ii) statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen and other Liens (other than Liens imposed under ERISA or
any Environmental Law or in connection with any Environmental Claim) imposed by
law and created in the ordinary course of business for amounts not yet overdue
or which are being contested in good faith by appropriate proceedings, in each
case, with respect to which adequate reserves or other appropriate provisions
are being maintained by the Company or its Subsidiaries to the extent required
by GAAP and which, to the extent same do not relate to work or materials
provided for in the Capital Expenditure Budget and Schedule, the 1998 and 1999
Preliminary Capital Expenditure Budgets and Schedules or the Development Budget
and Schedule, do not exceed $300,000 in the aggregate (excluding from such
calculation, any amounts disclosed in writing by the Company to Buyer which (a)
are fully covered by insurance held by the Company under which the Company
reasonably expects full recovery of such amounts, or (b) for which an adequate
escrow has been established and is, at the relevant time, maintained), (iii) the
Company Leases and any leases entered into after December 31, 1997 in the
ordinary course of business on commercially reasonable terms, (iv) easements,
rights-of-way, covenants, restrictions and other similar matters which are
customary and typical for properties similar to the Company Properties and which
do not (x) interfere materially with the ordinary conduct of any Company
Property or the business of the Company and its Subsidiaries as a whole or (y)
detract materially from the value or usefulness of the Company Properties to
which they apply, (v) the Liens which were granted by the Company or any of its
Subsidiaries to lenders pursuant to credit agreements in existence on the date
hereof which are described in either Schedule 3.9(c) or the Company Reports,
(vi) the other Liens, if any, described in Schedule 1.84, and (vii) such
imperfections of title and encumbrances, if any, as would not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect.
Section 1.85 "person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust, unincorporated
organization, other form of business or legal entity or Government Authority.
Section 1.86 "Pro Forma Balance Sheet" shall have the meaning set forth
in Section 3.5(c).
Section 1.87 "Projects" shall have the meaning set forth in Section
3.11(j).
Section 1.88 "Property Restrictions" shall have the meaning set forth
in Section 3.11(a).
Section 1.89 "Proxy Statement" shall have the meaning set forth in
Section 5.1(b).
Section 1.90 "Purchase Price" shall mean the Per Share Purchase Price
multiplied by the number of shares of Company Common Stock to be purchased and
sold at a particular Closing.
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Section 1.91 "Purchased Shares" shall have the meaning set forth in
Section 2.1.
Section 1.92 "Registration Rights Agreement" shall have the meaning set
forth in Section 2.6(a).
Section 1.93 "Regulatory Filings" shall have the meaning set forth in
Section 3.4(e).
Section 1.94 "Repurchase Payment" shall have the meaning set forth in
Section 2.9(a).
Section 1.95 "REIT" shall have the meaning set forth in Section 3.8(b).
Section 1.96 "Release" shall have the meaning set forth in Section
3.12(g)(v).
Section 1.97 "Remaining Equity Ownership" shall mean, for any person
and on any date, the sum of (i) product of (A) the number of shares of Company
Stock held by such person and (B) the Fair Market Value of the Company Stock on
such date and (ii) the product of (A) the number of OP Units held by such person
and (B) the Fair Market Value of the OP Units on such date.
Section 1.98 "Rent Roll" shall have the meaning set forth in Section
3.11(f).
Section 1.99 "SEC" shall have the meaning set forth in Section 3.5(a).
Section 1.100 "Second Closing" shall mean the Closing as soon as
practicable following Stockholder Approval.
Section 1.101 "Securities" means the Purchased Shares and the
Contingent Value Rights.
Section 1.102 "Securities Act" shall have the meaning set forth in
Section 3.4(e).
Section 1.103 "Securities Laws" shall have the meaning set forth in
Section 3.5(a).
Section 1.104 "Stock Purchase" shall have the meaning set forth in
Section 2.1.
Section 1.105 "Stockholder Approval" shall have the meaning set forth
in Section 7.2(b).
Section 1.106 "Stockholders Agreement" shall have the meaning set forth
in Section 2.6(a).
Section 1.107 "Subsequent Closing" shall mean each Closing of a
Subsequent Purchase.
Section 1.108 "Subsequent Purchase Price" shall mean the Per Share
Purchase Price multiplied by the number of Purchased Shares purchased by Buyer
in a Subsequent Purchase.
Section 1.109 "Subsequent Purchases" shall have the meaning set forth
in Section 2.5(a).
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Section 1.110 "Subsidiaries" shall mean with respect to any person, any
corporation, partnership, limited liability company, joint venture, business
trust or other entity, of which such person, directly or indirectly, owns or
controls 50% or more of the securities or other interests entitled to vote in
the election of directors or others performing similar functions with respect to
such corporation or other organization, or to otherwise control such
corporation, partnership, limited liability company, joint venture, business
trust or other entity.
Section 1.111 "Target Date" shall mean any date within forty five days
of February 24, 1998, provided, the "Target Date" may, at the sole discretion of
the Company, mean any date within seventy five days of February 24, 1998.
Section 1.112 "Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
The term "Tax" also includes any amounts payable pursuant to any tax sharing
agreement to which any relevant entity is liable as a successor or pursuant to
contract.
Section 1.113 "Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
Section 1.114 "Title Policies" shall have the meaning set forth in
Section 3.11(a).
Section 1.115 "Topping Fee" shall have the meaning set forth in Section
9.3(b).
Section 1.116 "Total Equity Commitment" shall mean the amount of
$200,000,000.00.
Section 1.117 "Total Enterprise Value" shall mean, on any date, the
greater of (A) total asset value of the Company (as measured in accordance with
GAAP) and (B) total market capitalization of the Company (based on the Fair
Market Value of the outstanding Common Stock and OP Units and the outstanding
indebtedness of the Company and its Subsidiaries).
Section 1.118 "Transaction Documents" shall have the meaning set forth
in Section 7.1(e).
Section 1.119 "Updated Schedules" shall have the meaning set forth in
Section 5.7.
Section 1.120 "Welfare Plans" shall have the meaning set forth in
Section 3.13(h).
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ARTICLE 2
PURCHASE AND SALE OF SHARES; CLOSING
Section 2.1 Purchase and Sale. Subject to the terms and conditions
hereof, from time to time after the date hereof, at the Closings, the Company
will sell, convey, assign, transfer, and deliver, and Buyer will purchase and
acquire from the Company, up to an aggregate of 21,052,632 shares of Company
Common Stock (the "Purchased Shares"). Each Closing at which Buyer purchases any
Purchased Shares is herein referred to as a "Stock Purchase."
Section 2.2 Consideration. Subject to the terms and conditions hereof,
at each Closing, Buyer shall deliver to the Company the Purchase Price with
respect to the number of shares of Company Common Stock to be purchased and sold
at such Closing by wire transfer of immediately available funds in U.S. dollars
to the account or accounts specified by the Company.
Section 2.3 Initial Closing. Subject to the terms and conditions
hereof, at the Initial Closing, at which time the applicable conditions set
forth in Sections 7.1, 7.3 and 7.4 shall have been satisfied or duly waived,
Buyer will purchase and acquire from the Company, and the Company will sell,
convey, assign, transfer and deliver to Buyer, the Initial Number of Shares of
Company Common Stock, and Buyer will pay to the Company the Purchase Price for
such shares of Company Common Stock. Concurrently with the Initial Closing, the
Buyer shall be issued the Contingent Value Rights which shall vest in the
amounts, and on the terms, set forth in the Contingent Value Right Agreement.
Section 2.4 Second Closing. Subject to the terms and conditions hereof,
on or before September 30, 1998, at which time the applicable conditions set
forth in Sections 7.2, 7.3 and 7.4 shall have been satisfied or duly waived,
Buyer will purchase and acquire from the Company, and the Company will sell,
convey, assign, transfer and deliver to Buyer, a number of shares of Company
Common Stock equal to the difference between 10,526,316 shares of Company Common
Stock and the Initial Number of Shares, and Buyer will pay to the Company the
Purchase Price for such shares of Company Common Stock.
Section 2.5 Subsequent Purchases and Sales.
(a) Subject to the terms and conditions hereof, following the
Second Closing, the Company shall have the right to require, subject to
satisfaction or waiver of the applicable conditions set forth in Sections 7.3
and 7.4, Buyer to purchase from the Company from time to time at one or more
Subsequent Closings, an aggregate of 10,526,316 Purchased Shares (each referred
to as a "Subsequent Purchase" and, together, the "Subsequent Purchases").
Subject to the terms and conditions hereof, the Closing of any Subsequent
Purchase shall occur as soon as possible following the date on which the
applicable conditions set forth in Section 7.3 and 7.4 shall have been satisfied
or duly waived.
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(b) At least 20 Business Days prior to a Subsequent Purchase,
the Company shall notify (which notice shall be in writing and irrevocable)
Buyer of the anticipated date of the Subsequent Closing and the number of
Purchased Shares the Company is requiring Buyer to purchase, which shall not be
fewer than 1,052,631 Purchased Shares (except the final Subsequent Purchase).
(c) If fewer than 3,508,772 of the Purchased Shares shall have
been issued and sold at all Subsequent Closings prior to six months after the
Second Closing, then Buyer shall, subject to the satisfaction or waiver of the
applicable conditions set forth in Sections 7.3 and 7.4, make a Subsequent
Purchase of the number of Purchased Shares equal to 3,508,772 less the number of
Purchased Shares purchased after the Second Closing but prior to such date, from
the Company (and the Company shall sell to Buyer such number of shares) on or
before the date six months after the date of the Second Closing, or as soon
thereafter as all conditions to the parties' obligations to effect the
Subsequent Purchase hereunder shall have been satisfied or waived.
(d) If fewer than 7,017,544 of the Purchased Shares shall have
been issued and sold at all Subsequent Closings prior to twelve months after the
Second Closing, then Buyer shall, subject to the satisfaction or waiver of the
applicable conditions set forth in Sections 7.3 and 7.4, make a Subsequent
Purchase of the number of Purchased Shares equal to 7,017,544 less the number of
Purchased Shares purchased after the Second Closing but prior to such date, from
the Company (and the Company shall sell to Buyer such number of shares) on or
before the date twelve months after the date of Second Closing, or as soon
thereafter as all conditions to the parties' obligations to effect the
Subsequent Purchase hereunder shall have been satisfied or waived.
(e) If fewer than all Purchased Shares shall have been issued
and sold at any and all Closings on or before eighteen months after the Second
Closing, then Buyer shall, subject to the satisfaction or waiver of the
applicable conditions set forth in Sections 7.3 and 7.4, make a Subsequent
Purchase of all such remaining shares from the Company (and the Company shall
sell to Buyer such number of shares) on or before eighteen months after the
Second Closing, or as soon thereafter as all conditions to Buyer's obligation to
effect the Subsequent Purchase hereunder shall have been satisfied or waived.
(f) If the condition set forth in Section 7.3(e) is not
satisfied (which determination shall be made by Buyer, based upon the written
advice of Buyer's counsel, and the cause of such determination is not cured by
the Company prior to the relevant Closing) or waived at any time when a Closing
would otherwise occur, the relevant Closing will be effected as to the number of
Purchased Shares, if any, as will not result in such condition failing to be
satisfied, and Buyer shall acquire any remaining Purchased Shares as soon
thereafter as such condition to Buyer's obligation to effect the Subsequent
Purchase shall have been, as determined in Buyer's sole discretion, satisfied or
waived.
12
Section 2.6 Additional Agreements and Closing Deliveries.
(a) On February 24, 1998, the Company and Buyer entered into a
registration rights agreement substantially in the form attached as Exhibit A
(the "Registration Rights Agreement"), a stockholders agreement substantially in
the form attached as Exhibit B (the "Stockholders Agreement") and a contingent
value right agreement substantially in the form attached as Exhibit C (the
"Contingent Value Right Agreement").
(b) In addition to the other things required to be done
hereby, at each Closing, the Company shall deliver, or cause to be delivered, to
Buyer the following: (i) certificates representing the number of shares of
Company Common Stock to be issued and delivered at such Closing, free and clear
of all Liens, with all necessary share transfer and other documentary stamps
attached, (ii) a certificate, dated the relevant Closing Date and validly
executed on behalf of the Company, as contemplated by Section 7.1(a), as to the
Initial Closing only, by Section 7.2(a), as to the Second Closing only, and by
Section 7.3(a) as to other Subsequent Closings, (iii) evidence or copies of any
consents, approvals, orders, qualifications or waivers required pursuant to
Section 7.1(c), as to the Initial Closing only, and pursuant to Section 7.2(c),
as to the Second Closing, (iv) all certificates and other instruments and
documents required by this Agreement to be delivered by the Company to Buyer at
or prior to each Closing, and (v) such other instruments reasonably requested by
Buyer, as may be necessary or appropriate to confirm or carry out the provisions
of this Agreement.
(c) In addition to the delivery of the Purchase Price and the
other things required to be done hereby, at each Closing, Buyer shall deliver,
or cause to be delivered, to the Company the following: (i) a certificate, dated
the relevant Closing Date and validly executed by Buyer, as contemplated by
Section 7.4(a), (ii) if not previously delivered to the Company, all other
certificates, documents, instruments and writings required pursuant hereto to be
delivered by or on behalf of Buyer at or before each Closing, and (iii) such
other instruments reasonably requested by the Company, as may be necessary or
appropriate to confirm or carry out the provisions of this Agreement.
Section 2.7 Time and Place of Closings. Each Closing shall take place
at 9:00 a.m. New York City time on the relevant Closing Date at ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ or at such other place
and time as the Company and Buyer shall mutually agree.
Section 2.8 Right to Assign. Buyer may assign its rights and delegate
its obligations created hereby to purchase Company Common Stock in accordance
with the provisions of Section 10.5.
Section 2.9 Limited Put Option.
(a) In the event that the Second Closing does not occur by
September 30, 1998 or this Agreement is terminated at any time prior to the
Second Closing (other than as a result of Buyer's material breach of any of its
obligations hereunder), Buyer will have the right to require the Company to
repurchase all or any part of the Initial Number of Shares pursuant to the terms
13
described below at a price in cash equal to the Purchase Price thereof plus
accrued but unpaid dividends, if any, thereon to the date of purchase (the
"Repurchase Payment"). On any date within two months after the earlier to occur
of (i) the date that the Company fails to receive Stockholder Approval, (ii)
August 31, 1998 and (iii) the date this Agreement is terminated prior to the
Second Closing, Buyer may, at its sole option, exercise such right to cause the
Company to repurchase all or any part of the Initial Number of Shares by
surrendering to the Company the certificates for the shares it is causing the
Company to repurchase.
(b) If Buyer chooses to cause the Company to repurchase some
or all of the Initial Number of Shares, the Company will pay Buyer the
Repurchase Payment within six months after the date on which Buyer exercises its
rights pursuant to Section 2.9(a) of this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer as follows:
Section 3.1 Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Maryland. The
Company has all requisite corporate power and authority to own, operate, lease
and encumber its properties and carry on its business as now conducted, and to
enter into this Agreement, the Registration Rights Agreement, the Contingent
Value Right Agreement and the Stockholders Agreement and to perform its
obligations hereunder and thereunder.
(b) Each of the Subsidiaries of the Company is a corporation,
partnership or limited liability company duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, and has the corporate, partnership or limited liability company
power and authority to own its properties and to carry on its business as it is
now being conducted.
(c) Each of the Company and its Subsidiaries is duly qualified
to do business and in good standing in each jurisdiction in which the ownership
of its property or the conduct of its business requires such qualification,
except for any failures to be so qualified or to be in good standing as would
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
(d) Schedule 3.1(d) sets forth the name of each Subsidiary of
the Company (whether owned, directly or indirectly, through one or more
intermediaries). All of the outstanding shares of capital stock of, or other
equity interest in, each of the Subsidiaries owned by the Company are duly
authorized, validly issued, fully paid and nonassessable, and are owned,
directly or
14
indirectly, by the Company free and clear of all Liens, except as set forth in
Schedule 3.1(d). The following information for each Subsidiary is set forth in
Schedule 3.1(d), if applicable: (i) its name and jurisdiction of incorporation
or organization, (ii) the type of and percentage interest held by the Company in
the Subsidiary and the names of and percentage interest held by the other
interest holders, if any, in the Subsidiary, and (iii) any loans from the
Company to, or priority payments due to the Company from, the Subsidiary, and
the rate of return thereon. Except as contemplated hereby and as set forth on
Schedule 3.1(d), there are no existing options, warrants, calls, subscriptions,
convertible securities or other rights, agreements or commitments which obligate
the Company or any of the Subsidiaries to issue, transfer or sell any shares of
capital stock or equity interests in any of the Subsidiaries.
Section 3.2 Authority Relative to Agreements; Approvals.
(a) The execution, delivery and performance of this Agreement,
the Registration Rights Agreement, the Contingent Value Right Agreement and the
Stockholders Agreement have been duly and validly authorized by all necessary
corporate action on the part of the Company, subject only to the approval of the
issuance of Company Common Stock pursuant to this Agreement and the Company
Charter by the Company's stockholders. This Agreement, the Registration Rights
Agreement, the Contingent Value Right Agreement and the Stockholders Agreement
have been duly executed and delivered by the Company for itself and constitute
the valid and legally binding obligations of the Company, enforceable against
the Company in accordance with their terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights or
general principles of equity.
(b) The Board has, as of the date hereof, approved this
Agreement, the Registration Rights Agreement, the Stockholders Agreement, the
Contingent Value Right Agreement and the transactions contemplated hereby and
thereby, and the Board has determined to recommend that the stockholders of the
Company vote in favor of and approve the issuance of Company Common Stock
pursuant to this Agreement, subject to the fiduciary duty provisions of Section
5.4.
(c) The shares of Company Common Stock to be acquired pursuant
to this Agreement have been duly authorized and reserved for issuance, and upon
issuance will be duly and validly issued, fully paid and nonassessable and not
subject to any preemptive or similar rights.
(d) The issue and sale of the shares of Company Common Stock
hereunder will not give any stockholder of the Company the right to demand
payment for its shares under Maryland law or give rise to any preemptive or
similar rights.
Section 3.3 Capital Stock.
(a) The authorized capital stock of the Company as of the date
hereof consists of 45,000,000 shares of Company Common Stock, 25,000,000 shares
of excess stock, par value $0.01 per share (the "Company Excess Stock"), and
5,000,000 shares of preferred stock, par value $25.00 per share (the "Company
Preferred Stock"). As of the date hereof, there are 12,298,891 shares of
15
Company Common Stock issued and outstanding; to the Company's knowledge, no
shares of Company Excess Stock issued and outstanding; and the shares of Company
Preferred Stock issued and outstanding as described in the most recent Company
Report. All such issued and outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive or
similar rights. Except as set forth on Schedule 3.3(a), the Company has no
outstanding bonds, debentures, notes or other obligations the holders of which
have the right to vote (or which are convertible into or exercisable for
securities the holders of which have the right to vote) with the stockholders of
the Company on any matter. As of the date hereof, except as set forth in
Schedule 3.3(a) to this Agreement, there are no existing options, warrants,
calls, subscriptions, convertible securities, or other rights, agreements or
commitments which obligate the Company to issue, transfer or sell any shares of
capital stock or other equity interests of the Company.
(b) Except for interests in the Subsidiaries of the Company
and except as set forth in Schedule 3.3(b), neither the Company nor any of its
Subsidiaries owns directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, limited liability company,
joint venture, business, trust or entity (other than investments in short-term
investment securities).
Section 3.4 No Conflicts; No Defaults; Required Filings and Consents.
Neither the execution and delivery by the Company hereof nor the consummation by
the Company of the transactions contemplated hereby in accordance with the terms
hereof, will:
(a) conflict with or result in a breach of any provisions of
the Company Charter or by-laws of the Company;
(b) result in a breach or violation of, a default under, or
the triggering of any payment or other obligations pursuant to, or, except as
set forth in Schedule 3.9(g), accelerate vesting under, any compensation plan or
any grant or award made under any of the foregoing;
(c) violate or conflict with in any material respect any
material statute, regulation, judgment, order, writ, decree or injunction
applicable to the Company or its Subsidiaries;
(d) subject to the Company obtaining the third party consents
set forth in Schedule 3.4(d)-A (with respect to the Initial Closing), Schedule
3.4(d)-B (with respect to the Second Closing) and Schedule 3.4(d)-C (with
respect to each Subsequent Closing), violate or conflict with or result in a
breach of any provision of, or constitute a default (or any event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination or in a right of termination or cancellation of, or accelerate
the performance required by, or result in the creation of any material Lien upon
any of the properties of the Company or its Subsidiaries under, or result in
being declared void, voidable or without further binding effect, any of the
terms, conditions or provisions of any material note, bond, mortgage, indenture
or deed of trust or any material license, franchise, permit, lease, contract,
agreement or other instrument, commitment or obligation to which the Company or
its Subsidiaries is a party, or by which the Company or its Subsidiaries or any
of their properties is bound or affected; or
16
(e) require any material consent, approval or authorization
of, or declaration, filing or registration with, any Government Authority, other
than any filings required under the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or state securities laws ("Blue Sky Laws") (collectively, the
"Regulatory Filings"), and any material filings required to be made with the
Secretary of State of Maryland or any national securities exchange on which the
Company Common Stock is listed.
Section 3.5 SEC and Other Documents; Financial Statements; Undisclosed
Liabilities.
(a) The Company has delivered or made available to Buyer the
registration statement of the Company filed with the Securities and Exchange
Commission ("SEC") in connection with the Initial Public Offering, and all
exhibits, amendments and supplements thereto (collectively, the "Company
Registration Statement"), and each registration statement, report, proxy
statement or information statement and all exhibits thereto prepared by it or
relating to its properties since the effective date of the Company Registration
Statement up through the date hereof, each of which are set forth in Schedule
3.5(a) and are in the form (including exhibits and any amendments thereto) filed
with the SEC (collectively, the "Company Reports"). Except as set forth in
Schedule 3.5(a), the Company Reports were filed with the SEC in a timely manner
and constitute all forms, reports and documents required to be filed by the
Company under the Securities Act, the Exchange Act and the rules and regulations
promulgated thereunder (the "Securities Laws"). As of their respective dates,
the Company Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (ii) did not 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 the light
of the circumstances under which they were made, not misleading. There is no
unresolved violation asserted by any Government Authority with respect to any of
the Company Reports.
(b) Each of the balance sheets included in or incorporated by
reference into the Company Reports (including the related notes and schedules)
fairly presented the financial position of the entity or entities to which it
relates as of its date and each of the statements of operations, stockholders'
equity (deficit) and cash flows included in or incorporated by reference into
the Company Reports (including any related notes and schedules) fairly presented
the results of operations, stockholders' equity (deficit) or cash flows, as the
case may be, of the entity or entities to which it relates for the periods set
forth therein, in each case in accordance with United States generally accepted
accounting principles ("GAAP") consistently applied during the periods involved,
except as may be noted therein and except, in the case of the unaudited
statements, normal recurring year-end adjustments which would not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect.
(c) The Company has delivered to Buyer a balance sheet, dated
as of January 1, 1998, adjusted to give effect to the transactions contemplated
by this Agreement, the ▇▇▇▇ Purchase Agreement and the Konover Purchase
Agreement as if such transactions had occurred on January 1, 1998 (the "Pro
Forma Balance Sheet"). The Pro Forma Balance Sheet is based on the consolidated
balance sheets of the Company and its Subsidiaries as of December 31, 1997 which
the
17
Company believes have been prepared in accordance with GAAP; provided, that the
columns labeled "▇▇▇▇" and "▇▇▇▇▇▇▇" on the Pro Forma Balance Sheet are based on
the terms of the ▇▇▇▇ Purchase Agreement and the Konover Purchase Agreement,
respectively, and, where applicable, financial statements prepared by management
of ▇▇▇▇ and ▇▇▇▇▇▇▇, respectively. The Pro Forma Balance Sheet fairly presents
the pro forma financial position of the Company as of its date in accordance
with GAAP consistently applied.
(d) Except as and to the extent set forth in the Company
Reports and the Company's financial statements filed with the SEC or in any
Schedule hereto, none of the Company or any of its Subsidiaries has any
Liabilities (nor do there exist any circumstances) that would, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect.
Section 3.6 Litigation; Compliance With Law.
(a) Except as set forth on Schedule 3.6, there are no Actions
pending or, to the Company's knowledge, threatened against the Company or any of
its Subsidiaries that would, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, or which question the validity
hereof or any action taken or to be taken in connection herewith. Except as
disclosed in Schedule 3.6(a), there are no continuing orders, injunctions or
decrees of any Government Authority to which the Company or any of its
Subsidiaries is a party or by which any of its properties or assets are bound.
(b) None of the Company or its Subsidiaries is in violation of
any statute, rule, regulation, order, writ, decree or injunction of any
Government Authority or any body having jurisdiction over them or any of their
respective properties which, if enforced, would, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
Section 3.7 Absence of Certain Changes or Events. Except as disclosed
in the Company Reports filed with the SEC prior to the date hereof or in
Schedule 3.7, since November 15, 1997 the Company and each of its Subsidiaries
has conducted its business only in the ordinary course and has acquired real
estate and entered into financing arrangements in connection therewith only in
the ordinary course of such business, and there has not been (a) any change,
circumstance or event that would reasonably be expected to result in a Material
Adverse Effect, (b) any declaration, setting aside or payment of any dividend or
other distribution with respect to the Company Common Stock, except in
accordance with Section 5.3, (c) any material commitment, contractual
obligation, borrowing, capital expenditure or transaction (each, a "Commitment")
entered into by the Company or any of its Subsidiaries or (d) any material
change in the Company's accounting principles, practices or methods.
Section 3.8 Tax Matters; REIT and Partnership Status.
(a) The Company and each of its Subsidiaries has timely filed
with the appropriate taxing authority all Tax Returns required to be filed by it
or has timely requested extensions and any such request has been granted and has
not expired. Each such Tax Return is
18
complete and accurate in all respects. All Taxes shown as owed by the Company or
any of its Subsidiaries on any Tax Return have been paid or accrued, except for
Taxes being contested in good faith and for which adequate reserves have been
taken. The Company and each of its Subsidiaries has properly accrued all Taxes
for such periods subsequent to the periods covered by such Tax Returns as
required by GAAP. None of the Company or any of its Subsidiaries has executed or
filed with the IRS or any other taxing authority any agreement now in effect
extending the period for assessment or collection of any Tax. Except as set
forth in Schedule 3.8(a), none of the Company or any of its Subsidiaries is
being audited or examined by any taxing authority with respect to any Tax or is
a party to any pending action or proceedings by any taxing authority for
assessment or collection of any Tax, and no claim for assessment or collection
of any Tax has been asserted against it. True and complete copies of all
federal, state and local income or franchise Tax Returns filed by the Company
and each of its Subsidiaries for 1995 and 1996 and all written communications
relating thereto have been delivered to Buyer or made available to
representatives of Buyer prior to the date hereof. No claim has been made in
writing or, to the Company's knowledge, otherwise by an authority in a
jurisdiction where the Company or any of its Subsidiaries does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. Except as
set forth in Schedule 3.8(a), there is no dispute or claim concerning any Tax
liability of the Company or any of its Subsidiaries, (i) claimed or raised by
any taxing authority in writing or (ii) as to which the Company or any of its
Subsidiaries has knowledge. As of the date hereof, the Company is a domestically
controlled REIT within the meaning of Section 897(h)(4)(B) of the Code. To the
Company's knowledge, except as set forth in Schedule 3.8(a), no person or entity
which would be treated as an "individual" for purposes of Section 542(a)(2) of
the Code (as modified by Section 856(h) of the Code) owns or would be considered
to own (taking into account the constructive ownership rules of Section 544 of
the Code, as modified by Section 856(h) of the Code) in excess of 9.8% of the
value of the outstanding equity interests in the Company. Except as contemplated
by this Agreement or as set forth in Schedule 3.8(a), the Board has not exempted
any person from the Ownership Limit or otherwise waived any of the provisions of
Article IV of the Company Charter (as all capitalized terms used in this
sentence are defined in the Company Charter). The Ownership Limit (as such term
is defined in the Company Charter) has not been modified. Except as set forth on
Schedule 3.8(a), each ownership interest that the Company and each of its
Subsidiaries has in an entity formed as a partnership (or which files federal
income tax returns as a partnership) qualifies, and since the date of its
formation qualified, to be treated as a partnership for federal income tax
purposes or as a "qualified REIT subsidiary" within the meaning of Section
856(i)(2) of the Code.
(b) The Company (i) intends in its federal income tax return
for the tax year that will end on December 31, 1997 to be taxed as a real estate
investment trust within the meaning of Section 856 of the Code ("REIT") and has
complied (or will comply) with all applicable provisions of the Code relating to
a REIT, for 1997, (ii) has operated, and intends to continue to operate, in such
a manner as to qualify as a REIT for 1997, (iii) has not taken or omitted to
take any action which would reasonably be expected to result in a challenge to
its status as a REIT, and, to the Company's knowledge, no such challenge is
pending or threatened, and (iv) to the Company's knowledge, and assuming the
accuracy of Buyer's representations in Sections 4.8 and 4.10 (disregarding the
qualification relating to Buyer's knowledge and assuming no exceptions are set
forth in Schedule
19
4.10-B), will not be rendered unable to qualify as a REIT for federal income tax
purposes as a consequence of the transactions contemplated hereby.
(c) Except as set forth on Schedule 3.8(c), any amount or
other entitlement that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated hereby
by any person who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) with respect to the Company or
any of its Affiliates would not be characterized as an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code).
(d) Except as set forth on Schedule 3.8(d), the disallowance
of a deduction under Section 162(m) of the Code for employee remuneration will
not apply to any amount paid or payable by the Company or any of its
Subsidiaries under any contract, stock plan, program, arrangement or
understanding currently in effect.
(e) The Company was eligible to and did validly elect to be
taxed as a REIT for federal income tax purposes for calendar year 1993 and all
subsequent taxable periods and was in compliance with the Code and all
applicable rules and regulations of the Code necessary to permit it to be taxed
as a REIT for all such periods. Each Subsidiary of the Company organized as a
partnership (and any other Subsidiary that files Tax Returns as a partnership
for federal income tax purposes) was and continues to be classified as a
partnership for federal income tax purposes or as a "qualified REIT subsidiary"
within the meaning of Section 856(i)(2) of the Code.
Section 3.9 Compliance with Agreements; Material Agreements.
(a) Neither the Company nor any of its Subsidiaries is in
default under or in violation of any provision of the Company Charter, the
by-laws of the Company (or equivalent documents) or any partnership agreement,
operating agreement, joint venture agreement or any other organization or
formation documents to which the Company or any of its Subsidiaries is a party.
(b) The Company and each of its Subsidiaries have filed all
material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file with
any Government Authority and all other material reports and statements required
to be filed by them, including any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States, and have paid
all fees or assessments due and payable in connection therewith, except for such
failures to file or pay which would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect. Except as set
forth on Schedule 3.9(b), there is no unresolved violation asserted by any
regulatory agency with respect to any report or statement relating to an
examination of the Company or any of its Subsidiaries which, if resolved in a
manner unfavorable to the Company or such Subsidiary, would, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
20
(c) The Company Reports or Schedule 3.9(c) set forth (i) a
description of all material indebtedness of the Company and each of its
Subsidiaries, whether unsecured, or secured or collateralized by mortgages,
deeds of trust or other security interests in the Company Properties or any
other assets of the Company and each of its Subsidiaries, or otherwise and (ii)
each Commitment entered into by the Company or any of its Subsidiaries
(including any guarantees of any third party's debt or any obligations in
respect of letters of credit issued for the Company's or any of its Subsidiary's
account) which may result in total payments or liabilities in excess of
$300,000, excluding Commitments made in the ordinary course of business with a
maturity of less than one year or that are terminable on 30 days or less notice.
True and complete copies of the documents relating to the foregoing have been
delivered or made available to Buyer prior to the date hereof. Neither the
Company nor any of its Subsidiaries is in default, and, to the Company's
knowledge, no event has occurred which, with the giving of notice or the lapse
of time or both, would constitute a material default, under any of the documents
described in clause (i) or (ii) of this paragraph or in respect of any payment
obligations thereunder. All joint venture and partnership agreements to which
the Company or any of its Subsidiaries is a party as of the date hereof are set
forth in Schedule 3.1(d), all of which are in full force and effect as against
the Company or such Subsidiary and, to the Company's knowledge, as against the
other parties thereto, and none of the Company or any of its Subsidiaries is in
default, and, to the Company's knowledge, no event has occurred which, with the
giving of notice or the lapse of time or both, would constitute a default, with
respect to any obligations thereunder. To the Company's knowledge, the other
parties to such agreements are not in breach of any of their respective
obligations thereunder. To the Company's knowledge, no event has occurred nor is
the Company aware of the existence of any facts with respect to the Company's
Subsidiaries (including with respect to the partnership agreements for the
Company's Subsidiaries that are partnerships and operating agreements for the
Company's Subsidiaries that are limited liability companies) that would,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(d) Except as disclosed in the Company Reports, Schedule
3.9(d) sets forth a complete and accurate list of all material agreements
entered into by the Company or any of its Subsidiaries as of the date hereof
relating to the development or construction of, additions or expansions to, or
management or leasing services for retail shopping centers or other real
properties which are currently in effect and under which the Company or any of
its Subsidiaries currently has, or expects to incur, obligations in excess of
$300,000. True and complete copies of such agreements will be made available to
Buyer.
(e) Except as disclosed in the Company Reports and except for
(i) agreements made in the ordinary course of business with a maturity of one
year or less or that are terminable on 30 days or less notice, (ii) agreements
the breach or non-fulfillment of which would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect and
(iii) agreements under which the Company's total benefit or obligations do not
exceed $300,000, Schedule 3.9(e) sets forth a complete and accurate list of all
material agreements entered into by the Company as of the date hereof,
including, without limitation, material Debt Instruments. Each agreement set
forth in Schedule 3.9(e) is in full force and effect as against the Company and,
to the Company's knowledge, as against the other parties thereto, no payments,
if any, thereunder are
21
delinquent, the Company is not in default, in any material respect, thereunder,
and no notice of default thereunder has been sent or received by the Company or
any of its Subsidiaries. To the Company's knowledge, no event has occurred
which, with notice or lapse of time or both, would constitute a default, in any
material respect, by the Company under any agreement set forth in Schedule
3.9(e). To the Company's knowledge, the other parties to such agreements are not
in breach of their respective obligations thereunder, except as would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect. True and complete copies of each such agreement have been made
available to Buyer prior to the date hereof.
(f) Schedule 3.9(f) sets forth a complete and accurate list of
all agreements and policies of the Company in effect on the date hereof relating
to transactions with affiliates and potential conflicts of interest. Each
agreement or arrangement set forth in Schedule 3.9(f) is in full force and
effect, and the Company, each of its Subsidiaries, and, to the Company's
knowledge, the other parties thereto are in compliance with such agreements and
policies, or such compliance has been waived by the Board as set forth in
Schedule 3.9(f). True and complete copies of each such agreement or arrangement
were made available to Buyer.
(g) Except as set forth on Schedule 3.9(g), there are no
change of control or similar provisions in any employment, severance, stock
option, stock incentive, Company Plans or similar agreement or arrangement which
would be triggered by the transactions contemplated by this Agreement. Schedule
3.9(g) identifies the obligations to employees (including any payment or other
obligation, forgiveness of debt, other release from obligations, or acceleration
of vesting) which are created, accelerated or triggered by the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
Section 3.10 Financial Records; Company Charter and By-laws; Corporate
Records.
(a) The books of account and other financial records of the
Company and each of its Subsidiaries are in all material respects true and
complete, have been maintained in accordance with good business practices, and
are accurately reflected in all material respects in the financial statements
included in the Company Reports.
(b) The Company has previously delivered or made available to
Buyer true and complete copies of the Company Charter and the by-laws of the
Company, as amended to date, and the charter, by-laws, organizational documents,
partnership agreements and joint venture agreements of its Subsidiaries, and all
amendments thereto. All such documents are listed in Schedule 3.10(b).
(c) The minute books and other records of corporate or
partnership proceedings of the Company and each of its Subsidiaries have been
made available to Buyer and its representatives and contain in all material
respects accurate records of all meetings and accurately reflect in all material
respects all other corporate actions of the stockholders and directors and any
committees of the Board and the board of directors of its Subsidiaries which are
corporations and all material actions of the partners of its Subsidiaries which
are partnerships, except for
22
documentation of discussions relating to or in connection with the transactions
contemplated hereby or matters related hereto.
Section 3.11 Properties.
(a) Schedule 3.11(a) sets forth a complete and accurate list
and the address of all real property owned or leased by the Company or any of
its Subsidiaries or otherwise used by the Company or its Subsidiaries in the
conduct of their business or operations (collectively, and together with the
land at each address referenced in Schedule 3.11(a) and all buildings,
structures and other improvements and fixtures located on or under such land and
all easements, rights and other appurtenances to such land, the "Company
Properties"). The Company and each of its Subsidiaries own insurable fee simple
title (or, if so indicated in Schedule 3.11(a), leasehold title) to each of the
Company Properties, free and clear of any Liens, title defects, contractual
restrictions or covenants, laws, ordinances or regulations affecting use or
occupancy (including zoning regulations and building codes) or reservations of
interests in title (collectively, "Property Restrictions"), except for (i)
Permitted Liens and (ii) Property Restrictions imposed or promulgated by law or
by any Government Authority which are customary and typical for similar
properties. None of the matters described in clauses (i) and (ii) of the
immediately preceding sentence materially interferes with, materially impairs,
or is violated by, the existence of any building or other structure or
improvement which constitutes a part of, or the present use, occupancy or
operation of, the Company Properties taken as a whole, and such matters do not,
individually or in the aggregate, have a Material Adverse Effect. American Land
Title Association policies of title insurance (or marked title insurance
commitments having the same force and effect as title insurance policies or
binding irrevocable escrow instructions to issue such title insurance policies
or endorsements to existing title insurance policies) have been issued by
national title insurance companies insuring the fee simple or leasehold, as
applicable, title of the Company or its Subsidiaries, as applicable, to each of
the Company Properties in, to the Company's knowledge, sufficient amounts to
avoid co-insurance statutes, subject only to the matters set forth therein (the
"Title Policies"), and, to the Company's knowledge, the Title Policies are valid
and in full force and effect and no claim has been made under any such policy.
The Company will make available to Buyer true and complete copies of all such
policies and of the most recent surveys of the Company Properties, and true and
complete copies of all material exceptions referenced in such policies and the
most recent title reports for and surveys (to the extent not previously
delivered or made available to Buyer) of each of the Company Properties
available to the Company or any of its Subsidiaries for inspection by Buyer or
its representatives within five Business Days of Buyer's request therefor.
(b) Except as set forth in Schedule 3.11(b), and except for
matters which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or to materially and adversely affect
the use or occupancy of the applicable Company Property, to the Company's
knowledge, there are no (i) certificates, permits or licenses that are currently
required (including building permits and certificates of occupancy for tenant
spaces) from any Government Authority having jurisdiction over any Company
Property or agreements, easements or other rights which are necessary to permit
the lawful use, occupancy or operation of the existing buildings, structures or
other improvements which constitute a part of any of the Company Properties or
to
23
permit the lawful use and operation of utility service to any Company Property
or of any existing driveways, roads or other means of egress and ingress to and
from any of the Company Properties that have not been obtained or that are not
in full force and effect, or any pending modification or cancellation of any of
same, or (ii) violations by any Company Property of any federal, state or
municipal law, ordinance, order, regulation or requirement, including any
applicable zoning law or building code, as a result of the use or occupancy of
such Company Property or otherwise. Except as set forth in Schedule 3.11(b), the
Company has no knowledge of any uninsured physical damage to any Company
Property in excess of $300,000 in the aggregate. To the Company's knowledge,
except for repairs identified in the Capital Expenditure Budget and Schedule or
in any engineering or structural report reviewed by Buyer or its consultants,
each Company Property, (i) is in good operating condition and repair and is
structurally sound and free of defects, with no material alterations or repairs
being required thereto under applicable law or insurance company requirements,
and (ii) consists of sufficient land, parking areas, driveways and other
improvements and lawful means of access and utility service and capacity to
permit the use thereof in the manner and for the purposes to which it is
presently devoted, except, in each such case, to the extent that failure to meet
such standards would not materially and adversely affect the use or occupancy of
the applicable Company Property. The Company will make available to Buyer true
and complete copies of all engineering reports, inspection reports, maintenance
plans and other documents relating to the condition of any Company Property
prepared for or by the Company since the Initial Public Offering.
(c) Except as set forth in Schedule 3.11(c), there is no (i)
condemnation, eminent domain or rezoning proceeding pending or, to the Company's
knowledge, threatened with respect to any of the Company Properties, (ii) road
widening or change of grade of any road adjacent to any Company Property
currently underway or that, to the Company's knowledge, has been proposed, (iii)
proposed change in the assessed valuation of any Company Property other than
customarily scheduled revaluations, (iv) special assessment that has been made
or, to the Company's knowledge, threatened against any Company Property, or (v)
Company Property subject to any so-called "impact fee" or to any agreement with
any Government Authority to pay for sewer extensions, oversizing utilities,
lighting or like expenses or charges for work or services by such Government
Authority, except, in the case of each of the foregoing, to the extent that same
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect or to materially and adversely affect the use or
occupancy of the applicable Company Property.
(d) Each of the Company Properties is an independent unit
which does not rely on any facilities located on any property not included in
such Company Property to fulfill any municipal or governmental requirement or
for the furnishing to such Company Property of any essential building systems or
utilities, other than facilities the benefit of which inures to the Company
Properties pursuant to one or more valid easements or parking agreements. Each
of the Company Properties is served by public water and sanitary or septic
systems and all other utilities, and each of the Company Properties has lawful
access to public roads, in all cases sufficient for the current use and
occupancy of each Company Property. To the Company's knowledge or as set forth
in the surveys, all parcels of land included in each Company Property that
purport to be contiguous are contiguous and are not separated by strips or
gores. Except as set forth in Schedule 3.11(d) or
24
any surveys or Environmental Reports relating to any Company Property prepared
for or by the Company since the Initial Public Offering, no portion of any
Company Property includes any wetlands or vegetation or species protected by any
applicable laws or, in event that such surveys or Environmental Reports disclose
the existence of such wetlands or protected vegetation or species, such items
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the use or occupancy of the applicable Company
Property. Except as set forth on Schedule 3.11(d) or the Title Policies or
surveys, none of the Company Properties lies in any 100-year flood plain area,
as established by the U.S. Army Corps of Engineers (the "Army Corps of
Engineers"). With respect to the improvements on each Company Property which lie
in a flood plain area, if any, the Company or its Subsidiaries carry and
presently maintain in full force and effect flood insurance in connection with
such Company Properties as required by applicable law and as accurately
described in Schedule 3.11(d). The improvements on each Company Property comply
in all material respects with all applicable building codes and other relevant
laws and regulations. No improvements constituting a part of any Company
Property encroach on real property not constituting a part of such Company
Property or such encroachments would not, individually or in the aggregate, have
a Material Adverse Effect or materially and adversely affect the use or
occupancy of the applicable Company Property.
(e) Schedule 3.11(e) contains a complete and accurate list of
each survey, study or report prepared by or for the Company or any of its
Subsidiaries since the Initial Public Offering, in connection with any Company
Property's compliance or non-compliance with the requirements of the Americans
with Disabilities Act (the "ADA"), other than routine correspondence or
memoranda. Except for matters addressed in the Capital Expenditure Budget and
Schedule, no Company Property fails to comply with the requirements of the ADA
except for such non-compliance as the Company believes will not, individually or
in the aggregate, have a Material Adverse Effect.
(f) The Company has provided to Buyer an accurate rent roll
for each Company Property as of February 19, 1998 (the "Rent Roll"), which
accurately describes each lease of space in each Company Property (collectively,
the "Company Leases"). The Company has delivered to Buyer profiles of the
Company Leases (the "Lease Profiles"), which have been prepared in the ordinary
course of business. The Company will make available to Buyer a true and complete
copy of each Company Lease, including all amendments and modifications thereto.
With respect to each Company Lease for premises larger than 10,000 square feet
of rentable space (collectively, the "Material Company Leases"), except as set
forth in Schedule 3.11(f), (i) each of the Material Company Leases is valid and
subsisting and in full force and effect as against the Company or the
Subsidiary, as applicable, and, to the Company's knowledge, as against the
tenant, and the information on the Rent Roll with respect to the Material
Company Leases is accurate, (ii) except as otherwise set forth on the Rent Roll,
the tenant under each of the Material Company Leases is in actual possession of
the premises leased thereunder, (iii) except as otherwise set forth on the Rent
Roll, no tenant under any Material Company Lease is more than 30 days in arrears
in the payment of rent, (iv) neither the Company nor any of its Subsidiaries has
received any written notice from any tenant under any Material Company Lease of
its intention to vacate, (v) neither the Company nor any of its Subsidiaries has
collected payment of rent under any Material Company Lease (other than
25
security deposits) accruing for a period which is more than one month in
advance, (vi) no notice of default has been sent or received by the landlord
under any Material Company Lease which remains uncured as of the date hereof, no
default has occurred under any Material Company Lease by the landlord thereunder
and, to the Company's knowledge, no default has occurred under any Material
Company Lease by the tenant thereunder and, to the Company's knowledge, no event
has occurred and is continuing which, with notice or lapse of time or both,
would constitute a default under any Material Company Lease, (vii) except as
disclosed on the Lease Profiles or Schedule 3.11(f), no tenant under any of the
Material Company Leases has any purchase options or kick-out rights or is
entitled to any concessions, allowances, abatements, setoffs, rebates or
refunds, (viii) none of the Material Company Leases and none of the rents or
other amounts payable thereunder has been mortgaged, assigned, pledged or
encumbered by any party thereto or otherwise, except in connection with
financing secured by the applicable Company Property which is described in
Schedule 3.9(c) or the Company Reports, (ix) (A) as of the date hereof, except
as set forth in Schedule 3.11(f), no brokerage or leasing commission or other
compensation is due or payable to any person with respect to or on account of
any of the Material Company Leases or any extensions or renewals thereof
incurred after the date hereof, and (B) any brokerage or leasing commission or
other compensation due or payable to any person with respect to or on account of
any of the Material Company Leases or any extensions or renewals thereof have
been incurred in the ordinary course of business of the Company consistent with
past practice and market terms, (x) no space occupied under any Material Company
Lease in any Company Property is occupied by a tenant not paying base and/or
percentage rent, (xi) no tenant under any of the Material Company Leases has
asserted any claim in writing or, to the Company's knowledge, orally, which is
likely to affect the collection of rent from such tenant, (xii) other than as
would be customary or consistent with commercially reasonable retail leasing
business practices, no tenant under any of the Material Company Leases has any
right to remove material improvements or fixtures that have at any time been
affixed to the premises leased thereunder, (xiii) each tenant under the Material
Company Leases is required thereunder to maintain or to cause to be maintained,
at its cost and expense, public liability and property damage insurance with
liability limits in amounts at least equal to that maintained by commercially
prudent owners of properties similar to the Company Property to which such
Material Company Lease relates, or in the alternative, consistent with
commercially reasonable prudent retail leasing business practices, tenants may
self-insure or the Company may provide such coverage to tenants and (xiv) the
landlord under each Material Company Lease has fulfilled all of its obligations
thereunder in respect of tenant improvements and capital expenditures consistent
with commercially reasonable prudent retail leasing business practices. Other
than the tenants identified in the Rent Roll and parties to easement agreements
which constitute Permitted Liens, no third party has any right to occupy or use
any portion of any Company Property. Budgets for all material tenant
improvements and similar material work required to be made by the lessor under
each of the Material Company Leases is incorporated in Schedule 3.11(i).
(g) Schedule 3.11(g) sets forth a complete and accurate list
of all material commitments, letters of intent or similar written understandings
made or entered into by the Company or any of its Subsidiaries as of the date
hereof (x) to lease any space larger than 10,000 rentable square feet at any of
the Company Properties, (y) to sell, mortgage, pledge or hypothecate any Company
Property or Properties, which, individually or in the aggregate, are material,
or to
26
otherwise enter into a material transaction in respect of the ownership or
financing of any Company Property, or (z) to purchase or to acquire an option,
right of first refusal or similar right in respect of any real property, which,
individually or in the aggregate, are material, which, in any such case, has not
yet been reduced to a written lease or contract, and sets forth with respect to
each such commitment, letter of intent or other understanding the principal
terms thereof. The Company will make available to Buyer a true and complete copy
of each such commitment, letter of intent or other understanding. Schedule
3.11(g) also sets forth a complete and accurate list of all agreements to
purchase real property to which the Company or any of its Subsidiaries is a
party.
(h) Except as set forth in Schedule 3.11(h), none of the
Company Properties is subject to any outstanding purchase options nor has the
Company or any of its Subsidiaries entered into any outstanding contracts with
others for the (i) lease or sublease of space in excess of 10,000 square feet of
rentable space in any Company Property; or (ii) sale, mortgage, pledge,
hypothecation or other transfer of all or any part of any Company Property, and
no person has any right or option to acquire, or right of first refusal with
respect to, the Company's or any of its Subsidiaries' interest in any Company
Property or any part thereof. Except as set forth in Schedule 3.11(h) or
3.11(g), none of the Company or any of its Subsidiaries has any outstanding
options or rights of first refusal or has entered into any outstanding contracts
with others for the purchase of any real property.
(i) Schedule 3.11(i) sets forth the Company's or any of its
Subsidiary's capital expenditure budget and schedule for each Company Property,
which describes the capital expenditures which the Company or such Subsidiary
has budgeted for such Company Property for the period running through December
31, 1997 (the "Capital Expenditure Budget and Schedule"), and the Company's or
any of its Subsidiary's preliminary capital expenditure budget and schedule for
each Company Property, which describes the capital expenditures which the
Company or such Subsidiary has budgeted for such Company Property for the period
commencing January 1, 1998 and running through December 31, 1999 (the "1998 and
1999 Preliminary Capital Expenditure Budgets and Schedules"). Each of the
Capital Expenditure Budget and the 1998 and 1999 Preliminary Capital Expenditure
Budgets and Schedules also describes other capital expenditures as are
necessary, to the Company's knowledge, in order to bring the applicable Company
Property into material compliance with applicable laws, ordinances, codes,
health and safety regulations and insurance requirements (including in respect
of fire sprinklers, compliance with the ADA (except to the extent that (x) a
tenant under any Company Lease is contractually responsible and liable for such
ADA compliance under its Company Lease or (y) with respect to shopping center
properties, any work required to cause such compliance is not material and the
related expenditures are, in the aggregate with all other such expenditures,
less than $300,000), and asbestos containing material) or which the Company
otherwise plans or expects to make in order to cure or remedy any construction,
electrical, mechanical or other defects, to renovate, rehabilitate or modernize
such Company Property, or otherwise, excluding, however, any tenant improvements
required to be made under any Company Lease. To the Company's knowledge, the
costs and time schedules for 1998 and 1999 set forth in the 1998 and 1999
Preliminary Capital Expenditure Budgets and Schedules are reasonable estimates
and projections based upon information available to the Company at the time that
the 1998 and 1999 Preliminary Capital Expenditure Budgets and Schedules were
prepared, and, nothing has come to the attention of the Company since such time
which would indicate that the
27
1998 and 1999 Preliminary Capital Expenditure Budgets and Schedules are
inaccurate or misleading in any material respect. Except as set forth in
Schedule 3.11(i), there are no outstanding or, to the Company's knowledge,
threatened requirements by any insurance company which has issued an insurance
policy covering any Company Property, or by any board of fire underwriters or
other body exercising similar functions, requiring any repairs or alterations to
be made to any Company Property that would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(j) Schedule 3.11(j) contains a list of each Company Property
which consists of or includes undeveloped land or which is in the process of
being developed or redeveloped (collectively, the "Development Properties") and
a brief description of the development or redevelopment intended by the Company
or any of its Subsidiaries to be carried out or completed thereon (collectively,
the "Projects"), including any budget and development schedule therefor prepared
by or for the Company or any of its Subsidiaries (collectively, the "Development
Budget and Schedule"). Except as disclosed in Schedule 3.11(j), each Development
Property is zoned for the lawful development or redevelopment thereon of the
applicable Project, and the Company or its Subsidiaries have obtained all
permits, licenses, consents and authorizations required for the lawful
development or redevelopment thereon of such Project, except only for such
failure to meet the foregoing standards as would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect. Except as
set forth in Schedule 3.11(j), all of the existing improvements or structures
located on any of the Development Properties comply in all material respects
with all applicable building codes, laws, rules or regulations. Except as set
forth in Schedule 3.11(j), to the Company's knowledge, there are no material
impediments to or constraints on the development or redevelopment of any Project
in all material respects within the time frame and for the cost set forth in the
Development Budget and Schedule applicable thereto. Except as disclosed in
Schedule 3.11(j), each Development Property consists of sufficient land, parking
areas, driveways and other improvements, and lawful means of access and utility
and service and capacity to permit the development and operation of the Project
as intended to be carried out or completed thereon. Except as set forth on
Schedule 3.11(j), the Development Properties are free and clear of any Property
Restrictions, encroachments or other matters (including, any condemnation,
eminent domain or rezoning proceedings (proposed or threatened), special
assessments, taxes or so-called "impact fees") which would individually, or in
the aggregate, be reasonably expected to have a Material Adverse Effect on the
development of the related Development Property. In the case of each Project the
development of which has commenced, to the Company's knowledge, the costs and
expenses incurred in connection with such Project and the progress thereof are,
except as set forth in Schedule 3.11(j), consistent and in compliance in all
material respects with the Development Budget and Schedule applicable thereto.
The Company will make available to Buyer all feasibility studies, soil tests,
due diligence reports and other studies, tests or reports performed by or for
the Company at any time since the Initial Public Offering, which relate to the
Development Properties or the Projects.
(k) The ground leases underlying the leased Company Properties
referenced in Schedule 3.11(a) (collectively, the "Ground Leases") are
accurately described in Schedule 3.11(k). Each of the Ground Leases is valid,
binding and in full force and effect as against the Subsidiary and, to the
Company's knowledge, as against the other party thereto. Except as indicated in
Schedule
28
3.11(k) and except for any Company Leases and Permitted Liens affecting the
same, none of the Ground Leases is subject to any mortgage, pledge, Lien,
sublease, assignment, license or other agreement granting to any third party any
interest therein, collateral or otherwise, or any right to the use or occupancy
of any premises leased thereunder. True and complete copies of the Ground Leases
(including all amendments, modifications and supplements thereto) have been
delivered to Buyer prior to the date hereof. To the Company's knowledge, except
as set forth in Schedule 3.11(k), there is no pending or threatened proceeding
which is reasonably likely to interfere with the quiet enjoyment of the tenant
under any of the Ground Leases. Except as set forth in Schedule 3.11(k), as of
the last day of the month preceding the date hereof and as of the last day of
the month preceding the date of the Initial Closing, no payments under any
Ground Lease are delinquent and no notice of default under any Ground Lease has
been sent or received by the Company or any of its Subsidiaries. There does not
exist under any of the Ground Leases any default, and, to the Company's
knowledge, no event has occurred which, with notice or lapse of time or both,
would constitute such a default.
(l) The Company and each of its Subsidiaries have good and
sufficient title to all the personal and non-real properties and assets
reflected in their books and records as being owned by them (including those
reflected in the balance sheets of the Company and its Subsidiaries as of
December 31, 1997, except as since sold or otherwise disposed of in the ordinary
course of business), free and clear of all Liens, except for Permitted Liens
which are not, individually or in the aggregate, reasonably expected to have a
Material Adverse Effect.
(m) The Company has provided to Buyer historical operating
expense information (the "Historical Expense Information") for each of the last
three years, which has been prepared in the ordinary course of business. The
Historical Expense Information is accurate in all material respects.
(n) Except as set forth on Schedule 3.11(n), neither the
Company nor any of its Subsidiaries is a party to any material third-party
property management or leasing agreements pursuant to which the Company or any
of its Subsidiaries receives a fee or other compensation from a third party for
managing or leasing real property.
Section 3.12 Environmental Matters.
(a) To the Company's knowledge, each of the Company and its
Subsidiaries has obtained, and now maintains as currently valid and effective,
all permits, certificates of financial responsibility and other governmental
authorizations required to be obtained by the Company or any of its Subsidiaries
under the Environmental Laws (the "Environmental Permits") in connection with
the operation of its businesses and properties. Except as disclosed in the
Company Environmental Reports or the Company Reports, each of the Company and
its Subsidiaries and each Company Property is and has been in compliance with
all terms and conditions of the Environmental Permits and all Environmental
Laws, except only to an extent which would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect. The
Company has no
29
knowledge of any circumstances or conditions that may prevent or interfere with
such compliance in the future.
(b) Each of the Company and its Subsidiaries has provided or
made available to Buyer all formal written communications (whether from a
Government Authority, citizens' group, employee or other person), which the
Company has received regarding (x) alleged or suspected noncompliance of any of
the Company Properties with any Environmental Laws or Environmental Permits or
(y) alleged or suspected Liability of the Company or its Subsidiaries under any
Environmental Law, which noncompliance or Liability would, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
(c) To the Company's knowledge, there are no liens or
encumbrances on any of the Company Properties which arose pursuant to or in
connection with any Environmental Law or Environmental Claim and, to the
Company's knowledge, no government actions have been taken or threatened to be
taken or are in process which are reasonably likely to subject any Company
Property to such liens or other encumbrances.
(d) Except as disclosed in Schedule 3.12(d) or in the Company
Reports (none of which matters would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect), or set forth in the
Company Environmental Reports, no Environmental Claims have been asserted or, to
the Company's knowledge, threatened that, individually or in the aggregate, may
result in liabilities exceeding $300,000 with respect to the operations or the
businesses of the Company or its Subsidiaries, or with respect to the Company
Properties. To the Company's knowledge, except as set forth on the Company
Environmental Reports or in the Company Reports, no circumstances, past or
present actions, conditions, events or incidents exist with respect to the
Company or any of its Subsidiaries or the Company Properties that would
reasonably be expected to result in the assertion of any Environmental Claims
that, individually or in the aggregate, may result in liabilities exceeding
$300,000, in any such case, against (i) the Company or any of its Subsidiaries,
or (ii) to the Company's knowledge, any person whose liability for any
Environmental Claims the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law.
(e) Except as disclosed in Schedule 3.12(e) (none of which
matters would, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect), or set forth in the Company Environmental Reports or
the Company Reports, (i) none of the Company or its Subsidiaries has been
notified or anticipates being notified of potential responsibility in connection
with any site that has been placed on, or proposed to be placed on, the National
Priorities List or its state or foreign equivalents pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. ss. 9601 et seq., or analogous state laws, (ii) no Materials of
Environmental Concern are present on, in or under any Company Property in a
manner or condition that is reasonably likely to give rise to Environmental
Claims which, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect, (iii) none of the Company or its
Subsidiaries has Released or arranged for the Release of any Materials of
Environmental Concern at any location to an extent or in a manner which would
30
reasonably be expected to result in a Material Adverse Effect, (iv) no
underground storage tanks, surface impoundments, disposal areas, pits, ponds,
lagoons, open trenches or disused industrial equipment is present at any Company
Property in a manner or condition that is reasonably likely to give rise to one
or more Environmental Claims which, individually or in the aggregate, would
reasonably be expected to result in a Material Adverse Effect, (v) no
transformers, capacitors or other equipment containing fluid with more than 50
parts per million polychlorinated biphenyls are present at any Company Property
in a manner or condition that is reasonably likely to give rise to one or more
Environmental Claims which, individually or in the aggregate, would reasonably
be expected to result in a Material Adverse Effect, except for any such
transformers, capacitors or other equipment owned by any utility company, and
(vi) to the Company's knowledge, no friable asbestos and no friable
asbestos-containing material is present at any Company Property and, to the
Company's knowledge, no Employee, agent, contractor or subcontractor of the
Company or its Subsidiaries or any other person is now or has in the past been
exposed to friable asbestos at any Company Property, except, in the case of each
of the matters set forth in this subpart (vi), for such matters as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(f) Schedule 3.12(f) contains a list of each environmental
report, audit, summary, or similar document prepared for or by the Company or
any of its Subsidiaries or otherwise in the possession of any of them with
respect to the environmental condition of any Company Property (collectively,
the "Company Environmental Reports"). The Company has previously delivered or
made available to Buyer true and complete copies of each Company Environmental
Report. None of the matters disclosed by the Company Environmental Reports
would, individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect. The Company has no knowledge of any facts or circumstances
relating to the environmental condition of any property owned, leased or
otherwise held by the Company that is not a Company Property that are reasonably
likely to result in a Material Adverse Effect.
(g) For purposes hereof, the terms listed below shall have the
following meanings:
(i) "Claim" shall mean all actions, causes of action, suits,
judgments, executions, claims, Liabilities and demands whatsoever, in
law or equity.
(ii) "Environmental Claim" shall mean any Claim investigation
or notice by any person alleging potential liability (including
potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property
damages, personal injuries or fatalities, or penalties) arising out of,
based on or resulting from (A) the presence, generation,
transportation, treatment, use, storage, disposal or Release of
Materials of Environmental Concern or the threatened Release of
Materials of Environmental Concern at any location, or (B) activities
or conditions forming the basis of any violation, or alleged violation
of, or liability or alleged liability under, any Environmental Law.
(iii) "Environmental Laws" shall mean federal, state, and
local laws, ordinances, common law, orders, statutes, and regulations
relating to the pollution or protection of the
31
environment or of flora or fauna or their habitat or of human health
and safety, or to the cleanup or restoration of the environment,
including, without limitation, CERCLA, the Toxic Substances Control
Act, as amended, the Hazardous Materials Transportation Act, as
amended, the Resource Conservation and Recovery Act, as amended, the
Clean Water Act, as amended, the Safe Drinking Water Act, as amended,
the Clean Air Act, as amended, the Occupational Safety and Health Act,
as amended, and all analogous laws promulgated or issued by any state
or other Government Authority.
(iv) "Materials of Environmental Concern" shall mean all
chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum or any fraction thereof, petroleum products and hazardous
substances or solid or hazardous wastes as now defined and regulated
under any Environmental Laws.
(v) "Release" shall mean any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration.
Section 3.13 Employees and Employee Benefit Plans.
(a) Schedule 3.13(a) sets forth a complete and accurate list
of all employment agreements (the "Employment Agreements") between the Company
or any of its Subsidiaries and any employees of the Company or any of its
Subsidiaries. Except for the employees of the Company or its Subsidiaries who
are parties to such Employment Agreements, all of the employees of the Company
and each of its Subsidiaries are employed on an at-will basis (except for
restrictions or limitations on the at-will basis of such employees imposed by
law or equity or general principles of law or equity), other than such employees
party to Employment Agreements that are not, in the aggregate, material to the
Company.
(b) The Company Reports or Schedule 3.13(b) set forth a
complete and accurate list of all material Employee Benefit Plans and all
material Benefit Arrangements which cover Employees of the Company or any of its
Subsidiaries with respect to their employment relationship with the Company or
any of its Subsidiaries (the "Company Plans"). With respect to each Company
Plan, the Company has made available to Buyer true and complete copies of: (i)
the plans and related trust documents and all amendments thereto, (ii) the most
recent summary plan descriptions, if any, and the most recent annual report, if
any, (iii) the most recent actuarial valuation (to the extent applicable), and
(iv) the most recent determination letter issued by the IRS with respect to any
Company Plan intended to be qualified under Section 401(a) of the Code.
(c) With respect to each Company Plan, (i) the Company and
each of its Subsidiaries is, and has been since the date of adoption of each
Company Plan, in compliance in all material respects with the terms of each such
Company Plan and with the requirements prescribed by all applicable statutes,
orders or governmental rules or regulations, (ii) the Company and each of its
Subsidiaries has contributed to each Pension Plan included in the Company Plans
not less than the amounts accrued for such plan for all plan periods for which
payment is due, and (iii) neither the Company nor any of its Subsidiaries has
any funding commitment or other accrued liabilities except
32
as set forth on Schedule 3.13(c) or as reserved for in the financial statements
in or incorporated by reference into the Company Reports, and in the case of
each of clauses (i), (ii), and (iii), except for such matters as would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(d) Except as set forth on Schedule 3.13(d), none of the
Company or any of its Subsidiaries has made any commitment to establish any new
Employee Benefit Plan or Benefit Arrangement, to modify any Employee Benefit
Plan or Benefit Arrangement, or to increase benefits or compensation of
Employees of the Company or any of its Subsidiaries (except for normal increases
in compensation consistent with past practices), and, to the Company's
knowledge, no intention to do so has been communicated to Employees of the
Company or any of its Subsidiaries.
(e) Except as set forth on Schedule 3.13(e), there are no
pending or, to the Company's knowledge, anticipated government audits or claims
(excluding claims for benefits incurred in the ordinary course of Company Plan
activities) against or otherwise involving any of the Company Plans or any
fiduciaries thereof with respect to their duties to the Company Plans and no
suit, action or other litigation (excluding claims for benefits incurred in the
ordinary course of Company Plan activities) has been brought against or with
respect to any such Company Plans.
(f) Neither the Company nor any of the ERISA Affiliates has,
at any time after September 25, 1980, contributed to, or been required to
contribute to, any "multiemployer plan" (as defined in Sections 3(37) and
4001(a)(3) of ERISA).
(g) Except as required by the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the Code or
requirements of state law and regulations and except as set forth on Schedule
3.13(g), the Company and its Subsidiaries do not maintain or contribute to any
plan or arrangement which provides or has any liability to provide life
insurance, medical or other employee welfare benefits described in Section 3(1)
of ERISA to any Employee or former Employee following his retirement or
termination of employment and, to the Company's knowledge, the Company and its
Subsidiaries have never represented, promised or contracted (whether in oral or
written form) to any Employee or former Employee that such benefits would be
provided.
(h) For purposes hereof, "Employee Benefit Plans" means each
and all "employee benefit plans" as defined in Section 3(3) of ERISA maintained
or contributed to by the Company or a Subsidiary or in which the Company or a
Subsidiary participates or participated and which provides benefits to
Employees, including (i) any such plans that are "employee welfare benefit
plans" as defined in Section 3(1) of ERISA, including retiree medical and life
insurance plans ("Welfare Plans"), and (ii) any such plans that constitute
"employee pension benefit plans" as defined in Section 3(2) of ERISA ("Pension
Plans"). "Benefit Arrangements" means life and health insurance,
hospitalization, savings, bonus, deferred compensation, incentive compensation,
holiday, vacation, severance pay, sick pay, sick leave, disability, tuition
refund, service award, company car, scholarship, relocation, patent award,
fringe benefit, individual employment, consultancy or severance contracts and
other polices or practices of the Company or a Subsidiary providing
33
employee or executive compensation or benefits to Employees maintained or
contributed to by the Company or a Subsidiary, other than Employee Benefit
Plans. "Employees" mean all current employees, former employees and retired
employees of the Company or any of its Subsidiaries, including employees on
disability, layoff or leave status. "Controlled Group Liability" means any and
all liabilities (other than such liabilities that arise solely out of, or relate
solely to, the Company Plans) of the ERISA Affiliates (other than the Company
and its Subsidiaries) under (i) Title IV of ERISA, (ii) Section 302 of ERISA,
(iii) Sections 412 and 4971 of the Code, (iv) the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the Code, and
(v) corresponding or similar provisions of foreign laws or regulations.
(i) To the Company's knowledge, with respect to each Company
Plan that is subject to Title IV or Section 302 of ERISA or Section 412 or 4971
of the Code: (i) there does not exist any accumulated funding deficiency within
the meaning of Section 412 of the Code or Section 302 of ERISA, whether or not
waived, (ii) the fair market value of the assets of such plan equals or exceeds
the actuarial present value of all accrued benefits under such plan, on a
termination basis, (iii) no reportable event within the meaning of Section
4043(c) of ERISA has occurred, with respect to which notice has not been waived,
and the consummation of the transactions contemplated by this Agreement will not
result in the occurrence of any such reportable event, and (iv) all premiums due
to the Pension Benefit Guaranty Corporation have been timely paid in full.
(j) There does not now exist, nor do any circumstances exist
that could result in, any Controlled Group Liability that would be a liability
of the Company following the Closing. Without limiting the generality of the
foregoing, neither the Company nor any ERISA Affiliate has engaged in any
transaction described in Section 4069 or Section 4204 of ERISA.
(k) Neither the execution and delivery of this Agreement, the
▇▇▇▇ Purchase Agreement, the Konover Purchase Agreement nor the consummation of
the transactions contemplated hereby or thereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or benefit to any
employee of the Company, except as set forth in Schedule 3.13(k) or any
automatic extension of the term of any Employment Agreement.
(l) To the Company's knowledge, neither the Company nor any of
its Subsidiaries nor any plan fiduciary of any Company Plan has engaged in any
transaction in violation of Sections 404 or 406 of ERISA or any "prohibited
transaction," as defined in Section 4975(c)(1) of the Code, for which no
exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of the
Code, or has otherwise violated the provisions of Part 4 of Title I, Subtitle B
of ERISA. Neither the Company nor any Subsidiary has knowingly participated in a
violation of Part 4 of Title I, Subtitle B of ERISA by any plan fiduciary of any
Company Plan and has not been assessed any civil penalty under Section 502(l) of
ERISA.
(m) Schedule 3.13 (m) sets forth a complete and accurate list
of all amounts paid annually pursuant to short-term or long-term disability
benefits under any Company Plan and the number of Employees receiving such
payments, as well as any Employees, to the Company's
34
knowledge, who are participating in, or may become eligible to participate in,
any Company Plan who are suffering from serious illness or disease.
Section 3.14 Labor Matters. Except as set forth in Schedule 3.14, none
of the Company or any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor union organization. Except for the matters set forth
in Schedule 3.14 (none of which matters would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect), there is no unfair
labor practice or labor arbitration proceeding pending or, to the knowledge of
the Company, threatened against the Company or any of its Subsidiaries. To the
knowledge of the Company, there are no organizational efforts with respect to
the formation of a collective bargaining unit presently being made or threatened
involving employees of the Company or any of its Subsidiaries.
Section 3.15 Affiliate Transactions. Schedule 3.15 sets forth a
complete and accurate list of all transactions, series of related transactions
or currently proposed transactions or series of related transactions entered
into by the Company or any of its Subsidiaries since January 1, 1997 which are
of the type required to be disclosed by the Company pursuant to Item 404 of
Regulation S-K of the Securities Laws that are not otherwise disclosed in the
Company Reports. A true and complete copy of all agreements or contracts
relating to any such transaction will be made available to Buyer prior to the
date hereof.
Section 3.16 Insurance. The Company maintains insurance policies,
including liability policies, covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company and
each of its Subsidiaries (collectively, the "Insurance Policies"), which are of
a type and in amounts customarily carried by persons conducting businesses
similar to those of the Company. There is no material claim by the Company or
any of its Subsidiaries pending under any of the material Insurance Policies as
to which coverage has been questioned, denied or disputed by the underwriters of
such policies.
Section 3.17 Proxy Statement. The Proxy Statement and all of the
information included or incorporated by reference therein (other than any
information supplied or to be supplied by Buyer for inclusion or incorporation
by reference therein) will not, as of the date such Proxy Statement is first
mailed to the stockholders of the Company and as of the time of the meeting of
the stockholders of the Company in connection with the transactions contemplated
hereby, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
promulgated by the SEC thereunder.
Section 3.18 Vote Required. The affirmative vote of the holders of a
majority (including Buyer and its Controlled Affiliates (as defined in the
Stockholders Agreement) for purposes of determining a quorum, but not for
purposes of determining a majority) of the outstanding shares of Company Common
Stock entitled to vote hereon and duly present in person or by proxy at a
meeting duly called to vote hereon (and with each share of Company Common Stock
entitled to one vote per
35
share) is the only vote of the holders of any class or series of Company Stock
necessary to approve this Agreement, the Registration Rights Agreement, the
Contingent Value Right Agreement, the Stockholders Agreement and the
transactions contemplated hereby and thereby.
Section 3.19 Brokers or Finders. Except as set forth in Schedule 3.19,
no agent, broker, investment banker or other firm or person, including any of
the foregoing that is an Affiliate of the Company, is or will be entitled to any
broker's or finder's fee or any other commission or similar fee from the Company
in connection with this Agreement or any of the transactions contemplated hereby
for which Buyer or any of its Affiliates will be responsible.
Section 3.20 Maryland Takeover Law. The terms of Sections 3-602 and
3-702 of the Maryland General Corporation Law will not apply to Buyer, any Stock
Purchase or any other transaction contemplated hereby. The resolutions in the
form of Exhibit D hereto have been adopted by the Company and have not been
rescinded and revoked.
Section 3.21 ▇▇▇▇ and ▇▇▇▇▇▇▇ Properties. The Company hereby makes the
same representations and warranties with respect to the ▇▇▇▇ and Konover
Properties as are made by the sellers under the ▇▇▇▇ Purchase Agreement and the
Konover Purchase Agreement to the Company, subject to the knowledge and other
qualifications expressly set forth therein (i.e., for the purpose of this
Section 3.21, the Company's knowledge shall be limited to the knowledge, without
further inquiry, of the individuals named in the ▇▇▇▇ Purchase Agreement and the
Konover Purchase Agreement).
Section 3.22 Knowledge Defined. As used herein, the phrase "to the
Company's knowledge" (or words of similar import) means the actual knowledge of
▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ after due inquiry of persons likely to have knowledge of
any relevant facts or circumstances and includes any facts, matters or
circumstances set forth in any written notice from any Government Authority or
any other material written notice received by the Company or any of its
Subsidiaries, and also including any matter of which Buyer informs the Company
in writing.
Section 3.23 Accuracy of Information Furnished. To the Company's
knowledge, no representation or warranty by the Company contained in this
Agreement or the exhibits, schedules, lists or other documents delivered to
Buyer by the Company and referred to herein, and no statement contained in any
certificate furnished or to be furnished by or on behalf of the Company pursuant
hereto, or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact that is necessary to make the statements contained
herein or therein not misleading.
36
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company as follows:
Section 4.1 Organization. Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has all requisite corporate power and authority to own, operate,
lease and encumber its properties and to carry on its business as now conducted,
and to enter into this Agreement, the Registration Rights Agreement, the
Contingent Value Right Agreement and the Stockholders Agreement and to perform
its obligations hereunder and thereunder.
Section 4.2 Due Authorization. The execution, delivery and performance
of this Agreement, the Registration Rights Agreement, the Contingent Value Right
Agreement and the Stockholders Agreement have been duly and validly authorized
by all necessary corporate action on the part of Buyer. This Agreement, the
Registration Rights Agreement, the Contingent Value Right Agreement and the
Stockholders Agreement have been duly executed and delivered by Buyer and
constitute the valid and legally binding obligations of Buyer, enforceable
against Buyer in accordance with their terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights or
general principles of equity.
Section 4.3 Conflicting Agreements and Other Matters. Neither the
execution and delivery of this Agreement nor the consummation by Buyer of the
transactions contemplated hereby in accordance with the terms hereof, will
conflict with, result in a breach of the terms, conditions or provisions of,
constitute a default under, result in the creation of any mortgage, security
interest, encumbrance, lien or charge of any kind upon any of the properties or
assets of Buyer pursuant to, or require any consent, approval or other action by
or any notice to or filing with any Government Authority pursuant to, the
organizational documents or agreements of Buyer or any agreement, instrument,
order, judgment, decree, statute, law, rule or regulation by which Buyer is
bound, except for filings after any Closing under Section 13(d) or Section 16 of
the Exchange Act.
Section 4.4 Acquisition for Investment; Sophistication; Source of
Funds.
(a) Buyer is acquiring the Securities for its own account for
the purpose of investment and not with a view to or for sale in connection with
any distribution thereof, and Buyer has no present intention or plan to effect
any distribution of shares of Company Common Stock, provided that the
disposition of Company Common Stock owned by Buyer shall at all times be and
remain within its control, subject to the provisions of this Agreement and the
Registration Rights Agreement. The certificate(s) representing the Securities
shall bear a prominent legend with respect to the restrictions on transfer under
the Securities Act and under applicable state securities laws. Prior to any
proposed transfer of the Securities, unless such transfer is made pursuant to an
effective registration statement under the Securities Act, Buyer will deliver to
the Company an opinion of counsel, reasonably satisfactory in form and substance
to the Company, to the effect that the
37
Securities may be sold or otherwise transferred without registration under the
Securities Act. The Company will remove the legend relating to Securities Act
restrictions from any Securities at any time two years after issuance if Buyer
delivers to the Company an opinion of counsel, reasonably satisfactory in form
and substance to the Company, to the effect that such Securities are no longer
subject to transfer restrictions under the Securities Act. Upon original
issuance thereof, and until such time as the same shall have been registered
under the Securities Act or sold pursuant to Rule 144 promulgated thereunder (or
any similar rule or regulation), each stock certificate for the Securities shall
bear any restricted securities legend required pursuant to the Stockholders
Agreement, unless such legend is no longer required thereunder. Buyer is able to
bear the economic risk of the acquisition of Company Common Stock pursuant
hereto and can afford to sustain a total loss on such investment, and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the proposed investment.
(b) Buyer is an "accredited investor" as such term is defined
in Regulation D promulgated under the Securities Act.
(c) Buyer has previously delivered to the Company an audited
balance sheet for Buyer as of December 31, 1996, which was certified by an
officer of Buyer and which fairly presented the financial position of Buyer as
of its date in accordance with GAAP. Such balance sheet discloses either on its
face or by footnote, all material liabilities of Buyer required to be disclosed
under GAAP. The Company agrees to keep such information confidential to the same
extent that Buyer is obligated to keep information confidential pursuant to
Section 5.2(b).
Section 4.5 Resources. Buyer has requisite cash, cash equivalents,
equity commitments or other sources of financing available to consummate the
transactions contemplated hereby.
Section 4.6 Proxy Statement. None of the information supplied or to be
supplied by Buyer for inclusion or incorporation by reference in the Proxy
Statement will, as of the date the Proxy Statement is first mailed to the
stockholders of the Company and as of the time of the meeting of the
stockholders of the Company in connection with the transactions contemplated
hereby, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
Section 4.7 Brokers or Finders. No agent, broker, investment banker or
other firm or person, including any of the foregoing that is an Affiliate of
Buyer is or will be entitled to any broker's or finder's fee or any other
commission or similar fee from Buyer in connection with this Agreement or any of
the transactions contemplated hereby for which the Company or any of its
Affiliates will be responsible.
Section 4.8 REIT Qualification Matters. To Buyer's knowledge, no person
who would be treated as an "individual" for purposes of Section 542(a)(2) of the
Code (as modified by Section 856(h) of the Code) and who owns, directly or
indirectly, equity interests in Buyer will own actually or beneficially
(determined through the application of the constructive ownership rules of
Section
38
544 of the Code, as modified by Section 856(h)(1)(B) of the Code), in excess of
9.8% of the value of the outstanding equity interests in Company as of the date
of the applicable Closing.
Section 4.9 Investment Company Matters. Buyer is not, and after giving
effect to the purchase of Company Common Stock contemplated hereby will not be,
an "investment company" or an entity "controlled" by an "investment company", as
such terms are defined in the Investment Company Act of 1940, as amended.
Section 4.10 Ownership of Tenants. To Buyer's knowledge and except as
set forth in Schedule 4.10-B, Buyer does not own, as of the date of the
applicable Closing, actually or constructively (determined through the
application of the constructive ownership rules of Section 318 of the Code, as
modified by Section 856(d)(5) of the Code), any stock, securities, or other
ownership interest in any of the tenants of the Company, as set forth in
Schedule 4.10-A. Capitalized terms used but not defined in this Section 4.10
shall have the meaning assigned to them in the Company Charter. The Company
shall advise Buyer within a reasonable period of time before any Closing of any
material changes to Schedule 4.10-A. The Company may update Schedule 4.10-A
from time to time, and Buyer agrees to promptly notify the Company, to its
knowledge, as to its actual and constructive ownership (determined through the
application of the constructive ownership rules of Section 318 of the Code, as
modified by Section 856(d)(5) of the Code) of any additional tenants of the
Company, as may be set forth on such updated schedule.
ARTICLE 5
COVENANTS RELATING TO CLOSINGS
Section 5.1 Taking of Necessary Action.
(a) Each party hereto agrees to use its commercially
reasonable best efforts promptly to take or cause to be taken all action and
promptly to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, the Registration Rights Agreement,
the Contingent Value Right Agreement and the Stockholders Agreement, subject to
the terms and conditions hereof and thereof, including all actions and things
necessary to cause all conditions precedent set forth in Article 7 to be
satisfied. Each party acknowledges that the Company's stockholders' meeting at
which the stockholders will vote on, among other things, the transactions
contemplated hereby is anticipated to occur on May 12, 1998.
(b) As promptly as practicable after the date hereof (it being
understood that the relevant stockholders' meeting is anticipated to occur on
May 12, 1998), the Company shall prepare and file with the SEC a preliminary
proxy statement (the "Proxy Statement") by which the Company's stockholders will
be asked to approve, among other things, the issuance of shares of Company
Common Stock contemplated hereby. The Proxy Statement as initially filed with
the SEC, as it may be amended and refiled with the SEC and as it may be mailed
to the Company's
39
stockholders, shall be in form and substance reasonably satisfactory to Buyer.
The Company shall use its reasonable efforts to respond to any comments of the
SEC, and to cause the Proxy Statement to be mailed to the Company's stockholders
at the earliest practicable time. As promptly as practicable after the date
hereof, the Company shall prepare and file any other filings required of the
Company or its Subsidiaries under the Exchange Act, the Securities Act or any
other federal, state or local laws relating to this Agreement and the
transactions contemplated hereby, and state takeover laws (the "Other Filings").
The Company and Buyer will notify each other promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff or
any other government officials for amendments or supplements to the Proxy
Statement or any Other Filing or for additional information and will supply each
other with copies of all correspondence between each of them or any of their
respective representatives, on the one hand, and the SEC or its staff or any
other government officials, on the other hand, with respect to the Proxy
Statement or any Other Filing. The Proxy Statement and any Other Filing shall
comply in all material respects with all applicable requirements of law. Buyer
shall provide the Company all information about Buyer required to be included or
incorporated by reference in the Proxy Statement or any Other Filing and shall
otherwise cooperate with the Company in taking the actions described in this
paragraph. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Proxy Statement or any Other Filing, the Company
or Buyer, as the case may be, shall promptly inform the other party of such
occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to stockholders of the Company, such
amendment or supplement. Subject to the provisions of Section 5.4, the Proxy
Statement shall include the recommendation of the Board that the stockholders of
the Company vote in favor of and approve the issuance of Company Common Stock
pursuant to this Agreement.
(c) The Company shall call a meeting of its stockholders to be
held as promptly as practicable for the purpose of voting upon the transactions
(including the issuance of Company Common Stock) contemplated hereby; provided
that should a quorum not be obtained at such meeting of the stockholders, the
meeting of the stockholders shall be postponed or adjourned in order to permit
additional time for soliciting and obtaining additional proxies or votes.
(d) The Company shall use its commercially reasonable best
efforts to obtain the consents set forth in each of Schedules 3.4(d)-A, 3.4(d)-B
and 3.4(d)-C.
Section 5.2 Public Announcements; Confidentiality.
(a) Subject to each party's disclosure obligations imposed by
law and any stock exchange or similar rules and the confidentiality provisions
contained in Section 5.2(b), the Company and Buyer will cooperate with each
other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement, the Registration Rights
Agreement, the Contingent Value Right Agreement, the Stockholders Agreement and
any of the transactions contemplated hereby or thereby. If a party is required
by law or any stock exchange or similar rule to issue a news release or other
public announcement, it shall advise the other party in advance thereof and use
reasonable best efforts to cause a mutually agreeable release or announcement to
be issued.
40
(b) Buyer agrees that all information provided to Buyer or any
of its representatives pursuant to this Agreement shall be kept confidential,
and Buyer shall not (x) disclose such information to any persons other than the
directors, officers, employees, financial advisors, investors, lenders, legal
advisors, accountants, consultants and affiliates of Buyer who reasonably need
to have access to the confidential information and who are advised of the
confidential nature of such information or (y) use such information in a manner
which would be detrimental to the Company; provided, however, the foregoing
obligation of Buyer shall not (i) relate to any information that (1) is or
becomes generally available other than as a result of unauthorized disclosure by
Buyer or by persons to whom Buyer has made such information available, (2) is or
becomes available to Buyer on a non-confidential basis from a third party that
is not, to Buyer's knowledge, bound by any other confidentiality agreement with
the Company, or (ii) prohibit disclosure of any information if required by law,
rule, regulation, court order or other legal or governmental process.
Section 5.3 Conduct of the Business. Except for transactions
contemplated hereby, during the period from the date hereof to the sooner to
occur of (A) the date on which the Investor Nominees (as defined in the
Stockholders Agreement) first become members of the Board, and (B) if the
Stockholder Approval vote fails, the date of the stockholder meeting at which
the Stockholder Approval failed, each of the Company and each of its
Subsidiaries, except as otherwise consented to or approved by Buyer in writing
or as permitted or required hereby, (x) has conducted and will conduct the
business and has engaged and will engage in transactions only in the ordinary
course consistent with past practice, and (y) will not:
(a) acquire, whether by merger, consolidation, purchase of
stock or assets or other business combination, (i) in a single
transaction or group of related transactions, any business or assets
having an aggregate purchase price in excess of twenty-five percent
(25%) of Total Enterprise Value as measured at the beginning of the
fiscal year in which such acquisition is consummated, or (ii) during
any one fiscal year, businesses or assets having an aggregate purchase
price in excess of fifty percent (50%) of Total Enterprise Value as
measured at the beginning of such fiscal year;
(b) sell or dispose of any assets, whether by merger,
consolidation, sale of stock or assets or other business combination,
during any one fiscal year, having an aggregate value in excess of
twenty-five percent (25%) of Total Enterprise Value as measured at the
beginning of such fiscal year;
(c) directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to, any indebtedness if, after
giving pro forma effect to such indebtedness, the Company's ratio of
(i) total indebtedness to (ii) Total Enterprise Value, expressed as a
percentage, would be greater than 65%;
(d) make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property
or assets from, or enter into or make or
41
amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any of its Affiliates;
(e) issue Company Stock or options, rights or warrants or
other commitments to purchase or securities convertible into (or
exchangeable or redeemable for) shares of Company Stock, including,
without limitation, OP Units (such options, rights, warrants, other
commitments or securities, "Company Stock Equivalents"); provided,
however, Buyer's consent shall not be required for any issuance of
Company Stock or Company Stock Equivalents as long as the sum of (i)
all shares of Company Stock issued by the Company during the applicable
fiscal year and (ii) shares of Company Stock into which Company Stock
Equivalents issued by the Company and each of its Subsidiaries during
the applicable fiscal year are convertible, does not exceed fifty
percent (50%) of all shares of Company Stock outstanding, on a Fully
Diluted basis, on the first day of such fiscal year; provided, further,
that in connection with any issuance by the Company of Company Stock or
issuance by the Company or any of its Subsidiaries of any Company Stock
Equivalents, Investor shall be entitled, to the extent so provided in
Section 4.1 of the Stockholders Agreement, to a participation right on
the terms set forth in Section 4.1 of the Stockholders Agreement.
Notwithstanding the first sentence of this Section 5.3(e), (i) Company
Stock issued to the Company or a wholly owned Subsidiary thereof and
(ii) Company Stock and Company Stock Equivalents issued to directors or
employees of the Company or a Subsidiary of the Company in connection
with any employee benefit plan approved by the shareholders of the
Company, shall not be subject to Buyer's consent;
(f) change or amend any provision of the Company Charter or
the by-laws of the Company in a manner that would be materially adverse
to Investor;
(g) pursuant to or within the meaning of any bankruptcy law:
(i) commence a voluntary case, (ii) consent to the entry of an order
for relief against it in an involuntary case, (iii) consent to the
appointment of a custodian of it or for all or substantially all of its
property, (iv) make a general assignment for the benefit of its
creditors;
(h) in the case of the Company, (1) terminate its eligibility
for treatment as a real estate investment trust, as defined in the
Code, or (2) take any action or fail to take any action which would
reasonably be expected to, alone or in conjunction with any other
factors, result in the loss of such eligibility, unless in the case of
a failure to take action, such action is initiated within thirty days
and such action is completed within the period required under the Code
in order to maintain such eligibility; or
(i) subject to the right of the Company to terminate this
Agreement pursuant to Section 9.1(b)(iii) hereof, allow the
consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as
defined above), other than Buyer, becomes the "beneficial owner" (as
such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of stock having more than 15% of the
voting power of the Company.
42
Section 5.4 No Solicitation of Transactions. Unless and until this
Agreement is terminated in accordance with its terms, neither the Company nor
its Subsidiaries shall, directly or indirectly, through any officer, director,
agent or otherwise, initiate, solicit or knowingly encourage (including by way
of furnishing non-public information or assistance), or take any other action to
facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Competing
Transaction, or enter into or maintain or continue discussions or negotiate with
any person or entity in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize or
knowingly permit any of the officers, directors or employees of such party or
any of its Subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative retained by such party or any of such party's
Subsidiaries to take any such action, and the Company shall notify Buyer orally
(within one Business Day) and in writing (as promptly as practicable) of all of
the relevant details relating to all inquiries and proposals which any officer
or director of the Company may receive relating to any of such matters and if
such inquiry or proposal is in writing, the Company shall deliver to Buyer a
copy of such inquiry or proposal; provided, however, that nothing contained in
this Section shall prohibit the Board from complying with Rule 14e-2 promulgated
under the Exchange Act with regard to a tender or exchange offer or prohibit the
Board from taking such other actions as may be required to comply with its
fiduciary obligations. If the Board determines with the advice of counsel that
failure to do so could be held to violate its fiduciary duties, it may provide
information in response to an unsolicited proposal. If the Company receives a
bona fide proposal for a Competing Transaction that the Board determines in good
faith (based on the advice of a nationally recognized financial advisor) may
provide greater value to the Company and its stockholders than this Agreement,
it may enter into negotiations with respect to such proposal. The Company will
notify Buyer of any such superior proposal not less than two Business Days prior
to entering into any definitive agreement with respect to a Competing
Transaction; provided, however, that in no event shall the Company enter into a
definitive agreement with respect to a Competing Transaction less than five
Business Days after the Company's initial notification to Buyer of an inquiry or
proposal relating to a Competing Transaction. Within the two-Business-Day or
five-Business-Day period referred to above, Buyer may propose an improved
transaction.
Section 5.5 Information and Access. From the date hereof until the date
on which the Remaining Equity Ownership of Buyer shall be less than
$10,000,000.00, (i) the Company and its Subsidiaries shall afford to Buyer and
Buyer's accountants, counsel and other representatives full and reasonable
access during normal business hours (and at such other times as the parties may
mutually agree) to its properties, books, contracts, commitments, records and
personnel and, during such period, shall furnish promptly to Buyer (1) a copy of
each report, schedule and other document filed or received by it pursuant to the
requirements of the Securities Laws, and (2) all other information concerning
their businesses, personnel and the Company Properties as Buyer may reasonably
request, and (ii) without limiting the generality of the foregoing, Buyer shall
have the right to (1) conduct or cause to be conducted an environmental,
physical, structural, electrical, mechanical and other inspection and review of
any Company Properties, for which inspection Buyer will and hereby does
indemnify and hold the Company harmless from any and all damages whatsoever
caused by such inspection, or (2) request that the Company update any existing
reports, reviews or inspections thereof, in which case the Company shall
promptly so update its reports, reviews and inspections and
43
cause them to be certified to Buyer by the firm or person who prepared such
report or conducted such review or inspection. Buyer shall pay the expenses of
any outside professional employed by Buyer in connection with Buyer's exercise
of its rights under this Section 5.5. Buyer and its accountants, counsel and
other representatives shall, in the exercise of the rights described in this
Section, not unduly interfere with the operation of the businesses of the
Company or its Subsidiaries.
Section 5.6 Notification of Certain Matters. Each of Buyer and the
Company shall use its good faith efforts to notify the other party in writing of
its discovery of any matter that would render any of such party's or the other
party's representations and warranties contained herein untrue or incorrect in
any material respect, but the failure of either party to so notify the other
party shall not be deemed a breach of this Agreement.
Section 5.7 Delivery of Final Schedules and the Purchase Agreements.
The Company and Buyer acknowledge that, as of the date hereof, not all of the
Schedules referred to in this Agreement have been completed and that the final
▇▇▇▇ Purchase Agreement and the final Konover Purchase Agreement have not been
delivered to Buyer. The Company shall deliver to Buyer within ten Business Days
of the date hereof final Schedules to this Agreement (the "Final Schedules") and
the final ▇▇▇▇ Purchase Agreement and the final Konover Purchase Agreement (to
be attached hereto as Exhibits E and F). Following the delivery of the Final
Schedules, if Buyer does not exercise its right to terminate this Agreement
pursuant to 9.1(b)(iv), Buyer shall be deemed to have accepted the Final
Schedules. The Company will provide updates to the Schedules within five (5)
Business Days prior to each Closing to reflect new acquisitions or other
material matters (other than the acquisition of the ▇▇▇▇ and ▇▇▇▇▇▇▇ Properties,
which is governed by Section 5.8 below) arising since completion of the Final
Schedules (the "Updated Schedules"). Except as provided in Section 9.1(b)(vi)
with respect to the ▇▇▇▇ and Konover Properties, information relating to new
acquisitions approved by the Board and set forth on Updated Schedules shall not
constitute a failure of a condition to closing as set forth in Article 7, except
to the extent that such new information would result in a Material Adverse
Effect on the Company. Following delivery of any Updated Schedules, if Buyer
does not elect to terminate this Agreement pursuant to 9.1(b)(v) and consummates
the applicable Closing, Buyer shall be deemed to have accepted such Updated
Schedules (and shall not be permitted to seek indemnification for
representations and warranties that were true and correct when made but are
rendered untrue as a result of new information set forth in such Updated
Schedules relating to events occurring since the date Buyer was deemed to have
accepted the Final Schedules).
Section 5.8 Delivery of Konover and ▇▇▇▇ Schedules. For purposes of
this Agreement, all properties acquired under the ▇▇▇▇ Purchase Agreement as of
the date hereof have been included in the Final Schedules to the same extent and
with the same force and effect as all other properties currently owned by the
Company. With respect to the ▇▇▇▇ and ▇▇▇▇▇▇▇ Properties, the Company shall
make, on the date of the Second Closing, all representations and warranties set
forth herein with respect to the ▇▇▇▇ and Konover Properties as if the Company
owned such ▇▇▇▇ and ▇▇▇▇▇▇▇ Properties as of the date of the Second Closing,
such that the Company shall be deemed as of the Second Closing to (a) own all of
the real and personal property, (b) have assumed any contracts, other
agreements, liabilities or other obligations related to such real and personal
property and (c)
44
own any entities, if applicable, to be transferred to the Company or an
Affiliate thereof pursuant to the ▇▇▇▇ Purchase Agreement and the Konover
Purchase Agreement. Fifteen (15) Business Days prior to the date of the Second
Closing, the Company shall provide Buyer with schedules (the "▇▇▇▇ and ▇▇▇▇▇▇▇
Schedules") relating to all representations and warranties with respect to the
▇▇▇▇ and Konover Properties to be made on the date of the Second Closing
pursuant to this Section 5.8. The parties hereto agree that the Company may
elect prior to the Second Closing to not acquire up to an aggregate of three
properties (the "Kick Out Properties") pursuant to the terms of the ▇▇▇▇
Purchase Agreement and/or the Konover Purchase Agreement, as applicable, if the
Company is released from its obligations to purchase such properties under the
terms of the ▇▇▇▇ Purchase Agreement or the Konover Purchase Agreement, as
applicable, and in such case, if the Company has elected not to purchase such
properties: (i) any representations and warranties made pursuant to this Section
5.8 shall be deemed not to include any representations and warranties with
respect to the Kick Out Properties, (ii) the Company shall not have breached its
representations and warranties hereunder to the extent it does not close on the
Kick Out Properties and (iii) the failure to close on the Kick Out Properties
shall not by itself constitute a Material Adverse Effect or a failure of a
closing condition under Article 7 hereof (it being understood that if, prior to
the Second Closing, the Company elects not to acquire four or more of the ▇▇▇▇
and ▇▇▇▇▇▇▇ Properties, such failure will constitute a Material Adverse Effect
and the failure of a closing condition under Article 7 hereof, and it being
further understood that the failure of the Company to acquire the ▇▇▇▇ and
Konover Properties other than the Kick Out Properties, if any, will constitute a
Material Adverse Effect and the failure of a closing condition under Article 7
hereof as to all Subsequent Closings after the Second Closing).
ARTICLE 6
CERTAIN ADDITIONAL COVENANTS
Section 6.1 Resale. Buyer acknowledges and agrees that the Company
Common Stock that Buyer will acquire in any Stock Purchase will not be
registered under the Securities Act and may only be sold or otherwise disposed
of in one or more transactions registered under the Securities Act and, where
applicable, relevant state securities laws or as to which an exemption from the
registration requirements of the Securities Act and, where applicable, such
state securities laws is available, and Buyer agrees that the certificates
representing such Company Common Stock shall bear a legend to that effect and a
legend as to its status as restricted securities.
Section 6.2 REIT Compliance. Buyer will make available to the Company
information known to Buyer regarding the ownership of interests in Buyer as
requested by the Company and reasonably necessary for the Company to review the
accuracy of the representations set forth in Sections 4.8 and 4.10.
Section 6.3 REIT Status. From and after the date hereof and so long as
Buyer owns 10% or more of the outstanding Company Common Stock unless the
Directors on the Board nominated by the Buyer consent to doing otherwise, the
Company will elect to be taxed as a REIT in its federal income tax returns, will
comply with all applicable laws, rules and regulations of the Code relating to a
REIT, and will not take any action or fail to take any action which would
reasonably be expected
45
to, alone or in conjunction with any other factors, result in the loss of its
status as a REIT for federal income tax purposes.
Section 6.4 Ownership of Assets. From and after the date hereof and as
long as Buyer or an Affiliate thereof owns any Company Common Stock, the Company
shall not own, directly or indirectly, 20% or more of its assets, in the
aggregate, through Persons that are not Subsidiaries.
ARTICLE 7
CONDITIONS TO CLOSINGS
Section 7.1 Conditions of Purchase at Initial Closing. The obligation
of Buyer to purchase and pay for the Purchased Shares at the Initial Closing is
subject to satisfaction or waiver of each of the following conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Company contained herein shall have been
true and correct in all respects on and as of the date hereof, and shall be true
and correct in all respects on and as of the date of the Initial Closing
(including, without limitation, the Schedules hereto), with the same effect as
though such representations and warranties had been made on and as of the date
of the Initial Closing (except for representations and warranties that speak as
of a specific date or time other than the date of the Initial Closing (which
need only be true and correct in all respects as of such date or time)), other
than, in all such cases, such failures to be true and/or correct as would not in
the aggregate reasonably be expected to have a Material Adverse Effect;
provided, however, that if any of the representations and warranties is already
qualified in any respect by materiality or as to Material Adverse Effect for
purposes of this Section 7.1(a) such materiality or Material Adverse Effect
qualification will be in all respects ignored (but subject to the overall
standard as to Material Adverse Effect set forth immediately prior to this
proviso). The covenants and agreements of the Company to be performed on or
before the date of the Initial Closing in accordance with this Agreement shall
have been duly performed in all respects. The Company shall have delivered to
Buyer at the Initial Closing a certificate of an appropriate officer in form and
substance reasonably satisfactory to Buyer dated the date of the Initial Closing
to such effect.
In making any determination as to Material Adverse Effect
under this Section 7.1(a), the matters set forth in such Section shall be
aggregated and considered together.
(b) No Material Adverse Change. Since the date hereof, there
shall not have been any change, circumstance or event which has had or would
reasonably be expected to have a Material Adverse Effect.
(c) Consents. The Company shall have obtained the consents set
forth in Schedule 3.4(d)-A.
46
(d) Ownership Limit Waiver. Buyer's ownership of up to the
Initial Number of Shares shall have been exempted on a continuing basis subject
to continuing validity of the representations and warranties of the Buyer in
Article 4 hereof (disregarding the qualification in Sections 4.8 and 4.10
relating to Buyer's knowledge and assuming no exceptions are set forth in
Schedule 4.10-B) and provided such exemption does not otherwise jeopardize the
Company's tax status as a REIT, from the ownership limit provisions of Article
IV of the Company Charter and the Board shall have taken such action provided
for under Article IV of the Company Charter to grant such exemption to Buyer.
For purposes of this paragraph (d), references to Buyer, shall also be deemed to
be references to any person who would be an Investor within the meaning of the
Stockholders Agreement, provided such person has made the representations and
warranties of the Buyer in Article 4 hereof.
(e) Employment Agreements. Waivers in connection with each
Employment Agreement shall have been entered into to the extent necessary to
provide (i) that the transactions contemplated by this Agreement, the ▇▇▇▇
Purchase Agreement and the Konover Purchase Agreement (together with this
Agreement and the ▇▇▇▇ Purchase Agreement, the "Transaction Documents") will not
trigger any actual or contingent obligation under such Employment Agreement
(including any payment or other obligation, forgiveness of debt, other release
from obligation or acceleration of vesting of restricted stock, stock options or
other awards, but excluding any automatic extension of the term of any
Employment Agreement); and (ii) that the transactions contemplated by the
Transaction Documents will not be taken into account in determining whether any
subsequent transaction or event will trigger any such obligation.
(f) Restricted Stock Plan. Waivers in connection with The
Factory Stores of America, Inc. 1996 Restricted Stock Plan (the "Restricted
Stock Plan") and any award agreements thereunder shall have been entered into to
the extent necessary to provide (i) that the transactions contemplated by the
Transaction Documents will not trigger, directly or indirectly, the acceleration
of vesting of any restricted stock granted under the Restricted Stock Plan; and
(ii) that the transactions contemplated by the Transaction Documents will not be
taken into account in determining whether any subsequent transaction or event
will trigger any such acceleration of vesting.
(g) Stock Option Plan. Waivers in connection with The Factory
Stores of America, Inc. Amended and Restated 1993 Employee Stock Incentive Plan
(the "Stock Incentive Plan") and any award agreements thereunder shall have been
entered into to the extent necessary to provide (i) that the transactions
contemplated by the Transaction Documents will not result in the acceleration of
vesting of any stock options granted under the Stock Incentive Plan; and (ii)
that the transactions contemplated by the Transaction Documents will not be
taken into account in determining whether any subsequent transaction or event
will trigger any such acceleration of vesting.
(h) Title Policies. The Company shall deliver updates of all
Title Policies dated the date of the Initial Closing, in form and substance
consistent in all material respects with the representations and warranties set
forth in Section 3.11(a) of this Agreement.
47
(i) NYSE Approval. On or prior to the date of the Initial
Closing, the New York Stock Exchange shall have approved, with respect to
Buyer's ownership of up to the Initial Number of Shares at the Initial Closing,
this Agreement, the Registration Rights Agreement, the Stockholders Agreement,
the Contingent Value Right Agreement and the transactions contemplated hereby
and thereby.
Section 7.2 Conditions to Purchase at Second Closing. The obligations
of Buyer to purchase and pay for the Purchased Shares at the Second Closing are
subject to satisfaction or waiver of each of the following conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Company contained herein shall have been
true and correct in all respects on and as of the date hereof, and shall be true
and correct in all respects on and as of the date of the Second Closing
(including, without limitation, the Schedules hereto), with the same effect as
though such representations and warranties had been made on and as of the date
of the Second Closing (except for representations and warranties that speak as
of a specific date or time other than the date of the Second Closing (which need
only be true and correct in all respects as of such date or time)), other than,
in all such cases, such failures to be true and/or correct as would not in the
aggregate reasonably be expected to have a Material Adverse Effect; provided,
however, that if any of the representations and warranties is already qualified
in any respect by materiality or as to Material Adverse Effect for purposes of
this Section 7.2(a) such materiality or Material Adverse Effect qualification
will be in all respects ignored (but subject to the overall standard as to
Material Adverse Effect set forth immediately prior to this proviso). The
covenants and agreements of the Company to be performed on or before the date of
the Second Closing in accordance with this Agreement shall have been duly
performed in all respects. The Company shall have delivered to Buyer at the
Second Closing a certificate of an appropriate officer in form and substance
reasonably satisfactory to Buyer dated the date of the Second Closing to such
effect.
(b) Stockholder Approval. The issuance of Company Common Stock
pursuant to this Agreement, the election of three Investor Nominees to the Board
and the amendment of the Company Charter as set forth in Section 3.4 of the
Stockholders Agreement shall have been approved by the majority vote of the
Company's stockholders other than Buyer (the "Stockholder Approval").
(c) Consents. The Company shall have obtained the consents set
forth in Schedule 3.4(d)-B.
(d) Estoppel Certificates. The Company shall have delivered
estoppel certificates for 50% of the tenants at the properties listed on
Schedule 7.2(d), in form and substance satisfactory to Buyer.
(e) Title Policies. The Company shall deliver updates of all
Title Policies with respect to the ▇▇▇▇ and ▇▇▇▇▇▇▇ Properties.
48
(f) NYSE Approval. On or prior to the date of the Second
Closing, the New York Stock Exchange shall have approved this Agreement, the
Registration Rights Agreement, the Stockholders Agreement, the Contingent Value
Right Agreement and the transactions contemplated hereby and thereby.
(g) Opinion of Counsel. Buyer shall have received an opinion
of ▇▇▇▇▇▇ & Bird LLP, substantially in the form of Exhibit G hereto, that (i)
commencing with the Company's taxable year ending December 31, 1993, the Company
has been organized in conformity with the requirements for qualifications as a
REIT and its proposed method of operation, as described in certain
representations of the Company, will enable the Company to meet the requirements
for qualification and taxation as a REIT under the Code, and (ii) to the extent
the Company has met qualifications as a REIT, it has been a "domestically
controlled" REIT.
(h) Filing of Tax Return. The Buyer and each of its
Subsidiaries shall have filed with the appropriate taxing authority all Tax
Returns required to be filed by it for the year ended December 31, 1997.
Section 7.3 Conditions of Purchase at All Closings. The obligations of
Buyer to purchase and pay for the Purchased Shares at each Closing (including
the Initial Closing, the Second Closing and any Subsequent Closing, except where
otherwise indicated) are subject to satisfaction or waiver of each of the
following conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Company contained herein shall have been
true and correct in all respects on and as of the date hereof, and shall be true
and correct in all respects on and as of the relevant Closing Date (including,
without limitation, the Schedules hereto), with the same effect as though such
representations and warranties had been made on and as of such Closing Date
(except for representations and warranties that speak as of a specific date or
time other than such Closing Date (which need only be true and correct in all
respects as of such date or time)), other than, in all such cases, such failures
to be true and/or correct as would not in the aggregate reasonably be expected
to have a Material Adverse Effect; provided, however, that if any of the
representations and warranties is already qualified in any respect by
materiality or as to Material Adverse Effect for purposes of this Section 7.3(a)
such materiality or Material Adverse Effect qualification will be in all
respects ignored (but subject to the overall standard as to Material Adverse
Effect set forth immediately prior to this proviso). The covenants and
agreements of the Company to be performed on or before the relevant Closing Date
in accordance with this Agreement shall have been duly performed in all
respects. The Company shall have delivered to Buyer at the relevant Closing a
certificate of an appropriate officer in form and substance reasonably
satisfactory to Buyer dated the relevant Closing Date to such effect.
(b) No Material Adverse Change. Since the date of the
immediately preceding Closing, there shall not have been any change,
circumstance or event which has had or would reasonably be expected to have a
Material Adverse Effect.
49
(c) No Material Breach. The Company shall be in compliance in
all material respects with its covenants and other obligations under this
Agreement, the Stockholders Agreement, the Contingent Value Right Agreement and
the Registration Rights Agreement. The Company shall have satisfied the
conditions of (i) Section 7.1(a) at the Initial Closing, (ii) Section 7.2(a) at
the Second Closing, and (iii) Section 7.3(a) at all Closings.
(d) No Injunction. There shall not be in effect any final
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby and
there shall be no pending Actions which would reasonably be expected to have a
material adverse effect on the ability of the Company to consummate the
transactions contemplated hereby or to issue the Purchased Shares.
(e) REIT Status. The Company shall have elected to be taxed as
a REIT in its most recent federal income tax return, and shall be in compliance
with all applicable laws, rules and regulations, including the Code, necessary
to permit it to be taxed as a REIT, unless the Investor Nominees (as defined in
the Stockholders Agreement) shall have consented to changing such election. The
Company shall not have taken any action or have failed to take any action which
would reasonably be expected to, alone or in conjunction with any other factors,
result in the loss of its status as a REIT for federal income tax purposes,
unless the Investor Nominees (as defined in the Stockholders Agreement) shall
have consented to taking or omitting to take such action.
(f) Domestically Controlled REIT. To the Company's knowledge,
the Company is, and after giving effect to the relevant Closing will be, a
"domestically-controlled" REIT within the meaning of Section 897(h)(4)(B) of the
Code.
(g) Asset Test. The Board shall have determined that the
Company satisfied the "5% asset test" of Section 856(c)(5) of the Code, or such
successor provision as may be applicable, for the most recently ended calendar
quarter as required by the Code.
(h) Consents. On each Closing other than the Initial Closing
and the Second Closing, the Company shall have obtained the consents, if
required, set forth in Schedule 3.4(d)-C.
(i) Opinion of Counsel. On or prior to the date of each
Closing, the Company shall have delivered to Buyer the opinions of ▇▇▇▇▇▇ & Bird
LLP, counsel for the Company, in form and substance reasonably acceptable to
Buyer.
Section 7.4 Conditions of Sale. The obligation of the Company to issue
and sell any Purchased Shares at any Closing (including the Initial Closing, the
Second Closing and each Subsequent Closing, except where otherwise indicated
below) is subject to satisfaction or waiver of each of the following conditions
precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of Buyer contained herein shall have been true
and correct in all respects on and as of the date hereof, and shall be true and
correct in all respects on and as of the relevant Closing Date with
50
the same effect as though such representations and warranties had been made on
and as of the relevant Closing Date (except for representations and warranties
that speak as of a specific date or time other than such Closing Date (which
need only be true and correct in all respects as of such date or time)), other
than, in all such cases, such failures to be true and/or correct as would not in
the aggregate reasonably be expected to have a Material Adverse Effect on the
Company or Buyer's ability to consummate the transactions contemplated hereby;
provided, however, that if any of the representations and warranties is already
qualified in any respect by materiality or as to Material Adverse Effect for
purposes of this Section 7.4(a) such materiality or Material Adverse Effect
qualification will be in all respects ignored (but subject to the overall
standard as to Material Adverse Effect set forth immediately prior to this
proviso). The covenants and agreements of Buyer to be performed on or before the
relevant Closing Date in accordance with this Agreement shall have been duly
performed in all respects, other than (except for Buyer's obligation to pay the
relevant Purchase Price at the relevant Closing as to which the proviso set
forth in this other-than clause shall not apply) for such failures to have been
performed as would not in the aggregate reasonably be expected to have a
Material Adverse Effect on the Company's or Buyer's ability to consummate the
transactions contemplated hereby; provided, however, that if any such covenant
or agreement is already qualified in any respect by materiality or as to
Material Adverse Effect for purposes of determining whether this condition has
been satisfied, such materiality or Material Adverse Effect qualification will
be in all respects ignored and such covenant or agreement shall have been
performed in all respects without regard to such qualification (but subject to
the overall exception as to Material Adverse Effect set forth immediately prior
to this proviso). Buyer shall have delivered to the Company at the relevant
Closing a certificate of an appropriate officer in form and substance reasonably
satisfactory to the Company dated the relevant Closing Date to such effect.
(b) Stockholder Approval. Except in the case of the Initial
Closing, the issuance of the Company Common Stock pursuant to this Agreement
shall have received Stockholder Approval.
(c) No Injunction. There shall not be in effect any final
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby and
there shall be no pending Actions which would reasonably be expected to have a
material adverse effect on the ability of Buyer to consummate the transactions
contemplated hereby or to acquire the Purchased Shares.
(d) Consents. The Company shall have obtained the consents set
forth in Schedule 3.4(d)-A in the case of the Initial Closing, in Schedule
3.4(d)-B in the case of the Second Closing, and in Schedule 3.4(d)-C in the case
of each other Subsequent Closing.
51
ARTICLE 8
SURVIVAL; INDEMNIFICATION
Section 8.1 Survival. Other than the representations contained in
Sections 4.8 and 4.10 (which shall survive for as long as the Buyer owns
Purchased Shares), the representations contained in Sections 3.2 and 3.3(a)
(which shall survive indefinitely), the representations contained in Section
3.12 (which shall survive until the sixth anniversary of the date of the Initial
Closing) and the representations contained in 3.8 and 3.13 (which shall survive
for a period equal to the applicable statute of limitations for any taxes or
penalties imposed and payable in breach of such representations and warranties),
all representations, warranties and (except as provided by the last sentence of
this Section 8.1) covenants and agreements of the parties contained herein,
including indemnity or indemnification agreements contained herein, or in any
Schedule or Exhibit hereto, or any certificate, document or other instrument
delivered in connection herewith shall survive the Initial Closing, the Second
Closing, any Subsequent Closing and the termination of this Agreement pursuant
to Section 9.1 hereof (notwithstanding the exercise of Buyer's put option
pursuant to Section 2.9 hereof) until the twelve month anniversary of the latest
of the Initial Closing, the Second Closing, any Subsequent Closing and the
termination of this Agreement pursuant to Section 9.1 hereof; provided, however,
that there shall be no termination with respect to any representation and
warranty as to which either (a) a bona fide claim has been asserted prior to
such date or (b) the Company had actual knowledge of any breach thereof prior to
any Closing Date. No Action or proceeding may be brought with respect to any of
the representations and warranties, or any of the covenants or agreements which
survive until such twelve month anniversary, unless written notice thereof,
setting forth in reasonable detail the claimed misrepresentation or breach of
warranty or breach of covenant or agreement, shall have been delivered to the
party alleged to have breached such representation or warranty or such covenant
or agreement prior to such twelve month anniversary; provided, however, that, if
Buyer shall have complied with this Section 8.1, the damages for breach by the
Company of any of the representations and warranties, or any of the covenants or
agreements which survive until such twelve month anniversary, shall be measured
with respect to all of Buyer's purchases of Company Common Stock hereunder and
not with respect only to Buyer's purchases hereunder made prior to such twelve
month anniversary, but such measurement shall not in any event include any
shares of Company Stock that Buyer may have purchased other than from the
Company. Those covenants or agreements that contemplate or may involve actions
to be taken or obligations in effect after the Initial Closing shall survive in
accordance with their terms.
Section 8.2 Indemnification by Buyer or the Company.
(a) Subject to Section 8.1, from and after any Closing Date,
Buyer shall indemnify and hold harmless the Company, its Affiliates and its
Subsidiaries and its and their respective directors, officers, employees,
stockholders, partners, members and representatives, and their respective
successors and assigns, from and against any and all damages, claims, losses,
expenses, costs, obligations, and liabilities, including liabilities for all
reasonable attorneys' fees and expenses (including attorney and expert fees and
expenses incurred to enforce the terms of this
52
Agreement) (collectively, "Loss and Expenses") suffered, directly or indirectly,
by the Company by reason of, or arising out of, (i) any breach as of the date
made or deemed made or required to be true of any representation or warranty
made by Buyer in or pursuant to this Agreement, or (ii) any failure by Buyer to
perform or fulfill any of its covenants or agreements set forth herein.
Notwithstanding any other provision of this Agreement to the contrary, in no
event shall Loss and Expenses include a party's incidental or consequential
damages.
(b) Subject to Section 8.1, from and after any Closing Date,
the Company shall indemnify and hold harmless Buyer, its Affiliates and its
Subsidiaries and its and their respective directors, officers, employees,
stockholders, partners, members and representatives, and their respective
successors and assigns (each, an "Indemnified Party"), from and against any and
all Loss and Expenses, suffered, directly or indirectly, by Buyer by reason of,
or arising out of, (i) any breach as of the date made or deemed made or required
to be true of any representation or warranty made by the Company in or pursuant
to this Agreement and any statements made in any certificate delivered pursuant
to this Agreement, or (ii) any failure by the Company to perform or fulfill any
of its covenants or agreements set forth herein. Notwithstanding any other
provision of this Agreement to the contrary, in no event shall Loss and Expenses
include a party's incidental or consequential damages. Separate and apart from
the Company's obligation to indemnify Buyer pursuant to the terms of this
Section 8.2(b), the Company shall purchase on Buyer's behalf insurance against
Environmental Liabilities in the amount of $2,000,000 annually per each
occurrence and $10,000,000 per annum (exclusive of legal defense costs) of
coverage, and shall pay any deductible applicable thereto, and shall maintain
such insurance on Buyer's behalf for a period of seven years. For purposes
hereof, "Environmental Liabilities" shall include any liability, loss cost or
expense arising under Environmental Laws or from Environmental Claims,
including, without limitation, costs of investigation, cleanup, remedial or
response action, the costs associated with posting financial assurances for the
completion of response, remedial or corrective actions, the preparation of any
closure or other necessary or required plans or analyses, or other reports or
analyses submitted to or prepared by regulating agencies, including the cost of
health assessments, epidemiological studies and the like, retention of engineers
and other expert consultants, legal counsel, capital improvements, operation and
maintenance testing counsel, capital improvements, operation and maintenance
testing and monitoring costs, power and utility costs and pumping taxes or fees,
and administrative costs incurred by governmental agencies.
(c) In the event that (i) the closing condition set forth in
Section 7.2(g)(ii) hereof is not satisfied and, notwithstanding the failure of
such closing condition, the Second Closing has occurred, (ii) Buyer has not
exercised its put option pursuant to Section 2.9 hereof and (iii) the Company
indemnifies an Indemnified Party pursuant to the terms of Section 8.2(b) hereof
in connection with the failure of the Company to qualify as a "domestically
controlled REIT" (any payments payable under clause (iii) upon occurrence of the
events set forth in clauses (i) - (iii), the "Indemnified Taxes"), the Company
will be obligated to pay to such Indemnified Party, in addition to any
Indemnified Taxes, an additional amount equal to the sum of (i) the product of
(A) the amount of the Indemnified Taxes and (B) a fraction, the numerator of
which equals the percentage of the outstanding Company Common Stock owned by
Investor as of the date such indemnification arises (expressed as a percentage)
(the "Investor Ownership Percentage") and the denominator of which
53
equals the difference between the number one (1) and the Investor Ownership
Percentage and (ii) any Taxes imposed on such Indemnified Party in connection
with the receipt of payments pursuant to this Section 8.2(c) (including any
amounts paid under this clause (ii)). For the avoidance of doubt, this in the
event the closing condition set forth in Section 7.2(g)(ii) hereof is satisfied,
this Section 8.2(c) shall not be applicable.
(d) Notwithstanding the foregoing, (i) neither Buyer nor the
Company shall be responsible for any Loss and Expenses as provided by paragraphs
(a) and (b) (except with respect to the Indemnified Taxes and any amounts
payable pursuant to Section 8.2(c) hereof, which shall not be subject to any
minimum threshold), respectively, of this Section 8.2 until the cumulative
aggregate amount of such Loss and Expenses suffered by Buyer or the Company, as
the case may be, exceeds $500,000, in which case Buyer or the Company, as the
case may be, shall then be liable for all such Loss and Expenses, and (ii) the
cumulative aggregate indemnity obligation of each of Buyer and the Company under
this Section 8.2 shall in no event exceed the actual aggregate amount paid by
Buyer for the shares of Company Common Stock and the Contingent Value Rights
purchased by it from the Company pursuant to this Agreement. Except with respect
to third-party claims being defended in good faith or claims for indemnification
with respect to which there exists a good faith dispute, the indemnifying party
shall satisfy its obligations hereunder within 30 days of receipt of a notice of
claim under this Article 8.
Section 8.3 Third-Party Claims. If a claim by a third party is made
against an Indemnified Party and if such Indemnified Party intends to seek
indemnity with respect thereto under this Article, such Indemnified Party shall
promptly notify the indemnifying party in writing of such claims setting forth
such claims in reasonable detail; provided, however, the foregoing
notwithstanding, the failure of any Indemnified Party to give any notice
required to be given hereunder shall not affect such Indemnified Party's right
to indemnification hereunder except to the extent the indemnifying party from
whom such indemnity is sought shall have been prejudiced in its ability to
defend the claim or action for which such indemnification is sought by reason of
such failure. The indemnifying party shall have 20 days after receipt of such
notice to undertake, through counsel of its own choosing and at its own expense,
the settlement or defense thereof, and the Indemnified Party shall cooperate
with it in connection therewith; provided, however, that the Indemnified Party
may participate in such settlement or defense through counsel chosen by such
Indemnified Party, provided that the fees and expenses of such counsel shall be
borne by such Indemnified Party. The Indemnified Party shall not pay or settle
any claim which the indemnifying party is contesting. Notwithstanding the
foregoing, the Indemnified Party shall have the right to pay or settle any such
claim, provided that in such event it shall waive any right to indemnity
therefor by the indemnifying party. If the indemnifying party does not notify
the Indemnified Party within 20 days after the receipt of the Indemnified
Party's notice of a claim of indemnity hereunder that it elects to undertake the
defense thereof, the Indemnified Party shall have the right to contest, settle
or compromise the claim but shall not thereby waive any right to indemnity
therefor pursuant to this Agreement.
54
ARTICLE 9
TERMINATION
Section 9.1 Termination. (a) This Agreement may be terminated prior to
the Initial Closing by:
(i) the mutual consent of the Company and Buyer at any time;
(ii) Buyer at any time (if it is not in breach of any of its
material obligations hereunder) in the event of a breach or failure by
the Company that is material in the context of the transactions
contemplated hereby of any representation, warranty, covenant or
agreement by the Company contained herein which has not been, or cannot
be, cured within 30 Business Days after written notice of such breach
is given to the Company;
(iii) the Company at any time (if it is not in breach of any
of its material obligations hereunder) in the event of a breach or
failure by Buyer that is material in the context of the transactions
contemplated hereby of any representation, warranty, covenant or
agreement by Buyer contained herein which has not been, or cannot be,
cured within 30 Business Days after written notice of such breach is
given to Buyer; or
(iv) either the Company or Buyer at any time, if the Initial
Closing shall not occur on a Target Date, unless the failure of such
occurrence shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe any material covenant or
agreement set forth herein required to be performed or observed by such
party on or before the date of the Initial Closing.
(b) This Agreement may be terminated at any time by:
(i) either the Company or Buyer, in the event that the
stockholders of the Company vote upon and fail to approve the issuance
of Company Common Stock contemplated hereby (it being understood that
the Initial Closing shall have occurred prior to the date of the
meeting of holders of shares of Company Stock to so approve);
(ii) Buyer, (1) if the Board shall have withdrawn, modified or
failed to make or refrained from making its recommendation that the
stockholders of the Company approve the issuance of Company Common
Stock pursuant to this Agreement as provided for in Section 3.2(b) and
Section 5.1(b) or (2) if the Board at any time refuses to reaffirm, at
Buyer's request, such recommendation and its determination to make such
recommendation to the stockholders of the Company, except, in each
case, as permitted by Section 5.4, or (3) if no meeting at which the
stockholders of the Company are asked to vote upon the transactions
contemplated by this Agreement shall have duly occurred on or prior to
August 31, 1998;
55
(iii) the Company, if the Board in compliance with Section 5.4
hereof determines in good faith to terminate in favor of a Competing
Transaction, subject to the Company's obligation to pay Buyer certain
fees pursuant to Section 9.3 hereof;
(iv) Buyer on or before five Business Days following the date
on which the Final Schedules, the ▇▇▇▇ Purchase Agreement (with
completed schedules) and the Konover Purchase Agreement (with completed
schedules) have been delivered by the Company to Buyer if Buyer, in its
sole discretion, believes that the Final Schedules, the ▇▇▇▇ Purchase
Agreement or the Konover Purchase Agreement disclose facts that are
material and adversely affect the Company;
(v) Buyer on or before five Business Days following the date
any Updated Schedules have been delivered by the Company to Buyer if
Buyer, in its sole discretion, believes that the Updated Schedules
disclose facts that are material and adversely affect the Company;
(vi) Buyer on or before five Business Days following the date
on which the ▇▇▇▇ and ▇▇▇▇▇▇▇ Schedules have been delivered by the
Company to Buyer, if Buyer reasonably believes that the ▇▇▇▇ and
Konover Schedules disclose facts that have a material adverse effect on
the value of the ▇▇▇▇ and ▇▇▇▇▇▇▇ Properties to the Company; or
(vii) Buyer if the Second Closing does not occur by September
30, 1998 (other than as a result of a material breach by Buyer of its
obligations under this Agreement).
Notwithstanding anything to the contrary in this Agreement, no
provision of this Agreement shall be construed to permit the Company to prevent
Buyer from purchasing the Initial Number of Shares (other than if the Company
terminates this Agreement prior to the date of the Initial Closing pursuant to
Section 9.1(a)(iii)).
Section 9.2 Procedure and Effect of Termination. In the event of
termination of this Agreement by either or both of the Company and Buyer
pursuant to Section 9.1, written notice thereof shall forthwith be given by the
terminating party to the other party hereto, and this Agreement shall thereupon
terminate and become void and have no effect, and the transactions contemplated
hereby shall be abandoned without further action by the parties hereto (other
than the right of Buyer to purchase the Initial Number of Shares as set forth in
the last paragraph of Section 9.1 of this Agreement), except that the provisions
of Sections 5.2 (Public Announcements; Confidentiality), 9.3 (Expenses), 10.2
(Governing Law), and 10.4 (Notices), and, in the event of any termination
following any Closing hereunder, the provisions of Article 8 (Survival;
Indemnification), and any related definitional, interpretive or other provisions
necessary for the logical interpretation of such provisions, shall survive the
termination of this Agreement; provided, however, that such termination shall
not relieve any party hereto of any liability for any breach of this Agreement.
56
Section 9.3 Expenses.
(a) Whether or not any Stock Purchase is consummated, all
reasonable out-of-pocket legal and other costs and expenses incurred by Buyer in
connection with this Agreement and the transactions contemplated hereby shall be
reimbursed by the Company as of the date hereof (by wire transfer of same day
funds); provided that Buyer shall not have breached any of its representations
and warranties in any material respect. In addition, the Company shall promptly
reimburse Buyer for all reasonable out-of-pocket legal and other costs and
expenses incurred after the date hereof in connection with Buyer (i) monitoring
the Company and the performance of the Purchased Shares and (ii) performing its
duties under each of the Governing Documents.
(b) At any time prior to the Initial Closing or, if the
Initial Closing has occurred, at any time prior to the Second Closing, if this
Agreement is terminated, the Company shall pay Buyer a fee in the amount of
$2,250,000 (the "Break-up Fee"); provided, that Buyer is not in material default
under this Agreement, that Buyer has not breached any of its representations and
warranties in any material respect, and that Buyer has satisfied in all material
respects its covenants relating to the Initial Closing and contemplated by the
terms hereof to be performed at or prior to the time of the Company's
stockholders' meeting. In addition, in the event the Board, prior to the
stockholders meeting referenced in Section 5.1(b) of this Agreement, is
contacted by another person regarding a Competing Transaction or has information
relating to a Competing Transaction to be proposed by another person, and the
Company enters into a Competing Transaction with such person or any Affiliate of
such person on or prior to the one year anniversary of the date this Agreement
is terminated, the Company shall pay Buyer an additional fee in the amount of
$3,000,000 (the "Topping Fee"). Notwithstanding the foregoing, in the event a
Topping Fee is paid to Buyer and the amount of cash received by Buyer pursuant
to (i) the Break-up Fee PLUS (ii) the Topping Fee PLUS (iii) the 19.9% Sale
Transaction Profit exceeds $7,750,000, Buyer shall refund to the Company the
amount of such excess within thirty days.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each party hereto and delivered to the other party. Copies of executed
counterparts transmitted by telecopy, telefax or other electronic transmission
service shall be considered original executed counterparts for purposes of this
Section, provided receipt of copies of such counterparts is confirmed.
Section 10.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO THE CHOICE OF LAW PRINCIPLES THEREOF.
57
Section 10.3 Entire Agreement. This Agreement (including agreements
incorporated herein) and the Schedules and Exhibits hereto contain the entire
agreement between the parties with respect to the subject matter hereof and
there are no agreements, understandings, representations or warranties between
the parties other than those set forth or referred to herein. This Agreement is
not intended to confer upon any person not a party hereto (and their successors
and assigns) any rights or remedies hereunder.
Section 10.4 Notices. All notices and other communications hereunder
shall be sufficiently given for all purposes hereunder if in writing and
delivered personally, sent by documented overnight delivery service or, to the
extent receipt is confirmed, telecopy, telefax or other electronic transmission
service to the appropriate address or number as set forth below. Notices to the
Company shall be addressed to:
FAC Realty Trust, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ fl.
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & Bird LLP
▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
P.O. Drawer 31107
Raleigh, North Carolina 27622-1107
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyer. Notices to Buyer shall be
addressed to:
Lazard Freres Real Estate Investors, LLC
Thirty ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
58
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Section 10.5 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors. Except as specifically provided hereby, Buyer shall not be permitted
to assign any of its rights hereunder to any third party, other than to one or
more Affiliates of LFREI, a majority of the voting power and the economic
interests of which are Beneficially Owned (as that term is defined in the
Stockholders Agreement) by LFREI, provided that such Affiliates make the
representations set forth in Article 4 hereof and agree to be bound hereby and
by the Stockholders Agreement, and provided that Buyer shall remain liable
hereunder, and provided that any bona fide financial institution to which Buyer
or any permitted transferee has Transferred (as that term is used in the
Stockholders Agreement) (including upon foreclosure of a pledge) shares of
Company Stock for the purpose of securing bona fide indebtedness of Buyer or
such permitted transferee and which has agreed to be bound by this Agreement and
the Stockholders Agreement shall also be entitled to enforce the rights of Buyer
hereunder.
Section 10.6 Headings. The Section, Article and other headings
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement. All references
to Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.
Section 10.7 Amendments and Waivers. This Agreement may not be modified
or amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Either
party hereto may, only by an instrument in writing, waive compliance by the
other party hereto with any term or provision hereof on the part of such other
party hereto to be performed or complied with. The waiver by any party hereto of
a breach of any term or provision hereof shall not be construed as a waiver of
any subsequent breach.
Section 10.8 Interpretation; Absence of Presumption.
(a) For the purposes hereof, (i) words in the singular shall
be held to include the plural and vice versa and words of one gender shall be
held to include the other gender as the context requires, (ii) the terms
"hereof", "herein", and "herewith" and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole (including
all of the Schedules and Exhibits hereto) and not to any particular provision of
this Agreement, and Article, Section, paragraph, Exhibit and Schedule references
are to the Articles, Sections, paragraphs, Exhibits and Schedules to this
Agreement unless otherwise specified, (iii) the word "including" and words of
similar import when used in this Agreement shall mean "including, without
limitation," unless the
59
context otherwise requires or unless otherwise specified, (iv) the word "or"
shall not be exclusive, and (v) provisions shall apply, when appropriate, to
successive events and transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
Section 10.9 Severability. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
Section 10.10 Further Assurances. The Company and Buyer agree that,
from time to time, whether before, at or after any Closing Date, each of them
will execute and deliver such further instruments of conveyance and transfer and
take such other action as may be necessary to carry out the purposes and intents
hereof.
Section 10.11 Specific Performance. Buyer and the Company each
acknowledge that, in view of the uniqueness of the parties hereto, the parties
hereto would not have an adequate remedy at law for money damages in the event
that this Agreement were not performed in accordance with its terms, and
therefore agree that the parties hereto shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which the
parties hereto may be entitled at law or in equity.
Section 10.12 Interpretation of Schedules. Any matter set forth on any
Schedule shall be deemed to be referred to on all other Schedules to which such
matter logically relates and where such reference would be appropriate and can
reasonably be inferred from the matters disclosed on the first Schedule as if
set forth on such other Schedules.
[signature page follows]
60
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
PROMETHEUS SOUTHEAST RETAIL LLC
By: LF Strategic Realty Investor II, L.P.,
its sole member
By: Lazard Freres Real Estate Investors, LLC,
its general partner
By: _______________________
Name: _________________________
Title: _________________________
FAC REALTY TRUST, INC.
By: ________________________
Name: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer