EXHIBIT 3
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STOCKHOLDERS AGREEMENT
by and between
PROMETHEUS SOUTHEAST RETAIL LLC
and
FAC REALTY TRUST, INC.
dated as of
February 24, 1998
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THIS STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of February
24, 1998 is made by and between Prometheus Southeast Retail LLC ("Buyer"), an
affiliate of Lazard Freres Real Estate Investors, LLC ("LFREI"), and FAC Realty
Trust, Inc., a Maryland corporation (the "Company"). Capitalized terms not
otherwise defined herein have the meaning ascribed to them in the Stock Purchase
Agreement (as hereinafter defined).
RECITALS:
WHEREAS, the Company and Buyer have entered into a Stock Purchase
Agreement, dated as of the date hereof (the "Stock Purchase Agreement"),
pursuant to which the Company has agreed to sell, and Buyer has agreed to
purchase, certain shares of common stock, par value $0.01 per share, of the
Company (the "Company Common Stock"), together with Contingent Value Rights,
upon the terms and subject to the conditions set forth therein;
WHEREAS, it is a condition to the transactions contemplated by the
Stock Purchase Agreement and the parties believe it to be in their best
interests that they enter into this Agreement and provide for certain rights and
restrictions with respect to the investment by Investor (as hereinafter defined)
in the Company and the corporate governance of the Company;
WHEREAS, the Company and Buyer believe that the combination in a
strategic partnership of the leadership, expertise and experience in retail
development and operations of the Company and the 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; and
NOW, THEREFORE, in consideration of the premises and the covenants
and agreements contained herein and for 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 "Affiliate" shall have the meaning ascribed thereto in
Rule 12b-2 promulgated under the 1934 Act, and as in effect on the date hereof.
Section 1.2 "Aggregate Purchase Price" shall mean, on any date, the
amount equal to the aggregate consideration paid by Buyer on and prior to such
date in connection with the purchase of the Purchased Shares pursuant to the
Stock Purchase Agreement.
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Section 1.3 "Agreement" shall have the meaning set forth in the
first paragraph hereof.
Section 1.4 "Approval Rights Termination Date" shall mean the first
date on which the ratio (expressed as a percentage) of (i) the sum of (A) the
remaining Investment of Investor (and any transferee or assignee of Investor or
any group of transferees or assignees) on such date and (B) the remaining
Commitment to Invest of Investor (or any transferee or assignee of Investor or
group of transferees or assignees) on such date to (ii) the sum of (A) the Fair
Market Value of all Company Stock outstanding, as measured on such date, and (B)
the Fair Market Value of all OP Units outstanding, as measured on such date, is
less than 15%.
Section 1.5 "Beneficially Own" shall mean, with respect to any
security, having direct or indirect (including through any Subsidiary or
Affiliate) "beneficial ownership" of such security, as determined pursuant to
Rule 13d-3 under the 1934 Act, including pursuant to any agreement, arrangement
or understanding, whether or not in writing; provided, however, that all of the
shares of Company Common Stock which Buyer has agreed to purchase under the
Stock Purchase Agreement but which have not yet been purchased shall be deemed
to be Beneficially Owned by Investor until the Remaining Equity Ownership is
zero.
Section 1.6 "Board" shall mean the board of directors of the
Company.
Section 1.7 "Buyer" shall have the meaning set forth in the first
paragraph hereof.
Section 1.8 "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 1.9 "Commitment to Invest" shall mean, for any person and on
any date, the product of (A) the number of shares of Company Common Stock such
person is committed to purchase from the Company under the Stock Purchase
Agreement on or after such date and (B) the Fair Market Value of the Company
Common Stock on such date.
Section 1.10 "Company" shall have the meaning set forth in the first
paragraph hereof.
Section 1.11 "Company Charter" shall have the meaning set forth in
the Stock Purchase Agreement.
Section 1.12 "Company Common Stock" shall have the meaning set forth
in the second paragraph hereof.
Section 1.13 "Company Stock" shall mean, collectively, the Company
Common Stock and other shares of capital stock of the Company.
Section 1.14 "Company Stock Equivalents" shall have the meaning set
forth in Section 3.2(e).
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Section 1.15 "Control" shall mean with respect to any person, the
power to direct the management and policies of such person, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise. "Controlled" shall have a correlative meaning.
Section 1.16 "Declaration Date" shall have the meaning set forth in
Section 3.3(b).
Section 1.17 "Director" shall mean a member of the Board.
Section 1.18 "Eligible Securities" shall have the meaning set forth
in Section 3.3.
Section 1.19 "Executive Committee" shall mean the five-member
executive committee of the Board.
Section 1.20 "Exercise Notice" shall have the meaning set forth in
Section 4.1(c).
Section 1.21 "Fair Market Value" shall mean, with respect to Company
Stock on any day, the average of the last reported sales price for such Company
Stock for 60 consecutive calendar days before such date, and, with respect to OP
Units on any day, the average of the last reported sales price for Company
Common Stock for 60 consecutive calendar days before such date. In the event the
"Fair Market Value" for such Company Stock or OP Units cannot be determined as
aforesaid, the "Fair Market Value" for such Company Stock or OP Units, as
applicable, shall be determined by the Independent Directors of the Company as
they, in good faith, consider appropriate. Such determination may be challenged
in good faith by the Investor, and any dispute shall be resolved at the
Company's cost, by an investment banking firm of recognized national standing
selected by the Company and acceptable to Investor and shall be made in good
faith and be conclusive absent manifest error.
Section 1.22 "15% IRR Amount" shall mean, on any day, an aggregate
dollar amount that allows Buyer to realize a 15% internal rate of return on the
Aggregate Purchase Price paid by Buyer as of such date, on a compounded,
annualized basis (inclusive of all cash dividends paid to Buyer with respect to
the Purchased Shares (not including any special fees, expenses or other
consideration payable to Investor, but not to all other stockholders of the
Company)).
Section 1.23 "Final Threshold Date" shall mean the first date on
which the sum of (A) the remaining Investment of Investor (and any transferee or
assignee of Investor or any group of transferees or assignees) on such date and
(B) the remaining Commitment to Invest of Investor (or any transferee or
assignee of Investor or group of transferees or assignees) on such date, is less
than $10,000,000.00.
Section 1.24 "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
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(or exchangeable 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 1.25 "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 1.26 "Group" shall mean a "group" as such term is used in
Section 13(d)(3) of the 1934 Act.
Section 1.27 "Independent Directors" shall have the meaning set
forth in Section 2.1(d).
Section 1.28 "Initial Investor Nominees" shall have the meaning set
forth in Section 2.1(a).
Section 1.29 "Investment" 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 1.30 "Investor" shall mean Buyer, and shall also include any
Affiliate of LFREI, a majority or more of the voting power and economic
interests of which is Beneficially Owned by LFREI, or, for purposes only of the
provisions of the Registration Rights Agreement, any bona fide financial
institution to which any Investor has transferred (including upon foreclosure of
a pledge) shares of Company Stock for the purpose of securing bona fide
indebtedness of any Investor and which has agreed to be bound by this Agreement.
Section 1.31 "Investor Nominees" shall have the meaning set forth in
Section 2.1(a).
Section 1.32 "Key Committees" shall have the meaning set forth in
Section 2.2(a).
Section 1.33 "1933 Act" shall mean the Securities Act of 1933, as
amended.
Section 1.34 "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
Section 1.35 "Offer Period" shall have the meaning set forth in
Section 3.3(a).
Section 1.36 "Offer Price" shall have the meaning set forth in
Section 3.3.
Section 1.37 "Offer to Purchase" shall have the meaning set forth in
Section 3.3.
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Section 1.38 "Participation Notice" shall have the meaning set forth
in Section 4.1(c).
Section 1.39 "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 1.40 "Preliminary Threshold Date" shall mean the first date
on which the sum of (A) the remaining Investment of Investor (and any transferee
or assignee of Investor or any group of transferees or assignees) on such date
and (B) the remaining Commitment to Invest of Investor (or any transferee or
assignee of Investor or group of transferees or assignees) on such date, is less
than $50,000,000.00.
Section 1.41 "Purchase Date" shall have the meaning set forth in
Section 3.3(a).
Section 1.42 "Purchased Shares" shall have the meaning set forth in
the Stock Purchase Agreement.
Section 1.43 "Registrable Securities" shall have the meaning set
forth in the Registration Rights Agreement.
Section 1.44 "Registration Rights Agreement" shall mean the
Registration Rights Agreement, dated as of the date hereof, by and between the
Company and Buyer.
Section 1.45 "Securities Filings" shall have the meaning set forth
in Section 3.1(a)(iii).
Section 1.46 "Stockholder Approval" shall have the meaning set forth
in the Stock Purchase Agreement.
Section 1.47 "Stockholder Approval Date" shall mean the date on
which a duly called and held meeting of shareholders of the Company is held at
which meeting (i) a quorum is present and (ii) Stockholder Approval is obtained.
Section 1.48 "Stock Purchase Agreement" shall have the meaning set
forth in the second paragraph hereof.
Section 1.49 "Supermajority Board Approval" shall have the meaning
set forth in Section 3.2.
Section 1.50 "Second Threshold Date" shall mean the first date on
which the sum of (A) the remaining Investment of Investor (and any transferee or
assignee of Investor or any group of transferees or assignees) on such date and
(B) the remaining Commitment to Invest of Investor (or any transferee or
assignee of Investor or group of transferees or assignees) on such date, is less
than $25,000,000.00.
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Section 1.51 "Total Enterprise Value" shall have the meaning given
to it in the Stock Purchase Agreement.
Section 1.52 "Transfer Agent" shall have the meaning set forth in
Section 3.3(c).
ARTICLE 2
Board of Directors
Section 2.1 Members of the Board
(a) From and after the Stockholder Approval Date, if any, and until
the Preliminary Threshold Date, the Company and Investor shall take all
actions necessary to cause the Board to be structured to consist of no
less than nine members, of which three members will be designees of
Investor (the "Investor Nominees"), two of which shall be chosen at the
sole discretion of Investor (the "Initial Investor Nominees") and one of
which shall be subject to the reasonable approval of the Company, and the
Company and Investor will take all actions necessary to cause such
nominees to become members of the Board as soon as practicable after the
Stockholder Approval Date. If necessary to effectuate the placement of the
Investor Nominees on the Board, the Company shall solicit the resignations
of the appropriate number of Directors to the extent necessary to permit
the Investor Nominees to serve. The Initial Investor Nominees are expected
to be Art Solomon and ▇▇▇▇▇ ▇▇▇▇▇; provided, that Investor may at any time
appoint any other person, subject to the provisions of Section 2.1(d) of
this Agreement, as an Initial Investor Nominee without the consent of the
Company. At any time before the Preliminary Threshold Date, if the total
size of the Board is increased, the number of Investor Nominees shall also
be increased such that at least one-third of the members of the Board
shall be Investor Nominees.
(b) From and after the Preliminary Threshold Date and until the
Second Threshold Date, the Company and Investor shall take all actions
necessary to cause the Board to be structured to consist of no less than
nine members, of which at least two members will be Investor Nominees, and
the Company and Investor will take all actions necessary to cause such
nominees to become, or continue to be, members of the Board as soon as
practicable after the Preliminary Threshold Date. At any time before the
Second Threshold Date, if the total size of the Board is increased, the
number of Investor Nominees shall also be increased such that at least
two-ninths of the members of the Board shall be Investor Nominees.
(c) From and after the Second Threshold Date and until the Final
Threshold Date, the Company and Investor shall take all actions necessary
to cause the Board to be structured to consist of no less than nine
members, of which at least one member will be an Investor Nominee, and the
Company and Investor will take all actions necessary to cause such
nominee(s) to become, or continue to be, member(s) of the Board as soon as
practicable after the Second Threshold Date. At any time before the Final
Threshold
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Date, if the total size of the Board is increased, the number of Investor
Nominees shall also be increased such that at least one-ninth of the
members of the Board shall be Investor Nominees.
(d) Investor will not name any person as an Investor Nominee if (i)
such person is not reasonably experienced in business, financial or real
estate matters, (ii) such person has been convicted of, or has pled nolo
contendere to, a felony, (iii) the election of such person would violate
any law, or (iv) any event required to be disclosed pursuant to Item
401(f) of Regulation S-K of the 1934 Act has occurred with respect to such
person. Investor shall use its reasonable efforts to afford the
independent directors of the Company (the "Independent Directors") a
reasonable opportunity to meet any individual that Investor is considering
naming as an Investor Nominee.
(e) The Company will support the nomination of and the election of
each Investor Nominee to the Board, and the Company will exercise all
authority under applicable law to cause each Investor Nominee to be
elected to the Board. Without limiting the generality of the foregoing,
with respect to each meeting of shareholders of the Company at which
Directors are to be elected, the Company shall use its reasonable efforts
to solicit from the shareholders of the Company eligible to vote in the
election of Directors proxies in favor of each Investor Nominee.
Section 2.2 Committee Representation; Subsidiary Boards
(a) The Company shall amend its by-laws to (i) establish the
Executive Committee, which shall be delegated the authority to the maximum
extent permitted by law to approve any matter permissible under law for
authorization by an executive committee, and (ii) provide that each of the
Executive Committee, the compensation committee, the audit committee, any
special committee(s) of the Board, and any other committees which shall be
charged with exercising substantial authority on behalf of the Board
(other than any committee charged with the approval of the transactions
contemplated by the Stock Purchase Agreement or this Agreement, or any
committee charged with evaluating any Competing Transaction) (the
foregoing, the "Key Committees") shall (A) until the Preliminary Threshold
Date, be comprised of members, at least one-third of whom are Investor
Nominees, (B) until the Second Threshold Date, be comprised of members, at
least two-ninths of whom are Investor Nominees, and (C) until the Final
Threshold Date, be comprised of members, at least one-ninth of whom are
Investor Nominees.
Notwithstanding the foregoing, if none of the Directors who are
Investor Nominees would be considered "independent" of the Company,
"disinterested," "non-employee directors" and "outside directors" (i) for
purposes of any applicable rule of the New York Stock Exchange or any
other securities exchange or other self-regulating organization (such as
the National Association of Securities Dealers) requiring that members of
the audit committee of the Board be independent of the Company, (ii) for
purposes of any law or regulation that requires, in order to obtain or
maintain favorable tax, securities, corporate law or other material legal
benefits with respect to any plan or
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arrangement for employee compensation or benefits, that the members of the
committee of the Board charged with responsibility for such plan or
arrangement be "independent" of the Company, "disinterested,"
"non-employee directors" or "outside directors," or (iii) for purposes of
any special committee formed in connection with any transaction or
potential transaction involving the Company and any of Investor, its
Affiliates or any Group of which Investor is a member or such other
transaction or potential transaction which would involve an actual or
potential conflict of interest on the part of the Directors who are
Investor Nominees, then a Director who is an Investor Nominee shall not be
required to be appointed to any such committee; provided, however, that
the committees of the Board shall be organized such that, to the extent
practicable, the only items to be considered by a Key Committee on which
no Director who is an Investor Nominee may serve will be those items which
prevent the Director who is an Investor Nominee from serving on such Key
Committee. Any members of any Key Committee who are Investor Nominees
shall, in the event of any vacancy in such membership, be replaced by a
Director who is an Investor Nominee elected by a majority of the Directors
who are Investor Nominees.
(b) Until the Final Threshold Date, at least one Director who is an
Investor Nominee shall serve as a member of the board of directors or
comparable governing body of each Subsidiary of the Company, if any, that
is a corporation or other person with a board of directors or board of
trustees.
Section 2.3 Vacancies. In the event that any Investor Nominee shall
cease to serve as a Director for any reason other than the fact that Investor no
longer has a right to nominate a Director, the vacancy resulting thereby shall
be filled by an Investor Nominee designated by Investor; provided, however, that
any Investor Nominee so designated shall satisfy the qualification requirements
set forth in Section 2.1(b).
ARTICLE 3
Covenants; Transfer Provisions
Section 3.1 Operating Statements; Public Company Status
(a) From and after the date of this Agreement until the Final
Threshold Date, if any, the Company will:
(i) deliver to Investor, as soon as practicable after the end
of each month or other reporting period, any operating and financial
statements and management reports (x) of the Company, and (y) of
each Subsidiary of the Company not consolidated with the Company,
which are regularly provided to the senior management of the
Company, each as, at and for the end of such month or other
reporting period, and such other statements or reports as are
reasonably requested by Investor, all in such form as are prepared
by the Company for internal use by management (including, as
applicable, by e-mail);
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(ii) deliver to Investor copies of all other information
distributed by the Company to the Board, any other equity investor
in the Company or any of the Company's partners in joint ventures;
(iii) deliver to Investor, as promptly as practicable
following filing, a copy of each report, schedule or other document
filed by the Company pursuant to the requirements of any federal or
state securities laws (collectively, the "Securities Filings"); and
(iv) continue to comply in all material respects with the
reporting requirements of Section 13 or 15(d) of the ▇▇▇▇ ▇▇▇.
(b) Until the Final Threshold Date, the Company and Investor will
afford one another a reasonable opportunity to review any Securities
Filing, any other filing with a Government Authority and any press release
or similar public announcement which refers to, describes or mentions such
other party or any Affiliate of such other party prior to the time that
such filing is filed with or sent to the applicable Government Authority
or such announcement is disseminated.
Section 3.2 Conduct of Actions. From and after the Stockholder
Approval Date until the Approval Rights Termination Date, if any,
notwithstanding the fact that a vote of the Board or the Executive Committee may
not be required under applicable law, the Company shall not, and shall not
permit any of its Subsidiaries without the affirmative vote of over sixty-seven
percent (67%) of all of the Directors ("Supermajority Board Approval") to:
(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
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make or 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, that Supermajority Board
Approval 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 this Agreement, to a
participation right on the terms set forth in Section 4.1 of this
Agreement. Notwithstanding the first sentence of this Section 3.2(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 Supermajority Board Approval;
(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 the Stock
Purchase Agreement pursuant to Section 9.1(b)(iii) thereof, 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),
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directly or indirectly, of stock having more than 15% of the voting power
of the Company.
Section 3.3 Offer to Purchase. At any time prior to December 31,
2003 (after completion of the purchase of all of the Purchased Shares pursuant
to the Stock Purchase Agreement), the Company may make an irrevocable offer to
purchase (the "Offer to Purchase") to all holders of shares of Company Common
Stock that are Registrable Securities (such shares, "Eligible Securities") all
(and not less than all) outstanding shares of Eligible Securities at a per share
offer price (the "Offer Price") in cash equal to (i) the greater of (A) $19.00
multiplied by the number of outstanding shares of Purchased Shares on such date
less the aggregate amount of cash dividends paid (not including any special
fees, expenses or other consideration payable to Investor, but not to all other
stockholders of the Company) on the Purchased Shares between the date of the
Initial Closing and such date and (B) the 15% IRR Amount on such date, divided
by (ii) the number of outstanding shares of Purchased Shares on such date. In
making an Offer to Purchase, the Company shall follow the procedures set forth
below:
(a) The Offer to Purchase shall remain open for a period of 20
Business Days following its commencement and no longer, except to the
extent that a longer period is required by applicable law (the "Offer
Period"). No later than five Business Days after the termination of the
Offer Period (the "Purchase Date"), the Company shall purchase all shares
of Eligible Securities tendered in response to the Offer to Purchase.
Payment for any Eligible Securities so purchased shall be made in the same
manner as dividends are paid.
(b) If the Purchase Date is on or after the date on which dividends
are declared (the "Declaration Date"), any accrued or unpaid dividends
shall be paid to the person in whose name the applicable Eligible Security
is registered at the close of business on the Declaration Date, and no
additional dividends shall be payable to holders of Eligible Securities
pursuant to the Offer to Purchase.
(c) Upon the commencement of an Offer to Purchase, the Company,
within five days of such commencement, shall send, by first class mail, a
notice to the transfer agent for Company Common Stock (the "Transfer
Agent") and each holder of Eligible Securities. The notice shall contain
all instructions and material necessary to enable such holders to tender
Eligible Securities pursuant to the Offer to Purchase. The Offer to
Purchase shall be made to all holders of Eligible Securities. The notice,
which shall govern the terms of the Offer to Purchase, shall state:
(i) that the Offer to Purchase is being made pursuant to
Section 3.3 hereof and the length of time the Offer to Purchase
shall remain open;
(ii) the Offer Price and the Purchase Date;
(iii) that any Eligible Securities not tendered shall remain
outstanding;
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(iv) that, unless the Company fails to make the applicable
payment, any Eligible Securities tendered will cease to be
outstanding;
(v) that holders of Eligible Securities electing to have any
shares purchased shall be required to surrender such shares, with a
validly executed certificate of transfer, or transfer by book-entry
transfer, to the Company or the Transfer Agent at the address
specified in the notice at least three days before the Purchase
Date; and
(vi) that holders of Eligible Securities shall be entitled to
withdraw their election if the Company or the Transfer Agent, as the
case may be, receives, not later than the expiration of the Offer
Period, a telegram, telex, facsimile transmission or letter setting
forth the name of the holder, the number of shares the holder
delivered for purchase and a statement that such holder is
withdrawing his election to have such shares purchased.
For the avoidance of doubt, neither Investor nor any of its
assignees are required to accept an Offer to Purchase. The provisions governing
an Offer to Purchase are set forth in this Agreement for the purpose of
clarifying the terms of the Contingent Value Right Agreement.
Section 3.4 Amendment of Documents. The Company shall take all
actions necessary to amend the Company Charter and the Company's by-laws in
order to give effect to Article 2 and Section 3.2 of this Agreement. Such
amendments to the Company Charter and the Company's by-laws shall be in form and
substance reasonably satisfactory to Buyer and otherwise consistent with the
terms of this Agreement.
Section 3.5 Voting. On any matter that requires a vote of the
stockholders of the Company under the Company's Charter or by-laws or under any
applicable law, Buyer shall vote any Company Common Stock acquired by it
pursuant to Section 4.1(b) hereof pro rata based on the votes of the other
stockholders of the Company.
Section 3.6 Mergers. For a period of five years following the date
of the Initial Closing, Buyer shall not take any action to cause the Company to
consolidate or merge with or into another person if, pursuant to the terms of
such consolidation or merger, the stockholders of the Company (other than Buyer)
shall receive consideration in a form, or in an amount, different from Buyer. In
addition, if on any date Buyer shall, in one or a series of related
transactions, transfer a number of shares of Company Common Stock greater than
50% of the aggregate number of shares of Company Common Stock outstanding on
such date to a person (other than an Affiliate of Buyer) and such person's
Affiliates, such person shall be subject to the limitations set forth in this
Section 3.6 as if such person were a party to this Agreement.
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ARTICLE 4
Participation Rights
Section 4.1 (a) Right to Participate. From and after the date hereof
until the Preliminary Threshold Date, if any, Investor shall be entitled to a
participation right to purchase or subscribe for up to that number of additional
shares of capital stock (including as "capital stock" for purposes of this
Section, any security, option, warrant, call, commitment, subscription, right to
purchase or other agreement of any character that is convertible into or
exchangeable or redeemable for shares of capital stock of the Company or any of
its Subsidiaries, including, without limitation, OP Units (and all references in
this Section to capital stock shall, as appropriate, be deemed to be references
to any such securities), and also including additional shares of capital stock
to be issued pursuant to the conversion, exchange or redemption of any security,
option, warrant, call, commitment, subscription, right to purchase or other
agreement of any character that is convertible into or exchangeable or
redeemable for shares of capital stock, including, without limitation, OP Units,
as if the price at which such additional shares of capital stock is issued
pursuant to any such conversion, exchange or redemption were the market price on
the date of such issuance) to be issued or sold by the Company which represents
the same proportion of the total number of shares of capital stock to be issued
or sold by the Company (including the shares of capital stock to be issued to
Investor upon exercise of its participation rights hereunder; it being
understood and agreed that the Company will accordingly be required to either
increase the number of shares of capital stock to be issued or sold so that
Investor may purchase additional shares to maintain its proportionate interest,
or to reduce the number of shares of capital stock to be issued or sold to
Persons other than Investor) as is represented by the number of shares of
Company Stock and OP Units owned by Investor prior to such sale or issuance (and
including for this purpose any shares of Company Common Stock to be acquired
pursuant to the Stock Purchase Agreement, but not yet issued) relative to the
number of shares of Company Stock and OP Units outstanding prior to such sale or
issuance (and including for this purpose any shares of Company Common Stock to
be acquired pursuant to the Stock Purchase Agreement, but not yet issued);
provided, however, that the provisions of this Section shall not apply to the
issuance or sale by the Company of any of its capital stock issued to the
Company or any of its Subsidiaries or pursuant to options, rights or warrants or
other commitments or securities in effect or outstanding on the date of the
Stock Purchase Agreement (including, without limitation, any options issued or
to be issued pursuant to the Employment Agreements).
(b) Issuance of OP Units. Upon exercise of its participation rights
under this Section 4.1 by Buyer in connection with the issuance by the Company
of OP Units, Buyer shall have the right to purchase, and, upon such exercise,
the Company will be required to issue to Buyer, the number of shares of Company
Common Stock equal to the number of OP Units Buyer is entitled to purchase under
Section 4.1(a) hereof. Such shares of Company Common Stock shall be issued by
the Company in lieu of such number of OP Units Buyer would otherwise be entitled
to purchase under Section 4.1(a) hereof.
(c) Notice. In the event the Company proposes to issue or sell any
shares of capital stock in a transaction giving rise to the participation rights
provided for in this Section,
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the Company shall send a written notice (the "Participation Notice") to Investor
setting forth the number of shares of such capital stock of the Company that the
Company proposes to sell or issue, the price (before any commission or discount)
at which such shares are proposed to be issued (or, in the case of an
underwritten or privately placed offering in which the price is not known at the
time the Participation Notice is given, the method of determining such price and
an estimate thereof), and all other relevant information as to such proposed
transaction as may be necessary for Investor to determine whether or not to
exercise the rights granted in this Section. At any time within 20 days after
its receipt of the Participation Notice, Investor may exercise its participation
rights to purchase or subscribe for shares of such shares of capital stock, as
provided for in this Section, by so informing the Company in writing (an
"Exercise Notice"). Each Exercise Notice shall state the percentage of the
proposed sale or issuance that the Investor elects to purchase. Each Exercise
Notice shall be irrevocable, subject to the conditions to the closing of the
transaction giving rise to the participation right provided for in this Section.
(d) Abandonment of Sale or Issuance. The Company shall have the
right, in its sole discretion, at all times prior to consummation of any
proposed sale or issuance giving rise to the participation right granted by this
Section, to abandon, rescind, annul, withdraw or otherwise terminate such sale
or issuance, whereupon all participation rights in respect of such proposed sale
or issuance pursuant to this Section shall become null and void, and the Company
shall have no liability or obligation to Investor or any Affiliate thereof who
has acquired shares of Company Stock pursuant to the Stock Purchase Agreement or
from Investor with respect thereto by virtue of such abandonment, rescission,
annulment, withdrawal or termination.
(e) Terms of Sale. The purchase or subscription by Investor or an
Affiliate thereof, as the case may be, pursuant to this Section shall be on the
same price and other terms and conditions, including the date of sale or
issuance, as are applicable to the purchasers or subscribers of the additional
shares of capital stock of the Company whose purchases or subscriptions give
rise to the participation rights (except that the price to Investor to make such
purchase or subscription shall be net of an amount equal to fifty percent (50%)
of any underwriting, placement agent or similar fee associated with such
purchase or subscription paid or to be paid in connection with such purchase or
subscription), which price and other terms and conditions shall be substantially
as stated in the relevant Participation Notice (which standard shall be
satisfied if the price, in the case of a negotiated transaction, is not greater
than 110% of the estimated price set forth in the relevant Participation Notice
or, in the case of an underwritten or privately placed offering, is not greater
than the greater of (i) 110% of the estimated price set forth in the relevant
Participation Notice, and (ii) the most recent closing price on or prior to the
date of the pricing of the offering); provided, however, that in the event the
purchases or subscriptions giving rise to the participation rights are effected
by an offering of securities registered under the 1933 Act and in which offering
it is not legally permissible for the securities to be purchased by Investor to
be included, such securities to be purchased by Investor will be purchased in a
concurrent private placement.
(f) Timing of Sale. If, with respect to any Participation Notice,
Investor fails to deliver an Exercise Notice within the requisite time period,
the Company shall have 120 days after the expiration of the time in which the
Exercise Notice is required to be delivered in which
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to sell not more than 110% of the number of shares of capital stock of the
Company described in the Participation Notice (plus, in the event such shares
are to be sold in an underwritten public offering, an additional number of
shares of capital stock of the Company, not in excess of 15% of 110% of the
number of shares of capital stock of the Company described in the Participation
Notice, in respect of any underwriters overallotment option) and not less than
90% of the number of shares of capital stock of the Company described in the
Participation Notice at a price of not less than 90% of the estimated price set
forth in the Participation Notice. If, at the end of 120 days following the
expiration of the time in which the Exercise Notice is required to be delivered,
the Company has not completed the sale or issuance of capital stock of the
Company in accordance with the terms described in the Participation Notice (or
at a price which is at least 90% of the estimated price set forth in the
Participation Notice), or in the event of any contemplated sale or issuance
within such 120-day period but outside such price parameters, the Company shall
again be obligated to comply with the provisions of this Section with respect
to, and provide the opportunity to participate in, any proposed sale or issuance
of shares of capital stock of the Company; provided, however, that
notwithstanding the foregoing, if the price at which such capital stock is to be
sold in an underwritten offering (or a privately placed offering in which the
price is not less than 97% of the most recent closing price at the time of the
pricing of the offering) is not at least 90% of the estimated price set forth in
the Participation Notice, the Company may inform Investor of such fact and
Investor shall be entitled to elect, by written notice delivered within five
Business Days following such notice from the Company, to participate in such
offering in accordance with the provisions of this Section.
ARTICLE 5
Miscellaneous
Section 5.1 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 of the parties 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 5.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
MARYLAND WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES
THEREOF.
Section 5.3 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.
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Section 5.4 Expenses. All legal and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid as set forth in the Stock Purchase Agreement. Without
limiting the foregoing, the Company shall pay all costs and expenses incurred in
connection with the solicitation of votes of shareholders of the Company to
approve the transactions contemplated by the Stock Purchase Agreement.
Section 5.5 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 Investor. Notices to Buyer or
Investor shall be addressed to:
Lazard Freres Real Estate Investors, LLC
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
17
Section 5.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors. Neither party shall be permitted to assign any of its rights
hereunder to any third party without the prior written consent of the other
party, except that any Investor may, without such consent, assign its rights
hereunder, in whole or in part, to the same extent as Buyer is permitted to
assign its rights under the Stock Purchase Agreement, provided that such person
agrees to be bound by this Agreement.
Section 5.7 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 5.8 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. Any party hereto may, only by an instrument in writing, waive compliance
by another 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 5.9 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,
Schedule and Exhibit references are to the Articles, Sections, paragraphs,
Schedules and Exhibits 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 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 5.10 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 5.11 Further Assurances. The Company and Investor agree
that, from time to time, each of them will, and will cause their respective
Affiliates to, execute and deliver
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such further instruments and take such other action as may be necessary to carry
out the purposes and intents hereof.
Section 5.12 Specific Performance. The Company and Investor each
acknowledge that, in view of the uniqueness of arrangements contemplated by this
Agreement, 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 5.13 Investor Breach. In the event Investor shall have
breached (i) its obligation to effect a purchase of Company Common Stock
pursuant to the Stock Purchase Agreement which breach is neither cured nor
desisted from within 30 days of receipt of written notice of such breach, or
(ii) any of its obligations under this Agreement which breach is neither cured
nor desisted from within 30 days of receipt of written notice of such breach and
which would reasonably be expected to materially adversely affect the Company,
the Company shall no longer be required to perform any of its obligations
hereunder.
Section 5.14 Confidentiality. Buyer and Investor agree that all
information provided to any of them or any of their representatives pursuant to
this Agreement shall be kept confidential, and such parties shall not (x)
disclose such information to any persons other than the directors, officers,
employees, financial advisors, legal advisors, accountants, consultants and
affiliates of such parties 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 such parties
shall not (a) relate to any information that (i) is or becomes generally
available other than as a result of unauthorized disclosure by such parties or
by persons to whom such parties have made such information available, (ii) is or
becomes available to such parties on a non-confidential basis from a third party
that is not, to such parties' knowledge, bound by any other confidentiality
agreement with the Company, or (b) prohibit disclosure of any information if
required by law, rule, regulation, court order or other legal or governmental
process.
Section 5.15 Public Releases and Announcements. The Company agrees
that until a Termination Event, it shall endeavor to provide to Investor advance
copies of, or, in the case of oral announcements, advance notice of, any public
release or announcement concerning the Company to be issued, released or made by
the Company or any of its Affiliates, in each case, if possible, at least one
Business Day prior to such release or announcement.
Section 5.16 Termination. In the event the Stockholder Approval Date
does not occur prior to August 31, 1998, this Agreement shall terminate.
[Signature Page Follows]
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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: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Principal
FAC REALTY TRUST, INC.
By: /s/ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer, President