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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.
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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.
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.
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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).
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.
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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 (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.
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Section 1.37 "Offer to Purchase" shall have the meaning set
forth in Section 3.3.
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
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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.
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
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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 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
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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 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
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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);
(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;
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(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 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
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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), 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:
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(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;
(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
13
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.
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
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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, 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
15
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 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.
16
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.
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:
17
Lazard Freres Real Estate Investors, LLC
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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
18
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 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
19
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]
20
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