1
Exhibit 3
AGREEMENT
THIS AGREEMENT (as amended or otherwise modified from time to time
pursuant to the terms hereof, the "Agreement"), dated October 1, 1997, is among
California Housing Finance L.P., a Delaware limited partnership, (the
"Purchaser"), Capital Pacific Holdings, Inc., a Delaware corporation (the
"Company"), Capital Pacific Holdings L.L.C., a Delaware limited liability
company (the "New L.L.C."), and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, a natural person ("the
Indirect Stockholder").
WHEREAS, CPH2, L.L.C. and CPH3, L.L.C., each a Delaware limited
liability company (collectively, the "Stockholders"), and the Purchaser have
entered into a Stock Purchase Agreement dated as of September 29, 1997 (the
"Stock Purchase Agreement"), pursuant to which the Stockholders shall sell, and
the Purchaser shall buy, 2,484,340 shares (the "Shares") of Common Stock, $.10
par value, of the Company (the "Common Stock") for $10,000,000 (the "Purchase
Price") and the Purchasers, the Stockholders and Nationsbank, N.A. as escrow
agent have entered into an Escrow Agreement dated as of September 29, 1997 (the
"Escrow Agreement") pursuant to which the Stock and the Purchase Price are
escrowed pending the consummation of the transactions contemplated by this
Agreement;
WHEREAS, the Indirect Stockholder owns a majority of the membership
interests in CPH2, L.L.C. and CPH3, L.L.C.;
WHEREAS, simultaneously with the execution of this Agreement, the
Company, the Subsidiaries and the Purchaser have entered into an Investment and
Stockholder Agreement (the "Investment Agreement"), pursuant to which the
Company and the Subsidiaries shall transfer substantially all of their
respective assets to the New L.L.C. and the Purchaser shall contribute
$30,000,000 to the capital of the New L.L.C. and execute a counterpart of the
Amended and Restated Limited Liability Company Agreement of the New L.L.C. in
return for a 32.07% membership interest in the New L.L.C. and other rights.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements set forth herein, the
parties agree as follows:
SECTION 1. RESTRICTIVE COVENANTS.
(a) The Indirect Stockholder hereby agrees that he will from and
after the Closing Date during the Restrictions Period (as defined in the
Investment Agreement):
(i) not directly or indirectly (whether through an
affiliate or otherwise) conduct or invest in tract
homebuilding or production homebuilding activity
(provided any land development activity (x)
undertaken by the Indirect Stockholder at a time when
he is not the beneficial owner of more than ten
percent (10%) of
2
the common equity of the Company or (y) which the
Company is unable to undertake or which the Company
and the Purchaser shall have declined to undertake
shall not be restricted hereby even if the ultimate
purpose is homebuilding) within a 100 mile radius of
any current or future project of the Company, the New
L.L.C. or any Future Affiliate or Mirror Company or
of any real property which is the subject of any
purchase agreement or option agreement to which any
such entity is a party, provided however, that in the
event any land development activity by the Indirect
Stockholder was commenced prior to the acquisition of
any such project or the entering into of such
purchase agreement or option contract by the Company,
the New L.L.C. or any Mirror Company or Future
Affiliate, the continuation of such activity of the
Indirect Stockholder shall not be in breach of this
Agreement;
(ii) not directly or indirectly hire or solicit the hiring
of any current or future employee (other than any
person related by blood or marriage to the Indirect
Stockholder) of the Company, the Subsidiaries, the
new L.L.C. or any Future Affiliate or Mirror Company;
and
(b) The Indirect Stockholder acknowledges that the breach of this
Section 1 shall cause irreparable harm to the Purchaser, which harm cannot be
reasonably, adequately or fully redressed by the payment of damages.
Accordingly, the Purchaser shall be entitled, in addition to any other right it
may have in law or in equity, to an injunction enjoining the Indirect
Stockholder from any breach or threatened breach of this Agreement. The
Indirect Stockholder hereby waives the defense in any equitable proceeding that
there is an adequate remedy at law for any such breach.
SECTION 2. REPRESENTATIONS. The Indirect Stockholder hereby represents
and warrants to the Purchaser as of the date hereof and as of the Closing Date
that:
SECTION 2.01 Legal Capacity. He has full power, legal capacity and
authority to execute, deliver and perform this Agreement and this Agreement (i)
has been duly executed and delivered, (ii) is legal, valid and binding and
enforceable against the Indirect Stockholder, and (iii) is not in contravention
of any law, order or agreement by which the Indirect Stockholder is bound.
SECTION 2.02 Organization, Qualifications and Corporate Power. Each
of CPH2, LLC and CPH3, LLC is a limited liability company, duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly licensed or qualified to transact business as a foreign company and
is in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification, except where the failure to be so
licensed or qualified and in good standing would not, individually or in the
aggregate, have a material adverse effect on the business, financial condition,
results of operations, prospects, properties, assets or affairs of CPH2, LLC or
CPH3, LLC, respectively, or the ability of CPH2, LLC or CPH3, LLC, to perform
and comply in all material respects with all of its respective covenants and
agreements
-2-
3
contained in the Stock Purchase Agreement (a "Material Adverse Effect"). Each
of the Stockholders has full power and authority (i) to own and hold its
properties and to carry on its business as now conducted, and (ii) to execute,
deliver and perform its obligations under the Stock Purchase Agreement.
SECTION 2.03 Common Stock Ownership. The Stockholders are the
beneficial and record owner of the Shares in the respective amounts set forth
on Schedule A to the Stock Purchase Agreement, free and clear of any lien,
claim, encumbrance or security interest of any kind (each a "Lien"), and at the
Closing under the Stock Purchase Agreement will transfer to the Purchaser good
and marketable title to such Shares, free and clear of any Lien.
SECTION 2.04 Authorization of Agreement, Etc. The execution and
delivery by the Stockholders and the performance by the Stockholders of their
respective obligations under the Stock Purchase Agreement, and the sale and
delivery of the Shares by the Stockholders, have been duly authorized by the
relevant proceedings of each Stockholder and will not (i) violate any provision
of law or regulatory agency (including any stock exchange rules or
requirements), or any order of any court or other agency of government, (ii)
conflict with or result in a breach of any provision of the limited liability
company agreement of either Stockholder, (iii) conflict with, result in a
violation or breach of or constitute (with due notice or lapse of time or both)
a default under, any note, bond, mortgage, indenture, deed of trust, license,
lease, joint venture agreement, collaborative arrangement or relationship or
other contract, commitment or agreement or other instrument or obligation to
which either Stockholder or any of its properties or assets may be bound or
(iv) result in the creation or imposition of any lien, claim, encumbrance or
security interest of any kind upon any of the properties or assets of either
Stockholder.
SECTION 2.05 Validity. The Stock Purchase Agreement has been duly
executed and delivered by the Stockholders and constitutes the legal, valid and
binding obligations of the Stockholders, enforceable against the Stockholders
in accordance with its terms, except as the enforceability hereof may be
limited (i) by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and (ii) by general
equitable principles regardless of whether considered in a proceeding in equity
or at law.
SECTION 2.06 Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchaser set forth in Section 3.04 of
the Stock Purchase Agreement, no registration or filing with, or consent or
approval of or other action by, any Federal, state or other governmental agency
or instrumentality or regulatory body is or will be necessary for the valid
execution, delivery and performance by the Stockholders of the Stock Purchase
Agreement, or the delivery, sale and transfer of the Shares to the Purchaser
thereunder other than any filings necessary pursuant to Sections 13 and 16 of
the Securities Exchange Act of 1934 and the associated regulations.
SECTION 2.07 Capitalization.
-3-
4
(a) The authorized capital stock of the Company consists of (1)
30,000,000 shares of Common Stock, and (2) 5,000,000 shares of Preferred Stock.
As of the date of this Agreement, 14,995,000 shares of Common Stock and no
shares of Preferred Stock (together with the Common Stock, the "Company Stock")
are outstanding. All of the Shares have been duly authorized, validly issued
and are fully paid and nonassessable. Except for the Company Stock, there are
no shares of capital stock or other equity securities of the Company
outstanding.
(b) Except for the warrants to purchase 790,000 shares of Common
Stock and as contemplated by the Related Agreements, (i) there are no
preemptive or similar rights on the part of any holder of any class of
securities of the Company, and (ii) no options, warrants, conversion or other
rights, agreements or commitments of any kind are outstanding that obligate the
Company, contingently or otherwise, to issue, sell, purchase, return or redeem
any shares of its capital stock of any class or any securities convertible into
or exchangeable for any such shares, and no authorization therefor has been
given. No shares of capital stock of the Company are held in the Company's
treasury and except in respect of the warrants described above no shares of
capital stock of the Company are reserved for issuance. There are no voting
trusts, stockholder agreements, proxies or other agreements or understandings
in effect with respect to the voting or transfer of any of the Shares.
(c) Notwithstanding anything to the contrary set forth herein, the
sole remedy for any breach of the representations and warranties set forth in
subparagraph (b) above shall be a purchase price adjustment (the "Purchase
Price Adjustment") on a retrospective basis so that either (i) the number of
Shares transferred to the Purchaser is increased or (ii) the Purchase Price is
decreased so that, in either such event, the Purchaser shall have as of the
Closing Date the economic equivalent of 15.74% of the capital stock of the
Company (on a fully diluted basis) in consideration of the Purchase Price. The
Indirect Stockholder shall cause the Stockholders to effect the Purchase Price
Adjustment in any such event, and the parties agree that an interest factor of
ten percent (10%) from the Closing Date until the effective date of any such
Purchase Price Adjustment shall be included in the Purchase Price Adjustment to
compensate the Purchaser for the delay in obtaining such economic equivalent.
SECTION 3. MISCELLANEOUS.
SECTION 3.01 Definitions. Capitalized terms not otherwise defined
herein shall have their respective meanings set forth in the Investment
Agreement.
SECTION 3.02 Survival. Any representation and warranty made herein
shall survive the execution and delivery of this Agreement, and the sale,
transfer and delivery of the Shares pursuant to the Stock Purchase Agreement
for a period of eighteen (18) months.
SECTION 3.03 Parties in Interest; Assignment. All representations,
warranties, covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties
-4-
5
hereto whether so expressed or not. No party may assign its rights hereunder
without the prior written consent of the other parties hereto.
SECTION 3.04 Waiver. Any of the terms or conditions of this
Agreement may be waived at any time and from time to time in writing by the
party entitled to the benefits thereof without affecting any other terms or
conditions of this Agreement.
SECTION 3.05 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given, if delivered in person or by courier, telegraphed, telexed or by
facsimile transmission or mailed by certified or registered mail, postage
prepaid:
If to the Indirect Stockholder: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
c/o Capital Pacific Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Stockholders: CPH2, L.L.C. or CPH3, L.L.C.
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
c/o Capital Pacific Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Chairman of the Board
Capital Pacific Holdings, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Wiley, Rein & Fielding
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser: ▇/▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇.▇.▇.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
-5-
6
with a copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇
One Chase ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may, by written notice to the other parties, change the address or
telecopy number to which notices to such party are to be delivered or mailed or
sent by facsimile transmission. All such notices or other communications shall
be effective and be deemed to have been given as of the date on which such
notices are actually received.
SECTION 3.06 Entire Agreement; Amendment. This Agreement and the
Related Agreements set forth the entire agreement and understanding of the
parties in respect of the transactions contemplated hereby and supersede all
other agreements, arrangements and understandings relating to the subject
matter hereof, both oral and written. No representation, promise, inducement
or statement of intention has been made by any of the parties hereto which is
not embodied in this Agreement, or the written statements, certificates or
other documents delivered pursuant hereto or the Related Agreements referred to
above, and none of the parties hereto shall be bound by or liable for any
alleged representation, promise, inducement or statement of intention not so
set forth. This Agreement and the Related Agreements may be amended or
modified only by a written instrument executed by the parties hereto or by
their successors and assigns.
SECTION 3.07 General. This Agreement (i) shall be construed and
enforced in accordance with the laws of the State of Delaware without giving
effect to the choice of law principles thereof; and (ii) may be executed in
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The Section and other
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
SECTION 3.08 Severability. To the extent that any provision of this
Agreement which does not materially affect the intent of the parties hereto
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect.
[SIGNATURE PAGE FOLLOWS]
-6-
7
SIGNATURE PAGE TO AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CAPITAL PACIFIC HOLDINGS, INC.,
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Chairman
CALIFORNIA HOUSING FINANCE, L.P.
By: California Housing Finance L.L.C.
Its General Partner
By: Farallon Capital Management, L.L.C.
Its Manager
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
Managing Member
CAPITAL PACIFIC HOLDINGS, L.L.C.
By: Capital Pacific Holdings, Inc.
Managing Member
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Chairman
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, personally
-7-