INVESTOR AND REGISTRATION RIGHTS AGREEMENT Exhibit 10.7
THIS INVESTOR AND REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is
entered into as of October 17, 1996, between Homestead Village Incorporated, a
Maryland corporation ("Homestead"), and Security Capital Atlantic Incorporated,
a Maryland corporation ("Atlantic").
WHEREAS, on the date hereof, the parties are entering into a series of
transactions as described in that certain Merger and Distribution Agreement,
dated as of May 21, 1996, among Atlantic, Security Capital Pacific Trust
("PTR"), Security Capital Group Incorporated ("SCG") and Homestead (the "Merger
Agreement"), pursuant to which, among other things, Homestead will acquire all
of Atlantic's assets relating to its operation of extended-stay lodging
facilities;
WHEREAS, pursuant to the Merger Agreement, Atlantic and Homestead are
entering into a Funding Commitment Agreement (the "Funding Commitment
Agreement"), pursuant to which Atlantic will agree to make certain loans to
Homestead, which loans will be secured by mortgages, and the notes evidencing
such loans will be convertible into shares of Common Stock, $0.01 par value per
share ("Common Stock"), of Homestead on the terms and conditions described
therein;
WHEREAS, pursuant to a Warrant Purchase Agreement (the "Warrant
Purchase Agreement"), dated as of May 21, 1996, among Homestead, SCG, Atlantic
and PTR, Homestead has agreed to issue to Atlantic warrants to acquire Common
Stock; and
WHEREAS, the execution of this Agreement is a condition to the
consummation of the transactions contemplated by the Merger Agreement, the
Funding Commitment Agreement and the Warrant Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
Section 1. Board Representation. Until March 31, 1998 and for so long
thereafter as Atlantic shall continue to have the right to convert in excess of
$20 million in principal amount of loans made pursuant to the Funding Commitment
Agreement, Homestead shall not increase the number of members of its Board of
Directors to more than seven (7) members and Atlantic shall be entitled to
designate one person for nomination to the Homestead Board of Directors (such
person, a "Nominee") and Homestead will use its best efforts to cause the
election of such Nominee. The Nominee of Atlantic may, but need not, include the
same person or persons nominated by SCG pursuant to the Investor Agreement of
even date herewith between SCG and Homestead or the person nominated by PTR
pursuant to the Investor and Registration Rights Agreement of even date herewith
between PTR and Homestead.
Section 2. Inspection. Until March 31, 1998 and for so long
thereafter as Atlantic shall continue to have the right to convert any principal
amount of loans made, pursuant to the Funding Commitment Agreement, at any time
during regular business hours and as often as reasonably requested of
Homestead's officers, Homestead shall permit Atlantic or any authorized
employee, agent or representative of Atlantic to examine and make copies and
abstracts from the records and books of account of, and to visit the properties
of, Homestead and to discuss the affairs, finances, and accounts of Homestead
with any of its officers of directors; provided, that all costs and expenses of
such inspection shall be borne by Atlantic.
Section 3. Registration Rights.
(a) Demand. At any time prior to the first anniversary of the date on
which the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act of 1934, as amended (the "Exchange Act"), Atlantic may request
one registration of all or any part of its Registrable Securities (as
defined in sub-section (h) below) under the Securities Act of 1933, as
amended (the "Securities Act"), by delivering written notice (which notice
shall state that Atlantic intends to dispose of such securities through a
public distribution thereof) to Homestead specifying the number of
Registrable Securities that Atlantic desires to distribute and Homestead
shall use its reasonable efforts to effect the registration of such
Registrable Securities under the Securities Act in accordance with the
further provisions of this Section 3.
(b) Shelf Registration. At any time after the first anniversary of
the date on which the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, Atlantic may request, on up to three separate
occasions, registration of all or any part of its Registrable Securities
pursuant to Rule 415 under the Securities Act by delivering written notice
(which notice shall state that Atlantic intends to dispose of such
securities through a public distribution thereof) to Homestead and
Homestead shall use its reasonable efforts to effect the registration of
such Registrable Securities under the Securities Act in accordance with the
further provisions of this Section 3.
(c) Registration Procedures. If and whenever Homestead is required by
any of the provisions of this Section 3 to use its reasonable efforts to
effect the registration of any of the Registrable Securities under the
Securities Act, Homestead shall:
(i) prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement with respect to such
securities and use its reasonable efforts to cause such registration
statement to become effective and remain effective for as long as
shall be necessary to complete the distribution of the Registrable
Securities so registered;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection
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therewith as may be necessary to keep such registration statement
effective for so long as shall be necessary to complete the
distribution of the Registrable Securities so registered and to comply
with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration
statement whenever Atlantic shall desire to sell or otherwise dispose
of the same within such period;
(iii) furnish to Atlantic such numbers of copies of such
registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement, including any
preliminary prospectus, and any amendment or supplement thereto, and
such other documents, as Atlantic may reasonably request in order to
facilitate the sale or other disposition of the Registrable
Securities;
(iv) use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as Atlantic shall
reasonably request, and do any and all other acts and things
reasonably requested by Atlantic to assist it to consummate the public
sale or other disposition in such jurisdictions of the securities
owned by Atlantic, except that Homestead shall not for any such
purpose be required to qualify to do business as a foreign corporation
in any jurisdiction wherein it is not so qualified or to file therein
any general consent to service of process;
(v) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months,
beginning with the first fiscal quarter beginning after the effective
date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act;
(vi) use its reasonable efforts to list such securities on any
securities exchange or quotation system on which any securities of
Homestead are then listed, if the listing of such securities is then
permitted under the rules of such exchange or quotation system; and
(vii) notify Atlantic, at any time when a prospectus relating to
the Registrable Securities is required to be delivered under the
Securities Act, of the happening of any event of which it has
knowledge as a result of which the prospectus included in such
registration statement, as then in effect, contains an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing.
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(d) Homestead's Ability to Postpone. Homestead shall have the right
to postpone the filing of a registration statement under this Section 3 for
a reasonable period of time (not exceeding 60 days) if Homestead furnishes
Atlantic with a certificate signed by the Chairman of the Board or the
President of Homestead stating that, in its good faith judgment,
Homestead's Board of Directors has determined that effecting the
registration at such time would adversely affect a material financing,
acquisition, disposition of assets or stock, merger or other comparable
transaction or would require Homestead to make public disclosure of
information the public disclosure of that would have a material adverse
effect upon Homestead.
(e) Expenses. All expenses incurred in the registration of
Registrable Securities under this Agreement shall be paid by Homestead. The
expenses shall include, without limitation, the expenses of preparing the
registration statement and the prospectus used in connection therewith and
any amendment or supplement thereto, printing and photocopying expenses,
all registration and filing fees under Federal and state securities laws,
and expenses of complying with the securities or blue sky laws of any
jurisdictions, provided, however, that Atlantic shall be responsible for
the fees and disbursements of its own counsel.
(f) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 3:
(i) Indemnity by Homestead. Without limitation of any other
indemnity provided to Atlantic, to the extent permitted by law,
Homestead will indemnify and hold harmless Atlantic and its officers,
directors and any individual, partnership, corporation, trust,
unincorporated organization or other entity (a "Person") if any, who
controls Atlantic (within the meaning of the Securities Act or the
Exchange Act), against any losses, claims, damages, liabilities and
expenses (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of
a material fact contained in any registration statement (including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto), (ii) the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (iii) any
violation or alleged violation by Homestead of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state
securities law, and Homestead will reimburse Atlantic and its
officers, directors and any controlling person thereof for any
reasonable legal or other expenses
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incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, expense or action; provided,
however, that Homestead shall not be liable in any such case for any
such loss, claim, damage, liability, expense or action to the extent
that it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by Atlantic or
any officer, director or controlling person thereof.
(ii) Indemnity by Atlantic. In connection with any registration
statement in which Atlantic is participating, Atlantic will furnish to
Homestead in writing such information and affidavits as Homestead
reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will
indemnify Homestead, its directors and officers and each Person who
controls Homestead (within the meaning of the Securities Act or
Exchange Act) against any losses, claims, damages, liabilities and
expenses resulting from any Violation, but only to the extent that
such Violation is contained in any information or affidavit so
furnished in writing by Atlantic; provided, that the obligation to
indemnify will be several and not joint and several with any other
Person and will be limited to the net amount received by Atlantic from
the sale of Registrable Securities pursuant to such registration
statement.
(iii) Notice; Right to Defend. Promptly after receipt by an
indemnified party under this Section 3(f) of notice of the
commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 3(f), deliver to the
indemnifying party a written notice of the commencement thereof and
the indemnifying party shall have the right to participate in, and, if
the indemnifying party agrees in writing that it will be responsible
for any costs, expenses, judgments, damages and losses incurred by the
indemnified party with respect to such claim, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying
party, if the indemnified party reasonably believes that
representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall relieve
such indemnifying party of any liability to the indemnified party
under this Section 3(f) only if and to the extent that such failure is
prejudicial to its ability to defend such action, and the omission so
to deliver written notice to the indemnifying party will not relieve
it
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of any liability that it may have to any indemnified party other than
under this Section 3(f).
(iv) Contribution. If the indemnification provided for in this
Section 3(f) is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage
or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other hand in connection with the statements
or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The
relevant fault of the indemnifying party and the indemnified party
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. Notwithstanding the
foregoing, the amount Atlantic shall be obligated to contribute
pursuant to this Section 3(f)(iv) shall be limited to an amount equal
to the aggregate value of the Registrable Securities distributed by
Atlantic pursuant to the registration statement which gives rise to
such obligation to contribute (less the aggregate amount of any
damages which Atlantic has otherwise been required to pay in respect
of such loss, claim, damage, liability or action or any substantially
similar loss, claim, damage, liability or action arising from the
distribution of such Registrable Securities).
(v) Survival of Indemnity. The indemnification provided by this
Section 3(f) shall be a continuing right to indemnification and shall
survive the registration and sale of any securities by any Person
entitled to indemnification hereunder and the expiration or
termination of this Agreement.
(g) Limitations on Registration Rights.
(i) Homestead shall not, without the prior written consent of
Atlantic, include in any registration in which Atlantic has a right to
participate pursuant to this Agreement any securities of any Person
other than Atlantic and PTR.
(ii) Atlantic shall not, without the prior written consent of
Homestead, effect any public sale or distribution (including sales
pursuant to Rule 144 under the Securities Act) of securities of
Homestead during any period commencing 30 days prior to and ending 60
days after the effective date any registration statement
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filed by Homestead on behalf of any Person (including Homestead),
other than a registration statement on Form S-8 or any successor form.
(h) Registrable Security. The term Registerable Security means (i)
any shares of Common Stock issuable to Atlantic pursuant to the conversion
of notes issuable pursuant to the terms of the Funding Commitment Agreement
or otherwise held by Atlantic, (ii) any other shares of Common Stock owned
by Atlantic and (iii) any shares of Common Stock or other securities that
may subsequently be issued with respect to such shares of Common Stock as a
result of a stock split or dividend or any sale, transfer, assignment or
other transaction by Homestead involving the shares of Common Stock and any
securities into which the shares of Common Stock may thereafter be changed
as a result of merger, consolidation, recapitalization or otherwise. As to
any particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been distributed to the public
pursuant to an offering registered under the Securities Act. All
Registrable Securities shall cease to be Registrable Securities when all
such securities may be sold in any three-month period pursuant to Rule 144,
or any successor to such rule, under the Securities Act.
Section 4. File Reports. For so long as Atlantic owns any Registrable
Securities, Homestead shall file on a timely basis all annual, quarterly and
other reports required to be filed by it under Section 13 and 15(d) of the
Exchange Act, and the rules and regulations of the Commission thereunder, as
amended from time to time.
Section 5. Miscellaneous.
(a) Survival of Covenants. All covenants contained herein shall survive
the execution of this Agreement and shall remain in full force and effect until
terminated in accordance with this Agreement.
(b) Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective heirs, personal
representatives, successors, assigns and affiliates.
(c) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, sent via a recognized
overnight courier with delivery confirmed in writing or sent via facsimile to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
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If to Homestead:
Homestead Village Incorporated
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Atlantic:
Security Capital Atlantic Incorporated
Six ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(d) Waiver. No party may waive any of the terms or conditions of this
Agreement, except by a duly executed writing referring to the specific provision
to be waived.
(e) Amendment. This Agreement may be amended only by a writing duly
executed by both Homestead and Atlantic.
(f) Severability. Insofar as is possible, each provision of this
Agreement shall be interpreted so as to render it valid and enforceable under
applicable law and severable from the remainder of this Agreement. A finding
that any such provision is invalid or unenforceable in any jurisdiction shall
not affect the validity or enforceability of any other provision or the validity
or enforceability of such provision under the laws of any other jurisdiction.
(g) Entire Agreement. This Agreement constitutes the entire agreement,
and supersedes all other prior agreements and understandings, both written and
oral, between the parties hereto and their affiliates, with respect to the
subject matter hereof.
(h) Expenses. Except as otherwise expressly contemplated herein to the
contrary, regardless of whether the transactions contemplated hereby are
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
(i) Captions. The Section and Paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
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(j) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
(k) Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Maryland.
* * * * *
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IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
HOMESTEAD VILLAGE INCORPORATED
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Chairman
SECURITY CAPITAL ATLANTIC INCORPORATED
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman
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