STOCK PURCHASE AGREEMENT
------------------------
This Stock Purchase Agreement (the "Agreement"), dated
February 13, 1998, is by and between Franchise Finance Corporation of America, a
real estate investment trust and a Delaware corporation (the "Company"), and
Colony Investors III, L.P., a Delaware limited partnership ("Purchaser").
W I T N E S S E T H:
WHEREAS, the Company wishes to issue and sell to Purchaser (i)
certain shares of the Company's common stock, $.01 par value per share (the
"Common Stock"), and warrants (the "Warrants") to acquire additional shares of
Common Stock for an aggregate purchase price of $100,000,000 (the "Purchase
Price") on the terms and subject to the conditions set forth herein and in the
Other Documents (as defined herein); and
WHEREAS, Purchaser wishes to purchase such securities on the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
SECTION 1. THE SECURITIES
Section 1.1 Issuance, Sale and Purchase of the Securities. In reliance
upon the representations and warranties made herein and subject to the
satisfaction or waiver of the conditions set forth herein, the Company agrees to
issue and sell to Purchaser, and Purchaser agrees to purchase from the Company,
for the Purchase Price, (i) 3,792,112 shares (the "Common Shares" and,
collectively with the Warrants, the "Securities") of Common Stock and (ii) the
Warrants, exercisable for seven years (except as provided in a customary Warrant
Agreement relating thereto to be entered into between the Company and Purchaser
(the "Warrant Agreement")), to acquire an additional 1,476,908 shares (the
"Warrant Shares") of Common Stock at an initial exercise price of $31.64 per
share, subject to adjustment as provided in the Warrant Agreement.
Section 1.2 Other Agreements. Concurrently with the Closing (as
hereinafter defined), the Company will enter into (a) the Warrant Agreement in
form and substance reasonably satisfactory to the parties, (b) the Investor's
Agreement with Purchaser in substantially the form attached as Exhibit A hereto
(the "Investor's Agreement") and (c) a Registration Rights Agreement in favor of
Purchaser and its permitted assignees (the "Holders") in form and substance
reasonably satisfactory to the parties providing for (i) three "demand"
registrations in favor of the Holders (one of which may, at the election of the
Holders, be a "resale shelf registration" having a duration of four years, (ii)
customary "piggyback" registrations in favor of the Holders and (iii) such other
reasonable provisions as the parties negotiate in good faith (the "Registration
Rights Agreement" and, collectively with the Warrant Agreement and the
Investor's Agreement, the "Other Documents").
Section 1.3 Closing. The closing (the "Closing") shall take place at
the offices of the Company, The Perimeter Center, 00000 Xxxxx Xxxxxxxxx Xxxxx,
Xxxxxxxxxx, Xxxxxxx 00000, on the tenth business day after the satisfaction or
waiver of the conditions set forth in Section 3 below, or at such other
location, date and time as may be agreed upon between Purchaser and the Company
(such date and time being called the "Closing Date"). At the Closing, the
Company shall issue and deliver to Purchaser stock and warrant certificates in
definitive form, registered in the name of Purchaser or its designee,
representing the Securities. As payment in full for the Securities, and against
delivery of the certificates therefor at the Closing, Purchaser shall initiate a
wire transfer in immediately available United States funds in accordance with
the Company's instructions in the amount of the Purchase Price. Each certificate
representing the Securities shall bear the following legend in addition to any
other legend that may be required from time to time under applicable law or
pursuant to any other contractual obligation:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF (A "TRANSFER") EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
AN INVESTOR'S AGREEMENT DATED THE CLOSING DATE. SUCH SECURITIES ARE
ALSO SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED THE CLOSING DATE.
ANY TRANSFEREE OF THESE SECURITIES TAKES SUBJECT TO THE TERMS OF SUCH
AGREEMENTS, A COPY OF EACH OF WHICH IS ON FILE WITH THE COMPANY.
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR
STATE SECURITIES LAWS AND NO TRANSFER OF THESE SECURITIES MAY BE MADE
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT, OR (B) PURSUANT TO AN EXEMPTION THEREFROM WITH RESPECT TO WHICH
THE COMPANY MAY, UPON REQUEST, REQUIRE A SATISFACTORY OPINION OF
COUNSEL FOR THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE
REQUIREMENTS OF THE ACT.
Section 1.4 Further Action. During the period from the date hereof to
the Closing Date, each of the Company and Purchaser shall use their best efforts
to take all action necessary or appropriate to satisfy the closing conditions
contained in Section 3 hereof (including without limitation using all reasonable
efforts to finalize the Warrant Agreement and the Registration Rights Agreement
in the most expeditious manner practicable) and to cause its respective
representations and warranties contained in Section 2 to be complete and correct
as of the Closing Date, after giving effect to the transactions contemplated by
this Agreement, as if made on and as of such date.
SECTION 2. REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The Company
represents and warrants to Purchaser as follows:
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(a) Each of the Company and its subsidiaries
(collectively, the "Subsidiaries") has been duly organized and is validly
existing as a corporation, trust or partnership, as the case may be, in good
standing under the laws of the jurisdiction in which it is organized, with full
power and authority to own or lease and occupy its properties and conduct its
business, and is duly qualified to do business, and is in good standing, in each
jurisdiction which requires such qualification, except where the failure to so
qualify would not, individually or in the aggregate, have or be reasonably
likely to result in a material adverse effect on the business, operations,
business prospects, earnings, assets, liabilities or condition (financial or
otherwise) (a "Material Adverse Effect") of the Company. All of the outstanding
shares of capital stock or other equivalent interests of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable, and, except as disclosed in the Company's reports, proxy
statements, forms, and other documents with the SEC filed and publicly available
during the twelve months ended February 13, 1998 (the "Current SEC Documents"),
are owned by the Company, directly, or indirectly through another Subsidiary,
free and clear of any lien, adverse claim, security interest, mortgage, pledge,
equity or other encumbrance. None of the outstanding shares of capital stock or
other equivalent interests of the Subsidiaries was issued in violation of the
preemptive or similar rights of any stockholder or other holder of interests of
such Subsidiary arising by operation of law, under the charter, by-laws or other
organizational document of any Subsidiary or under any agreement to which the
Company or any Subsidiary is a party. The Company does not own, directly or
indirectly through a "qualified REIT subsidiary" (within the meaning of section
856(i) of the Internal Revenue Code of 1986, as amended (the "Code")),
partnership, limited liability company, association or other entity, any shares
of stock or any other debt or equity securities of, or other interests in, any
corporation, firm, partnership, limited liability company, association or other
entity, other than (1) stock of a corporation or equity of an entity that the
Company has been advised by its legal counsel qualifies as a "qualified REIT
subsidiary" within the meaning of section 856(i) of the Code, (2) stock or other
debt (excluding for this purpose any debt obligation that constitutes a real
estate asset within the meaning of section 856(c)(5)(B) of the Code) or equity
securities of any issuer (other than a partnership or limited liability company,
the ownership of which is governed by (3) below) where (i) the Company has been
advised by legal counsel that such ownership would not constitute ownership of
more than 9.8% of the voting securities of such issuer (within the meaning of
section 856(c) (5) of the Code) and (ii) the Company has determined in good
faith that the fair market value of the stock and securities of any one such
issuer does not exceed 4.8% of the value of the total assets of the Company
(within the meaning of section 856(c)(5) of the Code), or (3) interests in a
partnership or limited liability company where (i) the Company has received a
written opinion of its legal counsel that such partnership or limited liability
company is subject to tax as a partnership, and not an association subject to
tax as a corporation or a publicly traded partnership subject to tax as a
corporation, for United States federal income tax purposes and (ii) such
partnership or limited liability company does not itself own debt or equity
securities of any issuer that could cause the Company to violate the
representation contained in clause (2) above.
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(b) The Company and each of the Subsidiaries have all
requisite power and authority, and all necessary material authorizations,
approvals, orders, licenses, certificates and permits (collectively,
"Governmental Licenses"), of and from the appropriate Federal, state, local or
foreign regulatory or governmental agencies, officials, bodies and tribunals,
necessary to own or lease their respective properties and to conduct their
respective businesses as now being conducted, except where the failure to
possess any such Government Licenses would not have a Material Adverse Effect on
the Company or such Subsidiary, as the case may be; all such Governmental
Licenses are in full force and effect, except where the failure to be in full
force and effect would not have a Material Adverse Effect on the Company or such
Subsidiary, as the case may be; and the Company and each of the Subsidiaries are
in compliance with all applicable laws and Governmental Licenses, except where
the failure to comply would not have a Material Adverse Effect on the Company or
such Subsidiary, as the case may be.
(c) Except as otherwise disclosed in the Current SEC
Documents or as would not have a Material Adverse Effect on the Company or such
Subsidiary, as the case may be, (i) the Company and the Subsidiaries have good
and marketable title to all properties and assets described in the Current SEC
Documents as being owned by them, or reflected in the Base Balance Sheet (as
hereinafter defined), other than properties and assets conveyed or pledged in
customary asset securitization transactions (as to which no representation is
made); (ii) all liens, charges, claims, restrictions or encumbrances on or
affecting the properties and assets of the Company or any of the Subsidiaries
which are required to be disclosed in the Current SEC Documents are disclosed
therein; (iii) each of the properties of the Company and the Subsidiaries, at
the time such property was acquired or at the time the loan by the Company with
respect to such property was made, had access to public rights of way, either
directly or through insured easements; (iv) each of such properties, at the time
such property was acquired or at the time the loan by the Company with respect
to such property was made, was served by all public utilities necessary for the
current operations on such property in sufficient quantities for such
operations; (v) each of such properties complies with all applicable codes and
zoning and subdivision laws and regulations; (vi) the real property leases and
equipment leases, if any, relating to each of such properties are in full force
and effect; and (vii) there is no pending or threatened condemnation, eminent
domain, zoning change, or other proceeding or action that will in any manner
affect the size of, use of, improvements on, construction on or access to the
properties of the Company and the Subsidiaries.
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(d) Except as would not have a Material Adverse
Effect on the Company or any of the Subsidiaries, each of the mortgage loans
held by the Company or the Subsidiaries (the "Mortgage Loans") is (i) secured by
a valid lien on the property pledged as security for each such Mortgage Loan,
(ii) insured by a nationally recognized title insurance company for the amount
of each such applicable Mortgage Loan, (iii) evidenced by loan documents which
are valid and enforceable against the borrower under each such Mortgage Loan,
(iv) in good standing, without defaults or, to the Company's knowledge, offsets
or counterclaims which could be validly asserted by any borrower under any of
the Mortgage Loans, (v) is documented by loan documents substantially in the
form of the Company's standard loan documents, and (vi) except in the case of
loans which have been sold, assigned or conveyed in connection with an asset
securitization thereof, is currently owned and held by the Company and/or the
Subsidiaries and has not been assigned or pledged to any third party.
(e) The Company and the Subsidiaries have title
insurance on all real property described in the Current SEC Documents as being
owned (or held under a ground lease) or financed by any of them in an amount at
least equal to the cost of acquisition of such property or the original
principal amount of the loan provided by any of them, as the case may be, and
there are in effect for such properties and assets insurance policies covering
risks and in amounts that are commercially reasonable for such types of
properties and assets and that are consistent with the types and amounts of
insurance typically maintained by prudent owners of similar properties or assets
or required by commercial lenders with respect to similar properties or assets
and all such insurance is in full force and effect.
(f) To the extent applicable, the Company and the
Subsidiaries own or possess, or can acquire on reasonable terms, the patents,
patent rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and trade names
(collectively, "patent and proprietary rights") presently employed by them in
connection with the business now operated by them, and neither the Company nor
any of the Subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to any
patent or proprietary rights or of any facts or circumstances which would render
any patent and proprietary rights invalid or inadequate to protect the interest
of the Company or any of Subsidiaries therein, and which infringement or
conflict (if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, either singly or in the aggregate, would result in any
Material Adverse Change (as defined herein).
(g) The Company's authorized and outstanding
capitalization (including all securities exercisable for, or convertible or
exchangeable into, Common Stock) is as set forth in Schedule 2.1(g) hereto. The
outstanding shares of Common Stock have been duly and validly authorized and
issued in compliance with all Federal and state securities laws, and are fully
paid and nonassessable; the Common Shares have been duly and validly authorized
and, when issued and delivered pursuant to this Agreement, will be fully paid
and nonassessable; and the holders of outstanding shares of capital stock of the
Company are not entitled to preemptive or other rights to subscribe for the
Common Shares.
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(h) There is no action, suit, proceeding, inquiry or
investigation before or by any court or governmental agency or body, domestic or
foreign, now pending, or, to the knowledge of the Company, threatened, against
or affecting the Company or any of the Subsidiaries, which is required to be
disclosed in the Current SEC Documents, or which might reasonably be expected to
result in any Material Adverse Change in the condition, financial or otherwise,
or in the earnings, business affairs or business prospects of the Company or the
Subsidiaries, whether or not arising in the ordinary course of business
("Material Adverse Change"), or which might reasonably be expected to have a
Material Adverse Effect on the Company or such Subsidiary or materially and
adversely affect the consummation of this Agreement or the performance by the
Company of its obligations hereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any Subsidiary is a party or of
which any of their respective property or assets is the subject which are not
described in the Current SEC Documents, including ordinary routine litigation
incidental to the business, could not reasonably be expected to result in a
Material Adverse Change.
(i) The Company has full corporate power and
authority to enter into and perform its obligations under this Agreement and the
Other Documents and to issue, sell and deliver the Securities; this Agreement
and the Other Documents have been or will, at or prior to the Closing, be duly
authorized, executed and delivered by the Company and, when so executed, will
each constitute a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to the extent that
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereinafter in effect
relating to creditors' rights generally and (ii) general principles of equity
(regardless of whether a proceeding is considered at law or in equity).
(j) No consent, approval, authorization or order of
any court or governmental agency, authority or body is required (and has not
been received) for the execution by the Company of this Agreement and the Other
Documents, the performance by the Company or its obligations hereunder and
thereunder or the consummation by the Company of the transactions contemplated
herein and therein.
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(k) Neither the Company nor any or the Subsidiaries
is in violation of, in conflict with, in breach of or in default under (and none
of them know of an event which with the giving of notice or the lapse of time or
both would be reasonably likely to constitute a default under) its charter or
by-laws (and none of them know of an event which with the giving of notice or
the lapse of time or both would be reasonably likely to constitute a violation),
and neither the Company nor any Subsidiary is in default in the performance of
any obligation, agreement or condition contained in any loan, note or other
evidence of indebtedness or in any indenture, mortgage, deed of trust or any
other material agreement by which it or its properties are bound, except for
such defaults as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or such Subsidiary, as the case may be.
(l) Except as described in the Current SEC Documents,
(A) neither the Company nor the Subsidiaries is in violation of any Federal,
state, local or foreign laws or regulations relating to pollution or protection
of human health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products (collectively,
"Hazardous Materials") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials
(collectively, "Environmental Laws"), except where the Company or the
Subsidiaries has obtained one or more policies of environmental insurance to
cover such risks, with deductible amounts, loss limits and aggregate liability
limitations which were deemed reasonably appropriate by the Company under the
circumstances, and except for such violations as would not have a Material
Adverse Effect on the Company or such Subsidiary, as the case may be, and (B)
there are no events or circumstances that could form the basis of an order for
clean-up or remediation, or an action, suit or proceeding by any private party
or governmental body or agency, against or affecting the Company or any of the
Subsidiaries relating to any Hazardous Materials or the violation of any
Environmental Laws, which, either individually or in the aggregate, would have a
Material Adverse Effect on the Company or such Subsidiary, as the case may be.
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(m) Neither the issuance and sale of the Securities
nor the consummation of any of the other transactions contemplated herein or in
the Other Documents nor the fulfillment of the terms hereof and thereof will
conflict with, result in a breach or violation of or constitute a default under
any law or the charter or bylaws of the Company or any of the Subsidiaries or
the terms of any indenture or other agreement or instrument to which the Company
or any of the Subsidiaries is a party or is bound or any judgment, order or
decree applicable to the Company or any of the Subsidiaries of any court,
regulatory body, administrative agency, governmental body or arbitrator having
jurisdiction over the Company or any of the Subsidiaries. To enable Purchaser to
purchase the Securities without violating Article IV of the Company's
Certificate of Incorporation, the Board of Directors of the Company will have
adjusted the ownership limitations contained therein to the extent necessary to
permit Purchaser's purchase of the Securities (including, without limitation,
the exercise from time to time of the Warrants) and the transactions
contemplated hereby and by the Other Documents at or prior to the Closing.
(n) Each employee benefit or compensation plan,
program, policy, agreement or arrangement of any type sponsored, maintained,
contributed to or required to be contributed by the Company or any ERISA
Affiliate for the benefit of any current or former employee or director of the
Company or any of the Subsidiaries (the "Company Plans") has been operated and
administered in all material respects in accordance with its terms and all
applicable law, including without limitation ERISA (as defined below) and the
Code. There are no actions, suits or claims pending, other than routine claims
for benefits, with respect to the Company Plans or their operation,
administration or maintenance. Neither the Company nor any ERISA Affiliate has
at any time sponsored, maintained, contributed to or been required to contribute
to any "pension plan" (within the meaning of Section 3(2) of ERISA) subject to
Title IV of ERISA, including without limitation any multiemployer plan, and
neither the Company nor any ERISA Affiliate has at any time incurred or can
expect to incur any liability under Title IV of ERISA. Each Company Plan
intended to qualify under section 401(a) of the Code is so qualified, and the
Company has timely applied for and received a currently effective determination
letter from the Internal Revenue Service with respect to each such Company Plan.
The consummation of the transactions contemplated hereunder will not result in
the payment, vesting, acceleration or enhancement of any benefit under any
Company Plan. Except as required under Sections 601-609 of ERISA, no Company
Plan provides medical benefits to participants following retirement or other
termination of employment or service. For purposes of this Agreement, "ERISA"
means the Employee Retirement Income Security Act of 1974, as amended; and
"ERISA Affiliate" means any entity that, together with the Company or any
subsidiary would be deemed a "single employer" for purposes of section
4001(b)(1) of ERISA.
(o) Except as disclosed in the Current SEC Documents,
other than the Warrants and grants of options to purchase an aggregate of
740,000, 22,230 and 233,000 shares of Common Stock issued in January 1997, May
1997 and January 1998, respectively, and restricted stock awards representing
29,887 shares of Common Stock issued in January 1998, there are no outstanding
warrants or options to purchase any shares of capital stock of the Company and
there are no restrictions upon the voting or transfer of, or the declaration or
payment of any dividend or distribution on, any shares of capital stock of the
Company pursuant to the certificate of incorporation or by-laws of the Company,
any agreement or other instrument to which the Company is a party or by which
the Company is bound, or any order, law, rule, regulation or determination of
any court, governmental agency or body (including, without limitation, any
banking or insurance regulatory agency or body), or arbitrator having
jurisdiction over the Company.
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(p) There are no registration or other rights
entitling any person to registration by the Company under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the issued capital
stock of the Company (other than pursuant to the Registration Rights Agreement),
or to purchase or subscribe for capital stock of the Company (other than
pursuant to understandings to issue Common Stock representing an aggregate
purchase price of up to $70 million in two separate underwritten transactions to
one or more unit investment trusts and the Investor's Agreement).
(q) The Company has qualified as a "real estate
investment trust" ("REIT") under section 856 of the Code from its inception and
it has operated and intends to continue to operate in a manner so as to qualify
as a REIT. The Company has not taken any action or omitted to take any action
that would reasonably be expected to result in a challenge to its status as a
REIT, and no such challenge is pending or, to the Company's knowledge,
threatened.
(r) Each of FFCA Acquisition Corporation, FFCA
Institutional Advisors, Inc., FFCA Secured Assets Corporation, FFCA Residual
Interest Corporation and FFCA Secured Lending Corporation has been (at all times
during the period each such corporation has been in existence) and is subject to
tax as a corporation for United States federal income tax purposes and the
Company has owned 100% of the stock of each such corporation at all times during
the period each such corporation has been in existence. Each such entity is a
qualified REIT subsidiary, as described in section 856(i) of the Code.
(s) FFCA Co-Investment Limited Partnership has been
(at all times on and after June 1, 1994) and is subject to tax as a partnership,
and not as an association taxable as a corporation or a publicly traded
partnership subject to tax as a corporation, for United States federal income
tax purposes.
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(t) The Company files and has filed all required
reports, proxy statements, forms, and other documents with the SEC since January
1, 1995 (including all information incorporated therein by reference, the "SEC
Documents"). True and complete copies of all such SEC Documents have been made
available to Purchaser. As of their respective dates, (i) the SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Securities Exchange Act of 1934, as amended, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and (ii) except to the extent that information contained in any SEC
Document has been revised or superseded by a later filed SEC Document filed and
publicly available prior to the date of this Agreement, none of the SEC
Documents contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved and fairly
present the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except for
liabilities and obligations incurred in the ordinary course of business,
consistent with past practices, since the date of the most recent consolidated
balance sheet included in the SEC Documents filed and publicly available prior
to the date of this Agreement (the "Base Balance Sheet"), neither the Company
nor any of the Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by generally
accepted accounting principles to be set forth on a consolidated balance sheet
of the Company and its consolidated Subsidiaries or in the notes thereto.
(u) Except as disclosed in Current SEC Documents,
since the date of the Base Balance Sheet, the Company and the Subsidiaries have
conducted their respective businesses only in the ordinary course of business in
accordance with past practices, and there has not been (i) any Material Adverse
Change in the Company, (ii) any split, combination or reclassification of any of
its capital stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of the
capital stock of the Company, (iii) any damage, destruction or loss, whether or
not covered by insurance, that has or reasonably could be expected to have a
Material Adverse Effect on the Company or any Subsidiary, as the case may be, or
(iv) any change in accounting methods, principles or practices by the Company
materially affecting its assets or liabilities or that otherwise has or
reasonably could be expected to have a Material Adverse Effect on the Company or
any Subsidiary, as the case may be and (v) except for regular quarterly
dividends (including a quarterly dividend increase of $.02 declared January 30,
1998) on the Common Stock, there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital stock.
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(v) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that in all
material respects (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(w) To the Company's knowledge, neither the Company
nor any of the Subsidiaries nor any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any Subsidiary or
received or retained any funds in violation of any law, rule or regulation.
(x) The Company and each of the Subsidiaries have (i)
duly filed with the appropriate tax authorities all tax returns required to be
filed by them, and such tax returns are true, correct and complete in all
material respects, and (ii) duly paid in full or made provision in accordance
with generally accepted accounting principles for the payment of all material
taxes ending through the date hereof.
(y) No labor disturbance by the employees of the
Company or the Subsidiaries exists or (to the best of the Company's knowledge)
is imminent that would, individually or in the aggregate, have a Material
Adverse Effect. No collective bargaining agreement exists with any of the
Company's employees and, to the best of the Company's knowledge, no such
agreement is imminent.
(z) The Company has been advised concerning the
Investment Company Act of 1940, as amended (the "1940 Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the future
to conduct, its affairs in such a manner as to ensure that it will not become an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the 1940 Act and such rules and regulations.
(aa) The Company agrees that neither it, nor anyone
acting on its behalf, will offer any of the Securities so as to bring the
issuance and sale of the Securities within the provisions of Section 5 of the
Securities Act, or offer any similar securities for issuance or sale to, or
solicit any offer to acquire any of the same from, or otherwise approach or
negotiate with respect thereto with, anyone if the sale of any of the Securities
or any such similar securities would be integrated as a single offering for the
purposes of the Securities Act, including, without limitation, Regulation D
thereunder.
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(bb) The Company has not retained, directly or
indirectly, any broker or finder or incurred any liability or obligation for any
brokerage fees or finder's fees with respect to this Agreement or the
transactions contemplated hereby.
(cc) All the Company's representations and warranties
herein shall survive until ninety (90) days following the delivery to the
Company of its signed, audited financial statements for the year ending December
31, 1998.
Section 2.2 Representations and Warranties of Purchaser. Purchaser
represents and warrants to the Company that:
(a) Purchaser has been duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite power and authority under such laws to own or lease and operate
its properties and to carry on its business as now conducted.
(b) Purchaser has the power and authority to execute,
deliver and perform this Agreement and the Other Documents. All action on the
part of Purchaser necessary for the authorization, execution and delivery of
this Agreement and the Other Documents and the performance of all obligations of
Purchaser hereunder and thereunder have been taken or will be taken prior to the
Closing. This Agreement and the Other Documents have been duly authorized,
executed and delivered by Purchaser and each constitutes a valid and legally
binding obligation of Purchaser, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
enforcement is sought by proceedings in equity or at law).
(c) The execution and delivery by Purchaser of this
Agreement and the Other Documents and the performance by Purchaser of its
obligations hereunder and thereunder will not violate any provision of law, the
organizational documents governing Purchaser or any order of any court or other
agency of government, or conflict with, result in a breach of or constitute
(with notice or lapse of time or both) a default under any indenture, agreement
or other instrument by which Purchaser or any of its properties or assets is
bound, or result in the creation or imposition of any lien, charge, restriction,
claim or encumbrance of any nature whatsoever known to Purchaser upon any of the
properties or assets of Purchaser.
(d) The Securities will be acquired for investment
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for Purchaser's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and Purchaser has no present
intention of selling, granting any participation in, or otherwise distributing
the same. Purchaser further represents that it does not presently have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities. Purchaser (i) has such knowledge and
experience in financial and business matters, including investments of the type
represented by the Securities, as to be capable of evaluating the merits of
investment in the Company; (ii) has not been furnished with or relied upon any
oral representation, warranty or information in connection with the offering of
the Securities; and (iii) is an "Accredited Investor" as such term is defined in
Rule 501 of the rules and regulations promulgated under the Securities Act.
Purchaser and its agents, attorneys and advisors have been provided full and
complete access to all of the books, records, financial statements, accounts,
places of business, and any other information reasonably related to the conduct
of the business of Company, and has been afforded the opportunity to conduct an
independent investigation of all of those matters and has satisfied itself as to
all of the risks of the business of the Company, and has satisfied itself that
it has obtained, or been offered access to all of the information and
descriptions of reasonable risks associated with the transaction contemplated
hereby that a reasonably prudent investor would wish to obtain.
(e) The Company will not have any liability or
obligation for any brokerage fees or finder's fees with respect to this
Agreement or the transactions contemplated hereby as a result of any action
taken by Purchaser in connection herewith and therewith.
(f) After giving effect to the constructive ownership
rules of section 544 of the Code (as modified by section 856(h) of the Code), no
member of Purchaser (each a "Member") (i) owns more than 9.8% of the Common
Stock or (ii) owns directly or indirectly 25% or more of Purchaser.
(g) After giving effect to the constructive ownership
rules under section 318 of the Code (as modified by section 856(d)(5) of the
Code), Purchaser does not directly or indirectly own the stock of any person
that is a tenant under any lease with the Company and will not directly or
indirectly acquire stock in any such tenant if, upon and as a direct consequence
of such acquisition, the rents to be derived by the Company under such lease
would fail to qualify as rent from real property pursuant to section 856(d)(2)
of the Code.
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(h) Purchaser is a newly formed fund that is its own
ultimate parent as that term is defined in the rules and regulations promulgated
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), does not have and will not have a regularly prepared balance sheet
at the Closing Date, and at the Closing Date will not have assets or net sales
of $10 million or more other than the cash that will be used as consideration
for the acquisition and expenses incidental to the transactions contemplated
hereunder and as a result such transactions are not subject to the notification
and waiting period requirements of the HSR Act pursuant to 16 C.F.R. Section
801.11(e).
SECTION 3. CLOSING CONDITIONS
Section 3.1 Conditions to Obligation of Purchaser. The obligation of
Purchaser to purchase the Securities shall be subject to satisfaction or waiver
by it of the following conditions on or before the Closing Date:
(a) The representations and warranties of the Company
contained in Section 2.1 hereof that are qualified as to materiality shall be
true and accurate, and those not so qualified shall be true and accurate in all
material respects at and as of the Closing Date as if made on the date hereof.
(b) The Company shall have performed and complied in
all material respects with all agreements, covenants and conditions contained
herein that are required to be performed or complied with by it on or before the
Closing Date.
(c) The Company shall have received all consents,
permits, approvals and other authorizations that may be required from, and made
all such filings and declarations that may be required with, any person pursuant
to any law, statute, regulation or rule (federal, state, local and foreign), or
pursuant to any agreement, order or decree by which the Company or any of its
assets is bound, in connection with the transactions contemplated by this
Agreement, except for (i) notice requirements which may be fulfilled subsequent
to the Closing Date and (ii) consents, permits, approvals, authorizations,
filings and declarations the failure to obtain or to undertake which will not
adversely affect the Company's ability to perform its obligations under this
Agreement or any agreement executed in accordance herewith.
15
(d) Purchaser shall have received a certificate,
dated the Closing Date and signed by the President and the Chief Financial
Officer of the Company, certifying that the conditions in Sections 3.1(a), (b)
and (c) are satisfied on and as of such date.
(e) The Company shall have entered into the Other
Documents, and Purchaser's designee shall have been appointed to the Board of
Directors of the Company pursuant to the Investor's Agreement.
(f) Purchaser and its counsel shall have received
copies of the following documents:
(i) the Certificate of
Incorporation, certified as of a recent date by the Secretary of State
of the State of Delaware, and a certificate of such authority dated as
of a recent date as to the due incorporation and good standing of the
Company and listing all documents of the Company on file with said
authority;
(ii) a certificate of the Secretary
or an Assistant Secretary of the Company dated the Closing Date
certifying: (A) that attached thereto is a true and complete copy of
the Bylaws of the Company as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of
all resolutions adopted by the Board of Directors authorizing the
execution, delivery and performance of this Agreement and the Other
Documents and the issuance, sale and delivery of the Securities, and
that all such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by
this Agreement; (C) that the Certificate of Incorporation of the
Company has not been amended since the date of the last amendment
referred to in the certificate delivered pursuant to clause (i) above;
(D) that the Bylaws have not been amended since the date of the last
amendment referred to in such certificate pursuant to subclause (ii)(A)
above; and (E) that each officer of the Company executing this
Agreement and the Other Documents, the certificates representing the
Securities and any agreement, certificate or instrument furnished
pursuant hereto, was, at the respective times of such execution and
delivery of such documents, duly elected or appointed, qualified and
acting as such officer, and the signatures of such persons appearing on
such documents are their genuine signatures or true facsimiles thereof;
and
16
(iii) such additional supporting
documents as Purchaser may reasonably request.
(g) Purchaser shall have received an opinion
(satisfactory to Purchaser and its counsel), dated the Closing Date, from Xxxxx
Xxxx in substantially the form of Exhibit B hereto.
(h) The Board of Directors of the Company shall have
adjusted the ownership limitations contained in the Company's certificate of
incorporation to the extent necessary to permit Purchaser's purchase of the
Securities (including, without limitation, the exercise from time to time of the
Warrants) and the transactions contemplated hereby and the Other Documents.
Section 3.2 Conditions to the Obligations of the Company. The Company's
obligation to sell the Securities shall be subject to the satisfaction or waiver
by it of the following conditions on or before the Closing:
(a) The representations and warranties of Purchaser
contained in Section 2.2 of this Agreement that are qualified as to materiality
shall be true and accurate, and those not so qualified shall be true and
accurate in all material respects at and as of the Closing Date as if made on
the date hereof.
(b) Purchaser shall have performed and complied in
all material respects with all agreements and conditions contained herein that
are required to be performed or complied with by it on or before the Closing
Date, including without limitation, payment of the Purchase Price.
(c) Purchaser shall have received all consents,
permits, approvals and other authorizations that may be required from, and made
all such filings and declarations that may be required with, any person pursuant
to any law, statute, regulation or rule (federal, state, local and foreign), or
pursuant to any agreement, order or decree by which Purchaser or any of its
assets is bound, in connection with the transactions contemplated by this
Agreement, except for (i) notice requirements which may be fulfilled subsequent
to the Closing Date and (ii) consents, permits, approvals, authorizations,
filings and declarations the failure to obtain or to undertake which will not
adversely affect Purchaser's ability to perform its obligations under this
Agreement or any agreement executed in accordance herewith.
17
(d) The Company shall have received a certificate,
dated the Closing Date and signed by the President of the general partner of
Purchaser, certifying that the conditions in Sections 3.2(a), (b) and (c) are
satisfied on and as of such date.
(e) The Company shall have received an opinion
(reasonably satisfactory to the Company and its counsel), dated the Closing
Date, from outside counsel to Purchaser in substantially the form of Exhibit C
hereto.
SECTION 4. MISCELLANEOUS
(a) Each party hereto shall pay its own expenses
(including, without limitation, counsel fees) in connection with the
transactions contemplated hereby, whether or not such transactions shall be
consummated. The Company and the Purchaser shall share all joint filing fees and
related expenses equally.
(b) Except as otherwise provided herein, covenants,
agreements, representations and warranties made in this Agreement, or any
certificate or instrument delivered pursuant to or in connection therewith shall
survive the execution and delivery of this Agreement.
(c) All representations, 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 hereto whether so expressed or not; provided that Purchaser shall not
assign its rights in this Agreement to any unrelated third party without first
obtaining the prior written consent of the Company, and provided further that,
notwithstanding the above provision, Purchaser may assign its rights in this
Agreement to any 50% or greater controlled Affiliate of Colony Capital, Inc.
(d) All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
sent by facsimile or mailed by certified or registered mail; return receipt
requested, addressed as follows:
If to Purchaser, to: Colony Investors III, L.P.
c/o Colony Capital, Inc.
1999 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xx. Xxxxxx X. Xxxxx
18
with a copy to: Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxxxx, Esq.
If to the Company, to: Franchise Finance Corporation of America
The Perimeter Center
00000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xx. X.X. Xxxxxxxxx
with a copy to: Franchise Finance Corporation of America
The Perimeter Center
00000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
with a copy to: Xxxxx Xxxx
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxx X. Xxxxxx , Esq.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others. All notices, requests,
consents and other communications hereunder shall be deemed to have been duly
given or served on the date on which personally delivered or on the date
actually received, with receipt acknowledged.
(e) This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to the
conflict of laws provisions thereof.
(f) This Agreement and the Other Documents constitute
the sole and entire agreement of the parties with respect to the subject matter
hereof and supersedes any and all prior or contemporaneous agreements,
discussions, representations, warranties or other communications. All Schedules
and Exhibits hereto are hereby incorporated herein by reference.
19
(g) This Agreement 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.
(h) As used in this Agreement, knowledge shall mean,
with respect to any person, actual knowledge of such person (without imputing
any knowledge to such person), if an individual, or of any executive officer of
such Person, if not an individual.
(i) This Agreement may not be amended or modified
without the written consent of the Company and Purchaser, nor shall any waiver
be effective against any party unless in a writing executed on behalf of such
party.
(j) If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms to the fullest extent permitted by law.
(k) The titles and subtitles used in this Agreement
are for convenience only and are not to be considered in construing or
interpreting any term or provisions of this Agreement.
20
IN WITNESS WHEREOF, the Company and Purchaser have caused this
Agreement to be executed and delivered by the undersigned duly authorized
officers as of the day and year first above written.
FRANCHISE FINANCE CORPORATION OF AMERICA
By: /s/ XXXXXX X. XXXXXXXXX
-------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and Chief
Executive Officer
COLONY INVESTORS III, L.P.
By: Colony Capital III, L.P.
By: ColonyGP III, Inc.
By: /s/ XXXXXX X. XXXXX
---------------
Name: Xxxxxx X. Xxxxx
Title: President and Chief
Executive Officer
