SECURITIES PURCHASE AGREEMENT
between
WESTREC MARINA MANAGEMENT, INC.,
and
COMMERCIAL ASSETS, INC.
Shares of Class A Common Stock
Shares of Class B Common Stock
and
Warrants to Purchase Shares of Class B Common Stock
Dated as of March 26, 1998
114038.12-Los Angeles Server 1A Draft May 11, 1998 - 10:58 AM
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS..........................................................1
Section 1.1 Definitions.............................................1
Section 1.2 Rules of Construction..................................10
ARTICLE II
PURCHASE AND SALE OF SECURITIES; CLOSING............................11
Section 2.1 Authorization and Issuance of Securities...............11
Section 2.2 Purchase and Sale of Securities........................11
Section 2.3 Closing Deliveries ...................................12
Section 2.4 Delivery Expenses ....................................13
Section 2.5 Issue Taxes ..........................................14
Section 2.6 Lost, Etc. Securities ................................14
Section 2.7 Indemnification ......................................14
Section 2.8 Indemnification Threshold..............................16
Section 2.9 Maximum Losses.........................................16
Section 2.10 Subrogation...........................................17
Section 2.11 Damages...............................................17
ARTICLE III
CLOSING CONDITIONS..................................................17
Section 3.1 Conditions to Purchaser's Obligations..................17
Section 3.2 Conditions to the Company's Obligations................19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................21
Section 4.1 Company's Due Incorporation and Good Standing..........21
Section 4.2 Capitalization.........................................21
Section 4.3 [Reserved].............................................22
Section 4.4 Authority..............................................22
Section 4.5 Authorization, Etc. of Shares..........................22
Section 4.6 Authorization of Warrant Shares........................22
Section 4.7 Authorization, Etc. of Registration Rights Agreement...23
Section 4.8 Authorization, Etc. of Stockholder Agreement...........23
i
Section 4.9 No Violation or Conflict; No Default...................23
Section 4.10 No Material Adverse Change; Financial Statements......25
Section 4.11 Full Disclosure.......................................25
Section 4.12 Private Offering......................................25
Section 4.13 No Brokers............................................26
Section 4.14 Representations and Warranties........................26
Section 4.15 Litigation............................................26
Section 4.16 Labor Relations.......................................27
Section 4.17 Taxes.................................................27
Section 4.18 Environmental Matters.................................28
Section 4.19 ERISA.................................................30
Section 4.20 Properties............................................31
Section 4.21 Compliance with Laws..................................32
Section 4.22 Insider Transactions..................................32
Section 4.23 Certain Transfers.....................................32
Section 4.26 Survival of Representations and Warranties.............33
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.....................33
Section 5.1 Purchase for Own Account...............................33
Section 5.2 Accredited Investor....................................33
Section 5.3 Authorization..........................................34
Section 5.4 Capitalization.........................................34
Section 5.5 No Brokers.............................................34
Section 5.6 Survival of Representations and Warranties.............35
ARTICLE VI
COVENANTS...........................................................35
Section 6.1 Further Actions........................................35
Section 6.2 Additional Covenants of the Company....................35
ARTICLE VII
TERMINATION.........................................................37
Section 7.1 Termination Events.....................................37
Section 7.2 Effect of Termination..................................38
ARTICLE VIII
MISCELLANEOUS.......................................................38
ii
Section 8.1 Notices................................................38
Section 8.2 Successors and Assigns.................................40
Section 8.3 No Waivers; Amendments.................................40
Section 8.4 Counterparts...........................................40
Section 8.5 Section Headings.......................................40
Section 8.6 GOVERNING LAW..........................................40
Section 8.7 Entire Agreement.......................................41
Section 8.8 Severability...........................................41
Section 8.9 Attorneys' Fees........................................41
Section 8.11 Knowledge.............................................42
EXHIBITS
EXHIBIT A Certificate of Incorporation
EXHIBIT B Registration Rights Agreement
EXHIBIT C Sachs Warrant Agreement
EXHIBIT D Stockholder Agreement
EXHIBIT E Tax Allocation Agreement
EXHIBIT F Westrec Warrant Agreement
SCHEDULES
4.1
4.9(a)(3)
4.15
4.16
4.17
4.18(d)
4.18(e)
4.19
4.20
4.22
4.24
iii
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement") is dated
as of March 26, 1998, and entered into by and between WESTREC MARINA MANAGEMENT,
INC., a California corporation (the "Company") and COMMERCIAL ASSETS, INC., a
Maryland corporation (the "Purchaser").
In consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the Company and the Purchaser agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions
As used in this Agreement, the following terms have the
following meanings:
"Affiliate," with respect to any Person, means any other
Person that, directly or indirectly, controls, is controlled by or is under
common control with that Person. For purposes of the foregoing, "control," when
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by contract, or
otherwise, and the terms "controlled" and "controlling" shall have meanings
correlative to the foregoing. In the case of a Person who is an individual, the
term "Affiliate" shall include (i) members of his or her immediate family (as
defined in Instruction 2 of Item 404(a) of Regulation S-K under the Securities
Act) and (ii) trusts, the trustee or the beneficiaries of which are that Person
or members of his or her immediate family, as determined in accordance with the
foregoing clause (i).
"Annual Financial Statements" means, with respect to any year,
audited consolidated financial statements of the Company and its consolidated
Subsidiaries, including a balance sheet, income statement, statement of
stockholders' equity and statement of cash flows, as of the end of and for such
year, prepared in accordance with GAAP and accompanied by an opinion of the
Company's independent public accountants, which statements (beginning with the
fiscal year 1998 statement) must include the operations of the workers
compensation and group medical plans maintained for employees of the Company and
its Subsidiaries.
"Audit" means any audit, assessment of Taxes, other
examination by any Tax Authority, proceeding, or appeal of a ruling in any of
the foregoing, relating to Taxes.
"Board of Directors" means, as to any corporation, its board
of directors or any duly authorized committee thereof.
"Business Day" means any day other than a Saturday, Sunday, or
other day when commercial banks are required or authorized by Law to be closed
for business in Los Angeles, California.
"Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock,
including, without limitation, all common stock and preferred stock.
"Cash Purchase Price" has the meaning ascribed thereto in
Section 2.2(c).
"Certificate of Amendment" means the certificate of amendment
to the Company's Articles of Incorporation, substantially in the form of Exhibit
A hereto.
"Charter Documents" means the Articles of Incorporation,
Bylaws and any other organizational document, as amended or restated (or both)
to date, of the Company.
"Class A Common Stock" means the Class A Common Stock, par
value $.10 per share, of the Company.
"Class B Common Stock" means the Class B Common Stock, par
value $.10 per share, of the Company.
"Closing" has the meaning ascribed thereto in Section 2.2(c).
"Closing Date" has the meaning ascribed thereto in Section
2.2(c).
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute or law thereto.
"Common Stock" means the Class A Common Stock and the Class B
Common Stock.
2
"Consolidated EBITDA" means, for any period, the Consolidated
Net Income of the Company for such period adjusted by adding thereto (to the
extent deducted in determining Consolidated Net Income), without duplication,
the sum of (i) consolidated income tax expense of the Company and its
Subsidiaries for such period, and consolidated depreciation and amortization
expense of the Company and its Subsidiaries for such period, provided, that
consolidated income tax expense and consolidated depreciation and amortization
of a Subsidiary that is a less than a wholly-owned Subsidiary shall only be
added to the extent of the equity interest of the Company and its wholly-owned
Subsidiaries in such Subsidiary, (ii) Consolidated Fixed Charges of the Company
for such period, and (iii) (to the extent not already reflected in Consolidated
EBITDA) the difference between (x) the earnings of Westrec Financial derived, in
the insurance plan year ending during such period, from the workers compensation
and group medical plans maintained for employees of the Company and its
Subsidiaries minus (y) an estimate reasonably prepared by Company and reasonably
acceptable to the Purchaser of the aggregate amount of all claims expected to be
incurred by those plans for that insurance plan year.
"Consolidated Fixed Charges" of the Company means, for any
period, the aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued, or
scheduled to be paid or accrued (including, in accordance with the following
sentence, interest attributable to capitalized lease obligations) by the Company
and its Subsidiaries during such period, including (i) original issue discount
and non-cash interest payments or accruals on any indebtedness, (ii) the
interest portion of all deferred payment obligations and (iii) all commissions,
discounts and other fees and charges owed with respect to bankers acceptances
and letters of credit financings and currency and interest swap and hedging
obligations, in each case to the extent attributable to such period, and (b) the
amount of dividends accrued or payable by the Company or any of its Subsidiaries
in respect of Preferred Stock (other than to the Company or a wholly-owned
Subsidiary of the Company). For purposes of this definition, (x) interest on a
capitalized lease obligation shall be deemed to accrue at an interest rate
reasonably determined by the Company to be the rate of interest implicit in such
capitalized lease obligation in accordance with GAAP and (y) interest expense
attributable to any indebtedness represented by the guarantee by the Company or
a Subsidiary of the Company of an obligation of another Person shall be deemed
to be the interest expense attributable to the indebtedness guaranteed.
"Consolidated Net Income" means, for any period, the net
income (or loss) of the Company and its Subsidiaries (determined on a
consolidated basis in accordance with GAAP) for such period, adjusted to exclude
(only to the extent included in computing such net income (or loss) and without
3
duplication): (a) all gains and losses which are either extraordinary or are
either unusual or nonrecurring (as determined in accordance with GAAP)
(including any gain or loss from the sale or other disposition of assets or from
the issuance or sale of any capital stock), less all fees and expenses relating
thereto, (b) the net income or loss of any person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition, (c)
the amount of any finders' fees or similar fees paid to the Company or its
Subsidiaries by the Purchaser or any of its Affiliates in connection with the
acquisition by the Purchaser or such Affiliates of a marina property, (d) all
reasonable expenses incurred by the Company or its Subsidiaries in connection
with the review, evaluation, development and acquisition of new marina
properties to be managed by the Company, and (e) any expenses incurred by the
Company as a result of payment of any commissions or fees to Xxxxx Xxxx.
"Contracts" has the meaning ascribed thereto in Section
4.9(a)(3).
"Conversion Notice" means a notice sent by either the
Purchaser or a Converting Transferee to the Company. If sent by the Purchaser,
the Conversion Notice will (a) represent that the Purchaser has entered into an
agreement to transfer Class B Common Stock to a Converting Transferee in a
transfer permitted under the Stockholder Agreement, and (b) designate the
Converting Transferee to whom the Company must issue shares of Class A Common
Stock in accordance with the terms of Section 6.5. If sent by a Converting
Transferee, the Conversion Notice will (x) represent that the sender is a
Converting Transferee that received shares of Class B Common Stock or Warrants
in a transfer permitted under the Stockholder Agreement, and (y) set forth the
number of such shares of Class B Common Stock that the Converting Transferee
desires the Company to purchase in accordance with the terms of Section 6.5.
"Converting Transferee" means a holder of any Purchaser
Securities other than the Purchaser that either (i) is a Permitted Transferee
(as defined in the Stockholder Agreement) that (x) is not a Subsidiary of the
Purchaser or (y) does not own, directly or indirectly, under the constructive
ownership rules of section 544 of the Code, more than 9.8% of the Purchaser's
Capital Stock, or (ii) an Unaffiliated Party (as defined in the Stockholder
Agreement).
"Documents" means this Agreement, the Westrec Warrant
Agreement, the Sachs Warrant Agreement, the Registration Rights Agreement, the
Stockholder Agreement, and the Tax Sharing Agreement, collectively, or each of
such documents singularly, and any documents or instruments contemplated by or
executed in connection with any of them or in connection with the Transactions.
4
"Environmental Claim" means any claim, action, cause of
action, or investigation or any assertion by any Person of potential liability
(including potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on, or resulting from (a)
the presence, or release into the environment, of any Material of Environmental
Concern at any location now or previously owned, leased, used or operated by the
Company or any Partnership, or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all federal, state, local, and
foreign laws and regulations relating to pollution or protection of human health
or the environment (including ambient air, surface water, ground water, land
surface or subsurface strata, and natural resources), including laws and
regulations relating to emissions, discharges, releases, or threatened releases
of Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern.
"Employee Benefit Plan" has the meaning ascribed thereto in
Section 4.19.
"Enterprise Value" means, at any time during any fiscal year,
an amount equal to (i) five times Consolidated EBITDA for the immediately
preceding fiscal year (the "Preceding Year"), plus (ii) the fair market value,
as mutually determined by the Company and the Purchaser, of any investments
(other than in the Partnerships) held by the Company and its Subsidiaries, plus
(iii) the sum of all cash and cash equivalents held by the Company and its
Subsidiaries, plus (iv) the trade receivables (adjusted as appropriate for
collectibility) of the Company and its Subsidiaries, plus (v) any normal
pre-paid expenses of the Company and its Subsidiaries, paid in the ordinary
course of business, plus (vi) all normal inventory of the Company and its
Subsidiaries, acquired for resale in the ordinary course of business, valued at
the lower of cost or market value, plus (vii) any receivable from Affiliates of
the Company actually collected within 90 days of the end of the Preceding Year,
minus (viii) all Liabilities of the Company or any of its Subsidiaries, in each
case or shown on the balance sheet included in the Annual Financial Statements
for the Preceding Year, minus (ix) the fair market value (or, if less, the
redemption price) of any outstanding shares of stock (a) of the Company, other
than Common Stock, and (b) of any Subsidiary of the Company, other than stock
held by the Company or any Subsidiaries of the Company. For purposes of the
above calculation, (a) the amounts in clauses (ii) - (ix) will be determined
with reference to, or as of, the end of the Preceding Year, and (b) Westrec
Equities, Inc. shall not be deemed to be a Subsidiary of the Company.
5
"Enterprise Value Per Common Share" means, on any date, the
Company's Enterprise Value on that date divided by the number of shares of
Common Stock issued and outstanding on that date.
"Equity Interest" means (i) with respect to a corporation, any
and all issued and outstanding Capital Stock and warrants, options or other
rights to acquire Capital Stock and (ii) with respect to a partnership, limited
liability company or similar Person, any and all units, interests, or other
equivalents of, or other ownership interests in any such Person and warrants,
options or other rights to acquire any such units or interests.
"ERISA" means The Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute or law thereto.
"ERISA Affiliate" has the meaning ascribed thereto in Section
4.19.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder, and any successor
statute or law thereto.
"GAAP" means those generally accepted accounting principles
and practices which are recognized as such from time to time by the American
Institute of Certified Public Accountants acting through its Accounting
Principles Board or by the Financial Accounting Standards Board or through other
appropriate boards or committees thereof and which are consistently applied for
all periods after the date hereof.
"Governmental Body" means (i) any federal, state, local, or
foreign governmental authority or regulatory body, (ii) any subdivision, agency,
commission, or authority thereof, or any quasi-governmental or private body
exercising any governmental regulatory authority thereunder, (iii) any Person
directly or indirectly owned by and subject to the control of any of the
foregoing, or (iv) any court, arbitrator, or other judicial or quasi-judicial
tribunal.
"Haulover Debt" means the obligation of Westrec Equities, Inc.
evidenced by a note in the approximate amount of $420,000 executed by Westrec
Equities Inc. in favor of California United Bank, and as to which the Company
may be a guarantor or a co-obligor.
6
"Holder" or "Holders" means the Purchaser and any Affiliate
thereof that becomes a holder of any of the Securities, so long as such Person
holds any Securities.
"Initial Purchase Price" means $1.5 million.
"Laws" has the meaning ascribed thereto in Section 4.9.
"Liabilities" of the Company means all amounts that are shown
as liabilities on a consolidated balance sheet of the Company prepared in
accordance with GAAP plus, to the extent not so shown, any preferred stock of
the Company (valued at the greater of the liquidation preference of such
preferred stock or any amount required to be paid upon redemption or repurchase
thereof), regardless of whether such preferred stock is required to be redeemed
or repurchased by the Company or any Subsidiary; provided that, to the extent
reflected on the Company's 1997 Audited Financial Statements, the Haulover Debt
as to which Xxxxxxx X. Xxxxx has indemnified the Company in Section 3.10 of the
Stockholder Agreement shall not be counted as a Liability of the Company.
"Lien" means any mortgage, pledge, lien, encumbrance, charge
or adverse claim affecting title or resulting in a charge against real or
personal property, or security interest of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof, any
option or other agreement to sell and any filing of any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Losses" has the meaning ascribed thereto in Section 2.7.
"Material Adverse Effect" means (a) a material adverse effect
upon the business, operations, properties, assets, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, or (b) a material
adverse effect on the ability of the Company or any other party to the Documents
(other than the Company) to perform its respective obligations under this
Agreement or any of the other Documents.
"Materials of Environmental Concern" means chemicals,
pollutants, contaminants, industrial, toxic or hazardous wastes, substances or
constituents, petroleum or petroleum products (or any by-product or constituent
thereof), asbestos or asbestos-containing materials, or PCBs.
"Notice" has the meaning ascribed thereto in Section 8.1.
7
"Outside Date"means May 31, 1998.
"Partnerships" means PS Marinas I, a California Limited
Partnership, PS Marinas 3, a California Limited Partnership, PS Marinas 4, a
California Limited Partnership, PS Marinas 5, a California Limited Partnership,
Tower Park Marina Investors, L.P., a California limited partnership, and
Southwinds.
"Person" means an individual, partnership, corporation, trust
or unincorporated organization or a government or agency or political
subdivision thereof.
"Preferred Stock" has the meaning ascribed thereto in Section
4.2.
"Proceedings" has the meaning ascribed thereto in Section 4.15
"Purchase Price Adjustment" has the meaning ascribed thereto
in Section 2.2(c)(ii). "Purchaser Securities" means (a) 326,740 shares of
newly-issued shares of Class A Common Stock, (b) the Warrants, and (c) 82,351
shares of newly-issued shares of Class B Common Stock.
"Put Notice" has the meaning ascribed thereto in Section
6.4(a).
"Put Date" has the meaning ascribed thereto in Section 6.4(b).
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, by and between the Company and the
Purchaser, substantially in the form attached hereto as Exhibit B.
"Sachs Warrant Agreement" means the Warrant Agreement, to be
dated as of the Closing Date, by and between the Company and Xxxxxxx X. Xxxxx,
substantially in the form attached hereto as Exhibit C.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder, and any successor statute
or law thereto.
"Securities" means, collectively, the Shares, the Warrants,
and the Warrant Shares, and "Security" means any of the Shares, the Warrants or
the Warrant Shares, as in the context may be appropriate.
8
"Shares" means the shares of newly-issued Common Stock to be
purchased pursuant to this Agreement.
"Southwinds" means Southwinds Marina, L.L.C., a Delaware
limited liability company.
"Stockholder Agreement" means the Stockholder Agreement, to be
dated as of the Closing Date, by and among the Company, the Purchaser, Westrec
Financial, Xxxxxxx Xxxxx, and each other Person who becomes a party thereto in
accordance with the terms thereof, substantially in the form attached hereto as
Exhibit D.
"Subsidiary" of any Person means (a) a corporation in which
such Person, a subsidiary of such Person, or such Person and one or more
subsidiaries of such Person, directly or indirectly, at the date of
determination, has either (i) a majority ownership interest or (ii) the power,
under ordinary circumstances, to elect, or to direct the election of, a majority
of the board of directors of such corporation, or (b) a partnership in which
such Person, a subsidiary of such Person, or such Person and one or more
subsidiaries of such Person (i) is, at the date of determination, a general
partner of such partnership, or (ii) has a majority ownership interest in such
partnership or the right to elect, or to direct the election of, a majority of
the governing body of such partnership, or (c) any other Person (other than a
corporation or a partnership) in which such Person, a subsidiary of such Person,
or such Person and one or more subsidiaries of such Person has either (i) at
least a majority ownership interest or (ii) the power to elect, or to direct the
election of, a majority of the directors or other governing body of such Person.
"Taxes" means all federal, state, local, and foreign taxes,
and other assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.
"Tax Allocation Agreement" means the Tax Allocation Agreement
to be dated as of the Closing Date, between the Company, Westrec Financial and
the other parties thereto, substantially in the form attached hereto as Exhibit
E.
"Tax Authority" means the Internal Revenue Service and any
other domestic or foreign governmental authority responsible for the
administration of any Taxes.
"Tax Returns" means all federal, state, local, and foreign tax
returns, any declarations, statements, reports, schedules, forms, and
information returns relating to Taxes, including any amendment to any of them.
9
"Transactions"means the transactions contemplated by this
Agreement and the other Documents.
"Warrants" means warrants to purchase shares of Class B Common
Stock at the times and in accordance with the terms and conditions set forth in
the Westrec Warrant Agreement.
"Warrant Shares" means the shares of Class B Common Stock
issuable upon exercise of the Warrants.
"Westrec Equities, Inc." means Westrec Equities, Inc., a
California corporation and a wholly-owned Subsidiary of the Company.
"Westrec Financial" means Westrec Financial, Inc., a
California corporation and the owner as of the date hereof of all of the
outstanding equity interests in the Company.
"Westrec Warrant Agreement" means the Warrant Agreement, to be
dated as of the Closing Date, by and between the Company and the Purchaser,
substantially in the form attached hereto as Exhibit F.
Section 1.2 Rules of Construction
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) words in the singular include the plural, and words
in the plural include the singular;
(d) provisions apply to successive events and transactions;
(e) "herein," "hereof," "hereunder," and other words of
similar import refer to this Agreement as a whole and
not to any particular section or other subdivision;
and
10
(f) "including" means including without limitation.
ARTICLE II
PURCHASE AND SALE OF SECURITIES; CLOSING
Section 2.1 Authorization and Issuance of Securities
(a) The Company has authorized the issuance and sale
to the Purchaser of the Shares and the Warrants.
(b) The Warrants will be evidenced by a Warrant
certificate, substantially in the form attached as Exhibit A to the Westrec
Warrant Agreement and dated the Closing Date. The Warrants will be exercisable,
at the times and in the manner provided in the Westrec Warrant Agreement and the
Warrants, for a number of Warrant Shares as provided in the Westrec Warrant
Agreement. The terms and provisions of the Westrec Warrant Agreement constitute,
and are hereby expressly made, a part of this Agreement, and the Company and the
Purchaser, by their execution and delivery of this Agreement, expressly agree to
those terms and provisions and to be bound thereby.
(c) Each Holder of Securities will have certain
registration rights with respect thereto as set forth in the Registration Rights
Agreement.
Section 2.2 Purchase and Sale of Securities
(a) Purchase and Sale. Subject to the terms and
conditions set forth herein and in reliance on the respective representations
and warranties set forth or incorporated by reference herein, the Company agrees
to sell to the Purchaser, and the Purchaser agrees to purchase from the Company,
the Purchaser Securities.
(b) Closing. The purchase and sale of the Securities
will take place at a closing (the "Closing") at the offices of Skadden, Arps,
Slate, Xxxxxxx & Xxxx, LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000 at 9:00 a.m., Los Angeles time, on the second Business Day
after all of the conditions set forth in Article III have been satisfied or
waived, or such other Business Day as may be agreed upon by the Purchaser and
the Company (the "Closing Date"). Other than as set forth in Section 7.1, the
failure to consummate the purchase and sale provided for herein at the time and
place determined under this Section 2.2(b) will not result in the termination of
this Agreement nor relieve any party of any obligation hereunder.
11
(c) Payment of Purchase Price.
(i) At the Closing, the Purchaser will pay the
Initial Purchase Price to the Company.
(ii) The aggregate consideration for the Shares and
the Warrants will be (A) an amount equal to the Company's Enterprise
Value Per Common Share on the Closing Date times 409,091 (the "Cash
Purchase Price"), plus (B) the warrants granted under the Sachs Warrant
Agreement (which warrants are being distributed by the Company solely
to Westrec Financial and are being sold by Westrec Financial to Xxxxxxx
X. Xxxxx). As soon as practicable after the delivery by the Company to
the Purchaser of the Company's 1997 Annual Financial Statements, the
Company and the Purchaser will calculate the Cash Purchase Price. If
the Cash Purchase Price exceeds the Initial Purchase Price, the
Purchaser will pay the excess to the Company. If the Cash Purchase
Price is less than the Initial Purchase Price, the Company will refund
the difference to the Purchaser. Any payment due under this paragraph
(a "Purchase Price Adjustment") must be made as promptly as possible
after the determination of the Cash Purchase Price, in the manner
prescribed for the payment of the Initial Purchase Price in Section
2.3(a)(1) hereof.
(iii) The Company and the Purchaser hereby agree to
allocate the purchase price with respect to the Shares and the
Warrants, based on their fair market value, as follows: 100% to the
Shares; 0% to the Warrants. Contemporaneously with the payment of any
Purchase Price Adjustment, the Company and the Purchaser will agree
upon an allocation of the purchase price between the Shares and the
Warrants, based on each Security's fair market value, except that the
failure to agree upon the allocation will not relieve any party from
its obligation hereunder to pay a Purchase Price Adjustment. The
Company and the Purchaser hereby agree that all Tax Returns filed by
the Company and the Purchaser will be consistent in all material
respects with the allocation determined as set forth in this Paragraph
2.2(c)(iii).
Section 2.3 Closing Deliveries
At the Closing:
(a) The Company will deliver to the Purchaser:
12
(1) certificates representing the Shares and the Warrants,
duly endorsed (or accompanied by duly executed stock powers in such
permitted denomination or denominations and registered in the
Purchaser's name or the name of such nominee or nominees as the
Purchaser may request), dated the Closing Date, against payment of the
purchase price therefor by one or more intra-bank or Federal funds bank
wire transfers of same day funds to such bank account within the United
States as the Company shall designate at least two Business Days prior
to the Closing);
(2) duly executed copies of each of the Westrec Warrant
Agreement, the Sachs Warrant Agreement, the Registration Rights
Agreement, the Stockholder
Agreement, and the Tax Allocation Agreement; and
(3) a certificate to the effect that each of the Company's
representations and warranties set forth or incorporated by reference
in this Agreement was accurate in all respects as of the date hereof
and is accurate in all respects as of the Closing Date, as if made on
the Closing Date.
(b) The Purchaser will deliver to the Seller:
(1) one or more wire transfers in accordance with Section 2.3
(a)(1) above;
(2) duly executed copies of each of the Westrec Warrant
Agreement, the Sachs Warrant Agreement, the Registration Rights
Agreement, and the Stockholder Agreement; and
(3) a certificate to the effect that each of the Purchaser's
representations and warranties in this Agreement was accurate in all
respects as of the date hereof and is accurate in all respects as of
the Closing Date as if made on the Closing Date.
Section 2.4 Delivery Expenses
If a Holder surrenders any Securities to the Company for any
reason, the Company agrees to pay the cost of delivering to such Holder's office
or to the office of such Holder's designee from the Company, insured (at such
Holder's expense) to such Holder's reasonable satisfaction, each Security issued
13
in substitution, replacement or exchange for, or upon exercise of, the
surrendered Security.
Section 2.5 Issue Taxes
The Company agrees to pay all sales, transfer, and other
similar Taxes (other than Taxes in the nature of income, franchise or gift
taxes) and governmental fees arising in connection with the issuance, sale,
delivery or transfer by the Company to each Holder of the Shares, the Warrants
and the Warrant Shares, as the case may be, and the execution and delivery of
the other Documents and any modification of any of such Securities and Documents
and will hold such Holder harmless without limitation as to time against any and
all liabilities with respect to all such Taxes and fees. The obligations of the
Company under this Section 2.5 shall survive the exercise of the Warrants and
the termination of this Agreement and the other Documents.
Section 2.6 Lost, Etc. Securities
Notwithstanding anything to the contrary contained in the
Charter Documents or the Westrec Warrant Agreement, if a mutilated Security or a
Warrant Share is surrendered to the Company by a Holder for replacement or if
the Holder of a Security or Warrant Share claims and submits an affidavit or
other evidence, reasonably satisfactory to the Company, to the effect that the
Security or Warrant Share has been lost, destroyed or wrongfully taken, the
Company shall issue, or cause to be issued, a replacement Security or Warrant
Share if the customary requirements relating to replacement securities are
reasonably satisfied; provided, that the affidavit of an authorized officer of
such Holder, setting forth the fact of loss, theft or destruction and of its
ownership of the Security or Warrant Share at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof, and no further
indemnity shall be required as a condition to the execution and delivery of a
new Security or Warrant Share other than the unsecured written agreement of such
owner, reasonably satisfactory to the Company, to indemnify the Company, or, at
the option of the Holder, an indemnity bond in the amount of the Security or
Warrant Share remaining outstanding.
Section 2.7 Indemnification
In addition to all other sums due hereunder or provided for in
this Agreement or any of the other Documents and any and all obligations of the
Company to indemnify the Purchaser hereunder or under any of the other
Documents, the Company hereby agrees, without limitation as to time, to
indemnify the Purchaser, each of its Affiliates and each director, officer,
14
partner, employee, counsel, agent or representative of the Purchaser or any of
its Affiliates (collectively, the "Indemnified Parties") against, and hold each
of them harmless from, to the fullest extent lawful, all losses, claims,
damages, taxes, liabilities, costs (including, without limitation, costs of
preparation and reasonable fees and other charges and expenses of counsel and
customary per diem reimbursement or fees for time spent preparing for or
participating in any deposition or giving testimony) and reasonable expenses,
including expenses of investigation (collectively, "Losses"), incurred by any of
them, arising out of or in connection with (i) the breach of any representation
or warranty of the Company set forth in or incorporated by reference in this
Agreement, or (ii) any pollution or threat to human health or the environment
that is related in any way to the Company and its Subsidiaries' respective
operations, including, without limitation, all on-site and off-site activities
involving Materials of Environmental Concern, and that occurred, existed, or
arises out of conditions that existed or were caused, in whole or in part, on or
before the Closing Date; provided, however, that the Company shall not be liable
to any Indemnified Party for any Losses to the extent that it shall be
determined by a court of competent jurisdiction (which determination is not
subject to appeal or review) that such Losses arose from any act or failure to
act of such Indemnified Party constituting gross negligence or willful
misconduct, so long as such acts were not taken by such Indemnified Party in
good faith or in reasonable reliance upon any of the representations,
warranties, covenants, or promises of the Company or its Affiliates included or
incorporated by reference herein or in any other Document. The Company agrees to
reimburse any Indemnified Party promptly for all such Losses as they are
incurred by such Indemnified Party (subject to repayment to the Company to the
extent that it is ultimately determined that an Indemnified Party is not
entitled to indemnification hereunder). The obligations of the Company to each
Indemnified Party hereunder shall be separate obligations, and the Company's
liability to any Indemnified Party hereunder shall not be extinguished solely
because any other Indemnified Party is not entitled to indemnity hereunder.
Subject to Section 4.26, the obligations of the Company under this Section 2.7
shall survive the purchase of the Securities, the exercise of the Warrants, the
purchase of any Warrant Shares, any transfer of the Securities by the Purchaser
and the termination of this Agreement and any of the other Documents.
In case any action, claim, suit, citation or proceeding (an
"Action") shall be brought against any Indemnified Party with respect to which
indemnity may be sought against the Company hereunder, such Indemnified Party
shall promptly notify the Company in writing and the Company shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party and payment of all fees and other charges and expenses
incurred in connection with the defense thereof. The failure to so notify the
Company shall not affect any obligation it may have to any Indemnified Party
15
under this Agreement except to the extent that (as finally determined by a court
of competent jurisdiction, which determination is not subject to review or
appeal) such failure materially and adversely prejudiced the Company's ability
to defend such Action. Each Indemnified Party shall have the right to employ
separate counsel in any such Action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless: (i) the Company has agreed to pay such fees and other
charges and expenses, it being understood that the Company is under no
obligation to agree to do so except as set forth in clauses (ii) - (iii) of this
paragraph; (ii) the Company has failed reasonably promptly to assume the defense
and employ counsel reasonably satisfactory to such Indemnified Party; or (iii)
the named parties to any such Action (including any impleaded parties) include
any Indemnified Party and the Company or an Affiliate of the Company, and such
Indemnified Party and the Company shall have been advised in writing by counsel
that a conflict of interest may exist if the Company's counsel represents such
Indemnified Party and the Company or its Affiliate; provided that, if such
Indemnified Party notifies the Company in writing that it elects to employ
separate counsel in the circumstances described in clause (i), (ii) or (iii)
above, the Company shall not have the right to assume the defense thereof,
provided, however, that the Company shall not, in connection with any one such
Action or separate but substantially similar or related Actions arising out of
the same general allegations or circumstances, be responsible hereunder for the
fees and other charges and expenses of more than one such firm of separate
counsel (in addition to any local counsel), which counsel shall be designated by
such Indemnified Party. The Company shall not be liable for any settlement of
any such Action effected without its written consent (which shall not be
unreasonably withheld), except as set forth below. The Company agrees that it
will not, without the Indemnified Party's prior written consent, consent to
entry of any judgment or settle or compromise any pending or threatened Action
in respect of which indemnification or contribution may be sought hereunder
unless the foregoing contains an unconditional release, in form and substance
reasonably satisfactory to the Indemnified Parties, of each of the Indemnified
Parties from all liability and obligation arising therefrom.
If the indemnification provided for in this Section 2.7 is
unavailable to, or insufficient to hold harmless, any Indemnified Party in
respect of any Losses referred to herein, then the Company shall have an
obligation to contribute to the amount paid or payable by such Person as a
result of such Losses in such proportion as is appropriate to reflect the
relative fault of the Company, its subsidiaries and Affiliates, on the one hand,
and such Indemnified Party, its Subsidiaries and Affiliates, on the other hand,
in connection with the actions which resulted in such Losses as well as any
other relevant equitable considerations. The amount paid or payable by any such
16
Person as a result of the Losses referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such Person in
connection with any investigation or Action.
Section 2.8 Indemnification Threshold
No claim for indemnification may be made by any Indemnified
Party hereunder unless the aggregate of all Losses incurred by all Indemnified
Parties and subject to indemnification exceeds $100,000 and only to the extent
of any such Losses in excess of $100,000.
Section 2.9 Maximum Losses
No claim for indemnification of Losses (whether in an action
for indemnification or otherwise) may be made by an Indemnified Party hereunder
to the extent that the aggregate Losses claimed (including any Losses previously
recovered) by all Indemnified Parties exceeds the Cash Purchase Price, except
that this Section 2.9 will not apply to or limit any Indemnified Party's right
to indemnification arising under clause (ii) of Section 2.7, the breach of any
representation or warrant in Section 4.18, or any other provision hereof
relating to Environmental Laws.
Section 2.10 Subrogation
If the Company makes any payment under Section 2.7 in respect
of any Losses, the Company shall be subrogated, to the extent of such payment,
to the rights of the Indemnified Party against any insurer or third party with
respect to such Losses; provided, however, that the Company shall not have any
rights of subrogation with respect to the Indemnified Party or any of its
Affiliates or any of its or its Affiliates' officers, directors, agents or
employees.
Section 2.11 Damages
Notwithstanding anything to the contrary elsewhere in this
Agreement or any other Document, neither the Company nor its Affiliates shall,
in any event, be liable to any Indemnified Party for any consequential damages,
including, but not limited to, loss of revenue or income, cost of capital, or
loss of business reputation or opportunity relating to the breach or alleged
breach of this Agreement. Each party agrees that it will not seek punitive
damages as to any matter under, relating to or arising out of the Transactions.
17
ARTICLE III
CLOSING CONDITIONS
Section 3.1 Conditions to The Purchaser's Obligations
The obligation of the Purchaser to purchase and pay for the
Securities at the Closing is subject to the satisfaction or waiver of each of
the following conditions on or before the Closing Date:
(a) Delivery of Documents. The Company shall have
delivered to the Purchaser, in form and substance satisfactory to the
Purchaser and its counsel, the following:
(i) Certificates representing the the Purchaser
Securities, duly executed by authorized officers of the Company and
registered in the Purchaser's name;
(ii) Executed copies of each Document (other than
this Agreement) to which the Company is a party.
(iii) An opinion, dated the Closing Date and
addressed to the Purchaser, from Xxxxxx, Xxxx & Xxxxxxxx LLP, counsel
for the Company, in a form reasonably acceptable to the Purchaser. In
rendering their opinion, such counsel may rely as to factual matters
upon certificates or other documents furnished by the Company's
officers and other representatives (copies of which must be delivered
to the Purchaser) and by government officials, and upon such other
documents as such counsel deem appropriate as a basis for their
opinion. Such counsel shall opine, as applicable, as to the federal
laws of the United States and the laws of the State of California.
(iv) A duly certified resolution of the Company's
Board of Directors, in full force and effect on the Closing Date,
authorizing the Company's execution, delivery and performance of this
Agreement and all other Documents to which the Company is a party and
the consummation of the Transactions.
(v) Such other documents, certificates and opinions
as the Purchaser may reasonably request.
18
(b) Compliance with Agreements. The Company shall
have performed and complied with all agreements, covenants, and conditions
herein and in each other Document that are to be performed or complied with by
the Company on or before the Closing Date.
(c) Representations and Warranties. All of the
Company's representations and warranties contained or incorporated by reference
herein or in any other Document shall be true and correct on and as of the
Closing Date, both before and after giving effect to the Transactions.
(d) No Material Adverse Change. Subsequent to
December 31, 1997, (i) there shall not have been any material adverse change, or
any development involving a prospective material adverse change, in the
properties, business, operations, assets, condition (financial or otherwise) or
prospects of the Company, its Subsidiaries, or any of their properties; and (ii)
except for the issuance of the Securities, (A) there shall not have been any
change in the Company's Capital Stock (other than as contemplated hereby) or
long-term debt (other than resulting from scheduled payments thereunder) or any
material increase in its short-term debt, and (B) the Company shall not (other
than in the ordinary course of business consistent with past practice) have
incurred any liability or obligation, direct or contingent, that is material to
the Company, is required to be disclosed on a balance sheet in accordance with
GAAP, and is not disclosed on the latest balance sheet provided to the Purchaser
prior to the date of this Agreement.
(e) No Material Judgment or Order. There shall not be
on the Closing Date any judgment or order of a court of competent jurisdiction
or any ruling of any Governmental Body that, in the reasonable judgment of the
Purchaser or its counsel, would prohibit or subject the Company to any material
penalty on account of the sale or issuance of the Securities hereunder.
(f) Consummation of the Transactions shall not cause
the Purchaser tofail to qualify as a "real estate investment trust" under
Section 856 of the Code, and there shall not have been enacted, proposed or
announced any amendment to the Code or the rules or regulations thereunder
(including any rulings) which, if applied to the Purchaser or the Transactions,
could cause the Purchaser to fail to qualify as a "real estate investment
trust."
(g) All of the transactions contemplated by the other
Documents shall have been consummated.
(h) The Closing Date shall have occurred on or prior
to the Outside Date.
19
Section 3.2 Conditions to the Company's Obligations
The obligation of the Company to issue and sell the Purchaser
Securities to the Purchaser at the Closing is subject to the satisfaction or
waiver of each of the following conditions on or before the Closing Date:
(a) Performance of Obligations. The Purchaser shall
have performed and complied with all agreements, covenants, and conditions
herein and in each other Document on or before the Closing Date.
(b) Delivery of Documents and Payment of Initial
Purchase Price. The Purchaser shall have delivered each of the following
documents and shall have made the payment required by Section 2.2(c)(i) hereof:
(i) Executed copies of each Document (other than this
Agreement) to which the Purchaser is a party.
(ii) Opinions, dated the Closing Date and addressed
to the Company, from Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, counsel
for the Purchaser and from separate local counsel for the Purchaser, in
a form reasonably acceptable to the Company. In rendering their
opinion, such counsel may rely as to factual matters upon certificates
or other documents furnished by the Purchaser's officers and other
representatives (copies of which must be delivered to the Company) and
by government officials, and upon such other documents as such counsel
deems appropriate as a basis for their opinion. Such counsel shall
opine, as applicable, as to the federal laws of the United States and
the laws of the States of California and Maryland.
(iii) A duly certified resolution of the Purchaser's
Board of Directors ratifying and approving the Purchaser's execution,
delivery and performance of this Agreement and all other Documents to
which it is a party and the consummation of the Transactions.
(iv) Such other documents, certificates and opinions
as the Company may reasonably request.
(c) Representations and Warranties. All of the
Purchaser's representations and warranties contained or incorporated by
20
reference herein or in any other Document shall be true and correct on and as of
the Closing Date, both before and after giving effect to the Transactions.
(d) No Material Adverse Change. Subsequent to
December 31, 1997, there shall not have been any material adverse change, or any
development involving a prospective material adverse change in the properties,
business, operations, assets, condition (financial or otherwise) or prospects of
the Purchaser or its Subsidiaries.
(e) No Material Judgment or Order. There shall not be
on the Closing Date any judgment or order of a court of competent jurisdiction
or any ruling of any Governmental Body that, in the reasonable judgment of the
Company or its counsel, would prohibit or subject the Purchaser or the Company
to any material penalty on account of the consummation of the Transactions.
(f) All of the transactions contemplated by the other
Documents shall have been consummated.
(g) The Closing Date shall have occurred on or prior
to the Outside Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser on the
date hereof and as of the Closing Date as follows:
Section 4.1 Company's Due Incorporation and Good Standing
(a) The Company is a corporation duly incorporated,
validly existing, and in good standing under the laws of the State of California
with full corporate power and authority to own, lease and operate its
properties, to conduct its business as currently conducted and as proposed to be
conducted and to enter into and perform its obligations under this Agreement and
the other Documents to which it is a party. The Company is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required.
(b) Schedule 4.1 sets forth a list of each Subsidiary
of the Company. Each such Subsidiary is a corporation duly incorporated, validly
21
existing and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to own, lease and operate
its properties and to conduct its business as currently conducted and as
proposed to be conducted. Each Subsidiary is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which such qualification is required. All of the outstanding Capital Stock of
each of the Subsidiaries is owned by the Company free and clear of any Lien.
Section 4.2 Capitalization
The authorized capital stock of the Company consists of
20,000,000 shares of Class A Common Stock, 10,000,000 shares of Class B Common
Stock and 5,000,000 shares of preferred stock (the "Preferred Stock"). As of the
Closing Date, after giving effect to the transactions contemplated by this
Agreement and the other Documents, (a) there will be issued and outstanding
3,326,740 shares of Class A Common Stock and 82,351shares of Class B Common
Stock, all of which will be validly issued and fully paid and nonassessable, and
no shares of Preferred Stock; and (b) there will be reserved for issuance (i)
upon exercise of the Warrants, 1,206,288 shares of Class B Common Stock and (ii)
upon conversion of shares of Class B Common Stock, 1,288,639 shares of Class A
Common Stock. Except as set forth above, at the Closing Date, after giving
effect to the transactions contemplated by this Agreement and the other
Documents, no Equity Interests of the Company will be issued or outstanding and
there are not, and at the Closing Date there will not be, any options,
agreements, instruments or securities relating to the issued or unissued Equity
Interests of the Company or any Subsidiary of the Company, or obligating the
Company or any Subsidiary of the Company to issue, transfer, grant or sell any
Equity Interests in the Company or any Subsidiary.
Section 4.3 [Reserved]
Section 4.4 Authority
The Company has all necessary corporate power and authority to
execute and deliver this Agreement and each other Document to which it is a
party, to perform its obligations hereunder and thereunder, and to consummate
the Transactions. The execution and delivery of this Agreement and each of the
other Documents to which it is a party has been authorized by all necessary
corporate action on the part of the Company, and no other corporate proceeding
or approval is required on the part of the Company to authorize this Agreement
or the other Documents to which it is a party or to consummate the Transactions.
This Agreement and each of the other Documents (except the Registration Rights
Agreement and the Stockholder Agreement) have been duly and validly executed and
22
delivered by the Company and, assuming the due authorization, execution and
delivery thereof by the Purchaser, constitute the Company's legal, valid and
binding obligation, enforceable against the Company in accordance with its
terms, except for (a) the effect thereon of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (b) limitations imposed
by federal or state law or equitable principles upon the specific enforceability
of any provision thereof and upon the availability of injunctive relief or other
equitable remedies.
Section 4.5 Authorization, Etc. of Shares
The Shares issuable to the Purchaser hereunder have been duly
authorized for issuance and, when issued to the Purchaser in accordance
herewith, will be validly issued, fully paid, and non-assessable. At the
Closing, the Purchaser will acquire good and valid title to the Shares, free and
clear of any Lien. The Company has duly authorized and reserved a sufficient
number of shares of Class A Common Stock for issuance upon exchange of the Class
B Common Stock (including Warrant Shares) and, when issued upon such exchange,
the shares of Class A Common Stock will be validly issued, fully paid and
non-assessable.
Section 4.6 Authorization of Warrant Shares
The Company has duly authorized and reserved a sufficient
number of shares of Class B Common Stock for issuance upon exercise of the
Warrants and exchange of the Warrant Shares, when issued upon exercise of the
Warrants in accordance with the terms of the Westrec Warrant Agreement, will be
validly issued, fully paid, and nonassessable.
Section 4.7 Authorization, Etc. of Registration Rights Agreement
The Registration Rights Agreement has been duly authorized
and, at the Closing Date, will be validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery thereof by the other
parties thereto, will constitute the Company's legal, valid and binding
obligation, enforceable against the Company in accordance with its terms, except
for (a) the effect thereon of bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally, (b) limitations imposed by federal or state law or
equitable principles upon the specific enforceability of any provision thereof
and upon the availability of injunctive relief or other equitable remedies, and
(c) rights to indemnification thereunder may be limited by federal or state
23
securities laws or the policies underlying such laws.
Section 4.8 Authorization, Etc. of Stockholder Agreement
The Stockholder Agreement has been duly authorized and, at the
Closing Date, will be validly executed and delivered by each signatory thereto
(other than the Purchaser). Assuming the due authorization, execution and
delivery thereof by the Purchaser, it will constitute a legal, valid and binding
agreement of each other signatory thereto, enforceable against each of them in
accordance with its terms, except (a) the effect thereon of bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (b) limitations
imposed by federal or state law or equitable principles upon the specific
enforceability of any provision thereof and upon the availability of injunctive
relief or other equitable remedies.
Section 4.9 No Violation or Conflict; No Default
(a) Neither the nature of the Company's business, the
execution, delivery or performance of this Agreement or any other Document, the
Company's compliance with its respective obligations thereunder, the
consummation of the transactions contemplated hereby and thereby, nor the
issuance, sale or delivery of the Securities will:
(1) violate or conflict with any provision of the Company's
Charter Documents;
(2) violate or conflict with any statute, law, executive
order, rule or regulation or any judgment, decree, order, regulation or
rule of any court or Governmental Body (collectively, "Laws")
applicable to the Company or any of its Subsidiaries or their
respective properties or assets, except where such violation is
reasonably not expected to have, singly or in the aggregate, a Material
Adverse Effect; or
(3) violate, be in conflict with, constitute a breach or
default (or any event which, with the passage of time or notice or
both, would become a default) under, permit the termination of, require
the consent of any Person (other than as disclosed in Schedule
4.9(a)(3) hereto) under, result in the creation or imposition of any
Lien upon any property of the Company or any of its Subsidiaries under,
result in the loss (by the Company or any Subsidiary) or modification
24
in any manner adverse to the Company and its Subsidiaries of any right
or benefit under, or give to any other Person any right of termination,
amendment, acceleration, repurchase or repayment, increased payments or
cancellation under, any mortgage, indenture, note, debenture,
agreement, lease, license, permit, franchise or other instrument or
obligation, whether written or oral (collectively, "Contracts") to
which the Company or any of its Subsidiaries is a party or by which
their properties may be bound or affected except is reasonably expected
not, individually or in the aggregate, to have a Material Adverse
Effect.
(b) Neither the Company nor any of its Subsidiaries
is in default (without giving effect to any grace or cure period or notice
requirement) under any Contract, except where such default is reasonably
expected not, individually or in the aggregate, to have a Material Adverse
Effect.
(c) The execution, delivery and performance of this
Agreement and the other Documents by the Company and the other parties thereto
(other than the Purchaser) will not require any consent, approval,
authorization, or permit of, or filing with or notification to, any Governmental
Body under any Laws, except (i) for required filings under the Securities Act or
state "blue sky" laws as a result of the exercise of rights under the
Registration Rights Agreement, and (ii) where the failure to obtain such
consents, approvals, authorizations or permits or to make such filings or
notifications, is reasonably expected not, individually or in the aggregate, to
have a Material Adverse Effect or to prevent or delay in any material respect
consummation of the transactions contemplated hereby, or otherwise prevent the
Company from performing their obligations under this Agreement or the other
Documents.
Section 4.10 No Material Adverse Change; Financial Statements
(a) Since December 31, 1997, (i) there has not been
any material adverse change in the properties, business, operations, assets,
condition (financial or otherwise) or prospects of the Company; and (ii) except
for the authorization and issuance of the Shares and the Warrants, there shall
not have been any change in the Capital Stock of the Company or of the long-term
debt (other than resulting from scheduled payments thereunder), or any increase
in the short-term debt, of the Company or the Partnerships.
(b) The Company has delivered to the Purchaser a
consolidated balance sheet of the Company and its Subsidiaries as of December
31, 1997, and the related statements of income, stockholders' equity and cash
flows for the two fiscal years then ended, together with the report thereon of
Ernst & Young LLP, independent certified public accountants, on such financial
25
statements at and for the years ended December 31, 1995 and 1996 including the
notes thereto. Such financial statements fairly present the financial position
and results of operations and cash flows of the Company as of the respective
dates and for the respective periods referred to therein and have been prepared
in accordance with GAAP, consistently applied throughout the periods involved.
Section 4.11 Full Disclosure
Neither this Agreement (including without limitation the
representations and warranties incorporated herein by reference), the financial
statements referred to in Section 4.10(b), any other Document, nor any other
certificate (addressed to the Purchaser) furnished by or on behalf of the
Company to the Purchaser in connection with the sale of the Securities or the
consummation of the Transactions contains any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made.
Section 4.12 Private Offering
Assuming the correctness of the representations and warranties
set forth in Section 5.1 hereof, the offer and sale of the Securities to the
Purchaser hereunder is exempt from the registration and prospectus delivery
requirements of the Securities Act. In the case of each offer or sale of the
Securities, neither the Company nor its representatives used any form of general
solicitation or general advertising, including advertisements, articles, notices
or other communications published in any newspaper, magazine or similar medium
or broadcast over television or radio, or any seminar or meeting whose attendees
were invited by any general solicitation or general advertising.
The Purchaser is the sole purchaser of the Securities from the
Company. No securities have been issued and sold by the Company within the
six-month period immediately prior to the date hereof that would be integrated
with the sale of the Securities hereunder pursuant to the Securities Act.
Section 4.13 No Brokers
Neither the Company nor any of its Affiliates has engaged any
broker, finder, commission agent, or other intermediary in connection with the
sale of the Securities and the Transactions or is under any obligation to pay
any broker's or finder's fee or commission or similar payment in connection
therewith, other than certain compensation that may be payable to Xxxxx Xxxx
Investments ("Xxxxx Xxxx") by the Company.
26
Section 4.14 Representations and Warranties
The Company's representations and warranties (and the related
schedules) in the Documents other than this Agreement will be deemed to
constitute representations and warranties of the Company under this Agreement
with the same force and effect as the representations and warranties expressly
set forth herein.
Section 4.15 Litigation
(a) Except as set forth on Schedule 4.15, there is no
Action (including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced, or to the knowledge of the Company,
threatened or contemplated ("Proceedings") against or affecting the Company or
any of its Subsidiaries, or the properties or assets of any of them, except for
Proceedings that, if finally determined adversely to the Company or any of its
Subsidiaries, could not reasonably be expected to have, singly or in the
aggregate, a Material Adverse Effect. In addition, there have not been any
developments with respect to any of the Proceedings disclosed on Schedule 4.15
which would reasonably be expected in the future to have, singly or in the
aggregate, a Material Adverse Effect. No Proceeding seeking to restrain, enjoin,
prevent the consummation of, or otherwise challenge this Agreement, any other
Document or the Transactions is pending.
(b) Neither the Company nor any Subsidiary is subject
to any judgment, order, decree, rule, or regulation of any Governmental Body
that has had a Material Adverse Effect or that is reasonably expected to have,
singly or in the aggregate, a Material Adverse Effect.
Section 4.16 Labor Relations
To the knowledge of the Company, neither the Company nor any
of its Subsidiaries, nor any Person for whom the Company or any of its
Subsidiaries is or may be responsible, by contract or by operation of law, is
engaged in any unfair labor practice that could reasonably be expected to have,
singly or in the aggregate, a Material Adverse Effect. There is (a) no unfair
labor practice charge or complaint pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, or any Person for
whom the Company or any of its Subsidiaries is or may be responsible by contract
or by operation of law, before the National Labor Relations Board or any
corresponding state, local or foreign agency, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending or threatened, (b) no strike, labor dispute, slowdown or stoppage
27
pending or threatened against the Company or any of its Subsidiaries, or any
Person for whom either the Company or any of its Subsidiaries is or may be
responsible by contract or by operation of law, and (c) no union representation
claim or question existing with respect to the employees of the Company or any
of its Subsidiaries, or any Person for whom the Company or any of its
Subsidiaries is or may be responsible by contract or by operation of law, and no
union organizing activities taking place. Neither the Company, nor any of its
Subsidiaries or any Person for whom the Company or any of its Subsidiaries is or
may be responsible by contract or by operation of law, is a party to any
collective bargaining agreement.
Except as disclosed on Schedule 4.16 or such as is reasonably
not expected to result in a Material Adverse Effect, neither the Company nor any
of its Subsidiaries has violated any applicable federal, state, provincial or
foreign law relating to employment or employment practices or the terms and
conditions of employment, including, without limitation, discrimination in the
hiring, promotion or pay of employees, wages, hours of work, plant closings and
layoffs, collective bargaining, immigration and occupational safety and health.
No charges with respect to or relating to the Company or any of its Subsidiaries
are pending before the Equal Employment Opportunity Commission or any
corresponding state agency, and the Company and its Subsidiaries have at all
times been in material compliance with all federal and state laws and
regulations prohibiting discrimination in the workplace, including laws and
regulations that prohibit discrimination or harassment on account of race,
national origin, religion, gender, disability, age, immigration status, workers
compensation status or otherwise.
Section 4.17 Taxes
Except as otherwise disclosed in Schedule 4.17:
(a) The Company has timely filed (or has had filed on
its behalf) or will timely file or cause to be timely filed, all Tax Returns
required by applicable law to be filed on or before the Closing Date. All such
Tax Returns and amendments thereto are or will be true, complete, and correct.
(b) The Company has paid or, where payment was not
yet due, has established an adequate accrual for the payment of all Taxes due
with respect to any period ending on or before December 31, 1997.
(c) No Audit by a Tax Authority is pending or
threatened with respect to any Tax Returns filed by, or Taxes due from, the
Company or any of its Subsidiaries. No issue has been raised by any Tax
Authority in any Audit of or affecting the Company or any of its Subsidiaries
28
that if raised with respect to any other period not so audited could be expected
to result in a material proposed deficiency for any period not so audited. No
deficiency or adjustment for any Taxes has been threatened, proposed, asserted
or assessed against the Company or any of its Subsidiaries. There are no liens
for Taxes upon the assets of the Company or any of its Subsidiaries, except
liens for current Taxes not yet due.
(d) Neither the Company nor any of its Subsidiaries
has given nor been requested to give any waiver of statutes of limitations
relating to the payment of Taxes or executed powers of attorney with respect to
Tax matters, which will be outstanding as of the Closing Date.
(e) Neither the Company nor any of its Subsidiaries
is a party to or bound by any tax sharing, cost sharing, or similar agreement or
policy relating to Taxes (other than the Tax Sharing Agreement).
(f) The Company has not entered into any agreement
that would result in the disallowance of any tax deductions pursuant to section
280G of the Code. No "consent" within the meaning of section 341(f) of the Code
has been filed with respect to the Company.
Section 4.18 Environmental Matters
(a) To the Company's knowledge, the Company and its
Subsidiaries are in compliance with all Environmental Laws, which compliance
includes, but is not limited to, the possession by the Company and its
Subsidiaries of all permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof, except where such non-compliance could not reasonably be expected to
have a Material Adverse Effect. To the Company's knowledge, neither the Company
nor any of its Subsidiaries has received any communication (written or oral),
whether from a Governmental Authority, citizens group, employee or otherwise,
that alleges that it is not in compliance with any Environmental Law. To the
Company's knowledge, there are no circumstances that may prevent or interfere
with such compliance in the future.
(b) To the Company's knowledge, there is no
Environmental Claim pending or threatened against the Company or any of its
Subsidiaries with respect to its operations or business or against any Person
whose liability therefor the Company or any of its Subsidiaries is or may be
responsible by contract or by operation of law.
29
(c) To the Company's knowledge, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge, presence or
disposal of any Material of Environmental Concern, that could form the basis of
any Environmental Claim against the Company or any of its Subsidiaries, or any
Person whose liability for any Environmental Claim the Company any of its
Subsidiaries is or may be responsible by contract or by operation of law.
(d) Without in any way limiting the generality of the
foregoing, to the Company's knowledge Schedule 4.18(d) sets forth (1) all
material permits, licenses and other governmental authorizations held by the
Company and its Subsidiaries, or required for their operations and businesses,
under any Environmental Law, including the current status of each permit,
license and authorization, (2) all on-site and off-site locations where the
Company or any Subsidiary has stored (to the extent such storage is regulated by
the Resource Conservation and Recovery Act of 1976, as amended), disposed or
arranged for the disposal of Materials of Environmental Concern, (3) all
underground storage tanks, and the capacity and contents of such tanks, located
on property currently owned, leased or controlled by the Company or any
Subsidiary, (4) the location and condition of any asbestos or lead (including
furnishings or lead-based paints) contained in or forming part of any building,
building component, structure or office space owned, leased or controlled by the
Company or any Subsidiary, and (5) all PCBs or PCB-containing items that are
used or stored at any property owned, leased or controlled by the Company or any
Subsidiary.
(e) To the Company's knowledge, the Company and its
Subsidiaries have all material permits, licenses, registrations, authorizations
and approvals and financial assurance (including, without limitation, rights
under grandfather provisions, exemptions, waivers and the like) ("Environmental
Permits") required to be held or provided by them under applicable Environmental
Laws in order to conduct their respective businesses as currently operated. To
the Company's knowledge, the Company and its Subsidiaries are in material
compliance with the requirements of all such Environmental Permits, and none of
them have been notified by any Governmental Authority or has any basis to
believe that any Environmental Permit is reasonably likely to be modified,
suspended or revoked, or that any Environmental Permit cannot be renewed in the
ordinary course of business. Schedule 4.18(e) lists all Environmental Permits,
if any, held by the Company and its Subsidiaries and all Environmental Permits,
if any, relating to them or the properties currently owned or leased by any of
them.
(f) The Company has provided to the Purchaser
complete and correct copies, or originals, of all environmental and worker
safety and health reports, studies, risk assessments, exposure assessments,
30
investigations, audits, internal assessments of potential responsibility or
liability under Environmental Laws, and records of agency audits under
Environmental Laws which are in the possession of the Company, its Subsidiaries
or Affiliates relating to the properties currently owned or leased by any of
them.
(g) The Company has made available to the Purchaser
copies of all documents relating to the purchase or acquisition by the
Partnerships of their respective assets, and has provided to the Purchaser
copies of all other contracts or agreements allocating responsibility,
obligation or liability for environmental matters to the Company or any
Subsidiary from a third party or allocating responsibility, obligation or
liability for environmental matters from any such Person to a third party.
Section 4.19 ERISA
Except as set forth on Schedule 4.19, neither the Company nor
any other trade or business (whether or not incorporated) that together with the
Company or its Subsidiaries would be deemed a "single employer" (within the
meaning of Section 4001 of ERISA (an "ERISA Affiliate") is a "party in interest"
(as defined in Section 3(14) of ERISA) or a "disqualified person" (within the
meaning of Section 4975 of the Code), with respect to any profit-sharing,
pension or retirement plan, program, arrangement or agreement, or any other
"employee benefit plan" (within the meaning of Section 3(3) of ERISA) or any
"plan" (within the meaning of Section 4975 of the Code) (collectively, each such
plan, program, arrangement or agreement an "Employee Benefit Plan").
With respect to each Employee Benefit Plan: (i) each Employee
Benefit Plan has been administered in compliance in all material respects, with
its terms including, but not limited to, any provisions relating to
contributions thereunder, and is in compliance in all material respects with the
applicable provisions of ERISA, the Code and all other federal, state and other
applicable laws, rules and regulations, as they relate to such Employee Benefit
Plans; (ii) no "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) has been the subject of a "reportable event" (as defined in Section 4043
of ERISA) and to the knowledge of the Company, there have been no "prohibited
transactions" (as described in Section 4975 of the Code or Section 406 of ERISA)
with respect to any Employee Benefit Plan which could subject the Company to a
material tax, penalty or other liability under ERISA or the Code; (iii) there
are no proceedings, suits or material claims (other than routine claims for
benefits) pending or to the knowledge of the Company threatened with respect to
any Employee Benefit Plan, the assets of any trust thereunder, or the Employee
Benefit Plan sponsor with respect to the design or operation of any Employee
Benefit Plan; (iv) to the knowledge of the Company, no condition exists or event
31
or transaction has occurred in connection with any Employee Benefit Plan that
has resulted or is reasonably likely to result in the Company or any ERISA
Affiliate incurring any liability, fine or penalty except as could not
reasonably be expected to have, singly or in the aggregate, a Material Adverse
Effect; (v) no Employee Benefit Plan is or ever has been subject to, and the
Company has no liability under, Title IV of ERISA, whether actual or contingent;
and (vi) no amounts payable under any Employee Benefit Plan will, in connection
with the transactions contemplated under this Agreement, the Related Agreements,
or otherwise, fail for any reason to be deductible for federal income tax
purposes in an amount that could reasonably be expected to result in a Material
Adverse Effect.
Section 4.20 Properties
(a) Neither the Company nor any Subsidiary thereof
owns any real property. Schedule 4.20 sets forth a true, correct and complete
list of all of the real property leased or occupied by the Company or its
Subsidiaries indicating, in each case, the address or legal description of such
real property and the legal and equitable owner of such real property. There are
no options, rights of first refusal, rights of first offer or comparable rights
held by any Person to purchase or otherwise acquire a direct or indirect
interest in the Company's leasehold interest in any real property.
(b) To the Company's knowledge, each such real
property is in material compliance with all Laws, including, without limitation,
all Laws with respect to zoning, building, fire and health codes, and sanitation
and pollution control. Neither the Company nor any of its Subsidiaries has
received notice of, or has knowledge of, any condition currently or previously
existing on any such real property or any portion thereof which is reasonably
expected to give rise to any material violation of any existing Law applicable
to any of such real property if it were disclosed to the authorities having
jurisdiction over any of such real property.
(c) Neither the Company nor any of its Subsidiaries
has knowledge of any pending or contemplated condemnation, eminent domain or
similar proceeding or special assessment which would affect any of such real
property or any part thereof.
(d) To the knowledge of the Company, each such real
property and the improvements thereon are in good condition and repair and are
free from any material defects, including, without limitation, environmental,
erosion, draining or soil problems, physical, structural, mechanical,
construction or electrical defects, defects in the parking lot pavement or
32
defects in utility systems. To the knowledge of the Company, there are no leaks
in any of the roofs or any other portions of the improvements at any such real
properties, and no infestation at any properties by rodents, termites or other
insects or animals of any type that would have a material adverse effect on the
value of any such real properties.
Section 4.21 Compliance with Laws
The Company and its Subsidiaries have obtained and maintained
in good standing any licenses, permits, consents, and authorizations required to
be obtained by it under all Laws relating to their respective businesses, the
absence of which is reasonably expected to have, singly or in the aggregate, a
Material Adverse Effect. All such licenses, permits, consents, and
authorizations remain in full force and effect, except insofar as the absence of
any of the foregoing could not reasonably be expected to have, singly or in the
aggregate, a Material Adverse Effect. The Company and its Subsidiaries are in
compliance, in all material respects, with all Laws, except to the extent that
any failure to comply is not reasonably expected to have a Material Adverse
Effect.
Section 4.22 Insider Transactions
Except for the distribution of Warrants contemplated hereby,
since December 31, 1997, the Company has not entered into any transaction or
contract with any of its Affiliates or an Affiliate of any of its Affiliates,
other than as described in Schedule 4.22, attached hereto.
Section 4.23 Certain Transfers
Before the Closing Date, the Company distributed to Westrec
Financial (i) all limited partnership interests held by the Company in PS
Marinas I, a California Limited Partnership, PS Marinas 3, a California Limited
Partnership, PS Marinas 4, a California Limited Partnership, Tower Park Marina
Investors, L.P., a California limited partnership and (ii) all Capital Stock
owned by the Company in Westrec Equities, Inc. As of the Closing Date, the
Company holds no legal or beneficial interest in any Partnership.
Section 4.24 Insurance Plans
Schedule 4.24, attached hereto, contains a true and correct
accounting of the earnings of Westrec Financial derived, in the insurance plan
year ending June 30, 1997, from the workers compensation and group medical plans
maintained for employees of the Company and its Subsidiaries and an estimate
reasonably prepared by Company and reasonably acceptable to the Purchaser of the
aggregate amount of all claims expected to be incurred by those plans for that
33
insurance plan year.
Section 4.25 Southwinds
As of the date hereof and on the Closing Date, Westrec
Financial owns, free and clear of all liens, claims, and encumbrances, 100% of
the Capital Stock of Westrec Southwinds, Inc., and Westrec Southwinds, Inc.
owns, free and clear of all liens, claims, and encumbrances, a 10% membership
interest in Southwinds.
Section 4.26 Survival of Representations and Warranties
All of the Company's representations and warranties hereunder
and under the other Documents will survive the execution and delivery of the
same through and until the third anniversary of the Closing Date, except that
the representations and warranties contained in Sections 4.1 through 4.8 will
survive indefinitely and the representations and warranties in Section 4.17 will
survive until the expiration of the applicable statute of limitations with
respect to such Tax Returns. All other obligations of the Company under this
Agreement will expire upon consummation of the Closing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company that:
Section 5.1 Purchase for Own Account
The Purchaser is purchasing Securities solely for its own
account and not as nominee or agent for any other Person and not with a view to,
or for offer or sale in connection with, any current distribution thereof
(within the meaning of the Securities Act) that would cause the original
purchase of the Securities to be in violation of the securities laws of the
United States of America or any state thereof. The foregoing is without
prejudice to the Purchaser's right at all times to sell or otherwise dispose of
all or any part of the Securities pursuant to a registration statement under the
Securities Act or pursuant to an exemption from the registration requirements of
the Securities Act.
34
Section 5.2 Accredited Investor
The Purchaser is knowledgeable, sophisticated and experienced
in business and financial matters and in investing in privately held business
enterprises; acknowledges that the Securities have not been registered under the
Securities Act and understands that the Securities must be held indefinitely
unless they are subsequently registered under the Securities Act or their sale
is permitted pursuant to an exemption from such registration requirement; is
able to bear the economic risk of its investment in the Securities and is
presently able to afford the complete loss of such investment; and is an
"accredited investor" as defined in Regulation D promulgated under the
Securities Act.
Section 5.3 Authorization
The Purchaser has taken all actions necessary to authorize it
(i) to execute, deliver and perform all of its obligations under this Agreement
and the other Documents, and (ii) to consummate the Transactions. This Agreement
and each of the other Documents have been duly and validly executed and
delivered by the Purchaser and, assuming the due authorization, execution, and
delivery thereof by the Company, constitutes the Purchaser's legal, valid and
binding obligation, enforceable against it in accordance with its terms, except
for (a) the effect thereon of bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting the rights of creditors generally
and (b) limitations imposed by federal or state law or equitable principles upon
the specific enforceability of any provision hereof and upon the availability of
injunctive relief or other equitable remedies.
Section 5.4 Capitalization
(a) The authorized Capital Stock of the Purchaser
consists of 25 million shares of preferred stock and 75 million shares of common
stock. As of the Closing Date, there will be issued and outstanding no shares of
preferred stock and 10,342,009 shares of common stock, all of which will be
validly issued and fully paid and nonassessable. Upon the exercise of any
Warrants, the Purchaser will reserve adequate shares of its common stock for
issuance upon exercise of any warrant issued pursuant to the Sachs Warrant
Agreement. Except as set forth above, at the Closing Date, no Equity Interests
of the Purchaser will be issued or outstanding and there are not, and at the
Closing Date there will not be, any options, agreements, instruments or
securities relating to issued or unissued Equity Interests of the Purchaser
obligating the Purchaser to issue, transfer, grant or sell any Equity Interests
in the Purchaser.
35
Section 5.5 No Brokers
Neither the Purchaser nor any of its Affiliates has engaged
any broker, finder, commission agent, or other intermediary in connection with
the sale of the Securities and the Transactions or is under any obligation to
pay any broker's or finder's fee, commission, or similar payment in connection
therewith, other than certain compensation that may be payable to Xxxxx Xxxx.
Section 5.6 Survival of Representations and Warranties
All of the Purchaser's representations and warranties
hereunder and under the other Documents will survive the execution and delivery
of the same through and until the third anniversary of the Closing Date.
Section 5.7 Investigation
The Purchaser has conducted an investigation of the Company
and its Subsidiaries and acknowledge that the Company has provided to the
Purchaser access to the employees, books, and records of the Company and its
Subsidiaries as the Purchaser has requested in connection therewith.
ARTICLE VI
COVENANTS
Section 6.1 Further Actions
During the period from the date hereof to the Closing Date,
each of the parties shall, and shall cause their respective Affiliates to (a)
use their best efforts to take all actions necessary or appropriate to cause its
representations and warranties contained in Articles IV or V respectively,
hereof or incorporated by reference herein or contained or incorporated by
reference in any of the other Documents to be true and correct as of the Closing
Date (except with respect to any representation that specifically relates to
another date), both before and after giving effect to the transactions
contemplated by this Agreement and the other Documents, as if made on the
Closing Date, and (b) take, or cause to be taken, all action, and do, or cause
to be done, all things necessary, proper or advisable under applicable law and
regulations to consummate and make effective the Transactions including using
their best efforts to obtain all consents and approvals that are necessary to
the consummation of the Transactions, and to remove all injunctive or other
impediments or delays, legal or otherwise thereto.
36
Section 6.2 Additional Covenants of the Company
(a) Between the date of this Agreement and the
Closing Date, the Company (i) shall and shall cause each of its Subsidiaries to,
conduct its business consistent with past practice and in the ordinary course of
its normal day-to-day operations, and (ii) shall not take, or permit any of its
Subsidiaries to take, any of the actions set forth in Section 3.6 of the
Stockholder Agreement, except as specifically contemplated by this Agreement and
the other Documents or with the prior written approval of the Purchaser.
(b) As soon as practicable after the Closing, the
Company and its Affiliates will take all necessary action to cause the operation
of the workers compensation and group medical plans maintained for employees of
the Company and its Subsidiaries to be transferred to the Company or to a
wholly-owned Subsidiary of the Company.
Section 6.3 No General Solicitation
Neither the Company, nor any of its Affiliates, nor any Person
acting on its or any of their behalf has engaged or will engage, in connection
with the offering of the Securities, in any form of general solicitation or
general advertising within the meaning of Rule 502(c) under the Securities Act.
Section 6.4 The Purchaser's Put Right
(a) If, as of the 210th day after the Closing Date, the
Purchaser or any designated Affiliate thereof shall not have acquired, on terms
reasonably acceptable to the Purchaser, (i) with respect to each Partnership,
either all general partnership interests therein, all of the Capital Stock of
each of its general partners, or substantially all of its assets, (ii) the
interest in Southwinds held on the Closing Date by Westrec Southwinds, Inc., or
all of the Capital Stock of the entity holding that interest, or substantially
all of Southwind's assets, and (iii) all the limited partnership interests in
any Partnership held by the Company or any Affiliate thereof, then the Purchaser
may, no later than the 240th day after the Closing Date (or if that date is not
a Business Day, then the first Business Date thereafter), deliver a written
notice (a "Put Notice") to the Company containing the information set forth in
Section 6.4(b).
(b) The Put Notice will advise the Company of the Purchaser's
intention to exercise its right under this Section 6.4 to cause the Company to
repurchase the Securities, specify a date (the "Put Date") on which the
repurchase is to occur (which date may be no sooner than the 15th Business Day
37
after the date of delivery of the Put Notice), and include wire instructions for
the Company's payment in connection therewith.
(b) If the Purchaser timely delivers a Put Notice to the
Company, then on the Put Date:
(1) the Purchaser will deliver to the Company certificates
representing all of the Purchaser's Securities, together with
a certificate from the chief executive officer or chief
financial officer of the Purchaser certifying that the
Securities are free and clear of any lien, claim, or
encumbrance of any Person; and
(2) the Company will deliver to the Purchaser, by wire
transfer as specified in the Put Notice, an amount equal to
the Cash Purchase Price paid by the Purchaser.
Section 6.5 Class B Common Stock Purchase
No later than 10 days after receipt of a Conversion Notice,
the Company will exchange the number of shares of Class B Common Stock specified
therein for an equal number of shares of Class A Common Stock, and will issue
the shares of Class A Common Stock to the Person designated in the Conversion
Notice. The parties hereby acknowledge that the rights granted in this Section
6.5 will be automatically assigned to any party to whom shares of Class B Common
Stock are transferred in a transfer permitted under the Stockholder Agreement,
and that, notwithstanding any other provision of this Agreement, such party
shall be considered a third-party beneficiary with respect to this Section 6.5.
ARTICLE VII
TERMINATION
Section 7.1 Termination Events
This Agreement may be terminated, by written notice delivered
before or at the Closing, only as follows:
(a) by the Company, if the Purchaser has committed a
material breach of this Agreement, or by the Purchaser, if the Company has
38
committed a material breach of this Agreement;
(b) by the Company, if any of the conditions in
Section 3.2 has not been satisfied or waived as of the Closing Date, or if the
satisfaction of any such condition is or becomes impossible (other than as a
result of the Company's failure to perform its obligations hereunder) and the
Company has not waived the condition;
(c) by the Purchaser, if any of the conditions in
Section 3.1 has not been satisfied or waived as of the Closing Date, or if the
satisfaction of any such condition is or becomes impossible (other than as a
result of the Purchaser's failure to perform its obligations hereunder) and the
Purchaser has not waived the condition; or
(d) by mutual consent of the Company and the
Purchaser.
Section 7.2 Effect of Termination
Each party's right of termination under Section 7.1 is in
addition to any other rights it may have under this Agreement or any other
Document, and the exercise of the right to terminate will not constitute an
election of remedies or a waiver of any other right. If this Agreement is
terminated under Section 7.1, all further obligations of the parties hereto will
terminate, except that the terminating party's right to pursue all legal
remedies will survive the termination.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices
All notices, demands, requests, consents or approvals
(collectively, "Notices") required or permitted to be given hereunder or which
are given with respect to this Agreement must be in writing and personally
delivered or mailed, registered or certified, return receipt requested, postage
prepaid (or by a substantially similar method), or delivered by a reputable
overnight courier service with charges prepaid, or transmitted by hand delivery,
telegram, telex or facsimile, addressed as set forth below, or to any other
address (and with any other copy) as a party may have specified most recently by
written Notice. Notice will be deemed given or delivered on the date of delivery
or transmission if personally delivered or transmitted by telegram, telex or
facsimile. Notice otherwise sent as provided herein shall be deemed given or
delivered on the third Business Day following the date mailed or on the next
39
Business Day following delivery thereof to a reputable overnight courier
service.
To the Company:
Westrec Marina Management, Inc.
00000 Xxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy (which shall not alone constitute Notice) to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
To the Purchaser:
Commercial Assets, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy (which shall alone not constitute Notice) to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Xx., Esq.
Fax: (000) 000-0000
Section 8.2 Successors and Assigns
This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto which acquire
40
Common Stock in a transfer permitted under the Stockholder Agreement.
Section 8.3 No Waivers; Amendments
(a) No failure or delay by any party in exercising
any right, power, or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege
provided by law. Notwithstanding the foregoing, neither the Company nor any of
its officers, employees, agents, stockholders, Affiliates, consultants, legal
advisors, or representatives shall have any liability or obligation to the
Purchaser in respect of any statement, representation, warranty or assurance of
any kind made by the Company, its representatives, or any other Person, except
for the representations and warranties specifically set forth herein; provided,
that no provision of this Agreement will act to relieve the Company, its
representatives, or any other Person from liability for fraud.
(b) This Agreement may not be amended or modified,
nor may any provision hereof be waived, other than by a written instrument
signed by the Company and the Purchaser.
Section 8.4 Counterparts
This Agreement may be signed in counterparts, each of which
shall constitute an original and which together shall constitute one and the
same agreement.
Section 8.5 Section Headings
The section headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
Section 8.6 GOVERNING LAW; SUBMISSION TO JURISDICTION
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA, AS APPLIED TO CONTRACTS MADE AND
PERFORMED WITHIN THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF ANY CALIFORNIA STATE COURT SITTING IN THE COUNTY OF LOS ANGELES
OR ANY UNITED STATES DISTRICT COURT IN THE CITY OF LOS ANGELES, IN RESPECT OF
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ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. EACH PARTY AGREES THAT IT WILL NOT
COMMENCE ANY SUCH ACTION IN ANY OTHER JURISDICTION. THE PARTIES HERETO
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THAT THEY MAY DO SO UNDER APPLICABLE
LAW, ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH ACTION BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH
COURT CONSTITUTES AN INCONVENIENT FORUM.
Section 8.7 Entire Agreement
This Agreement, together with the other Documents, constitutes
the entire agreement and understanding among the parties hereto with respect to
the subject matter hereof and thereof and supersedes any and all prior
agreements and understandings, written or oral, relating to the subject matter
hereof.
Section 8.8 Severability
Any provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining provisions of this Agreement or affecting the
validity or enforceability of any provision of this Agreement in any other
jurisdictions, it being intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent permitted by law.
Section 8.9 Attorneys' Fees
Subject to Section 2.7, if any litigation is commenced between
the parties hereto or their representatives concerning any provision of this
Agreement or the rights and duties of any person or entity hereunder, solely as
between the parties hereto or their successors, the party or parties prevailing
in that proceeding will be entitled to the reasonable attorneys' fees and
expenses of counsel and court costs incurred by reason of such litigation.
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Section 8.10 Representations and Warranties
The disclosure of any information on any Schedule to this
Agreement shall be deemed to constitute the disclosure of such information on
all other schedules to this Agreement applicable to such information.
Section 8.11 Knowledge
Whenever a representation or warranty is stated to be based on
the knowledge of a party, such phrase refers to whether a member of such party's
senior management has or reasonably should have acquired actual knowledge, in
the performance of his or her duties in that capacity, of the matters involved.
As used herein, "senior management" means any officer of the Company or the
Purchaser, as the case may be, with a title of vice president or its equivalent
or higher.
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IN WITNESS WHEREOF, this Securities Purchase Agreement has
been duly executed by the parties set forth below as of the date first written
above.
WESTREC MARINA MANAGEMENT, INC.
By:_________________________________
Name:
Title:
COMMERCIAL ASSETS, INC.
By: ________________________________
Name:
Title:
EXHIBIT A
