1
OPERATING AGREEMENT
OPERATING AGREEMENT, dated as of May __, 1997, between Pacific
Gulf Properties Inc., a Maryland corporation (the "Company"), and Five Arrows
Realty Securities L.L.C., a limited liability company organized under the laws
of the State of Delaware (the "Investor"), for the benefit of the Investor.
This Agreement is executed pursuant to the Investment Agreement,
dated as of May 27, 1997, between the Company and the Investor (the "Investment
Agreement"). In order to induce the Investor to enter into the Investment
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement.
The parties hereby agree as follows:
1. DEFINITIONS. The following terms shall have the meanings set forth
below:
"Affiliate" means, with respect to any Person, (a) any member of
the Immediate Family of such Person or a trust established for the
benefit of such member, (b) any beneficiary of a trust described in (a),
(c) any Entity which, directly or indirectly though one or more
intermediaries, is deemed to be the beneficial owner of 25% or more of
the voting equity of the Person for the purposes of Section 13(d) of the
Exchange Act, (d) any officer of the Person or any member of the Board
of Directors of the Company, or (e) any Entity which, directly or
indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with, such Person, including such Person
or Persons referred to in the preceding clauses (a) or (d); provided,
however, that none of the Investor, Rothschild Realty Inc. or their
respective Affiliates, nor any of their respective officers, directors,
partners or members nor a Preferred Director (as such term is defined in
the Certificate of Designation) shall be considered an Affiliate of the
Company or any of its Subsidiaries for the purposes of this Agreement.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday or
Friday which is not a day on which banking institutions in New York City
are authorized or obligated by law or executive order to close.
"Certificate of Designation" means the Articles Supplementary
classifying 1,411,765 shares of preferred stock as Class B Senior
Cumulative Convertible Preferred Stock of the Company.
"Class A Preferred Shares" means the Class A Senior Cumulative
Convertible Preferred Stock of the Company.
"Commission" means the Securities and Exchange Commission.
2
"Common Stock" means the Common Stock, par value $.01 per share,
of the Company.
"Demand Requesting Holders" means any Holder or Holders holding
an aggregate of not less than 30% of the Registrable Securities then
outstanding. For purposes of calculating such percentage, shares of
Common Stock constituting Registrable Securities shall be deemed to
equal the number of shares of converted Preferred Stock in respect of
which such shares of Common Stock were issued.
"Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate
investment trust, limited liability company, cooperative or association.
"equity security" includes common stock, preferred stock and any
other security that is treated as an equity security either under the
Exchange Act or under generally accepted accounting principles by the
issuer thereof or any other security convertible into, or exchangeable
for any equity security and any other instrument, such as an equity
swap, the value of which is based, at least in part, on the value of
such equity security.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Body" means any foreign, federal, state, municipal
or other government, or any department, commission, investigative body,
board, bureau, agency, public authority or instrumentality thereof or
any court, mediator, arbitrator or other tribunal.
"Holder" means any person that owns or has the right to acquire
Registrable Securities or Piggyback Registrable Securities, as
applicable, constituting more than 3% of the outstanding shares of such
class of Registrable Securities or Piggyback Registrable Securities, as
applicable.
"Immediate Family" means, with respect to any Person, such
Person's spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law, stepchildren,
sons-in-law and daughters-in-law.
"Majority Holders" means (a) the Investor, so long as (i) the
Investor holds at least 25% of the outstanding Registrable Securities
and (ii) no underwritten Demand Registration or Piggyback Registration
has been consummated by the Company pursuant to Section 3 of this
Agreement, or (b) otherwise, the holder or holders at the relevant time
(excluding the Company or any of its Subsidiaries) of more than 50% of
the Preferred Shares or Registrable Securities then outstanding. For
purposes of calculating such percentage, shares of Common Stock
constituting Registrable Securities shall be deemed to equal the number
of shares of converted Preferred Stock in respect of which such shares
of Common Stock were issued.
"Person" means any individual or Entity.
-2-
3
"Piggyback Registrable Securities" means Registrable Securities
of the same class and series as the securities the Company proposes to
register under the Securities Act in a transaction giving rise to
Piggyback Registration rights under Section 4 hereof, except that in the
case of a shelf registration statement, all Registrable Securities shall
be deemed to be Piggyback Registrable Securities.
"Preferred Shares" means the Class B Senior Cumulative
Convertible Preferred Stock of the Company.
"Prospectus" means the Prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference in such
Prospectus.
"Registrable Securities" means (i) all Preferred Shares and all
shares of Common Stock that have been issued, or are issuable on
conversion, in respect of the Preferred Shares pursuant to the
provisions of Section 7 of the Certificate of Designation of the
Company, dated the date hereof, (ii) any other securities that are
received by the Holders pursuant to Section 7 of the Certificate of
Designation, (iii) any other capital stock of the Company, the holders
of which shall have the right, without limitation as to amount, either
to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference, and (iv) any other securities into which or for
which any of the securities described in clauses (i) through (iii) above
may be or have been converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise,
until such time as (a) they have been effectively registered under the
Securities Act for resale and sold thereunder, (b) they are distributed
to the public pursuant to Rule 144 (or any similar provisions then in
force) under the Securities Act, (c) they shall have been otherwise
transferred, new certificates therefor not bearing a legend restricting
further transfer shall have been issued by the Company and subsequent
disposition thereof shall not require registration under the Securities
Act, or (d) they shall have ceased to be outstanding.
"Registration Statement" means any registration statement of the
Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in
such Registration Statement.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Shareholder Approval" means the affirmative vote of holders of a
majority of the shares of Voting Capital Stock of the Company
represented in person or by proxy at a duly held meeting of such
shareholders at which a quorum was present or the written
-3-
4
consent of holders of a majority of all outstanding shares of Voting
Capital Stock of the Company; provided, however, that if the outstanding
shares of Voting Capital Stock having varying votes per share, the
foregoing references in this sentence to holders of a majority of shares
shall be deemed to mean holders of shares entitled to cast a majority of
votes.
"Underwriters Maximum Number" means for any underwritten
registration, that number of shares of securities to which such
registration should, in the written opinion of the managing underwriter
or underwriters of such registration in light of market factors, be
limited.
"underwritten registration" or "underwritten offering" means a
registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
"Voting Capital Stock" means equity securities of the Company
entitled to vote generally in the election of directors of the Company.
2. COVENANTS AND UNDERTAKINGS
2.1 Reservation of Shares. The Company will maintain as reserved
those shares of Common Stock reserved in accordance with Section 4.6 of the
Investment Agreement and shall take all such action as may be required from time
to time in order that it may validly and legally issue fully paid and
non-assessable shares of Common Stock in accordance herewith and therewith.
2.2 No Partial Redemption. Notwithstanding its ability to effect
partial redemptions of the Preferred Shares pursuant to Section 5 of the
Certificate of Designation, if the Company shall elect to redeem any Preferred
Shares or any Class A Preferred Shares held by the Investor, Rothschild Realty
Inc., an Affiliate of either of them or one of their respective members or
partners, the Company shall redeem all of such Preferred Shares and all of the
Class A Preferred Shares held by such persons, simultaneously and on the same
terms.
2.3 Affiliate Transactions. So long as the Investor or an
Affiliate of the Investor, or one of their respective members or partners, is
the holder of either (A) all of the outstanding Preferred Shares or (B) an
amount of the Company's Voting Capital Stock which, if converted into shares of
Common Stock, would exceed 10% of the outstanding Common Stock on a fully
diluted basis (determined on the basis of then convertible, exercisable or
exchangeable securities, warrants or options issued by the Company), the Company
will not, and will not permit any of their respective Subsidiaries to, directly
or indirectly, consummate any transaction or series of transactions (including,
without limitation, the sale, purchase, exchange or lease of any assets or
properties or the rendering of any services) with any Affiliate (other than
among the Company or its Subsidiaries) (an "Affiliate Transaction") unless (i)
such transaction or series of related transactions is on terms that are no less
favorable to the Company or its Subsidiaries, as the case may be, than would be
available in a comparable transaction in arm's-length dealings with an unrelated
third party and (ii) with respect to any one transaction or series of related
transactions involving aggregate payments in excess of $1,000,000, the Company
delivers a
-4-
5
certificate, certified by an officer of the Company, to the Investor certifying
that such transaction or series of related transaction complies with clause (i)
above and such transaction or series of related transactions has received the
approval of a majority of the disinterested members of the Board of Directors of
the Company; provided, however, that this Section 2.3 shall not apply to any
transaction (i) arising out of any agreement existing on the date hereof or any
transaction in which all holders of any class or series of outstanding capital
stock of the Company have the right to participate on a pro rata basis or (ii)
that has received Shareholder Approval.
2.4 Inspection Rights. So long as the Investor or an Affiliate
of the Investor, or one of their respective members or partners, is the holder
of either (A) all of the Preferred Shares outstanding or (B) an amount of the
Company's Voting Capital Stock which, if converted into shares of Common Stock,
would exceed 10% of the Common Stock on a fully diluted basis (determined on the
basis of then convertible, exercisable or exchangeable securities, warrants or
options issued by the Company), the Company shall permit, and cause its
Subsidiaries to permit, the Investor or any agents or representatives thereof to
examine and inspect the books and records of the Company and take copies and
extracts therefrom on reasonable prior notice and at reasonable times and during
normal business hours; provided, however, that the Company shall have the right
to require, as a condition to such examination, inspection or taking of copies
or extracts therefrom, that the Investor and such agents and representatives
execute a confidentiality and standstill agreement substantially in the form of
the letter agreement dated September 30, 1996 between the Company and Rothschild
Realty Inc., for itself and as agent for the Investor.
2.5 Insurance for Directors. So long as the Investor or an
Affiliate of the Investor, or one of their respective members or partners, is
the holder of either (A) all of the Preferred Shares outstanding or (B) an
amount of the Company's Voting Capital Stock which if converted into shares of
Common Stock would exceed 10% of the Common Stock on a fully diluted basis
(determined on the basis of then convertible, exercisable or exchangeable
securities, warrants or options issued by the Company), the Company shall obtain
and maintain directors' and officers' reimbursement and liability insurance in
the name of each Preferred Director (as such term is defined in the Certificate
of Designation) in an amount not less than the amount provided to other outside
directors of the Company or less than the amount of the current policy therefor;
provided, however, that (i) such directors supply the information required by
the Company's insurance carrier and meet the qualifications established by such
carrier, if any, which shall not be more burdensome than those of the Company's
current policy, (ii) if such insurance is a claims based or equivalent policy,
each such Preferred Director shall be entitled to such insurance for an
additional six years and (iii) in no event shall the Company be required to
obtain and maintain such insurance in an amount such that the annual premiums
exceed 300% of the annual premiums currently being paid for such insurance.
2.6 Accrued and Unpaid Dividends. Notwithstanding anything in
the Certificate of Designation to the contrary, on the date of conversion of any
Preferred Shares pursuant to Section 7 of the Certificate of Designation by the
Investor, Rothschild Realty Inc., an Affiliate of either of them or one of their
respective members or partners, the Company shall pay such holder of such
Preferred Shares all accrued and unpaid dividends in respect of such Preferred
Shares as provided for in Section 2 of the Certificate of Designation.
-5-
6
2.7 Fees and Expenses. In the event that the Company shall
request that the Investor consent to any action by the Company that is otherwise
prohibited by, or amend any of, the Operative Instruments, the Company shall pay
all reasonable legal fees and expenses reasonably incurred by the Investor in
connection with the Investor's review of such request.
2.8 Board of Directors. For so long as each of the Preferred
Shares and the Class A Preferred Shares are outstanding, the Company shall not
increase the number of members of the Board of Directors of the Company beyond
seven members other than Preferred Directors serving pursuant to the terms of
the Certificate of Designation or the Articles Supplementary Classifying
1,351,351 Shares of Preferred Stock as Class A Senior Cumulative Convertible
Preferred Stock.
3. DEMAND REGISTRATION
3.1 Right to Demand Registration. (a) Subject to Section 3.5, at any
time following the earlier of June 1, 1998 or the date of the 1998 Annual
Meeting of Shareholders of the Company, Demand Requesting Holders may make a
written request to the Company for registration with the Commission (a "Demand
Registration") under and in accordance with the provisions of the Securities Act
of all or part of its Registrable Securities; provided, however, that the
Company (i) shall be required to effect no more than one such Demand
Registration pursuant to this Section 3 (other than the "shelf" registration
provided for under Section 3.1(c)), (ii) shall not be required to effect a
Demand Registration if less than $10 million in market value of Registrable
Securities would be registered and (iii) shall not be required to provide any
such Demand Registration if the Investor shall have received a favorable opinion
letter from counsel to the Company, in form and substance satisfactory in the
reasonable judgment of counsel to the Investor that (x) subject to the
restrictions on transfer set forth in the Certificate of Designation, the
Preferred Shares were, when issued to the Investor, fully registered under the
Securities Act and shall be freely transferable by the Investor without the
requirement that such Preferred Shares be registered or qualified pursuant to
any federal securities law or the Investor comply with the prospectus delivery
requirements of the Securities Act or Rule 144(e) under the Securities Act and
(y) subject to the restrictions on transfer set forth in the Charter, any Common
Stock held by the Investor as a result of the conversion of any Preferred Shares
pursuant to the provisions of the Certificate of Designation were, when the
Preferred Shares were issued to the Investor, registered under the Securities
Act and shall be freely transferable by the Investor without the requirement
that such Common Stock be registered or qualified pursuant to any federal
securities law or the Investor comply with the prospectus delivery requirements
of the Securities Act or Rule 144(e) under the Securities Act.
(b) The Demand Registration shall be in the form of a firmly
underwritten offering managed by an underwriter or underwriters selected by the
Company pursuant to Section 3.4.
(c) At the election of the Majority Holders (in their sole
discretion), but in no event prior to the earlier of June 1, 1998 or the date of
the 1998 Annual Meeting of Shareholders of the Company, the Company shall
promptly file with the Commission a "shelf" registration
-6-
7
statement with respect to all of their Registrable Shares, on an appropriate
Form, pursuant to Rule 415 under the Securities Act or any similar rule that may
be adopted by the Commission (the "Shelf Registration"). The Company shall use
its best efforts to have the Shelf Registration declared effective as soon as
practicable after such filing and, notwithstanding anything to the contrary
herein, shall use best efforts to keep the Shelf Registration continuously
effective until the earlier of (i) the second anniversary (plus the term of any
Blackout Period, as defined in Section 3.5) of the date such Shelf Registration
is declared effective and (ii) the date on which all shares registered on such
"shelf" registration statement have been sold. Such "shelf" registration shall
provide for distributions other than through underwritten offerings and shall
not qualify as the Demand Registration to which the Holders are entitled. Any
Holder shall be required to comply with the rules of the New York Stock Exchange
or any other stock exchange on which the Common Stock is then listed. The
Company shall not be required to effect more than one such Shelf Registration
pursuant to this Section 3 and shall not be required to effect any such Shelf
Registration if the Investor shall have received a favorable opinion letter from
counsel to the Company, in form and substance satisfactory in the reasonable
judgment of counsel to the Investor that (x) subject to the restrictions on
transfer set forth in the Certificate of Designation, the Preferred Shares were,
when issued to the Investor, fully registered under the Securities Act and shall
be freely transferable by the Investor without the requirement that such
Preferred Shares be registered or qualified pursuant to any federal securities
law or the Investor comply with the prospectus delivery requirements of the
Securities Act or Rule 144(e) under the Securities Act and (y) subject to the
restrictions on transfer set forth in the Charter, any Common Stock held by the
Investor as a result of the conversion of any Preferred Shares pursuant to the
provisions of the Certificate of Designation were, when the Preferred Shares
were issued to the Investor, registered under the Securities Act and shall be
freely transferable by the Investor without the requirement that such Common
Stock be registered or qualified pursuant to any federal securities law or the
Investor comply with the prospectus delivery requirements of the Securities Act
or Rule 144(e) under the Securities Act.
(d) Within ten days after receipt of any request by the Demand
Requesting Holders under Section 3.1(a) or the Majority Holders under Section
3.1(c), the Company will give written notice (the "Other Holders Notice") of
such registration request to all other Holders, if any, and, subject to Section
3.3, shall include in such registration all Registrable Securities with respect
to which the Company has received written requests for inclusion therein from
the Holders thereof within 15 days after such notice by the Company.
3.2 Effective Registration and Expenses. A registration will qualify
as a Demand Registration or a Shelf Registration when it has become effective;
provided, however, that (i) if the Demand Requesting Holders with regard to a
Demand Registration, or the Majority Holders with regard to a Shelf
Registration, withdraw their Registrable Securities after the filing with the
Commission of the initial Registration Statement related thereto, such demand
will count as a Demand Registration or a Shelf Registration unless such Demand
Requesting Holders or Majority Holders, as the case may be, agree severally to
pay all of the Registration Expenses of the Company and all other out of pocket
expenses of the Company contemplated by Section 7 hereof, incurred through the
date that notice of such withdrawal is given and (ii) an effective Demand
Registration will not count as the sole Demand Registration if the Demand
Requesting
-7-
8
Holders have not been permitted to register and sell all of the Registrable
Securities requested to be included in such registration by such Demand
Requesting Holders.
3.3 Priority on Underwritten Demand Registrations. Subject to the
rights granted pursuant to the agreements set forth on Schedule 11.2, if the
managing underwriter or underwriters of any underwritten Demand Registration
advise the Company and the Holders in writing of an Underwriters Maximum Number,
the Company will be obligated and required to include in such registration (i)
first, the Registrable Securities requested to be included in such Demand
Registration by the Holders, pro rata in proportion to the number of Registrable
Securities requested to be included in such registration by each of them until
all such Registrable Securities have been so included, (ii) second, the
securities requested to be included in such Demand Registration by the Company
and other Persons having contractual rights thereto, in accordance with the
priorities that exist among them, and (iii) third, any other securities of the
Company to be registered on behalf of any other Person, including the Company.
Neither the Company nor any of its securityholders (other than Holders of
Registrable Securities) shall be entitled to include any securities in any
Demand Registration unless the Company or such securityholders (as the case may
be) shall have irrevocably agreed in writing to sell such securities on the same
terms and conditions as shall apply to the Registrable Securities to be included
in such Demand Registration.
3.4 Selection of Underwriters. The managing underwriter and any
additional investment bankers and managers for use in connection with any
underwritten Demand Registration will be selected by the Company from a list of
five choices provided by the Majority Holders; provided, that the Majority
Holders shall be required to select such five firms from the list attached
hereto as Schedule 3.4.
3.5 Limitations Regarding Registration at the Request of Holders. (a)
The Company shall not be required to effect a Demand Registration or a Shelf
Registration under Section 3.1 and the Holders of Registrable Securities will
discontinue the disposition of their securities covered by a Shelf Registration
during any Blackout Period (as defined below) (i) if the Board of Directors of
the Company determines in good faith that effecting such a registration or
continuing such disposition at such time would have a material adverse effect
upon a proposed sale of all (or substantially all) of the assets of the Company
or a merger, reorganization, recapitalization or similar current transaction
materially affecting the capital structure or equity ownership of the Company,
(ii) if the Company is in possession of material information which the Board of
Directors of the Company determines in good faith is not in the best interests
of the Company to disclose in a registration statement at such time, or (iii) if
the Company has delivered a notice pursuant to Section 4.1 that it is
undertaking an underwritten offering in which the Holders will be entitled to
exercise their Piggyback Registration rights; provided, however, that the
Company may (i) only delay a Demand Registration pursuant to this Section 3.5 by
delivery of a Blackout Notice (as defined below) within thirty (30) days of
delivery of the notice requesting a Demand Registration and only for a period
not exceeding three (3) months (or until such earlier time as such transaction
is consummated or no longer proposed or the material information has been made
public); and (ii) require, by delivery of a Blackout Notice, that the Holders of
Registrable Securities discontinue from time to time, the disposition of their
securities
-8-
9
covered by a Shelf Registration for an aggregate period not to exceed
six (6) months (each period as described in (i) and (ii) above, a "Blackout
Period") .
(b) The Company shall promptly notify the Holders in writing (a
"Blackout Notice") of any decision not to effect a Demand Registration or a
Shelf Registration or to discontinue sales of Registrable Securities pursuant to
this Section 3.5, which notice shall set forth the reason for such decision (but
not disclosing any nonpublic material information unless expressly requested by
Holders) and shall include an undertaking by the Company promptly to notify the
Holders as soon as a Demand Registration or a Shelf Registration may be effected
or sales may resume.
(c) The Company shall not be required to effect a Demand
Registration or Shelf Registration under Section 3.1 during any period the
Company is restricted from filing a registration statement or from making any
public sale or distribution of its equity securities pursuant to any agreement
on Schedule 11.2.
4. PIGGYBACK REGISTRATION
4.1 Right to Include Registrable Securities. Subject to Section 4.3,
if the Company or any other issuer of Registrable Securities at any time or from
time to time proposes to register shares of its equity securities or Registrable
Securities under the Securities Act (other than in a registration on Form S-4 or
S-8 or any successor form to such forms or in connection with an exchange offer
or an offering of securities solely to the existing stockholders or employees of
the Company), whether or not for sale for its own account, the Company shall
deliver prompt written notice to all Holders of Registrable Securities of its
intention to undertake such registration and of such Holders' rights to
participate in such registration to the extent of their holdings of Piggyback
Registrable Securities under this Section 4 as hereinafter provided. The Company
shall use its reasonable best efforts to effect the registration under the
Securities Act of all Piggyback Registrable Securities with respect to which the
Company receives a request for registration from the Holders thereof by written
notice to the Company within 15 Business Days after the date of the Company's
notice to such Holders of its intended registration (which notice by Holders
shall specify the amount of such Piggyback Registrable Securities to be
registered, which amount for each Holder must equal or exceed the lesser of (i)
half of all Piggyback Registrable Securities that such Holder either owns or has
the right to acquire or (ii) 10,000 shares), to the extent necessary to permit
their disposition in accordance with the Company's intended methods thereof of
all such Piggyback Registrable Securities by including such Piggyback
Registrable Securities in the registration statement pursuant to which the
Company proposes to register the securities (a "Piggyback Registration");
provided, however, that if such registration involves an underwritten offering,
all Holders requesting inclusion in the registration shall be required to sell
such Piggyback Registrable Securities to the underwriters selected by the
Company at the same price and on the same terms of underwriting applicable to
the Company and any other Persons selling securities. Holders desiring to
participate in a Piggyback Registration shall be bound by the Company's intended
method of disposition of shares thereunder. The Holders requesting inclusion in
a registration pursuant to this Section 4 may, at any time prior to the
effective date of the registration statement relating to such registration,
-9-
10
revoke such request by delivering written notice to the Company revoking such
requested inclusion. All requests for Piggyback Registration under this Section
4 shall be without prejudice to the rights of the Holders to request, and shall
not be counted as, the sole Demand Registration or Shelf Registration under
Section 3 above.
4.2 Priority in Piggyback Registration. If any of the Piggyback
Registrable Securities registered pursuant to any Piggyback Registration are to
be sold in one or more firm commitment underwritten offerings, and the managing
underwriters advise in writing the Company and the Holders of such Piggyback
Registrable Securities of an Underwriters Maximum Number, or, in the case of a
Piggyback Registration not being underwritten, the Company shall reasonably
determine (and notify the Holders of Piggyback Registrable Securities of such
determination), after consultation with an investment banker of nationally
recognized standing, that the number of shares of securities proposed to be sold
in such offering exceeds the number of shares which can be sold in such offering
within a price range acceptable to the Company, the Company shall include in
such registration only such number of shares (including Piggyback Registrable
Securities) which in the opinion of such underwriter or underwriters or the
Company, as the case may be, can be sold within such price range, selected in
the following order of priority: (i) first, all of the shares that the Company
proposes to register (but solely to the extent that the proceeds thereof shall
not be used to purchase Common Stock or other securities of the Company), and
the shares requested by any other Person having demand registration rights and
having made demand for the subject registration, and (ii) second, the Piggyback
Registrable Securities requested to be included in such registration by Holders
that have requested their Piggyback Registrable Securities to be included
therein, pro rata in proportion to the number of Piggyback Registrable
Securities requested to be included in such registration by each of them.
4.3 Limitations Regarding Piggyback Registrations. If the Company, at
any time after giving written notice under Section 4.1 of its intention to
register Common Stock and prior to the effectiveness of the registration
statement filed in connection with such registration, determines for any reason
either not to effect such registration or to delay such registration, the
Company may, at its election, by the delivery of written notice to each Holder,
(i) in the case of a determination not to effect registration, relieve itself of
its obligation to register the Piggyback Registrable Securities in connection
with such registration, or (ii) in the case of a determination to delay the
registration, delay the registration of such Piggyback Registrable Securities
for the same period as the delay in the registration of such other shares of
Common Stock.
4.4 Agreement of Holders. As a condition precedent to permitting any
Holder to participate in a Piggyback Registration, the Company shall have the
right to require such Holder to execute an agreement in form and substance
satisfactory to the Company to the effect that such Holder agrees to be bound
by, and to comply with, all of the obligations of a Holder under this Agreement.
5. HOLD-BACK AGREEMENTS
5.1 Restrictions on Public Sale by Holder of Registrable Securities.
(a) Each Holder of Registrable Securities agrees, if requested by the managing
underwriter or underwriters in an
-10-
11
underwritten offering of any Registrable Securities, not to effect any public
sale or distribution or any other sale pursuant to the exemption from the
registration requirements of the Securities Act available for private
placements, of its remaining equity securities of the Company, including a sale
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act (except as part of such underwritten registration), during the
14-day period prior to, and during the 90-day period (or such shorter period as
may be agreed to by the parties hereto) beginning on, the effective date of such
Registration Statement, to the extent timely notified in writing by the Company
or the managing underwriter or underwriters, unless the underwriters managing
the registered offering and the Company otherwise agree.
(b) Each Holder of Registrable Securities agrees by acquisition
of such Registrable Securities not to effect any public sale or distribution or
any other sale pursuant to the exemption from the registration requirements of
the Securities Act available for private placements, of its remaining equity
securities of the Company, including a sale pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act (except as part of such
underwritten registration), during the period that a holder of securities
registrable under any of the agreements set forth on Schedule 11.2 is prohibited
from making any such sale or distribution as a result of a underwritten public
offering pursuant to such agreement.
5.2 Restriction on Public Sale by the Company and Others. The Company
agrees (i) not to effect any public sale or distribution of any of its equity
securities during the 14-day period prior to, and during the 90-day period
beginning on, the effective date of a Demand Registration Statement filed
pursuant to Section 3 or such longer periods as may be required in the
reasonable judgment of the managing underwriter or underwriters (except as part
of such underwritten registration or pursuant to registrations on Forms S-4 or
S-8 or any successor form to such forms or in connection with an exchange offer
or an offering of securities solely to the existing stockholders or employees of
the Company), and (ii) that it will cause each holder of equity securities of
the Company purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) who as a result of such
purchase, owns more than 5% of the Common Stock on a fully diluted basis, to
agree not to effect any public sale or distribution or any other sale pursuant
to the exemption from the registration requirements of the Securities Act
available for private placements, of any such securities during such period,
including a sale pursuant to Rule 144 under the Securities Act (except as part
of such underwritten registration, if permitted).
6. REGISTRATION PROCEDURES
Upon the Company incurring registration obligations under Section
3 or Section 4 and subject thereto (including, without limitation, the Company's
unfettered right to terminate or withdraw a registration under Section 4 for any
or no reason), the Company will use its reasonable best efforts to effect such
registrations to permit the sale of such Registrable Securities in accordance
with the intended method or methods of distribution thereof, and pursuant
thereto the Company will, at its expense, as expeditiously as reasonably
possible:
-11-
12
(a) prepare and file with the Commission a Registration
Statement relating to such registration on any appropriate form under the
Securities Act, which form shall be available for the sale of the Registrable
Securities by the Holders thereof in accordance with the intended method or
methods of distribution thereof, and use its reasonable best efforts to cause
such Registration Statement to become effective; provided, however, that before
filing a Registration Statement or Prospectus or any amendments or supplements
thereto, including documents incorporated by reference after the initial filing
of any Registration Statement, the Company will furnish to the Holders of the
Registrable Securities covered by such Registration Statement, their counsel and
the underwriters, if any, copies of all such documents proposed to be filed
sufficiently in advance of filing to provide them with a reasonable opportunity
to review such documents and comment thereon;
(b) prepare and file with the Commission such amendments and
post-effective amendments to a Registration Statement as may be necessary to
keep such Registration Statement effective for a period of not less than 180
days (or such shorter period which shall terminate when all Registrable
Securities covered by such Registration Statement have been sold or withdrawn,
but not prior to the expiration of the 90-day period referred to in Section 4(3)
of the Securities Act and Rule 174 thereunder, if applicable); cause the related
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities Act; and
comply with the provisions of the Securities Act applicable to it with respect
to the disposition of all securities covered by such Registration Statement
during the applicable Period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement or
supplement to such Prospectus;
(c) notify each Holder of Registrable Securities included in the
Registration Statement, their counsel and the managing underwriters, if any, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, promptly, and (if requested by any such Person) confirm such
notice in writing, (1) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(2) of any request by the Commission for amendments or supplements to a
Registration Statement or related Prospectus or for additional information, (3)
of the issuance by the Commission of any stop order suspending the effectiveness
of a Registration Statement or the initiation of any proceedings for that
purpose, (4) if at any time the representations and warranties of the Company
contained in agreements contemplated by Section 6(n) cease to be true and
correct, (5) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, (6) of the happening of any event as a result of which the
Prospectus included in the Registration Statement (as then in effect) contains
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus or any preliminary Prospectus, in light of the
circumstances under which they were made) not misleading and (7) of the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate or that there exist circumstances
not yet disclosed to the public
-12-
13
which make further sales under such Registration Statement inadvisable pending
such disclosure and post-effective amendment;
(d) at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, upon the occurrence of any event
contemplated by Section 6(c)(2)-(7), prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, which Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(e) use reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement, or the lifting
of any suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction required pursuant to Section 6(i), as soon as
reasonably possible;
(f) if requested by a managing underwriter or any Holder of
Registrable Securities, immediately incorporate in a prospectus supplement or
post-effective amendment such information concerning such Holder of Registrable
Securities, the managing underwriter or underwriters or the intended method of
distribution as the managing underwriter or underwriters or the Holder of
Registrable Securities reasonably requests to be included therein and as is
appropriate in the reasonable judgment of the Company, including, without
limitation, information with respect to the number of shares of the Registrable
Securities being sold to such underwriter or underwriters, the purchase price
being paid therefor by such underwriter or underwriters and with respect to any
other terms of the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; make all required filings of
such Prospectus supplement or post-effective amendment as soon as notified of
the matters to be incorporated in such Prospectus supplement or post-effective
amendment; and supplement or make amendments to any Registration Statement if
requested by a managing underwriter of such Registrable Securities;
(g) furnish to each Holder of Registrable Securities included in
such Registration Statement and each managing underwriter, if any, without
charge, one manually-signed copy of the Registration Statement and any
post-effective amendments thereto, including financial statements and schedules,
and, upon request, all documents incorporated therein by reference and all
exhibits (including those incorporated by reference);
(h) deliver to each Holder of Registrable Securities included in
such Registration Statement, their counsel and the underwriters, if any, without
charge, as many copies of the Prospectus or Prospectuses (including each
preliminary Prospectus) and any amendment or supplement thereto as such Persons
may reasonably request; the Company consents to the use of such Prospectus or
any amendment or supplement thereto by each Holder of Registrable Securities
included in the Registration Statement and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto;
-13-
14
(i) prior to any public offering of Registrable Securities use
its reasonable best efforts to register or qualify, or cooperate with the
Holders of Registrable Securities included in the Registration Statement, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification of, such Registrable Securities for offer and sale
under the securities or blue sky laws of such jurisdictions as any Holder or
underwriter reasonably requests in writing; use its reasonable best efforts to
keep each such registration or qualification effective, including through new
filings or amendments or renewals, during the period such Registration Statement
is required to be kept effective and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the applicable Registration Statement;
provided, however, that the Company will not be required to qualify to do
business or take any action that would subject it to taxation or general service
of process in any jurisdiction where it is not then so qualified or subject;
(j) cooperate with the Holders of Registrable Securities included
in the Registration Statement and the managing underwriter or underwriters, if
any, to facilitate (x) the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Securities to be sold
under the Registration Statement or (y) the timely transfer of beneficial
ownership of such Registrable Securities in machine book-entry fashion under the
auspices of The Depository Trust Company or other similar organization; and
cause such Registrable Securities to be in such denominations and registered in
such names as the managing underwriter or underwriters, if any, or such Holders
may request at least two business days prior to any sale of Registrable
Securities;
(k) use its reasonable best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with or
approved by such Governmental Bodies consistent with the provisions of Section
6(i) as may be necessary to enable the seller or sellers thereof or the managing
underwriter or underwriters, if any, to consummate the disposition of such
Registrable Securities;
(l) cause all Registrable Securities included in such
Registration Statement to be (1) listed, by the date of first sale of
Registrable Securities pursuant to such Registration Statement, on each
securities exchange on which shares of the same class and series have previously
been, or are concurrently to be, listed, if any, or (2) if the Registrable
Securities to be included in such Registration Statement are to be distributed
in an underwritten offering, quoted on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or the National Market System of
NASDAQ if the Common Stock is then quoted thereon and such Registrable
Securities qualify for inclusion thereon;
(m) provide a transfer agent and registrar for the
Registrable Securities not later than the effective date of such Registration
Statement;
(n) enter into such agreements and take all such other reasonable
actions in connection therewith in order to expedite or facilitate the
disposition of such Registrable Securities and in such connection, in the case
of an underwritten offering, enter into an
-14-
15
underwriting agreement in form, scope and substance as is customary in
underwritten offerings and use its best efforts to comply with and satisfy the
covenants and conditions of such underwriting agreement, including, without
limitation, providing opinions of counsel to the Company, indemnifications, and
"comfort" letters from the Company's independent certified public accountants;
(o) make available for inspection by a representative of the
Holders of Registrable Securities included in the Registration Statement, any
underwriter participating in any disposition pursuant to such Registration
Statement and any lawyer, accountant or other advisors retained by such selling
Holders or underwriter, all pertinent financial and other records, pertinent
corporate documents and properties of the Company as they may reasonably
request, and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such representative, underwriter,
lawyer, accountant or other advisors in connection with such Registration
Statement, provided, however, that any records, information or documents that
are furnished by the Company and that are non-public shall be used only in
connection with such registration and shall be kept confidential by such Persons
except to the extent disclosure of such records, information or documents is
required by law; and
(p) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make generally available to its
security holders earnings statements satisfying the provisions of Section 11(a)
of the Securities Act, no later than 90 days after the end of any 12-month
period commencing at the end of any fiscal quarter in which Registrable
Securities are sold to underwriters in a firmly underwritten offering.
Each Holder of Registrable Securities as to which any
registration is being effected shall furnish promptly to the Company such
information regarding the distribution of such securities as the Company may
from time to time reasonably request in writing.
Each Holder of Registrable Securities (i) shall sell its
securities covered by any Registration Statement in accordance with the plan of
distribution provided for therein and (ii) upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
6(c)(2)-(7), shall forthwith discontinue disposition of Registrable Securities
covered by such Registration Statement or Prospectus until such Holder's receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
6(d), or until it is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any additional
or supplemental filings which are incorporated by reference in such Prospectus,
and, if so directed by the Company, such Holder will, or will request the
managing underwriter or underwriters, if any, to, deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such securities current at the
time of receipt of such notice. In the event the Company shall give any such
notice, the time period mentioned in Section 6(b) during which a Registration
Statement is required to be kept effective shall be extended by the number of
days during the time period from and including the date of the giving of such
notice pursuant to Section 6(c) to and including the earlier of (x) the date
when each seller of Registrable Securities covered by such Registration
Statement shall have received the copies of the supplemented or
-15-
16
amended Prospectus contemplated by Section 6(d), or (y) the date when each such
seller is notified by the Company that it may resume use of the Prospectus as
then in effect. The Company shall be obligated to use its best efforts to cause
such Registration Statement and Prospectus to conform to all legal requirements
and to notify the Holders that the use of the applicable Prospectus may be
resumed. Nothing in this paragraph shall limit the obligations of the Company
under Section 3.5 of this Agreement.
7. REGISTRATION EXPENSES
All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all registration
and filing fees, fees and expense of compliance with state securities or blue
sky laws, including reasonable fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities under the laws of such jurisdictions as the managing underwriter or
underwriters may reasonably designate, printing expenses, messenger, telephone
and delivery expenses, and fees and disbursements of counsel for the Company and
of all independent certified public accountants of the Company (including the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), and of underwriters, any liability insurance and fees and
expenses of other Persons retained by the Company (all such expenses being
herein called "Registration Expenses") will be borne by the Company whether or
not the Registration Statement becomes effective. The Company will also pay its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit, the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange on which
similar securities issued by the Company are then listed and the fees and
expenses of any Person, including special experts, retained by the Company. None
of the following expenses shall be paid by the Company: transfer taxes,
discounts, commissions or fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals relating to the distribution of the
Registrable Securities and the legal fees and disbursements of counsel to the
Holders.
8. INDEMNIFICATION
8.1 Indemnification by the Company. The Company agrees to indemnify,
defend, exonerate and hold harmless, to the full extent permitted by law, each
Holder of Registrable Securities registered pursuant to any registration
hereunder and each of its Affiliates or partners, each of their respective
members, officers, directors, employees, agents, representatives, successors and
assigns and each Person who controls such Holder, Affiliate or partner (within
the meaning of the Securities Act) against any and all actions, causes of
action, suits, losses, liabilities, obligations, damages, deficiencies, demands,
claims, judgments, taxes, assessments, settlement costs, court costs and other
costs and expenses, including, without limitation, interest, penalties, fines,
costs of investigation, discovery, case preparation, defense or appeal, expert
witness fees and expenses and reasonable attorneys' and paralegal fees and
disbursements (collectively, "Losses") incurred by any such Person in any
capacity and caused by any untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary Prospectus or any omission to
state therein a material fact required to be stated therein or
-16-
17
necessary to make the statements therein (in the case of a Prospectus or any
preliminary Prospectus, in the light of the circumstances under which they were
made) not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by such Holder or its
representative expressly for use therein; provided, however, that such
indemnification with respect to any preliminary prospectus shall not be
applicable if a copy of the Prospectus was not sent or given by or on behalf of
such Holder on the initial sale, if such is required by law, at or prior to the
written confirmation of the sale and if the Prospectus (as amended or
supplemented) would have cured the defect giving rise to such Losses.
8.2 Indemnification by Holders. In connection with any registration
hereunder, each Holder participating in such registration will promptly furnish
to the Company in writing such information and affidavits with respect to such
Holder as the Company reasonably requests for use in connection with any
Registration Statement or Prospectus and agrees to indemnify, defend, exonerate
and hold harmless, to the full extent permitted by law, the Company, its
directors, officers, agents and representatives and each Person who controls the
Company (within the meaning of the Securities Act) against any Losses incurred
by any such Person in any capacity and caused by any untrue statement of a
material fact or any omission of a material fact required to be stated in any
Registration Statement or Prospectus or preliminary Prospectus or necessary to
make the statements therein (in the case of a Prospectus, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in any
information or affidavit with respect to such Holder so furnished in writing by
such Holder or its representatives to the Company specifically for inclusion in
such Registration Statement or Prospectus; provided, however, that such
indemnification with respect to any preliminary prospectus shall not be
applicable if a copy of the Prospectus was not sent or given by or on behalf of
the Company on the initial sale, if such is required by law, at or prior to the
written confirmation of the sale and if the Prospectus (as amended or
supplemented) would have cured the defect giving rise to such Losses. In no
event shall the liability of any selling Holder hereunder be greater in amount
than the net dollar amount of the proceeds received by such Holder upon the sale
of the Registrable Securities giving rise to such indemnification obligation.
The Company shall be entitled to receive indemnities from underwriters to the
same extent as provided above with respect to information so furnished in
writing by such persons or their representatives to the Company specifically for
inclusion in any Prospectus or Registration Statement.
8.3 Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party. Notwithstanding the
foregoing, any Person entitled to indemnification hereunder shall have the right
to employ separate counsel and to participate in the defense of such claim, but
the reasonable fees and expenses of such counsel shall be at the expense of such
Person unless (a) the indemnifying party has agreed in writing to pay such fees
or expenses, (b) the indemnifying party shall have failed to assume the defense
of such claim and employ counsel reasonably satisfactory to such Person or (c) a
conflict of interest may exist between such Person and the indemnifying party
(it being understood that (x) in the case of each of (a), (b) and (c) above, the
reasonable fees and expenses
-17-
18
of such separate counsel to such Person shall be paid by the indemnifying party
and (y) in the case of (c) above, if the Person notifies the indemnifying party
in writing that such Person elects to employ separate counsel at the expense of
the indemnifying party, the indemnifying party shall not have the right to
assume the defense of such claim on behalf of such Person). If such defense is
not assumed by the indemnifying party, the indemnifying party will not be
subject to any liability for any settlement made without its consent (but such
consent will not be unreasonably withheld or delayed). No indemnifying party
will be required to consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the indemnified party of a release from all
liability in respect to such claim or litigation. An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the reasonable fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the indemnifying
party shall be obligated to pay the fees and expenses of such additional counsel
or counsels. The Company may not enter into any settlement of any claim relating
to the offer and sale of Registrable Securities that does not provide for the
complete and unconditional release of such Person.
8.4 Contribution. If the indemnification provided for in this Section
8 from the indemnifying party is unavailable to an indemnified party hereunder
in respect of any losses, claims, damages, liabilities or expense referred to
therein, then the indemnifying party in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action; provided,
however, that in no event shall the liability of any selling Holder hereunder be
greater in amount than the difference between the dollar amount of the proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such contribution obligation and all amounts previously contributed by such
Holder with respect to such losses, claims, damages, liabilities and expenses.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 8.4 were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately paragraph. No person
guilty of fraudulent misrepresentation (within the meaning of
-18-
19
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
9. RULE 144
The Company agrees that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder, to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such information and requirements.
10. EFFECTIVENESS. This Agreement shall be effective upon the execution and
delivery of a counterpart by each of the parties hereto.
11. MISCELLANEOUS
11.1 No Adequate Remedy at Law. In the event of a breach by the
Company of its obligations under this Agreement, each Holder, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate. The
failure to file a Registration Statement within 60 days of a written request
delivered under Section 3.1 shall constitute, in the absence of an injunction or
a Blackout Period having been imposed, a breach thereof entitling the Holders to
remedies hereunder.
11.2 No Inconsistent Agreement. (a) Except for the registration
rights contained in the agreements set forth on Schedule 11.2 hereto, the
Company has not previously entered into any agreement with respect to its
capital stock granting any registration rights to any Person.
(b) The Company will not on or after the date of this Agreement
enter into any agreement with respect to its securities, (i) which grants
registration rights to anyone on a preferred or pari passu position to the
Holders or (ii) which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof.
11.3 Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Majority Holders. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter which relates exclusively to
the rights of Holders of Registrable Securities whose securities are being sold
pursuant to a
-19-
20
Registration Statement and which does not directly or indirectly affect the
rights of other Holders may be given by Holders owning a majority of the shares
of the Registrable Securities being sold by such Holders, provided that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.
11.4 Notices. Any notice or other communication required or permitted
hereunder shall be deemed to be delivered if in writing (or in the form of a
telecopy) addressed as provided below and if either (a) actually delivered or
telecopied to said address, (b) in the case of overnight delivery of a notice,
the next business day after properly posted with postage prepaid, or (c) in the
case of a letter, 3 business days shall have elapsed after the same shall have
been deposited in the United States mails, postage prepaid and registered or
certified:
If to the Company, then to Pacific Gulf Properties Inc., 000 Xxx
Xxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000, Attention:
President, or such other address or addresses of which the Investor
shall have been given notice, with concurrent copies to Xxxxxx, Xxxx &
Xxxxxxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx
00000-0000, Attention: Dhiya El-Saden, Esq., or such other address of
which the Investor shall have been given notice.
If to any Holder of Registrable Securities, to it at its address
set forth on the books and records of the Company.
11.5 Counterparts. This Agreement and any amendments, waivers,
consents or supplements may be executed in two or more counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument. This Agreement shall become effective upon the
execution of a counterpart by each of the parties hereto.
11.6 Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
11.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to agreements
made and to be performed entirely within such State.
11.8 Consent to Jurisdiction; Waiver of Jury Trial. (a) Any action,
suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby may be instituted in any federal court of the
Southern District of New York or any state court located in New York County,
State of New York, and each party agrees not to assert, by way of motion, as a
defense or otherwise, in any such action, suit or proceeding, any claim that it
is not subject personally to the jurisdiction of such court, that the action,
suit or proceeding is brought in an inconvenient forum, that the venue of the
action, suit or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court. The parties irrevocably
submit to the exclusive jurisdiction of such court in any such action, suit or
proceeding. Any and all service of process and any other notice in any such
action, suit or
-20-
21
proceeding shall be effective against any party if given personally or by
registered or certified mail, return receipt requested, or by any other means of
mail that requires a signed receipt, postage prepaid, mailed to such party as
herein provided. Nothing herein contained shall be deemed to affect the right of
any party to serve process in any manner permitted by law or to commence legal
proceedings or otherwise proceed against any other party in any other
jurisdiction to enforce judgments obtained in any action, suit or proceeding
brought pursuant to this Section 11.8.
(b) Each of the parties hereby irrevocably waives trial by jury
in any action, suit, proceeding or counterclaim, whether at law or equity,
brought by either of them in connection with this Agreement or the transactions
contemplated hereby.
11.9 Severability. The invalidity, illegality or unenforceability in
any jurisdiction of any provision in or obligation under this Agreement shall
not affect or impair the validity, legality and enforceability of the remaining
provisions or obligations under this Agreement or of such provision or
obligation in any other jurisdiction.
11.10 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein, other than the provisions of any other
documents specifically referred to herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the registration rights granted by the Company with respect to
the Registrable Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
11.11 Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to its reasonable costs and expenses and
any other available remedy.
-21-
22
11.12 Construction. The Company and the Investor acknowledge that each
of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by the Company and the
Investor.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
PACIFIC GULF PROPERTIES INC.
By: ______________________________________
Name: Xxxxx X. Xxxxxxxxx
Title: Chairman, Chief Executive Officer
and President
FIVE ARROWS REALTY SECURITIES L.L.C.
By: ______________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Manager
-22-
23
SCHEDULE 3.4
LIST OF UNDERWRITER CHOICES
AG Xxxxxxx
Xxxx. Xxxxx & Sons
Bankers Trust
Bear Xxxxxxx & Co. Inc.
CS First Boston Corporation
Xxxx Xxxxxx Xxxxxxxx Inc.
Xxxxxxxxx Xxxxxx Xxxxxxxx Securities Corporation
Xxxxxx Xxxx Incorporated
Xxxxxxx Xxxxx & Co.
XX Xxxxxx Securities
Xxxxxx Brothers
Xxxxxxx Xxxxx
Xxxxxxxxxx Securities
Xxxxxx Xxxxxxx Co. Incorporated
NatWest Securities
Nomura Securities
Xxxxxxxxxxx Securities
Xxxxx Xxxxxx
Prudential Securities
Xxxxxxxx Xxxxxxxx
Xxxxxxxxx Xxxxxxxx
Xxxxxxx Brothers
Xxxxx Xxxxxx
24
SCHEDULE 11.2
REGISTRATION RIGHTS AGREEMENTS
Registration Rights Agreement dated August 15, 1995 by and between
Pacific Gulf Properties Inc., a Maryland Corporation, and certain holders of
units of limited partnership interest in PGP Inland Communities, L.P., a
Delaware limited partnership.
Operating Agreement, dated as of April 1, 1997, between Pacific Gulf
Properties Inc., a Maryland corporation, and Five Arrows Realty Securities
L.L.C., a limited liability company organized under the laws of the State of
Delaware.
