PACIFIC GATEWAY PROPERTIES, INC.
STOCKHOLDERS' AGREEMENT
AND IRREVOCABLE PROXY
THIS STOCKHOLDERS' AGREEMENT AND IRREVOCABLE PROXY (the "Agreement")
is entered into as of September 21, 1998, by and among Pacific Gateway
Properties, Inc., a New York corporation (the "Company"), GEM Value/PGP, LLC
("GEM"), and Xxxxxxx Xxxxxxx Trust, Turkey Vulture Fund XIII, Ltd. and Liberty
Self Stor, Ltd. (collectively, with each of their respective Affiliates, the
"Principal Stockholders").
RECITALS
WHEREAS, the Company is issuing shares of its Series 1 Preferred
Stock to GEM pursuant to the terms and conditions of that certain Series 1
Preferred Stock Purchase Agreement, dated as of even date herewith, between
the Company and GEM (the "Purchase Agreement") and it is a condition to the
closing of the transactions contemplated by the Purchase Agreement that the
Company, GEM and the Principal Stockholders enter into this Agreement;
WHEREAS, the parties hereto wish to provide for certain Tag-Along
Rights with respect to the transfer and disposition of their Shares (as
hereinafter defined); and
WHEREAS, the parties hereto wish to provide for certain voting
arrangements with respect to a Change in Control Transaction (as hereinafter
defined).
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants, and conditions set forth in this
Agreement, the parties hereby mutually agree as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Affiliate" shall mean, with respect to any person or entity, another
person or entity that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with
such person or entity.
"Beneficial Owner" and "Beneficially Own" shall have the meanings
contemplated by Rule 13d-3 under the Exchange Act.
"Certificate" shall mean the Certificate of Incorporation of the
Company, as amended and/or restated from time to time.
"Change of Control Transaction" shall mean a sale of a majority of
the outstanding voting stock of the Company, a merger or consolidation in
which the Beneficial Owners of the outstanding voting stock of the Company
before the transaction do not Beneficially Own a majority of the outstanding
voting stock of the combined entity, a sale of all or substantially all the
assets of the Company or a reorganization in which a third party will acquire
a majority of the voting power of the Company.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Company's voting Common Stock.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Exempt Transfers" shall mean (i) Transfers by an individual
stockholder by gift to his or her spouse or to the siblings, lineal
descendants, or ancestors of such individual or his or her spouse or to any
trust, partnership, limited liability company or other entity of which such
person or persons are beneficiaries, if, in the case of a Transfer to such an
entity, the Transferor retains voting rights with respect to the shares being
Transferred and Transfers by any such entity to its beneficiaries; (ii)
Transfers upon death of an individual stockholder to his or her heirs,
executors, administrators, testamentary trustees, legatees or beneficiaries;
(iii) Transfers in the form of a bona fide pledge or hypothecation to a third
party, unaffiliated institutional lender, and (iv) Transfers by and among
Affiliates of the Principal Stockholders; provided that each such transferee
shall become a "Principal Stockholder" subject to the terms and conditions of
this Agreement.
"Majority Stockholders" shall mean the holders of more than 50% of
the outstanding voting securities of the Company.
"Preferred Stock" shall mean any shares of the Company's Preferred
Stock that may be outstanding from time to time.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Series 1 Preferred Stock" shall mean shares of the Company's Series
1 Preferred Stock purchased by GEM pursuant to the Purchase Agreement and any
securities issued in respect thereof as a result of the reincorporation of the
Company in Maryland.
"Shares" shall mean shares of Preferred Stock and Common Stock of
the Company.
"Transfer" shall mean a sale, assignment, encumbrance, gift, pledge,
hypothecation or other disposition of (i) Shares or any interest therein, or
(ii) a controlling interest in a Principal Stockholder.
2. Tag-Along Rights.
2.1 The Tag-Along Rights Notice. If one or more Principal
Stockholders negotiates or receives and elects to accept one or more bona fide
offers to purchase in the aggregate (on a cumulative basis) Common Stock in
excess of 200,000 shares (subject to adjustment to reflect any stock split,
reverse stock split, stock dividend, combination of shares, reclassification
of shares and the like) of Common Stock (a "Purchase Offer"), each such
Principal Stockholder shall promptly notify in writing GEM and the Company of
the terms and conditions of such Purchase Offer and the number of shares
proposed for sale pursuant to the Purchase Offer (the "Tag-Along Rights
Notice").
2
2.2 The Rights. GEM shall have the right, exercisable upon
written notice to the Principal Stockholders within 10 days after the date of
receipt of the Tag-Along Rights Notice, to participate in accordance with the
terms and conditions set forth below in the Principal Stockholders' sale of
Common Stock in excess of 200,000 shares (subject to adjustment to reflect any
stock split, reverse stock split, stock dividend, combination of shares,
reclassification of shares and the like) pursuant to the specified terms and
conditions of such Purchase Offer. To the extent GEM exercises such right of
participation, the number of shares of Common Stock that the Principal
Stockholders may sell pursuant to such Purchase Offer shall be ratably reduced
in the manner described below. The right of participation of GEM shall be
subject to the following terms and conditions:
(a) GEM may sell all or any part of that number of shares of Common
Stock owned by it (assuming full conversion of its Series 1 Preferred Stock at
the applicable conversion rate) that is not in excess of the product obtained
by multiplying (i) the number of shares of Common Stock owned by GEM
(assuming full conversion of its Series 1 Preferred Stock at the applicable
conversion rate) by (ii) a fraction, the numerator of which is the
number of shares of Common Stock covered by the Purchase Offer, and the
denominator of which is the total number of shares of Common Stock of the
Company Beneficially Owned by such Principal Stockholders. For purposes of
making this computation, any options or warrants then outstanding shall be
included. For purposes of the foregoing calculation, convertible securities
outstanding shall be deemed to have been converted into the number of shares
of Common Stock into which they are then convertible in accordance with the
provisions of the respective governing instruments.
(b) GEM may effect its participation in the sale by delivering to the
Principal Stockholders, with a copy to the Company, within the 10-day period
specified under Section 2.2 above, for transfer to the maker(s) of the
Purchase Offer, one or more certificates, properly endorsed for transfer,
which shall be accompanied by a written election to participate in the sale
with respect to a specified number of shares of Common Stock (the "Election
Number") and such certificate shall represent at least the Election Number of
shares of Common Stock.
2.3 Procedures. The stock certificate or certificates that GEM
delivers pursuant to Section 2.2(b) above shall be transferred by the Company
to the maker(s) of the Purchase Offer in consummation of the sale of the
Common Stock pursuant to the terms and conditions specified in the Tag-Along
Rights Notice to GEM, and the Company shall promptly thereafter remit to GEM
that portion of the sale proceeds to which it is entitled by reason of its
participation in such sale and any stock certificate representing any
remaining shares not sold in such sale.
2.4 Future Rights. The exercise or non-exercise of the rights of GEM
to participate in one or more sales of Common Stock made by the Principal
Stockholders shall not adversely affect the rights of GEM to participate in
subsequent Common Stock sales by the Principal Stockholders pursuant to this
Section 2.
2.5 Limits and Termination. The provisions of this Section 2 shall
not pertain or apply to: (a) Exempt Transfers by the Principal
Stockholders; or (b) sales in connection with a qualified public offering
pursuant to a registration statement under the Securities Act.
3. Voting Agreement and Irrevocable Proxy.
3
3.1 Voting Agreement. In the event that a Change of Control
Transaction is submitted to the stockholders of the Company for their approval
prior to the reincorporation of the Company in Maryland, to the extent that,
pursuant to Section 903 of the New York Business Corporation Law, holders of
Series 1 Preferred Stock are entitled to vote as a separate class (the "Series
1 Class Vote") with respect to such a Change of Control Transaction, GEM
hereby agrees to exercise its Series 1 Class Vote, with respect to each share
of Series 1 Preferred Stock then held by GEM or its Affiliates, in accordance
with the vote of the Majority Stockholders. Notwithstanding the foregoing,
with respect to a change of Control Transaction and all other matters properly
submitted to the stockholders, GEM shall be entitled to vote, together with
the holders of Common Stock, one vote for each share of Common Stock into
which such Series 1 Preferred Stock could then be converted (the "Common
Vote"). As a result of the provisions contained in this Section 3.1: (i) any
Change of Control Transaction that is approved by the Majority Stockholders,
taking into account GEM's Common Vote, will be approved by the Series 1 Class
Vote, and (ii) any Change of Control Transaction that is not approved by the
Majority Stockholders, taking into account GEM's Common Vote, will not be
approved by the Series 1 Class Vote.
3.2 Irrevocable Proxy. In order to implement the provisions of
Section 3.1, GEM has agreed to grant to the Principal Stockholders an
irrevocable proxy to vote or to execute and deliver written consents in
respect of the Series 1 Class Vote for all shares of Series 1 Preferred now
owned or hereafter registered in his or her name in connection with the
approval of such a Change of Control Transaction. In furtherance of the above,
by execution of this Agreement, GEM agrees to, and hereby grants to the
Principal Stockholders an irrevocable proxy pursuant to the provisions of
Section 609 of the New York Business Corporation Law to vote, or to execute
and deliver written consents or otherwise act with respect to, the Series 1
Class Vote for all shares of Series 1 Preferred Stock of the Company now owned
or hereafter acquired as fully, to the same extent and with the same effect as
GEM might or could do under any applicable laws or regulations governing the
rights and powers of a New York corporation in connection with the approval of
a Change of Control Transaction. GEM affirms that this proxy is given as a
condition of this Agreement and the other agreements between the parties
hereto and as such is coupled with an interest and is irrevocable. This proxy
shall remain in full force and effect and be enforceable against any donee,
transferee or assignee of the shares of Series 1 Preferred Stock. This proxy
shall remain in full force and effect throughout the term of this Agreement
for as long as the Company remains a New York corporation. It is understood
that this proxy relates solely to the Series 1 Class Vote in respect of a
Change of Control Transaction, in accordance with Section 3.1, and does not
constitute the grant of any rights to vote as to any other matters.
4. Miscellaneous
4.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of California, without
regard to conflicts of laws provisions.
4.2 Enforcement. The parties expressly agree that the provisions of
this Agreement may be specifically enforced against each of the parties hereto
in any court of competent jurisdiction.
4
4.3 Successors and Assigns. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto, including, without limitation, any transferees of the Shares
other than transferees who have received such shares pursuant to an effective
Registration Statement under the Securities Act of 1933, as amended (the
"Act") or in compliance with Rule 144 promulgated under the Act. GEM may
assign this Agreement with respect to the transfer of up to 100,000 Shares
(subject to adjustment to reflect any stock split, reverse stock split, stock
dividend, combination of shares, reclassification of shares and the like) to
any entity controlled by GEM Value Partners, LLC or to up to two (2) limited
partners or investors in GEM Value Fund L.P., provided that such assignment
will be effective only upon written acceptance by the assignee of the terms of
this Agreement and provided, further that no such assignment shall relieve GEM
from any obligations hereunder or limit GEM's rights and obligations hereunder
with respect to any Shares retained by GEM. GEM may assign this Agreement to
additional limited partners or investors of GEM upon prior written consent of
the Principal Stockholders and the Company, which consent shall not be
unreasonably withheld provided that such assignment will be effective only
upon written acceptance by the assignee of the terms of this Agreement and
provided, further that no such assignment shall relieve GEM from any
obligations hereunder or limit GEM's rights and obligations hereunder with
respect to any Shares retained by GEM.
4.4 Entire Agreement. This Agreement and each of the agreements
entered into in connection herewith, constitute the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and supersede all prior oral or written (and all contemporaneous
oral) agreements or understandings with respect to the subject matter hereof.
4.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, return receipt requested, postage prepaid, or otherwise
delivered by hand, messenger or facsimile transmission, addressed to each
party at the address listed on the signature pages hereto, or at such other
address as such party or its transferee shall have furnished to each of the
other parties in writing. Each such notice or other communication shall for
all purposes of this Agreement be treated as effective or as having been given
when delivered, if delivered by hand or by messenger (or overnight courier),
24 hours after confirmed receipt if sent by facsimile transmission or at the
earlier of its receipt or on the fifth day after mailing as aforesaid.
4.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party hereto upon any breach or default of the
Company under this agreement, shall impair any such right, power or remedy of
such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereunder occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party of any breach or default under this agreement, or any
waiver on the part of any party of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, or by law or otherwise afforded to any party, shall be cumulative
and not alternative.
5
4.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the parties
hereto, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
4.8 Severability. If any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
4.9 Amendments. The provisions of this Agreement may be amended at
any time and from time to time, and particular provisions of this Agreement
may be waived, with and only with an agreement or consent in writing signed by
the Company and by the holders of at least a majority of the Shares.
4.10 Jurisdiction. The parties hereto irrevocably submit, in any
legal action or proceeding relating to this Agreement, to the exclusive
jurisdiction of the courts of the State of California and consent that any
such action or proceeding may be brought in such courts and waive any
objection that they may now or hereafter have to the venue of such action or
proceeding in any such court or that such action or proceeding was brought in
an inconvenient forum.
4.11 Termination. The provisions of this Agreement shall terminate
upon the earlier of (a) the closing of a Change of Control Transaction
or (b) GEM, any Affiliate of GEM and any limited partner or investor of
GEM Value Fund, L.P. ceasing to collectively Beneficially Own at least 60,000
shares (subject to adjustment to reflect any stock split, reverse stock split,
stock dividend, combination of shares, reclassification of shares and the
like) of the Series 1 Preferred Stock (together with any Common Stock issuable
upon conversion thereof).
4.12 No Personal Liability. Nothing in this Agreement shall be deemed
to impose any personal liability on the part of any officer, director,
shareholder, partner, member, manager or employee of GEM, the Principal
Stockholders (except for any obligation to comply with the tag along rights
under Section 2 above) or the Company.
* * * *
6
IN WITNESS WHEREOF, the foregoing Stockholders' Agreement and
Irrevocable Proxy is hereby executed as of the date first above written.
PACIFIC GATEWAY PROPERTIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------
Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
Address: 000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
GEM VALUE/PGP LLC
By: GEM Value Partners, L.L.C.,
Its Managing Member
By: /s/ Xxxxxxx X. Xxxxx
-------------------------
Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President
Address: 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
7
PRINCIPAL STOCKHOLDERS:
TURKEY VULTURE FUND XIII, LTD.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------
Xxxxxxx X. Xxxxxxx, Manager
Address: _________________________________
__________________________________________
__________________________________________
XXXXXXX X. XXXXXXX TRUST
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------
Xxxxxxx X. Xxxxxxx, Trustee
Address: _________________________________
__________________________________________
__________________________________________
LIBERTY SELF STOR, LTD.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------
Xxxxxxx X. Xxxxxxx, Managing Member
Address: _________________________________
__________________________________________
__________________________________________
8
