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STOCK PURCHASE AGREEMENT
by and among
XXXXXXXXX XXXXXXX HOLDINGS, L.L.C.
XXXXXXXXX XXXXXXX CO-HOLDINGS, L.L.C.
XXXXXXX PACIFIC PROPERTIES, INC.
and
XXXXXXX PACIFIC OPERATING PARTNERSHIP, L.P.
dated as of
December 5, 1997
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TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
Section 1.1 "Action". . . . . . . . . . . . . . . . . . . . . .1
Section 1.2 "ADA" . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.3 "Affiliate" . . . . . . . . . . . . . . . . . . . .1
Section 1.4 "Agreement to Contribute" . . . . . . . . . . . . .2
Section 1.5 "Agreement" . . . . . . . . . . . . . . . . . . . .2
Section 1.6 "Amended Company By-laws" . . . . . . . . . . . . .2
Section 1.7 "Articles Supplementary". . . . . . . . . . . . . .2
Section 1.8 "ASTM Standard" . . . . . . . . . . . . . . . . . .2
Section 1.9 "Benefit Arrangements". . . . . . . . . . . . . . .2
Section 1.10 "Blue Sky Laws". . . . . . . . . . . . . . . . . .2
Section 1.11 "Board of Directors" . . . . . . . . . . . . . . .2
Section 1.12 "Business Day" . . . . . . . . . . . . . . . . . .2
Section 1.13 "Buyer". . . . . . . . . . . . . . . . . . . . . .2
Section 1.14 "Buyer Counsel". . . . . . . . . . . . . . . . . .2
Section 1.15 "Buyer Ownership". . . . . . . . . . . . . . . . .2
Section 1.16 "California REIT". . . . . . . . . . . . . . . . .2
Section 1.17 "Capital Expenditure Budget and Schedule". . . . .2
Section 1.18 "CERCLA" . . . . . . . . . . . . . . . . . . . . .2
Section 1.19 "Closing". . . . . . . . . . . . . . . . . . . . .3
Section 1.20 "Closing Date" . . . . . . . . . . . . . . . . . .3
Section 1.21 "Code" . . . . . . . . . . . . . . . . . . . . . .3
Section 1.22 "Commitment" . . . . . . . . . . . . . . . . . . .3
Section 1.23 "Company". . . . . . . . . . . . . . . . . . . . .3
Section 1.24 "Company Asset Transfer" . . . . . . . . . . . . .3
Section 1.25 "Company Charter". . . . . . . . . . . . . . . . .3
Section 1.26 "Company Common Stock" . . . . . . . . . . . . . .4
Section 1.27 "Company Excess Stock" . . . . . . . . . . . . . .4
Section 1.28 "Company Leases" . . . . . . . . . . . . . . . . .4
Section 1.29 "Company Notice" . . . . . . . . . . . . . . . . .4
Section 1.30 "Company Plans". . . . . . . . . . . . . . . . . .4
Section 1.31 "Company Preferred Stock". . . . . . . . . . . . .4
Section 1.32 "Company Properties" . . . . . . . . . . . . . . .4
Section 1.33 "Company Registration Statement" . . . . . . . . .4
Section 1.34 "Company Reports". . . . . . . . . . . . . . . . .4
Section 1.35 "Company Stock". . . . . . . . . . . . . . . . . .4
Section 1.36 "Controlled Group Liability" . . . . . . . . . . .4
i
Section 1.37 "Current Market Price" . . . . . . . . . . . . . .4
Section 1.38 "Debt Instruments" . . . . . . . . . . . . . . . .4
Section 1.39 "Development Properties" . . . . . . . . . . . . .5
Section 1.40 "Development Budget and Schedule". . . . . . . . .5
Section 1.41 "Disclosure Schedules" . . . . . . . . . . . . . .5
Section 1.42 "Employee Benefit Plans" . . . . . . . . . . . . .5
Section 1.43 "Employees". . . . . . . . . . . . . . . . . . . .5
Section 1.44 "Environmental Claim". . . . . . . . . . . . . . .5
Section 1.45 "Environmental Matters". . . . . . . . . . . . . .5
Section 1.46 "ERISA". . . . . . . . . . . . . . . . . . . . . .5
Section 1.47 "Exchange Act" . . . . . . . . . . . . . . . . . .5
Section 1.48 "Execution Closing". . . . . . . . . . . . . . . .5
Section 1.49 "Exercise Restriction" . . . . . . . . . . . . . .5
Section 1.50 "Existing Partners Registration Rights Agreement".5
Section 1.51 "GAAP" . . . . . . . . . . . . . . . . . . . . . .5
Section 1.52 "Golden State Acquisition" . . . . . . . . . . . .5
Section 1.53 "Government Authority" . . . . . . . . . . . . . .5
Section 1.54 "Hazardous Substance". . . . . . . . . . . . . . .6
Section 1.55 "Hazardous Waste". . . . . . . . . . . . . . . . .6
Section 1.56 "HQ Space" . . . . . . . . . . . . . . . . . . . .6
Section 1.57 "HSR Act". . . . . . . . . . . . . . . . . . . . .6
Section 1.58 "Incentive Plan" . . . . . . . . . . . . . . . . .6
Section 1.59 "Indemnitor" . . . . . . . . . . . . . . . . . . .6
Section 1.60 "Insurance Policies" . . . . . . . . . . . . . . .6
Section 1.61 "IRS". . . . . . . . . . . . . . . . . . . . . . .6
Section 1.62 "Knowledge". . . . . . . . . . . . . . . . . . . .6
Section 1.63 "Liabilities". . . . . . . . . . . . . . . . . . .6
Section 1.64 "Liens". . . . . . . . . . . . . . . . . . . . . .7
Section 1.65 "Losses and Expenses". . . . . . . . . . . . . . .7
Section 1.66 "Material Company Lease" . . . . . . . . . . . . .7
Section 1.67 "Materials of Environmental Concern" . . . . . . .7
Section 1.68 "New Company Title Policies" . . . . . . . . . . .7
Section 1.69 "Nomination Right" . . . . . . . . . . . . . . . .7
Section 1.70 "NYSE" . . . . . . . . . . . . . . . . . . . . . .7
Section 1.71 "Offered Securities" . . . . . . . . . . . . . . .7
Section 1.72 "Operating Partnership". . . . . . . . . . . . . .7
Section 1.73 "Operating Partnership Preferred Units". . . . . .7
Section 1.74 "Operating Partnership Preferred Units Buyer". . .8
Section 1.75 "Operating Partnership Units". . . . . . . . . . .8
Section 1.76 "Operating Partnership Agreement". . . . . . . . .8
Section 1.77 "Other Company Properties" . . . . . . . . . . . .8
Section 1.78 "Other Company Title Policies" . . . . . . . . . .8
Section 1.79 "Pension Plans". . . . . . . . . . . . . . . . . .8
Section 1.80 "Permitted Exceptions" . . . . . . . . . . . . . .8
Section 1.81 "Permitted Liens". . . . . . . . . . . . . . . . .8
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Section 1.82 "Person" . . . . . . . . . . . . . . . . . . . . .9
Section 1.83 "Pro Rata Share" . . . . . . . . . . . . . . . . .9
Section 1.84 "Project". . . . . . . . . . . . . . . . . . . . .9
Section 1.85 "Property Condition Reports" . . . . . . . . . . .9
Section 1.86 "Property Restrictions". . . . . . . . . . . . . .9
Section 1.87 "Proxy Statement". . . . . . . . . . . . . . . . .9
Section 1.88 "Purchase Price" . . . . . . . . . . . . . . . . .9
Section 1.89 "Purchased Shares" . . . . . . . . . . . . . . . .9
Section 1.90 "Registration Rights Agreement". . . . . . . . . .9
Section 1.91 "Regulatory Filings" . . . . . . . . . . . . . . .9
Section 1.92 "REIT" . . . . . . . . . . . . . . . . . . . . . .9
Section 1.93 "Related Documents". . . . . . . . . . . . . . . .9
Section 1.94 "Release " . . . . . . . . . . . . . . . . . . . .9
Section 1.95 "Rent Roll". . . . . . . . . . . . . . . . . . . .9
Section 1.96 "REOC Qualification Date". . . . . . . . . . . . .9
Section 1.97 "Rights Exercise Notice" . . . . . . . . . . . . .9
Section 1.98 "SEC". . . . . . . . . . . . . . . . . . . . . . 10
Section 1.99 "Securities Act" . . . . . . . . . . . . . . . . 10
Section 1.100 "Securities Laws" . . . . . . . . . . . . . . . 10
Section 1.101 "Subsidiaries . . . . . . . . . . . . . . . . . 10
Section 1.102 "Tax" . . . . . . . . . . . . . . . . . . . . . 10
Section 1.103 "Tax Return". . . . . . . . . . . . . . . . . . 10
Section 1.104 "Tenancy Leases". . . . . . . . . . . . . . . . 10
Section 1.105 "Welfare Plans" . . . . . . . . . . . . . . . . 10
ARTICLE 2
Purchase and Sale of Shares; Stock Purchase
Section 2.1 "Purchase and Sale" . . . . . . . . . . . . . . . 10
Section 2.2 "Consideration" . . . . . . . . . . . . . . . . . 10
Section 2.3 "Closing" . . . . . . . . . . . . . . . . . . . . 11
Section 2.4 "Additional Agreements and Stock Purchase
Deliveries". . . . . . . . . . . . . . . . . . . 11
Section 2.5 "Time and Place of Stock Purchase". . . . . . . . 11
Section 2.6 "Right to Assign.". . . . . . . . . . . . . . . . 11
ARTICLE 3
Representations and Warranties of the Company
and the Operating Partnership
Section 3.1 "Organization and Qualification, Subsidiaries". . 12
Section 3.2 "Authority Relative to Agreements;
Board Approval". . . . . . . . . . . . . . . . . 13
Section 3.3 "Capital Stock and Units" . . . . . . . . . . . . 13
Section 3.4 "No Conflicts; No Defaults, Required Filings and
Consents". . . . . . . . . . . . . . . . . . . . 15
Section 3.5 "SEC and Other Documents, Financial Statements;
Undisclosed Liabilities". . . . . . . . . . . . 16
Section 3.6 "Litigation, Compliance With Law" . . . . . . . . 17
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Section 3.7 "Absence of Certain Changes or Events". . . . . . 17
Section 3.8 "Tax Matters; REIT and Partnership Status". . . . 17
Section 3.9 "Compliance With Agreements; Liens" . . . . . . . 19
Section 3.10 "Financial Records; Company Charter and By-laws;
Corporate Records". . . . . . . . . . . . . . . 20
Section 3.11 "Properties" . . . . . . . . . . . . . . . . . . 21
Section 3.12 "Environmental Matters". . . . . . . . . . . . . 28
Section 3.13 "Employees and Employee Benefit Plans" . . . . . 30
Section 3.14 "Labor Matters". . . . . . . . . . . . . . . . . 32
Section 3.15 "Affiliate Transactions" . . . . . . . . . . . . 32
Section 3.16 "Insurance". . . . . . . . . . . . . . . . . . . 32
Section 3.17 "Brokers or Finders" . . . . . . . . . . . . . . 32
Section 3.18 "REOC Status". . . . . . . . . . . . . . . . . . 32
Section 3.19 "Knowledge Defined". . . . . . . . . . . . . . . 34
Section 3.20 "Maryland Takeover Law". . . . . . . . . . . . . 34
Section 3.21 "Proxy Statement." . . . . . . . . . . . . . . . 34
Section 3.22 "Vote Required". . . . . . . . . . . . . . . . . 34
Section 3.23 "Exemption from Ownership Restrictions". . . . . 35
ARTICLE 4
Representations and Warranties of Buyer
Section 4.1 "Organization". . . . . . . . . . . . . . . . . . 35
Section 4.2 "Due Authorization" . . . . . . . . . . . . . . . 35
Section 4.3 "Conflicting Agreements and Other Matters". . . . 35
Section 4.4 "Acquisition for Investment, Sophistication,
Source of Funds" . . . . . . . . . . . . . . . . 35
Section 4.5 "Brokers or Finders". . . . . . . . . . . . . . . 36
Section 4.6 "REIT Qualification Matters". . . . . . . . . . . 36
Section 4.7 "Investment Company Matters". . . . . . . . . . . 36
ARTICLE 5
Representations and Covenants Relating to Closing
Section 5.1 "Taking of Necessary Action". . . . . . . . . . . 36
Section 5.2 "Preferred Stock, Articles Supplementary;
By-laws" . . . . . . . . . . . . . . . . . . . . 37
Section 5.3 "Public Announcements; Confidentiality" . . . . . 37
Section 5.4 "Conduct of the Business" . . . . . . . . . . . . 38
Section 5.5 "Information and Access". . . . . . . . . . . . . 38
Section 5.6 "Notification of Certain Matters" . . . . . . . . 38
Section 5.7 "Approval of Company Shareholders; Redemption." . 39
ARTICLE 6
Certain Additional Covenants
Section 6.1 "Resale". . . . . . . . . . . . . . . . . . . . . 39
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Section 6.2 "REIT Status" . . . . . . . . . . . . . . . . . . 40
Section 6.3 "Payments". . . . . . . . . . . . . . . . . . . . 40
Section 6.4 "First Offer Rights". . . . . . . . . . . . . . . 40
Section 6.5 "Board of Directors". . . . . . . . . . . . . . . 42
Section 6.6 "Shareholders Vote Regarding the Conversion or
Redemption of Company Preferred Stock or Operating
Partnership Preferred Units". . . . . . . . . . . 44
Section 6.7 "Operating Partnership Preferred Units" . . . . . 44
Section 6.8 "Existing Partners Agreements". . . . . . . . . . 44
Section 6.9 "REOC Status" . . . . . . . . . . . . . . . . . . 44
Section 6.10 "Board of Directors Resolutions.". . . . . . . . 45
ARTICLE 7
Conditions to Closing
Section 7.1 "Conditions of Purchase at Closing" . . . . . . . 45
Section 7.2 "Conditions of Sale at Closing" . . . . . . . . . 48
ARTICLE 8
Survival; Indemnification
Section 8.1 "Survival". . . . . . . . . . . . . . . . . . . . 50
Section 8.2 "Indemnification by the Company". . . . . . . . . 50
Section 8.3 "Third-Party Claims". . . . . . . . . . . . . . . 50
Section 8.4 "Exclusive Remedy". . . . . . . . . . . . . . . . 51
Section 8.5 "Indemnification Limitation". . . . . . . . . . . 51
Section 8.6 "Covenant Between Buyer and Operating Partnership
Preferred Unit Buyer with Respect to
Indemnification Agreement". . . . . . . . . . . . 51
ARTICLE 9
Termination
Section 9.1 "Termination" . . . . . . . . . . . . . . . . . . 52
Section 9.2 "Procedure and Effect of Termination" . . . . . . 53
Section 9.3 "Expenses". . . . . . . . . . . . . . . . . . . . 53
ARTICLE 10
Miscellaneous
Section 10.1 "Counterparts" . . . . . . . . . . . . . . . . . 53
Section 10.2 "Governing Law". . . . . . . . . . . . . . . . . 53
Section 10.3 "Entire Agreement" . . . . . . . . . . . . . . . 53
Section 10.4 "Notices". . . . . . . . . . . . . . . . . . . . 53
Section 10.5 "Successors and Assigns" . . . . . . . . . . . . 55
Section 10.6 "Headings" . . . . . . . . . . . . . . . . . . . 55
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Section 10.7 "Amendments and Waivers" . . . . . . . . . . . . 55
Section 10.8 "Interpretation; Absence of Presumption" . . . . 56
Section 10.9 "Severability" . . . . . . . . . . . . . . . . . 56
Section 10.10 "Further Assurances". . . . . . . . . . . . . . 56
Section 10.11 "Specific Performance". . . . . . . . . . . . . 56
Section 10.12 "Schedules" . . . . . . . . . . . . . . . . . . 56
Section 10.13 "Submission to Jurisdiction". . . . . . . . . . 56
vi
SCHEDULES
Schedule 3.1(d) Jurisdictions in which Subsidiaries Not
Qualified to Do Business
Schedule 3.1(e) Subsidiaries
Schedule 3.3(b) Operating Partnership Unit Options, Warrants, Etc.
Schedule 3.3(c) Other Interests
Schedule 3.4(c) Company Stock Option Plans; Operating Partnership Unit
Option Plans
Schedule 3.4(e) Statutory; Regulatory Compliance
Schedule 3.4(f) Contract Compliance
Schedule 3.4(g) Company Filings; Consent
Schedule 3.5(a) Company Registration Statements and Company Reports
Schedule 3.5(b) Company Financials
Schedule 3.6(a) Pending Litigation
Schedule 3.6(b) Company Compliance; Subsidiary Compliance
Schedule 3.7 Absence of Certain Changes or Events
Schedule 3.8(a) Tax Matters
Schedule 3.9(a) Company Defaults; Charter or By-Laws Compliance
Schedule 3.9(b) Company Filings
Schedule 3.9(c) Material Agreements
Schedule 3.9(e) Permitted Liens
Schedule 3.10(a) Financial Records
Schedule 3.10(b) Company Charter and By-Laws; Operating Partnership
Agreement; Joint Venture and Partnership Agreements of
Subsidiaries
Schedule 3.10(c) Company Corporate Records; Operating Partnership Records;
Subsidiary Corporate Records
Schedule 3.11(a) Property Addresses; Title Summary
Schedule 3.11(a)-(i) Older Title Insurance
Schedule 3.11(a)-(ii) New Company Title Policies
Schedule 3.11(b) Permits; Licenses; Zoning
Schedule 3.11(b)-(i) Company Properties with No Zoning Endorsement
Schedule 3.11(c) Road Changes; Condemnation Proceedings
Schedule 3.11(f) Material Company Leases
Schedule 3.11(g) Material Commitments
Schedule 3.11(h) Property Rights; Rights of First Refusal
Schedule 3.11(i) Non-Compliance and Capital Expenditure Budget and
Schedule; Insurance
Schedule 3.11(j) Developed, Undeveloped, or Rehabilitated Land
of Company Property; Development, Construction,
Management and Leasing Agreements
Schedule 3.11(l) Company Properties; HQ Space; Tenancy Leases
Schedule 3.11(n) Mortgage Debt; Mortgage Defaults
Schedule 3.12(a)(i) Environmental Concerns
Schedule 3.12(a)(ii) Inherited Properties
Schedule 3.13(a) Employee Benefit Plans; Company Plans Compliance
Schedule 3.14 Collective Bargaining; Labor Union Agreements
Schedule 3.15 Affiliate Transactions; Conflict Policies & Agreements;
Waivers
vii
Schedule 3.18(g) Predecessor Company Information
Schedule 3.19 Individuals for Knowledge Test
viii
EXHIBITS
Exhibit A Form of Articles Supplementary (Section 9, Mandatory Redemption
in Certain Instances, to be agreed on before the close of
business on December 9, 1997, with the number of shares to be
redeemed to be calculated in accordance with the principles of
Section 4.20 of the Agreement to Contribute)
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Amended Company Bylaws
Exhibit D Form of Operating Partnership Agreement, including Exhibits A, B
and C and the First Amendment thereto
Exhibit E Form of Company Resolutions (to be delivered after the Execution
Closing)
Exhibit F Form of Charter "Limits" Exemption Representation
Letter
Exhibit G Form of Existing Partners Registration Rights
Agreement
ix
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of December 5,
1997, is made by and among Xxxxxxx Pacific Properties, Inc., a Maryland
corporation (the "Company"), Xxxxxxx Pacific Operating Partnership, L.P., a
Delaware limited partnership (the "Operating Partnership") and Xxxxxxxxx
Xxxxxxx Holdings, L.L.C. and Xxxxxxxxx Xxxxxxx Co-Holdings, L.L.C., each a
Delaware limited liability company (collectively, jointly and severally, the
"Buyer").
RECITALS:
WHEREAS, Buyer wishes to purchase from the Company, and the Company
wishes to sell to Buyer, an aggregate of 2,800,000 shares of a newly
designated and authorized series of convertible preferred stock of the
Company, convertible into shares of the Company's common stock, par value
$0.01 per share (respectively, the "Company Preferred Stock" and the "Company
Common Stock", and such stock of such series and class, and all other series
of preferred stock of the Company outstanding from time to time,
collectively, the "Company Stock"), having the terms set forth in the form of
Articles Supplementary in substantially the form attached as Exhibit A (the
"Articles Supplementary"), which designates the Company Preferred Stock
pursuant to the Company's Articles of Incorporation dated March 24, 1997, as
amended by the Articles of Amendment and Restatement dated May 22, 1997 (as
so amended to the date hereof, the "Company Charter"), at a price of $25.00
per share;
WHEREAS, the parties hereto are entering into this Agreement to
provide for such purchase and sale and to establish various rights and
obligations in connection therewith;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall have the
following respective meanings:
Section 1.1 "Action" shall mean any actual or threatened action,
suit, arbitration, inquiry, proceeding or investigation by or before any
Government Authority.
Section 1.2 "ADA" shall have the meaning set forth in
Section 3.11 (b).
Section 1.3 "Affiliate" shall have the meaning ascribed thereto in Rule
12b-2 promulgated under the Exchange Act, and as in effect on the date hereof
and including, with respect to Buyer, Xxxxxxxxx Real Estate Fund II, L.P.,
Xxxxxxxxx Real Estate Co-Investment Partnership II, L.P. and their Affiliates
and investors.
Section 1.4 "Agreement to Contribute" shall mean the Agreement to
Contribute, dated as of December 5, 1997, by and among Xxxxxxx Pacific
Properties, Inc., Xxxxxxx Pacific Operating Partnership, L.P. and each of the
Contributors listed in Exhibit A-1 thereto.
Section 1.5 "Agreement" shall have the
meaning set forth in the first paragraph hereof.
Section 1.6 "Amended Company By-laws" shall have the meaning set forth
in Section 7.1(d).
Section 1.7 "Articles Supplementary" shall have the meaning set forth in
the first paragraph of the Recitals hereof.
Section 1.8 "ASTM Standard" shall have the meaning set forth in Section
3.12(a).
Section 1.9 "Benefit Arrangements" shall have the meaning set forth in
Section 3.13(f).
Section 1.10 "Blue Sky Laws" have the meaning set forth in Section
3.4(g).
Section 1.11 "Board of Directors" shall mean the board of directors of
the Company.
Section 1.12 "Business Day" shall mean any day other than a Saturday, a
Sunday or a bank holiday in New York, New York.
Section 1.13 "Buyer" shall have the meaning set forth in the first
paragraph hereof.
Section 1.14 "Buyer Counsel" shall mean the General Counsel of Buyer or
such counsel to Buyer as such General Counsel shall have determined shall
render any opinion to the Company in connection with this Agreement.
Section 1.15 "Buyer Ownership" shall have the meaning set forth in
Section 6.5(a)(i).
Section 1.16 "California REIT" shall have the meaning set forth in
Section 3.18(g).
Section 1.17 "Capital Expenditure Budget and Schedule" shall have the
meaning set forth in Section 3.11(i).
Section 1.18 "CERCLA" shall have the meaning set forth in Section
3.12(a).
2
Section 1.19 "Closing" shall mean the Execution Closing or the
closing at which the purchase and sale of the Purchased Shares is
consummated.
Section 1.20 "Closing Date" shall mean, with respect to the Closing,
three (3) Business Days after the date on which the conditions set forth
herein with respect thereto shall have been satisfied or duly waived, or if
the Company and Buyer mutually agree on a different date, the date upon which
they have mutually agreed.
Section 1.21 "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto, including all of the rules and
regulations promulgated thereunder.
Section 1.22 "Commitment" shall have the meaning set forth in Section
3.7.
Section 1.23 "Company" shall have the meaning set forth in the first
paragraph hereof.
Section 1.24 "Company Asset Transfer" shall mean the transactions
pursuant to which (i) the Company and its Subsidiaries transfer legal or
beneficial ownership of (a) all real property and related personal property
owned by the Company or any Subsidiary of the Company directly and (b) at
least 99% of the beneficial interest owned by the Company and/or the
Company's Subsidiaries in any partnership or limited liability company that
owns a direct or indirect interest in real property and related personal
property (in each case as provided in Section 7.5 of the Operating
Partnership Agreement) to the Operating Partnership in exchange for a general
partner interest and a limited partner interest therein and (ii) a
wholly-owned corporate subsidiary of the Company will contribute cash in the
amount of $1,000 to the Operating Partnership in exchange for a limited
partner interest therein. Notwithstanding the foregoing, (i) it shall not be
a requirement of the Company Asset Transfer that there be transferred to the
Operating Partnership any real property and related personal property or
interests therein owned by so-called "downREIT partnerships" in which the
general partner is the Company or an Affiliate of the Company and the limited
partners are third parties or any real property and related personal property
or interest therein required by the terms of mortgage debt thereon to be held
in a single purpose bankruptcy remote subsidiary of the Company; provided,
however, that the Company shall have the right to cause legal or beneficial
ownership of any such real property and related personal property or interest
therein to be so contributed to the Operating Partnership or a Subsidiary of
the Operating Partnership as part of the Company Asset Transfer or
thereafter, and (ii) Buyer acknowledges that pursuant to Section 2.2(i) of
the Agreement to Contribute, it is a condition precedent to the closing of
the Golden State Acquisition that the Company Asset Transfer has been
accomplished and is proceeding to the extent provided in such Section 2.2(i)
of the Agreement to Contribute, as such Section 2.2(i) may be amended or
waived by the parties to the Agreement to Contribute (which amendment or
waiver shall not require the approval of Buyer).
Section 1.25 "Company Charter" shall have the meaning set forth in the
first paragraph of the Recitals hereof.
3
Section 1.26 "Company Common Stock" shall have the meaning set forth in
the first paragraph of the Recitals hereof.
Section 1.27 "Company Excess Stock" shall have the meaning set forth in
Section 3.3(a).
Section 1.28 "Company Leases" shall mean all retail property leases
relating to the Company Properties.
Section 1.29 "Company Notice" shall have the meaning as set forth in
Section 6.4(b).
Section 1.30 "Company Plans" shall have the meaning set forth in Section
3.13(a).
Section 1.31 "Company Preferred Stock" shall have the meaning set forth
in the first paragraph of the Recitals hereof.
Section 1.32 "Company Properties" shall have the meaning set forth in
Section 3.11(a).
Section 1.33 "Company Registration Statement" shall have the meaning set
forth in Section 3.5(a).
Section 1.34 "Company Reports" shall have the meaning set forth in
Section 3.5(a).
Section 1.35 "Company Stock" shall have the meaning set forth in the
first paragraph of the Recitals hereof.
Section 1.36 "Controlled Group Liability" shall have the meaning set
forth in Section 3.13(f).
Section 1.37 "Current Market Price" shall mean, as of any date of
determination, the average of the volume weighted average price of the
Company Common Stock (the "VWAP") on each of the twenty trading days
immediately preceding such date, based upon the trading prices reported by
the NYSE or any other nationally recognized exchange or quotation system on
which the price of the Company Common Stock is quoted, as the VWAP for each
day is reported by a firm of national reputation for the preparation of such
reports proposed either by Buyer to the Company, or by the Company to Buyer,
and in either case approved by the non-proposing party (such approval not to
be unreasonably withheld or delayed).
Section 1.38 "Debt Instruments" shall mean all notes, mortgages, deeds
of trust or similar instruments which evidence or secure any indebtedness
owing to the Company or any Subsidiary.
4
Section 1.39 "Development Properties" shall have the meaning set forth
in Section 3.11 (j).
Section 1.40 "Development Budget and Schedule" shall have the meaning
set forth in Section 3.11 (j).
Section 1.41 "Disclosure Schedules" shall mean the volume or volumes
of disclosure schedules delivered at or prior to the Closing pursuant to
Section 7.1(i).
Section 1.42 "Employee Benefit Plans" shall have the meaning set forth
in Section 3.13(f).
Section 1.43 "Employees" shall have the meaning set forth in Section
3.13(f).
Section 1.44 "Environmental Claim" shall have the meaning set forth in
Section 3.12(b).
Section 1.45 "Environmental Matters" shall have the meaning set forth in
Section 3.12(b).
Section 1.46 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, and any successor thereto.
Section 1.47 "Exchange Act" shall have the meaning set forth in Section
3.4(g).
Section 1.48 "Execution Closing" shall mean the date of execution and
delivery of this Agreement.
Section 1.49 "Exercise Restriction" shall have the meaning set forth in
Section 6.4(d).
Section 1.50 "Existing Partners Registration Rights Agreement" shall
mean that certain Registration Rights Agreement to be entered into as of the
"Closing Date", as that term is defined in the Agreement to Contribute, by
and among the Company and each of the Existing Partners listed on Exhibit
A-1, in the form attached as Exhibit G.
Section 1.51 "GAAP" shall have the meaning set forth in Section 3.5(b).
Section 1.52 "Golden State Acquisition" shall mean the contribution of
property to the Operating Partnership pursuant to the Agreement to Contribute.
Section 1.53 "Government Authority" shall mean any government or state
(or any subdivision thereof) of or in the United States, or any agency,
authority, bureau, commission, department or similar body or instrumentality
thereof, or any governmental court or tribunal.
5
Section 1.54 "Hazardous Substance" shall have the meaning set forth in
Section 3.12(a).
Section 1.55 "Hazardous Wastes" shall have the meaning set forth in
Section 3.12(a).
Section 1.56 "HQ Space" shall have the meaning set forth in Section
3.11(a).
Section 1.57 "HSR Act" shall have the meaning set forth in Section
3.4(g).
Section 1.58 "Incentive Plan" shall have the meaning set forth in
Section 3.3(a).
Section 1.59 "Indemnitors" shall have the meaning set forth in Section
8.2(a).
Section 1.60 "Insurance Policies" shall have the meaning set forth in
Section 3.16.
Section 1.61 "IRS" shall mean the Internal Revenue Service.
Section 1.62 "Knowledge" shall have the meaning set forth in Section
3.19.
Section 1.63 "Liabilities" shall mean, as to any Person, all debts,
adverse claims, liabilities and obligations, direct, indirect, absolute or
contingent of such Person, whether accrued, vested or otherwise, whether in
contract, tort, strict liability or otherwise which are either required by
GAAP to be reflected in such Person's balance sheets or other books and
records, or material to the Company, the Operating Partnership and the other
Subsidiaries, taken as a whole, including (i) obligations arising from
non-compliance with any law, rule or regulation of any Government Authority
or imposed by any court or any arbitrator of any kind, (ii) all indebtedness
or liability of such Person for borrowed money, or for the purchase price of
property or services (including trade obligations), (iii) all obligations of
such Person as lessee under leases, capital or other, (iv) liabilities of
such Person in respect of plans covered by Title IV of ERISA, or otherwise
arising in respect of plans for employees or former employees or their
respective families or beneficiaries, (v) reimbursement obligations of such
Person in respect of letters of credit, (vi) all obligations of such Person
arising under acceptance facilities, (vii) all liabilities of other Persons,
directly or indirectly, guaranteed, endorsed (other than for collection or
deposit in the ordinary course of business) or discounted with recourse by
such Person or with respect to which the Person in question is otherwise
directly or indirectly liable, (viii) all obligations secured by any Lien on
property of such Person, whether or not the obligations have been assumed,
and (ix) all other items which have been, or in accordance with GAAP would
be, included in determining total liabilities on the liability side of the
balance sheet, and in all events excluding litigation matters involving
tenants that arise and are dealt with in the ordinary course of business and
operating equipment leases.
6
Section 1.64 "Liens" shall mean all liens, mortgages, deeds of trust,
deeds to secure debt, security interests, pledges, claims, charges, easements
and other encumbrances of any nature whatsoever.
Section 1.65 "Losses and Expenses" shall have the meaning set forth in
Section 8.2(a).
Section 1.66 "Material Company Leases" shall have the meaning set forth
in Section 3.11(f).
Section 1.67 "Materials of Environmental Concern" shall have the meaning
set forth in Section 3.12(b).
Section 1.68 "New Company Title Policies" means the new ALTA owner's
title insurance policies or date-down endorsements to existing owner's title
insurance policies (in the case of new policies, in the amount of the fair
market value of the applicable Company Property and containing customary
endorsements) in each case dated as of the Closing Date, obtained or to be
obtained by the Company or the Operating Partnership with respect to those
Company Properties where (i) there is no existing owner's title insurance
policy or (ii) the existing owner's title insurance policy is more than one
(1) year old. A schedule of those Company Properties where New Company Title
Policies have been or will be obtained is attached to this Agreement as
Schedule 3.11(a)-(i). Such policies or endorsements shall show title to the
applicable Company Property vested in the applicable entity described on such
Schedule 3.11(a)-(i) with respect thereto or in the Operating Partnership,
subject to no liens or encumbrances other than (a) Permitted Liens, (b) those
matters shown on Schedule B-1 of the Old Company Title Policies, and (c)
those additional encumbrances (excluding monetary liens other than those
listed on Schedule 3.9(a)) which do not materially affect the value or
utility of the applicable Company Property, and which would be acceptable to
institutional life insurance companies and commercial bank mortgage lenders
in a similar context.
Section 1.69 "Nomination Right" shall have the meaning set forth in
Section 6.5(a).
Section 1.70 "NYSE" shall mean The New York Stock Exchange, Inc.
Section 1.71 "Offered Securities" shall have the meaning set forth in
Section 6.4(b).
Section 1.72 "Operating Partnership" shall have the meaning as set forth
in the first paragraph hereof.
Section 1.73 "Operating Partnership Preferred Units" shall mean the
class of partnership units representing convertible preferred interests in
the Operating Partnership and having the rights and preferences set forth in
Exhibit C to the Operating Partnership Agreement.
7
Section 1.74 "Operating Partnership Preferred Units Buyer" shall
mean the collective reference to Blackacre SMC Holdings, L.P. and Blackacre
SMC Holdings II, L.P., each a Delaware limited partnership, and the other
"Existing Partners", as that term is defined in the Agreement to Contribute.
Section 1.75 "Operating Partnership Units" shall mean the
ownership interests in the Operating Partnership.
Section 1.76 "Operating Partnership Agreement" shall mean that
certain Agreement of Limited Partnership, dated as of November 14, 1997,
including Exhibits A, B and C thereto and together with the First Amendment
thereto, dated the date hereof, as amended from time to time.
Section 1.77 "Other Company Properties" shall have the meaning
set forth in Section 3.11(a).
Section 1.78 "Other Company Title Policies" shall have the
meaning set forth in Section 3.11(a).
Section 1.79 "Pension Plans" shall have the meaning set forth in
Section 3.13(f).
Section 1.80 "Permitted Exceptions" shall have the meaning set
forth in Section 3.11(a).
Section 1.81 "Permitted Liens" shall mean (i) Liens (other than
liens imposed under ERISA) for taxes or other assessments or charges of
Governmental Authorities that are not yet delinquent or that are being
contested in good faith by appropriate proceedings, in each case, with
respect to which adequate reserves or other appropriate provisions are being
maintained by the Company or its Subsidiaries to the extent required by GAAP,
(ii) statutory Liens of landlords, carriers, warehousemen, mechanics,
materialmen and other Liens imposed by law and created in the ordinary course
of business for amounts not yet overdue or which are being contested in good
faith by appropriate proceedings, in each case, with respect to which
adequate reserves or other appropriate provisions are being maintained by the
Company or its Subsidiaries to the extent required by GAAP, (iii) the Company
Leases, (iv) easements, rights-of-way, covenants and restrictions which are
customary and typical for office or commercial properties similar to the
Company Properties and which do not (x) interfere materially with the
ordinary conduct of any Company Property or the business of the Company and
its Subsidiaries as a whole or (y) detract materially from the value or
usefulness of the Company Property to which they apply, (v) the Liens which
were granted by the Company or any of its Subsidiaries to lenders pursuant to
credit agreements in existence on the date hereof which are described in the
Company Reports or Schedule 3.9(e) or which provide for the financing of the
Company Properties in the ordinary course of the business of the Company or
any Subsidiaries, as applicable.
8
Section 1.82 "Person" shall mean any individual, partnership,
corporation, limited liability company, business trust, joint stock company,
unincorporated association, joint venture, other entity of whatever nature or
Government Authority.
Section 1.83 "Pro Rata Share" shall have the meaning set forth in
Section 6.4(b).
Section 1.84 "Project" shall have the meaning set forth in
Section 3.11(j).
Section 1.85 "Property Condition Reports" shall have the meaning
set forth in Section 3.11(b).
Section 1.86 "Property Restrictions" shall have the meaning set
forth in Section 3.11 (a).
Section 1.87 "Proxy Statement" shall have the meaning set forth
in Section 3.21.
Section 1.88 "Purchase Price" shall mean an amount equal to
$70,000,000 to be paid by Buyer to the Company at the Closing.
Section 1.89 "Purchased Shares" shall have the meaning set forth
in Section 2.1.
Section 1.90 "Registration Rights Agreement" shall mean the
Registration Rights Agreement, to be dated as of the Closing Date, by and
between the Company and Buyer.
Section 1.91 "Regulatory Filings" shall have the meaning set
forth in Section 3.4(g).
Section 1.92 "REIT" shall have the meaning set forth in Section
3.8(b).
Section 1.93 "Related Documents" shall mean (a) the Registration
Rights Agreement, (b) the Articles Supplementary, (c) the Agreement to
Contribute and (d) the Operating Partnership Agreement.
Section 1.94 "Release" shall have the meaning set forth in
Section 3.12(b).
Section 1.95 "Rent Roll" shall have the meaning set forth in
Section 3.11(f).
Section 1.96 "REOC Qualification Date" shall have the meaning set
forth in Section 3.18(b).
Section 1.97 "Rights Exercise Notice" shall have the meaning set
forth in Section 6.4(b).
9
Section 1.98 "SEC" shall have the meaning set forth in Section
3.5(a).
Section 1.99 "Securities Act" shall have the meaning set forth in
Section 3.4(g).
Section 1.100 "Securities Laws" shall have the meaning set forth
in Section 3.5(a).
Section 1.101 "Subsidiaries" shall mean, collectively, the
Operating Partnership and any other Person in which the Company owns a direct
or indirect equity interest and of which the Company is the direct or
indirect general partner or managing member or as to which the Company has
the right to elect a majority of the board of directors or other governing
body, or otherwise direct the management of its business and affairs.
Section 1.102 "Tax" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not. The term "Tax" also includes any amounts payable pursuant
to any tax sharing agreement to which any relevant entity is liable as a
successor or pursuant to contract.
Section 1.103 "Tax Return" means any return, declaration, report,
claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
Section 1.104 "Tenancy Leases" shall have the meaning set forth in
Section 3.11(l).
Section 1.105 "Welfare Plans" shall have the meaning set forth in
Section 3.13(f).
ARTICLE 2
Purchase and Sale of Shares; Stock Purchase
Section 2.1 "Purchase and Sale." Subject to the terms and
conditions hereof, at Closing the Company will issue, sell and deliver, and
Buyer will purchase and acquire from the Company an aggregate of 2,800,000
shares of Company Preferred Stock (the "Purchased Shares").
Section 2.2 "Consideration." Subject to the terms and conditions
hereof, at Closing, Buyer shall deliver to the Company the Purchase Price by
wire transfer of
10
immediately available funds in U.S. dollars to the account or accounts
specified by the Company.
Section 2.3 "Closing." Subject to the terms and conditions
hereof, at the Closing on the Closing Date, the Company will issue, sell, and
deliver, and Buyer will purchase and acquire from the Company the Purchased
Shares.
Section 2.4 "Additional Agreements and Stock Purchase
Deliveries." (a) At the Closing, and as a condition to Buyer's obligations
hereunder to effect the transactions contemplated hereby, the Company and
Buyer shall enter into a registration rights agreement (the "Registration
Rights Agreement"), in substantially the form of Exhibit B hereto, together
with such other agreements set forth in Section 7.1(a), each of which shall
be satisfactory in form and substance to Buyer and the Company.
(b) In addition to the other things required to be done hereby, at
Closing, the Company shall deliver, or cause to be delivered, to Buyer the
following: (i) stock certificates representing the number of Purchased Shares
to be issued and delivered in connection with such Stock Purchase, free and
clear of all Liens (unless created by Buyer or any of its Affiliates), with
all necessary stock transfer and other documentary stamps attached, (ii) a
certificate, dated the Closing Date and validly executed on behalf of the
Company, as contemplated by Section 7.1(b), (iii) evidence or copies of any
consents, approvals, orders, qualifications or waivers required pursuant to
Section 7.1, (iv) all certificates and other instruments and documents
required by this Agreement to be delivered by the Company to Buyer at or
prior to Closing, and (v) such other instruments reasonably requested by
Buyer, as may be necessary or appropriate to confirm or carry out the
provisions of this Agreement.
(c) In addition to the delivery of the Purchase Price and the
other things required to be done hereby, at Closing, Buyer shall deliver, or
cause to be delivered, to the Company the following: (i) a certificate, dated
the Closing Date and validly executed by Buyer, as contemplated by Section
7.2(b), (ii) if not previously delivered to the Company, all other
certificates, documents, instruments and writings required pursuant hereto to
be delivered by or on behalf of Buyer at or before Closing, and (iii) such
other instruments reasonably requested by the Company, as may be necessary or
appropriate to confirm or carry out the provisions of this Agreement.
Section 2.5 "Time and Place of Stock Purchase." The Closing
shall take place on the Closing Date at the offices of Cadwalader, Xxxxxxxxxx
& Xxxx at such time as the Company and Buyer shall mutually agree.
Section 2.6 "Right to Assign." Buyer may assign its rights and
delegate its obligations created hereby to purchase the Purchased Shares in
accordance with the provisions of Section 10.5.
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ARTICLE 3
Representations and Warranties of the Company and the Operating Partnership
The Company and the Operating Partnership hereby represent and
warrant, jointly and severally, to Buyer as follows:
Section 3.1 "Organization and Qualification, Subsidiaries." (a)
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Maryland. The Company has all
requisite corporate power and authority to own, operate, lease and encumber
its properties and conduct the business in which it is engaged or proposes to
engage through the Operating Partnership and to enter into this Agreement and
those other Related Documents to which it is a party, and to perform its
obligations hereunder and thereunder.
(b) The Operating Partnership is a limited partnership duly
organized, validly existing and in good standing under the laws of the State
of Delaware. The Operating Partnership has all requisite partnership power
and authority to own, operate, lease and encumber its properties and conduct
the business in which it engages and proposes to engage and to enter into
this Agreement and the Related Documents to which it is a party, and to
perform its obligations hereunder and thereunder.
(c) Each of the Subsidiaries of the Company other than the
Operating Partnership is a corporation, partnership or limited liability
company duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization, and has the
corporate, partnership or limited liability company power and authority to
own its properties and conduct the business in which it is engaged or
proposes to engage.
(d) Each of the Company and the Subsidiaries is duly qualified to
do business and in good standing in each jurisdiction in which the ownership
of its property or the conduct of its business requires such qualification,
except as set forth in Schedule 3.1(d).
(e) Schedule 3.1(e) sets forth the name of each Subsidiary of the
Company or the Operating Partnership (whether owned directly or indirectly
through one or more intermediaries). All of the outstanding shares of capital
stock of, or other equity interest in, each of the Subsidiaries owned by the
Company or the Operating Partnership are duly authorized, validly issued,
fully paid and nonassessable, and are owned, directly or indirectly, by the
Company or the Operating Partnership free and clear of all Liens, except as
set forth in Schedule 3.1(e). The following information for each Subsidiary
is set forth in Schedule 3.1(e), if applicable: (i) its name and jurisdiction
of incorporation or organization, (ii) the type of and percentage interest
held by the Company or Operating Partnership in the Subsidiary and, in the
case of Subsidiaries, the partnership agreement or other organizational
documents of the Subsidiary, and (iii) any loans from the Company or the
Operating Partnership to, or priority payments due to the Company or the
Operating Partnership from, the Subsidiary, and the rate of return thereon.
Except as set forth in Schedule 3.1(e), there are no existing
12
options, warrants, calls, subscriptions, convertible securities or other
rights, agreements or commitments which obligate the Company or any of the
Subsidiaries to issue, transfer or sell any shares of capital stock or equity
interests in any of the Subsidiaries.
Section 3.2 "Authority Relative to Agreements; Board Approval."
(a) As of the date hereof, the execution, delivery and performance of this
Agreement and the Related Documents, and the filing with the Maryland
Department of Assessments and Taxation of the Articles Supplementary, have
been duly and validly authorized by all necessary corporate action on the
part of the Company. This Agreement has been duly executed and delivered by
the Company and constitutes the valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights or general principles of equity. Upon the
issuance of shares of Company Preferred Stock, the Articles Supplementary
will constitute a valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating
to creditors' rights or general principles of equity.
(b) The shares of Company Preferred Stock to be acquired pursuant
to this Agreement have been duly authorized for issuance, and upon issuance
will be duly and validly issued, fully paid and nonassessable. When issued
and delivered against payment therefor as provided herein, Buyer will receive
good title to such shares of Company Preferred Stock, free and clear of all
Liens, security interests, pledges, charges, encumbrances, shareholders'
agreements and voting trusts, subject to any rights of Buyer hereunder and
under the Registration Rights Agreement and except for those resulting from
any action taken by Buyer. The shares of Company Common Stock issuable upon
conversion of the Company Preferred Stock in accordance with the provisions
of the Articles Supplementary will, upon issuance upon such conversion, be
duly and validly issued, fully paid and nonassessable.
Section 3.3 "Capital Stock and Units." (a) The authorized
capital stock of the Company on the date hereof consists of 75,000,000 shares
of Company Common Stock, and 5,000,000 shares of preferred stock, of which
4,800,000 shall be designated Company Preferred Stock upon the filing of the
Articles Supplementary, and 20,000,000 shares of excess stock of the Company
(the "Company Excess Stock"), par value $0.01 per share. As of September 30,
1997, there were 23,432,852 shares of Company Common Stock issued and
outstanding, no shares of such preferred stock issued and outstanding and no
shares of Company Excess Stock issued and outstanding and, as of the date of
the Execution Closing, there is no change except for an immaterial change in
the number of shares of Company Stock outstanding. All such issued and
outstanding shares of Company Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. In
addition, as of the date of the Execution Closing, the Company has reserved
out of its authorized shares of Company Common Stock 7,804,878 (or such other
number of shares of Company Common Stock as may from time to time be required
to effect any conversion of shares of Company Preferred Stock) shares of
Company Common Stock for issuance upon conversion or exchange of the shares
of Company Preferred Stock and the Operating
13
Partnership Preferred Units. The Company has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities the holders
of which have the right to vote) with the stockholders of the Company on any
matter. Except for the options awarded and the Company's Stock Option and
Incentive Plan as amended on May 6, 1997 (the "Incentive Plan"), there are no
existing options, warrants, calls, subscriptions, convertible securities, or
other rights, agreements or commitments which obligate the Company to issue,
transfer or sell any shares of capital stock or other equity interests of the
Company except with respect to certain "put" rights as disclosed in Schedule
3.1(e) and with respect to the contingent rights to receive Operating
Partnership Common Units as set forth in Schedule 3.3(b). The consummation
of the transactions contemplated in this Agreement will not give rise to any
preemptive rights or antidilution rights exercisable by any holder of Company
Stock except for any such rights which have been waived.
(b) Schedule 3.3(b) describes the number of Operating Partnership
Units which will be outstanding immediately after the Closing (after giving
effect to the transactions contemplated hereby and by the Agreement to
Contribute), subject to change from the date of Execution Closing to the
Closing Date (and which Schedule 3.3(b) shall be updated to the Closing Date
such that it is true, correct and complete as of the Closing Date, as
provided in Section 7.1(u) of this Agreement), which represents the sum of:
(i) a number of Operating Partnership Common Units to be held by the Company
not in excess of the number of shares of Company Common Stock then
outstanding, (ii) the number of Operating Partnership Common Units then
outstanding and issued to the contributors in connection with the Golden
State Acquisition as provided in the Agreement to Contribute, (iii) that
number of Operating Partnership Preferred Units equal to the number of shares
of Company Preferred Stock then outstanding and issued to Buyer hereunder,
(iv) the number of Operating Partnership Preferred Units then outstanding and
issued to the Operating Partnership Preferred Units Buyer and (v) that number
of Operating Partnership Common Units to be held by other contributors of
property to "downREIT" partnership Subsidiaries of the Company or the
Operating Partnership, estimated not to exceed 2,800,000 Operating
Partnership Units, which number shall be set forth in Schedule 3.3(b). All
such Operating Partnership Units will be validly issued, fully paid and, in
the case of limited partnership units, nonassessable. Immediately after the
Closing (after giving effect to the transactions contemplated hereby and by
the Agreement to Contribute), the Company will own the number of Operating
Partnership Common Units referred to in clause (i) of the first sentence of
this Section 3.3(b), and 2,800,000 Operating Partnership Preferred Units
referred to in clause (iii) of the first sentence of this Section 3.3(b).
Except as aforesaid, there will be no other Operating Partnership Units
issued or outstanding and no classes of units, or any other form of general
or limited partnership interest, of the Operating Partnership issued or
outstanding immediately after the Closing (after giving effect to the
transactions contemplated hereby and by the Agreement to Contribute). Except
as set forth in Schedule 3.3(b), as of the Closing Date, the Operating
Partnership will not have issued or granted securities convertible into
interests in the Operating Partnership, and will not be a party to any
outstanding commitments of any kind relating to, or any agreements or
understandings with respect to, interests in the Operating Partnership,
whether issued or unissued. The Operating Partnership Preferred Units that
will be owned by
14
the Company from and after the Closing will have in all material respects the
same distribution and liquidation preferences with respect to the Operating
Partnership as the Company Preferred Stock has with respect to the Company,
which distributions shall be applied by the Company exclusively to satisfy
the rights of the holders of the Company Preferred Stock.
(c) Except as set forth in Schedule 3.3(c) and except for
interests in the Subsidiaries of the Company and the Operating Partnership,
none of the Company or any of its Subsidiaries owns directly or indirectly
any interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust or entity (other than investments
in short-term investment securities).
Section 3.4 "No Conflicts; No Defaults, Required Filings and
Consents." Except as contemplated hereby, neither the execution and delivery
by the Company hereof nor the consummation by the Company or any Subsidiary
of the transactions contemplated hereby in accordance with the terms hereof,
will:
(a) conflict with or result in a breach of any provisions of the
Company Charter or By-laws of the Company;
(b) conflict with or result in a breach of any provisions of the
Operating Partnership Agreement or any amendment thereto;
(c) except as set forth in Schedule 3.4(c), result in a breach or
violation of, a default under, or the triggering of any right, payment or
other obligation pursuant to, or accelerate vesting under, any of the Company
stock option plans or Operating Partnership Unit option plans or similar
compensation plans or any grant or award made under any of the foregoing;
(d) violate or conflict with any regulation, rule, order or
administrative position of NYSE, or any other national securities exchange on
which the Company Common Stock is listed;
(e) except as set forth in Schedule 3.4(e), violate or conflict
with any statute, regulation, judgment, order, writ, decree or injunction
applicable to the Company or its Subsidiaries;
(f) except as set forth in Schedule 3.4(f), violate or conflict
with or result in a breach of any provision of, or constitute a default (or
any event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination or in a right of termination or
cancellation of, or accelerate the performance required by, or result in the
creation of any Lien upon any of the properties of the Company or its
Subsidiaries under, or result in being declared void, voidable or without
further binding effect, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust or any license, franchise,
permit, lease, contract, agreement or other instrument, commitment or
obligation to which the Company or its Subsidiaries is a party, or by which
the Company or its Subsidiaries or any of their properties is bound or
affected;
15
(g) except as set forth in Schedule 3.4(g), require any consent,
approval or authorization of, or declaration, filing or registration with,
any Government Authority, other than any filings required under the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 0000 (xxx "XXX Xxx"), xxxxx securities laws
("Blue Sky Laws") (collectively, the "Regulatory Filings"), and any filings
required to be made with the Office of the Secretary of the State of Maryland
and NYSE or any other national securities exchange on which the Company
Common Stock is listed; or
(h) conflict with or result in a breach of any provision of the
organizational documents of any Subsidiary.
Section 3.5 "SEC and Other Documents, Financial Statements;
Undisclosed Liabilities." (a) The Company has delivered or made available to
Buyer, or there are commercially available to Buyer in the ordinary course,
all annual, quarterly or current reports of the Company filed with the
Securities and Exchange Commission ("SEC") under the Exchange Act, and, in
connection with the Company's public offering of Company Common Stock
commenced in April 1997, the registration statement bearing number 333-31591,
and all exhibits, amendments and supplements thereto (collectively, the
"Company Registration Statement"), and each report, registration statement,
or proxy statement and all exhibits thereto prepared by it or relating to its
properties, in each case since January 1, 1994 (except as to the Company
Registration Statement, as to which the applicable date shall be the
effective date thereof), which are set forth in Schedule 3.5(a), each in the
form (including exhibits and any amendments thereto) filed with the SEC
(collectively, the "Company Reports"). The Company Reports were filed with
the SEC in a timely manner and constitute all forms, reports and documents
required to be filed by the Company under the Securities Act, the Exchange
Act and the rules and regulations promulgated thereunder (the "Securities
Laws"). As of their respective dates, the Company Reports (i) complied as to
form in all material respects with the applicable requirements of the
Securities Laws and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that as to the compliance of the Company Reports with the requirements of the
Securities Laws, insofar as such representation is made as to matters of form
established in the Securities Laws, and assuming that such Company Reports
were prepared under the direction of and with the advice of independent
counsel and auditors to the Company, it is a representation made to the
Company's Knowledge. There is no unresolved violation or position asserted
by any Government Authority with respect to any of the Company Reports.
(b) Except as set forth in Schedule 3.5(b), each of the balance
sheets included in or incorporated by reference into the Company Reports
(including the related notes and schedules) fairly presented the financial
position of the entity or entities to which it relates as of its date and
each of the statements of operations, stockholders' equity (deficit) and cash
flows included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presented the results of
operations, retained earnings or
16
cash flows, as the case may be, of the entity or entities to which it relates
for the periods set forth therein, in each case in accordance with United
States generally accepted accounting principles ("GAAP") consistently applied
during the periods involved except as may be noted therein and except in the
case of the unaudited statements, normal recurring year-end adjustments.
(c) Except as and to the extent set forth in the Company Reports
or any Schedule hereto, none of the Company or any of the Subsidiaries has
any Liabilities.
Section 3.6 "Litigation, Compliance With Law." (a) Except as
disclosed in Schedule 3.6(a), there are no Actions pending or, to the
Company's Knowledge, threatened against the Company or any of the
Subsidiaries which question the validity hereof or any action taken or to be
taken in connection herewith, and there are no continuing orders, injunctions
or decrees of any Government Authority to which the Company or any of its
Subsidiaries is a party or by which any of its properties or assets are bound.
(b) To the Company's Knowledge, none of the Company or its
Subsidiaries is in violation of any statute, rule, regulation, order, writ,
decree or injunction of any Government Authority or any body having
jurisdiction over them or any of their respective properties, except as set
forth in Schedule 3.6(b), provided, however, that this Section 3.6(b) shall
not apply to facts or matters otherwise set forth in (or by reference in)
Section 3.11 or Section 3.12 as to which Sections 3.11 or 3.12 shall apply.
Section 3.7 "Absence of Certain Changes or Events." Except as
disclosed in the Company Reports filed with the SEC prior to the date hereof,
as contemplated by any of the Related Documents or in Schedule 3.7, since
September 30, 1997, the Company and each of its Subsidiaries have conducted
their business only in the ordinary course of such business and have not
acquired any real estate or entered into any financing arrangements in
connection therewith or conducted their business, other than in each case in
the ordinary course of its business, and there has not been (a) any change,
circumstance or event that would reasonably be expected to result in an
adverse effect on the business, operations or condition (financial or
otherwise) of the Company, the Operating Partnership and the Subsidiaries,
considered as a whole, (b) any declaration, setting aside or payment of any
dividend or other distribution with respect to the Company Common Stock,
except for dividends in the ordinary course of business consistent with past
practice or otherwise, (c) any commitment, contractual obligation, borrowing,
capital expenditure or transaction (each, a "Commitment") entered into by the
Company or any of the Subsidiaries other than in the ordinary course of
business or (d) any change in the Company's accounting principles, practices
or methods other than as required by changes in GAAP and related accounting
practices or procedures. Except as set forth in Schedule 3.7, the Company is
not now contemplating entering into any Commitment which, had it occurred on
or before the date hereof, would be required to be disclosed in the Company
Reports or in Schedule 3.7.
Section 3.8 "Tax Matters; REIT and Partnership Status." (a) The
Company and each of the Subsidiaries has timely filed with the appropriate
taxing authority all Tax
17
Returns required to be filed by it or has timely requested extensions and any
such request has been granted and has not expired. Each such Tax Return is
complete and accurate in all respects. All Taxes shown as owed by the
Company or any of the Subsidiaries on any Tax Return have been paid or
accrued, except for Taxes being contested in good faith and for which
adequate reserves have been taken, in the reasonable opinion of the Company.
The Company and each of the Subsidiaries has properly accrued all Taxes for
such periods subsequent to the periods covered by such Tax Returns as
required by GAAP. Except as set forth in Schedule 3.8(a), none of the
Company or any of the Subsidiaries has executed or filed with the IRS or any
other taxing authority any agreement now in effect extending the period for
assessment or collection of any Tax. Except as set forth in Schedule 3.8(a),
none of the Company or any of the Subsidiaries is a party to any pending
action or proceedings by any taxing authority for assessment or collection of
any Tax, and no claim for assessment or collection of any Tax has been
asserted against it. True and complete copies of all federal, state and
local income and franchise Tax Returns, or any extensions applicable thereto,
filed by the Company and each of the Subsidiaries for the taxable years 1994
to the present and all communications relating thereto, have been delivered
to Buyer or have been made available for inspection by its representatives.
Except as set forth in Schedule 3.8(a), no claim has been made by an
authority in a jurisdiction where the Company or any of the Subsidiaries does
not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. Except as set forth in Schedule 3.8(a), there is no dispute or
claim concerning any Tax liability of the Company or any of the Subsidiaries
claimed or raised by any taxing authority in writing. As of the date hereof,
the Company is a "domestically-controlled" REIT within the meaning of Code
Section 897(h)(4)(B). Except as set forth in Schedule 3.8(a), to the
Company's Knowledge no person or entity which would be treated as an
"individual" for purposes of Section 542(a)(2) of the Code (as modified by
Section 856(h) of the Code) owns or would be considered to own (taking into
account the ownership attribution rules under Section 544 of the Code, as
modified by Section 856(h) of the Code) in excess of 9.8% of the value of the
outstanding equity interest in the Company. The Company is not a
"Pension-Held REIT" within the meaning of Section 856(h)(3)(D) of the Code.
(b) The Company (i) intends in its federal income tax return for
the tax year ended December 31, 1997 and for the tax year that will end on
December 31, 1998 to elect to be taxed as a real estate investment trust
within the meaning of Section 856 of the Code ("REIT") and has complied (or
will comply) with all applicable provisions of the Code relating to a REIT,
(ii) has operated, and intends to continue to operate, in such a manner as to
qualify as a REIT for each of its taxable years, (iii) has not taken or
omitted to take any action which would reasonably be expected to result in a
challenge to its status as a REIT, and no such challenge is pending or, to
the Company's Knowledge, threatened, and (iv) assuming the accuracy of
Buyer's representations in Section 4.6 and Section 4.7, will not be rendered
unable to qualify as a REIT for federal income tax purposes as a consequence
of the transactions contemplated hereby, including without limitation any
exchange of Operating Partnership Preferred Units by any holders thereof by
the Company for Company Preferred Stock or Company Common Stock, or both.
18
(c) Any amount or other entitlement that could be received
(whether in cash or property or the vesting of property) as a result of any
of the transactions contemplated hereby by any employee, officer, or director
of the Company, or the Operating Partnership or any of their Affiliates who
is a "disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.28OG-1) under any employment, severance or termination
agreement, other compensation arrangement or plan currently in effect, would
not be characterized as an "excess parachute payment" (as such term is
defined in Section 28OG(b)(1) of the Code).
(d) The disallowance of a deduction under Section 162(m) of the
Code for employee remuneration will not apply to any amount paid or payable
by the Company or any of its Subsidiaries under any contract, stock plan,
program, arrangement or understanding currently in effect.
(e) The Company and all of its predecessors was eligible to and
did validly elect to be taxed as a REIT for federal income tax purposes for
calendar year 1987 and all subsequent taxable periods. The Operating
Partnership is and each Subsidiary of the Company organized as a partnership
(and any other Subsidiary that files Tax Returns as a partnership for federal
income tax purposes) was, in the case of each such Subsidiary, and continues
to be classified as a partnership for federal income tax purposes.
Section 3.9 "Compliance With Agreements; Liens." (a) Neither the
Company nor any of the Subsidiaries is in default under, or in violation of
any provision of, the Company Charter, the By-laws of the Company or the
Operating Partnership Agreement (or equivalent documents), except as set
forth in Schedule 3.9(a).
(b) The Company and each of the Subsidiaries have filed all
material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file
with any Government Authority and all other material reports and statements
required to be filed by them, and have paid all fees or assessments due and
payable in connection therewith, except as set forth in Schedule 3.9(b).
There is no unresolved violation asserted by any regulatory agency, nor has
the Company received notice from any regulatory agency with respect to any
report or statement relating to an examination of the Company or any of the
Subsidiaries.
(c) The Company Reports describe all material agreements (other
than agreements providing for the Golden State Acquisition and agreements
entered into in the ordinary course of business relating to Company Leases,
indebtedness of the Company, commitments with respect thereto, the
acquisition or development or construction of, additions or expansions to, or
management or leasing services for commercial buildings or other real
properties) which are currently in effect and under which the Company or any
Subsidiaries currently has, or expects to incur any obligation. Schedule
3.9(c) sets forth a complete and accurate list of all material agreements
entered into by the Company or any Subsidiary as of the date hereof which are
not listed in the Company Reports or any other Schedule hereto, including the
material Debt Instruments, except for agreements providing for the Golden
State
19
Acquisition and the Related Documents. True and complete copies of each
agreement set forth in Schedule 3.9(c) have been delivered or made available
to Buyer.
(d) Subject to the provisions of Section 3.11, which as to facts
or matters otherwise set forth therein (or by reference therein) such Section
3.11 shall be applicable and this Section 3.9(d) shall not be applicable,
each agreement and instrument of the Company is in full force and effect as
against the Company and, as against the other parties thereto, no payments,
if any, thereunder are delinquent, and no notice of default thereunder has
been sent or received by the Company or any of its Subsidiaries and there
does not exist under any agreement of the Company or any of its Subsidiaries
any default by the Company or any Subsidiary, and no event has occurred
which, with notice or lapse of time or both, would constitute such a default
by the Company or any Subsidiary.
(e) Schedule 3.9(e) sets forth a true, complete and correct list
of all Liens which could materially adversely affect the value of the Company
or the Company Properties other than those described in the Company Reports,
Liens under credit agreements providing for the financing of the Company
Properties and entered into by the Company or its Subsidiaries in the
ordinary course of business, Permitted Exceptions relating to Company
Properties and items (i) - (iv) in the definition of Permitted Liens.
Section 3.10 "Financial Records; Company Charter and By-laws;
Corporate Records." (a) The books of account and other financial records of
the Company and each of the Subsidiaries are in all respects true and
complete, have been maintained in accordance with good business practices,
and are accurately reflected in all respects to the extent required by GAAP
in the financial statements included in the Company Reports, except as set
forth in Schedule 3.10(a).
(b) The Company has previously delivered or made available to
Buyer true and complete copies of the Company Charter and the By-laws of the
Company, as amended to date, the Operating Partnership Agreement, and the
charter, by-laws, organization documents, partnership agreements and joint
venture agreements of the Subsidiaries, and all amendments thereto. All such
documents are listed in Schedule 3.1(e) or Schedule 3.18(g). A true, complete
and correct chart of the Company, the Operating Partnership, and the
Subsidiaries showing ownership, voting rights and contractual relationships
affecting ownership and voting rights, and identifying the general partner of
any limited partnerships, is set forth in Schedule 3.10(b).
(c) The minute books and other records of corporate or partnership
proceedings of the Company and each of the Subsidiaries have been made
available to Buyer, contain in all material respects accurate records of all
meetings and accurately reflect in all material respects all other corporate
action of the stockholders and directors and any committees of the Board of
Directors of the Company and their Subsidiaries which are corporations and
all actions of the partners of the Operating Partnership and Subsidiaries
which are partnerships, and all actions of the members of Subsidiaries which
are limited liability companies except for documentation of discussions
relating to or in connection with
20
the transactions contemplated hereby or matters related thereto, except as
set forth in Schedule 3.10(c).
Section 3.11 "Properties." (a) Title Matters. Schedule 3.11(a)
sets forth as of the date of this Agreement a complete and accurate list and
the location of all real property directly or indirectly owned, all or in
part, by the Company, the Operating Partnership or any of the Subsidiaries,
or as to which the Company or its Subsidiaries has a leasehold interest
(collectively, and together with the land thereunder, all buildings,
structures and other improvements and fixtures (other than trade fixtures
owned by tenants under the terms of the Company Leases (as defined below))
located on or under such land, and all easements, rights and other
appurtenances to such land, the "Company Properties"), other than the office
space leased by the Company from which the Company operates its business
which is listed separately on Schedule 3.11(a) as HQ Space (the "HQ Space").
For purposes of this Section 3.11, the Company Properties expressly do not
include the properties acquired in the Golden State Acquisition; however, the
Company represents and warrants that neither the Company nor any of its
Subsidiaries have transferred title to any of the assets acquired in the
Golden State Acquisition. As of the date of this Agreement, the Company or,
in the case of Company Properties owned by Subsidiaries, the Subsidiary
indicated on Schedule 3.11(a), owns good and marketable fee simple title (or,
if so indicated in Schedule 3.11(a), leasehold title) to each of the Company
Properties, and such title is (i) in the case of those Company Properties
identified on Schedule 3.11(a)-(i), to the Company's Knowledge, free and
clear of any Liens, title, defects, restrictions or covenants, or reservation
of interests in title, except for (A) Permitted Liens, (B) zoning, building,
fire, health, environmental and pollution control laws and other land use
laws, ordinances, rules and regulations applicable to the Company Properties,
(C) all matters, whether or not of record, to the extent caused by Buyer or
its agents, representatives or contractors, and (D) all other matters listed
as exceptions on Schedules B-1 of the New Company Title Policies or shown on
any survey of the Company Properties listed on Schedule 3.11(a)-(ii) or
obtained by Buyer, and (ii) in the case of all other Company Properties (the
"Other Company Properties"), to the Company's Knowledge, free and clear any
Liens, title defects, restrictions or covenants or reservation of interests
in title, except for (A) Permitted Liens, (B) zoning, building, fire, health,
environmental and pollution control laws and other land use laws, ordinances,
rules and regulations applicable to the Company Properties, (C) all matters
whether or not of record, to the extent caused by Buyer or its agents,
representatives or contractors, and (D) all other matters listed as
exceptions in Schedule B-1 of the existing title policies (lender's or
owner's) provided to or made available to Buyer prior to the date of this
Agreement and issued with respect to the Other Company Properties (the "Other
Company Title Policies") or shown on any survey of the Company Properties
listed on Schedule 3.11(a)-(ii) or obtained by Buyer (items (i) (A) through
(D) and (ii)(A) through (D) are collectively the "Permitted Exceptions").
The Company also represents and warrants that, with respect to the Other
Company Properties, it has not voluntarily created any liens or encumbrances
not listed as exceptions to title to the Other Company Properties since the
date of the Other Company Title Policies, other than items which constitute
Permitted Liens. None of the Permitted Exceptions interferes with, impairs,
or is violated by the existence of any building or other structure or
improvement which constitutes a part of, or the present use, occupancy or
operation (or, if currently under
21
rehabilitation or development, such rehabilitation or development) of the
Company Properties in any material respect taken as a whole. Except as shown
or described in any of the Permitted Exceptions, or any survey listed on
Schedule 3.11 (a)-(ii) or obtained by Buyer, no material improvements
constituting a part of any Company Property encroach on real property not
constituting a part of such Company Property or an abutting Company Property
unless there is a valid easement for the benefit of the Company with respect
thereto, with customary duration and terms for institutional quality shopping
centers, of a type generally acceptable to institutional lenders, nor, except
as so described or disclosed, are there other material adverse matters
(which, in the case of Company Properties with respect to which there is a
survey listed on Schedule 3.11(a)-(ii), has arisen since the date thereof, or
at any time in the case of all other Company Properties) that would be
disclosed by a current ALTA survey. To the Company's Knowledge and except as
may be shown or indicated in any of the Permitted Exceptions, all parcels of
land included in each Company Property that purport to be contiguous are
contiguous and are not separated by strips, gaps or gores. All applicable
premiums with respect to the title policies regarding the Company Properties
have been paid, and to the Knowledge of the Company such policies are in full
force and effect. Except as set forth in Schedule 3.11(a), there is no
material outstanding claim, nor, to the Company's Knowledge, has any claim
been made by the Company or its Subsidiaries, or by any other party, that
would reduce the stated coverage under any such policy. True and complete
copies of all such policies and the surveys listed on Schedule 3.11(a)-(ii)
of each of the Company Properties in the possession or control of the Company
have been made available by the Company to Buyer or to its representatives,
and as of the date of this Agreement neither the Company nor any of the
Subsidiaries has any more recent policies or surveys for the Company
Properties.
(b) Permitting and Compliance with Laws; Uninsured Damage from
Casualty; Property Condition. Except as set forth in Schedule 3.11(b) and
except with respect to the Development Properties, to the Company's Knowledge
there has been obtained and is in full force and effect (i) any material
currently required certificate, permit or license (including certificates of
occupancy (or equivalent) for tenant space) from any Government Authority
having jurisdiction over any Company Property and (ii) any agreement,
easement or other right which is necessary to permit the lawful use,
occupancy or operation of the existing buildings, structures or other
improvements which constitute a part of any of the Company Properties as
currently used, occupied or operated or which are necessary to permit the
lawful use and operation of any current utility service to any Company
Property or of any currently utilized driveways, roads or other currently
utilized means of egress and ingress to and from any of the Company
Properties and there is not pending, or to the Company's Knowledge,
threatened (in writing) Action against the Company for the cancellation or
material adverse modification of any of same. To the Company's Knowledge
(provided, however, that with respect to the Properties listed on Schedule
3.11(b)-(i), such representation shall be absolute, and shall not be
qualified by Knowledge, with respect to uses allowed under zoning laws ),
each Company Property is in material compliance (compliance being deemed to
include for such purposes preexisting lawful zoning nonconformaties) with
each federal, state or municipal law, ordinance, order, regulation or
requirement, including any applicable zoning law or building code, or any
insurance requirements applicable to any Company Property. Except as
22
set forth in Schedule 3.11(b), neither the Company nor the Subsidiaries have
received notice of any violation of the Americans with Disabilities Act (the
"ADA") from any Government Authority or any notice from any other Person as
to a material violation of the ADA which the Company believes, in good faith,
is valid, in each case which have not been cured (or settled, with no further
payments or performance due from the Company or any Subsidiary, in the case
of private matters). Except as set forth in Schedule 3.11(b), there is no
uninsured current physical damage to any Company Property from casualty in
excess of $100,000. Except for repairs identified in the Capital Expenditure
Budget and Schedule and as set forth in the Company Reports or the Property
Condition Reports, to the Company's Knowledge each Company Property other
than a Development Property (i) is in good or better operating condition and
repair and is structurally sound, and (ii) consists of sufficient land,
parking areas, driveways and other improvements and lawful means of access
and utility service and capacity to permit the use thereof in the manner and
for the purposes to which it is presently devoted (or, in the case of the
Development Property and except as noted in Section 3.11(j) or Schedule
3.11(j), for the development and operation thereon of the applicable
Project), except, in each such case, to the extent that failure to meet such
standards would not materially and adversely affect the use or occupancy of
the Company Properties. The Company has made available to Buyer or to its
representative true and complete copies of the most recent existing third
party engineering and other third property condition reports relating to the
condition of any Company Property prepared for the Company or otherwise in
the Company's or any Subsidiary's possession, and all other such reports in
the Company's or any Subsidiaries possession that sets forth material adverse
facts with respect to the condition of any Company Property (collectively,
the "Property Condition Reports").
(c) Condemnation and Other Property-Related Actions. Except as set
forth in Schedule 3.11(c), or the Company Reports, or which are included in
the Permitted Exceptions, there is no currently pending or, to the Company's
Knowledge, threatened (in writing) (i) rezoning, condemnation or eminent
domain proceedings with respect to any Company Properties other than road
widenings or changes of grade of roads which would not have a material
adverse effect on the applicable Company Property's value or operations, (ii)
change in the assessed valuation of any Company Property which would have a
material adverse effect on the applicable Company Property's value, (iii)
special assessment against any Company Property, or (iv) so-called "impact
fee" or any agreement with any Government Authority to hereafter pay for
sewer extension, oversizing utilities, lighting or like expenses or charges
for work or services by such Government Authority except as set forth in the
Capital Expenditure Budget and Schedule or any Development Budget and
Schedule and except as reflected in the current operating statements for the
Company Properties, all of which have previously been delivered or made
available to Buyer.
(d) Independent Unit. Except for matters included in the
Permitted Exceptions, each of the Company Properties is an independent unit
which does not rely on any facilities, other than the facilities of public
utility companies and water and sewer departments or districts, which are
connected to the Company Properties through valid and customary easements, if
necessary or appropriate, located on any property not included in such
Company Property to fulfill any municipal or governmental requirements or for
the furnishing to such
23
Company Property of any essential building systems or utilities, or access or
parking other than facilities the benefit of which inures to the Company
Properties pursuant to one or more valid easements, or facilities which are
located on or abutting Company Properties pursuant to one or more valid
easements and are sufficient to serve more than one property adequately and
lawfully. Each of the Company Properties other than the Development
Properties is served by adequate water and sanitary systems and other
utilities currently used in the operation of such Company Property, and each
of the Company Properties has lawful access to public roads, in all cases
sufficient for the current use and occupancy of each Company Property. To
the Company's Knowledge and except as may be shown or described in any of the
Permitted Exceptions, no material portion of any building improvements
included in any Company Property lies in any area designated by the U.S. Army
Corps of Engineers or other Governmental Authority as a special flood hazard
area unless the Company or the applicable Subsidiary maintains all required
flood insurance with respect thereto.
(e) INTENTIONALLY OMITTED.
(f) Leasing Matters. Attached hereto as Schedule 3.11(f) is a
rent roll covering each Company Property (the "Rent Roll") which Rent Roll is
true, complete and correct as of October 31, 1997 in all material respects.
The Rent Roll attached as Schedule 3.11(f) shall be updated to a date not
more than five (5) Business Days prior to the Closing, and it shall be a
condition to the Buyer's obligation to close that such updated rent roll,
shall not show any material variations from the attached Rent Roll, other
than variations in the ordinary course of the Company's and its Subsidiaries'
business, which variations from the version of the Rent Roll attached hereto
as Schedule 3.11(f) do not have a material adverse effect on the Company
Properties. As of the date thereof, the Rent Roll lists all Company Leases
for any portion of each Company Property or otherwise affecting each Company
Property, and is accurate and complete in all material respects as of the
date of the Rent Roll. The copies of the Company Leases which have been
delivered or made available to Buyer are true, correct and complete, and
constitute all outstanding Company Leases known to the Company relating to
each Company Property. The Company shall promptly provide true, complete and
correct copies of any Company Leases entered into after the date of this
Agreement to Buyer. Each Company Lease (i) is in full force and effect with
respect to the Company or the applicable Subsidiary, and, to the Company's
Knowledge, the applicable tenant; and (ii) constitutes the entire agreement
between the Company and applicable Subsidiary and such tenant with respect to
the applicable Company Property and includes any other agreements between
such parties related in any way to such Property. Except as set forth on the
Rent Roll, Schedule 3.11(f), or the Capital Expenditure Budget and Schedule,
all tenant improvements and other improvements required to be furnished,
constructed or installed or paid for by a Company or Subsidiary as landlord
under each Company Lease (and to the Company's Knowledge, by any predecessor
landlord under such Company Lease) has been fully performed and has been
fully paid or will be fully performed and paid on or before the Closing Date
except as otherwise expressly indicated on the Rent Roll, Schedule 3.11 (f)
or the Capital Expenditure Budget and Schedule. To the Company's Knowledge,
neither the Company nor any Subsidiary is in default in the performance of
any material obligation under any of the Company Leases (or any agreements
incorporated therein by reference) and the
24
Company has no Knowledge of any circumstances which, merely with the passage
of time or the giving of notice, or both, would constitute an event of
default by landlord under any of the Company Leases. Except as set forth on
the Rent Roll or Schedule 3.11(f), to the Company's Knowledge, no tenant is
in monetary default beyond 30 days or material nonmonetary default under its
Company Lease. Except as indicated in the Rent Roll or Schedule 3.11(f), (x)
no advance rent or other payment has been made with respect to any Company
Lease except rental for the current month, other than security deposits in
the ordinary course, (y) no tenant which is currently paying rent, or which
is reflected in the Company's balance sheets, financial statements, other
operating statements or Company Reports as paying rent, is entitled to any
unexpired free rent period or other unexpired concession under its Company
Lease and (z) there is no obligation under the Company Lease for the
refunding of a security deposit. Except as otherwise expressly set forth in
the Rent Roll or as set forth on Schedule 3.11(f), to the Company's Knowledge
there are no actions, voluntary or involuntary, pending against any tenant
under any bankruptcy or insolvency laws. Except as shown on the Rent Roll,
on Schedule 3.11(f), or in any of the Company Leases, and except for certain
rights of first refusal which are set forth in the sections of the
partnership agreements referenced in Schedule 3.1(e) and which relate to
partnerships in which the Company and the Subsidiaries collectively, directly
or indirectly, own less than a 100% interest, neither the Company nor any
Subsidiary has granted to any Person (including without limitation tenants
under Company Leases) any option or right of first refusal, first offer or
first opportunity or comparable right to acquire any interest in any Company
Property or any portion thereof, and the Company has no Knowledge that any
other Person has granted any such option or right of first refusal or first
opportunity to acquire which remains in force and effect. In addition, and
without limiting the generality of the foregoing, with respect to each
Company Lease for premises larger than 10,000 square feet of rentable space
(collectively, the "Material Company Leases"), except as set forth in
Schedule 3.11(f) or in the Rent Rolls, (i) no tenant under any Material
Company Lease is more than 30 days in arrears in the payment of base rent,
and (ii) no tenant under any of the Material Company Leases has any options,
rights of first offer, rights of first refusal or first opportunity or
comparable rights to purchase any portion of any Company Property. None of
the Material Company Leases and none of the rents or other amounts payable
thereunder has been assigned, pledged or encumbered except in connection with
financing secured by the applicable Company Property which is described in
Section 3.9(c). Other than the tenants identified in the Rent Rolls,
licensees and month to month and other tenants with lease terms of less than
six (6) months or with respect to whom the Company or its Subsidiaries have
the right to terminate such occupancy rights upon no more than sixty days
notice, contractors pursuant to contracts entered into in the ordinary
course, and parties to easement agreements which constitute Permitted
Exceptions, no third party has any right to occupy or use any portion of any
Company Property. Except as otherwise set forth on Schedule 3.11(f), the
Capital Expenditure Budget and Schedule includes all outstanding material
tenant improvement and similar material work required to be made by the
lessor under each of the Material Company Leases. There are no outstanding
material brokerage commissions or similar amounts payable in respect of any
of the Company Leases other than amounts being paid in the ordinary course on
a timely basis or which are being diligently contested in good faith.
25
(g) Material Commitments. Schedule 3.11(g) sets forth a complete
and accurate list of all material contracts, options, commitments, letters of
intent or similar written understandings made or entered into by the Company
or any of the Subsidiaries as of the date hereof (x) to enter into any
Material Company Lease, (y) to sell, mortgage, pledge, hypothecate any
Company Property or to otherwise enter into a material transaction in respect
of the ownership or financing of any Company Property, or (z) to purchase or
acquire an option, right of first refusal or similar right in respect of any
real property, which, in any such case, has not yet been reduced to a written
lease or contract (other than in connection with or as the same may relate to
the Golden State Properties), and sets forth with respect to each such
commitment, letter of intent or other understanding the principal business
terms thereof, excluding, however, in each case such commitments, letters of
intent or similar written understandings which do not bind any party thereto.
The Company has previously delivered or made available to Buyer a true and
complete copy of each such commitment, letter of intent or other
understanding.
(h) Options, Rights of First Refusal and Other Property Related
Contracts. Except as set forth in the Company Reports or Schedule 3.11(h),
none of the Company or any of its Subsidiaries has any outstanding options or
rights of first refusal or has entered into any outstanding contracts with
others for the purchase of any real property by the Company, the Operating
Partnership or any Subsidiary (other than easements related to any Company
Property).
(i) Capital Expenditure Budgets and Schedules. Schedule 3.11(i)
sets forth the Company's or any Subsidiary's capital expenditure budget and
schedule for each Company Property (the "Capital Expenditure Budget and
Schedule"), which describes the material capital expenditures which the
Company or any Subsidiary has budgeted for such Company Property for calendar
year 1998, excluding, however (except as otherwise provided in Section
3.11(f)), any tenant improvements required to be made under any Company
Lease. The Capital Expenditure Budget and Schedule for each Company Property
represents the good faith business judgment of the Company as to all known
reasonably foreseeable maintenance and capital expenditure items for such
Company Property.
(j) Development Properties. Schedule 3.11(j) contains a list of
each Company Property, or property which the Company has under a letter of
intent or option, which consists of or includes material amounts of
underdeveloped land or which is intended to be or is in the process of being
substantially redeveloped or rehabilitated (collectively, the "Development
Properties") a brief description of the development or rehabilitation
intended by the Company or any Subsidiary to be carried out or completed
thereon (collectively, the "Projects"), including any budget and development
or rehabilitation schedule therefor prepared by or for the Company or any
Subsidiary (collectively, the "Development Budget and Schedule"), if the
Company or a Subsidiary does not own such Development Property, a description
of the Company's contract rights with respect thereto, the status of zoning
approvals and building permits for such Project, the status of design and
major construction contracts, and if such Project is under development, the
approximate percentage of completion and any known material impediments to
completion and opening for operation. In the case of
26
each Project the development of which has commenced, the costs and expenses
incurred in connection with such Project and the progress thereof are, except
as set forth in Schedule 3.11(j), consistent and in compliance in all
material respects with all aspects of the Development Budget and Schedule
applicable thereto. The Company has made available to Buyer or to its
representative all feasibility studies, soil tests, due diligence reports and
other studies, tests or reports performed by or for the Company, or otherwise
in the possession of the Company, and all material architectural, engineering
and general construction contracts which relate to the Development Properties
or the Projects. Neither the Company nor any of its Subsidiaries is in
material default under any development agreement, disposition agreement,
disposition and development agreement or comparable agreement affecting any
of the Company Properties, and all such agreements are in full force and
effect.
(k) Disclosure. To the Company's Knowledge, the representations
and warranties and the statements and information contained in this
Agreement, in the Exhibits and Schedules hereto and in all of the materials
delivered by the Company to Buyer and its counsel, accountants, appraisers
and consultants pursuant to this Agreement or in connection with the due
diligence investigations conducted by or on behalf of Buyer in connection
with this Agreement do not contain any untrue statement of a material fact
and, when taken together, do not omit to state a material fact required to be
stated therein or necessary in order to make such representations,
warranties, statements or information not misleading in light of the
circumstances under which they were made.
(l) Ground Leases and HQ Leases. The Company has provided or made
available to the Buyer accurate and complete copies of the leases for the HQ
Space and the ground leases underlying the leased Company Properties
referenced in Schedule 3.11(a), if any, including all amendments and other
modifications thereto (collectively, the "Tenancy Leases"). Each of the
Tenancy Leases is valid, binding and in full force and effect as against the
Company or the applicable Subsidiary and, to the Company's Knowledge, against
the other party thereto. Except as indicated in the Company Reports or
Schedule 3.11(l) or any other Schedule to this Agreement and except for
tenants under the Company Leases and matters set forth in the Permitted
Exceptions, none of the Tenancy Leases is subject to any pledge, lien,
assignment, license or other agreement granting to any third party any
interest therein or any right to the use or occupancy of any premises leased
thereunder. Except as set forth in the Company Reports or Schedule 3.11(l),
there is no pending or, to the Company's Knowledge, threatened (in writing)
proceeding which is reasonably likely to interfere with the quiet enjoyment
of the tenant under any of the Tenancy Leases. No payments under any Tenancy
Lease are delinquent and no notice of default thereunder has been sent or
received by the Company or any of its Subsidiaries which has not been cured
or waived prior to the date hereof, and to the Knowledge of the Company,
there does not exist under any of the Tenancy Leases any default by the
Company or any Subsidiary or any event which merely with notice or lapse of
time or both, would constitute such a default by the Company.
(m) Reciprocal Easement Agreements. To the Company's Knowledge,
all reciprocal easement agreements referenced as Permitted Exceptions or
otherwise necessary for the operation of any Company Property or with respect
to which any Company Property is
27
subject, are in full force and effect, without default in any material
respect by any party thereto.
(n) Mortgage and Other Debt. Schedule 3.11(n) accurately
describes and summarizes the approximate amount, term, interest rate, payment
terms, prepayment restrictions and restrictions on transfer that would be
applicable to the transactions contemplated hereby and by the Agreement to
Contribute, of all mortgage debt encumbering the Company Properties and all
other indebtedness for borrowed money of the Company. There are no material
defaults thereunder by the Company or any of its Subsidiaries except as
indicated on said Schedule 3.11(n).
Section 3.12 "Environmental Matters." (a) Except as disclosed on
Schedule 3.12(a)(i), the Company and its Subsidiaries have not generated,
stored, released, discharged or disposed of, nor to the Company's Knowledge
or its Subsidiaries' knowledge, used or handled Hazardous Substances or
Hazardous Wastes (as those terms are defined below) at, upon or from any
property in violation of any law, regulation or directive, or in connection
with which remedial action would be prudent or required under any federal,
state or local law, regulation or directive. To the Company's Knowledge and
its Subsidiaries' knowledge and except as set forth in any environmental
report provided by the Company and its Subsidiaries to Buyer including those
listed on Schedule 3.12-(a)(i), or otherwise provided to or obtained by
Buyer, in each case prior to the date that is fifteen (15) days after the
date of this Agreement, and except as expressly disclosed on Schedule
3.12(a)(i) attached hereto, no Hazardous Substances or Hazardous Wastes are
or have been generated, stored, released, located, discharged or disposed of,
used or handled from, at or upon any property, and no Hazardous Substance or
Hazardous Waste is or has been located on any property, except for cleaning
and maintenance supplies customarily used in connection with properties
similar to the Company Properties and except cleaning and maintenance
supplies which are customarily sold in comparable retail properties and which
have been used, stored and sold, as applicable, in compliance with all
applicable laws, regulations and directives. As used in this Agreement, the
terms "Hazardous Substances" and "Hazardous Wastes" shall have the meanings
set forth in the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Sections 9601 et. seq., as amended, and the
regulations thereunder (collectively, "CERCLA"), Solid Waste Disposal Act, as
amended, including amendments under the Resource Conservation and Recovery
Act, 42 U.S.C. Sections 6901 et. seq., and the regulations thereunder
(collectively "RCRA"), Federal Water Pollution Control Act, 33 U.S.C.
Sections 1251 et. seq., as amended, and the regulations thereunder
(collectively the "Federal Clean Water Act") and such terms shall also
include asbestos, petroleum products, radon, radioactive materials, lead
paint, UFFI and other regulated substances under any federal, state or local
law, regulation or directive. To the Company's Knowledge and its
Subsidiaries' knowledge and except as set forth in any environmental report
provided by the Company and its Subsidiaries to Buyer or otherwise obtained
by Buyer, in each case prior to the date hereof, and except as expressly
disclosed on Schedule 3.12(a)(i), no Hazardous Substance or Hazardous Wastes
are, to the Company's Knowledge and the Subsidiaries' knowledge, located on
property adjacent to any property hereunder. Except as disclosed in the
environmental report(s) delivered to Buyer hereunder or in any report
obtained by Buyer, in each case prior to the date that is fifteen (15) days
after the
28
date of this Agreement, neither the Company nor its Subsidiaries has received
written notice of, or has knowledge of, any notice from any agency, authority
or court concerning the removal, treatment or management of any Hazardous
Substances or Hazardous Wastes. For the properties listed in Schedule
3.12-(a)(ii) (the "Inherited Properties"), the facts and circumstances on
which an Environmental Claim related to a property is based shall be deemed
to have been "known" to the Company and its Subsidiaries for purposes of any
representations and warranties made under this Section 3.12 if (i) the
Environmental Claim results in liability of $1,000,000 or more for an
individual Environmental Claim, or $5,000,000 or more in the aggregate for
any Environmental Claims hereunder that individually may result in liability
of less than $1,000,000, and (ii) the facts or circumstances would have been
detected or discovered if the Company and its Subsidiaries had conducted an
environmental assessment for the property or properties in accordance with
the ASTM Standard Practice for Environmental Site Assessments: Phase I
Environmental Assessment Process, E 1527-97 (the "ASTM Standard"), on the
property or properties. For purposes of the Agreement, the Phase I reports
listed in Schedule 3.12-(a)(i) are deemed to be reports of environmental
assessments conducted in accordance with the ASTM Standard.
(b) For purposes hereof, the terms listed below shall have the
following meanings:
(i) "Environmental Claim" shall mean any Claim, investigation or
written notice by any person alleging potential liability
(including potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resources damages,
property damages, loss of value, consequential damages, personal
injuries or fatalities, or penalties) of the Company or its
Subsidiaries arising out of, based on or resulting from (A) the
presence, generation, transportation, management, recycling, reuse,
treatment, use, storage, disposal or Release of Materials of
Environmental Concern or the threatened Release of Materials of
Environmental Concern at any location, or (B) activities or
conditions upon which any violation, or alleged violation of, or
liability or alleged liability under, any Environmental Law.
(ii) "Environmental Laws" shall mean federal, state, local, and
municipal laws, ordinances, principles of common law, rules,
by-laws, orders, governmental policies, statutes and regulations
relating to the condition, pollution or protection of the
environment or of flora or fauna or their habitat or of human
(including employee and worker) health and safety, or to the
cleanup or restoration of the environment, including, but not
limited to, any laws relating to (A) generation, treatment,
storage, disposal, management, recycling, reuse or transportation
of chemicals, materials, wastes, emissions or discharges or
protection of the environment from the same, (B) exposure of
persons to, or Release or threat of Release of, Materials of
Environmental Concern, and (C) the safety and health of workers and
employees.
(iii) "Materials of Environmental Concern" shall mean all
chemicals, pollutants, contaminants, wastes, toxic substances,
asbestos, radioactive
29
materials, petroleum or any fraction thereof, petroleum products
and hazardous substances (as defined in Section 101(14) of CERCLA,
42 U.S.C. Section 6601(14)), or hazardous wastes as now defined and
regulated under any Environmental Laws.
(iv) "Release" shall mean any active or passive release, spill,
emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration.
Section 3.13 "Employees and Employee Benefit Plans." (a) The
Company Reports and Schedule 3.13(a) together set forth a complete and
accurate list of all Employee Benefit Plans and all material Benefit
Arrangements which affect Employees of the Company or any of its Subsidiaries
(the "Company Plans"). With respect to each Company Plan, (i) the Company
and each of its Subsidiaries is in compliance in all material respects with
the terms of each Company Plan and with the requirements prescribed by all
applicable statutes, orders or governmental rules or regulations, (ii) the
Company and each of its Subsidiaries has contributed to each Pension Plan
included in the Company Plans not less than the amounts accrued for such plan
for all plan periods for which payment is due, and (iii) none of the Company
or any of its Subsidiaries has any funding commitment or other liabilities
except as reserved for in the financial statements in or incorporated by
reference into the Company Reports, or, in the case of clauses (i) through
(iii), as is set forth in Schedule 3.13(a).
(b) Other than in connection with the proposed substitution of the
Operating Partnership as the employer and paymaster of the employees of the
Company on or about January 1, 1998, or as set forth on Schedule 3.13(a) none
of the Company or any of its Subsidiaries has made any commitment to
establish any new Employee Benefit Plan, to modify any Employee Benefit Plan,
or to increase benefits or compensation of Employees of the Company or any of
its Subsidiaries (except for normal increases in compensation consistent with
past practices), and no intention to do so has been communicated to Employees
of the Company or any of its Subsidiaries.
(c) There are no pending or, to the Company's Knowledge,
threatened claims against or otherwise involving any of the Company Plans or
any fiduciaries thereof with respect to their duties to the Company Plans and
no suit, action or other litigation (excluding claims for benefits incurred
in the ordinary course of Company Plan activities) has been brought against
or with respect to any such Company Plans.
(d) Neither the Company, the Operating Partnership or any entity
under "common control" with the Company or the Operating Partnership within
the meaning of Section 4001 of ERISA has contributed to, or been required to
contribute to, any "multiemployer plan" (as defined in Section 3(37) and
4001(a)(3) of ERISA).
(e) Other than the Company's Plans, the Company and its
Subsidiaries do not maintain or contribute to any plan or arrangement which
provides or has any liability to provide life insurance, medical or other
employee welfare benefits to any Employee or former Employee upon his
retirement or termination of employment and the Company and its
30
Subsidiaries have never represented, promised or contracted (whether in oral
or written form) to any employee or former employee that such benefits would
be provided.
(f) For purposes hereof, "Employee Benefit Plans" means each and
all "employee benefit plans" as defined in Section 3(3) of ERISA maintained
or contributed to by a party hereto or in which a party hereto participates
or participated and which provides benefits to Employees, including (i) any
such plans that are "employee welfare benefit plans" as defined in Section
3(l) of ERISA, including retiree medical and life insurance plans ("Welfare
Plans"), and (ii) any such plans that constitute "employee pension benefit
plans" as defined in Section 3(2) of ERISA ("Pension Plans"). "Benefit
Arrangements" means life and health insurance, hospitalization, savings,
bonus, deferred compensation, incentive compensation, holiday, vacation,
severance pay, sick pay, sick leave, disability, tuition refund, service
award, company car, scholarship, relocation, patent award, fringe benefit,
individual employment, consultancy or severance contracts and other polices
or practices of a party hereto providing employee or executive compensation
or benefits to Employees, other than Employee Benefit Plans. "Employees"
mean all current employees, former employees and retired employees of a party
hereto or any of its Subsidiaries, including employees on disability, layoff
or leave status. "Controlled Group Liability" means any and all liabilities
under (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412
and 4971 of the Code, (iv) the continuation coverage requirements of Section
601 et seq. of ERISA and Section 4980B of the Code, other than such
liabilities that arise solely out of, or relate solely to, the Plans.
(g) With respect to each plan that is subject to Title IV or
Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there does not
exist any accumulated funding deficiency within the meaning of Section 412 of
the Code or Section 302 of ERISA, whether or not waived, (ii) the fair market
value of the assets of such plan equals or exceeds the actuarial present
value of all accrued benefits under plan (whether or not vested), on a
termination basis, (iii) no reportable event within the meaning of Section
4043(c) of ERISA has occurred, and the consummation of the transactions
contemplated by this agreement will not result in the occurrence of any such
reportable event, and (iv) all premiums to the Pension Benefit Guaranty
Corporation have been timely paid in full.
(h) There does not now exist, nor to the Company's Knowledge, do
any circumstances exist that could result in, any Controlled Group liability
that would be a liability of the Company following the Buyer's purchase of
Company Preferred Stock hereunder. Without limiting the generality of the
foregoing, neither the Company nor any ERISA Affiliate has engaged in any
transaction described in Section 4069 or Section 4204 of ERISA.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or benefit to
any employee of the Company.
31
Section 3.14 "Labor Matters." Except as set forth in Schedule
3.14, none of the Company or any of its Subsidiaries is a party to, or bound
by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor union organization. Except for the
matters set forth in Schedule 3.14, there is no unfair labor practice or
labor arbitration proceeding pending or, to the Company's Knowledge,
threatened against the Company or any of its Subsidiaries. To the Company's
Knowledge, there are no organizational efforts with respect to the formation
of a collective bargaining unit presently being made or threatened involving
employees of the Company or any of its Subsidiaries.
Section 3.15 "Affiliate Transactions." Schedule 3.15 sets forth
a complete and accurate list of (i) all relationships and transactions,
series of related transactions or currently proposed transactions or series
of related transactions entered into by the Company or any of its
Subsidiaries since December 31, 1995, which are of the type required to be
disclosed by the Company pursuant to Item 404 of Regulation S-K of the
Securities Laws, and (ii) all agreements, arrangements or policies of the
Company and/or the Subsidiaries of the Company (including the Operating
Partnership) concerning transactions with Affiliates or other conflicts of
interest. Each agreement, arrangement or policy described in clause (ii)
hereof and set forth in Schedule 3.15 is in full force and effect, and the
Company, each of its Subsidiaries, and the other parties thereto are in
compliance therewith, or such compliance has been waived by the Board of
Directors as set forth in Schedule 3.15. A true and complete copy of all
agreements or contracts relating to any such transaction has been made
available for inspection by Buyer. Schedule 3.15 sets forth an accounting of
such transactions regarding participatory interests, the allocation of
overhead and expenses thereunder, and all other matters material to each of
such agreements or contracts.
Section 3.16 "Insurance." The Company and the Operating
Partnership maintain insurance policies covering the assets, business,
equipment, properties, operations and employees of the Company and each of
its Subsidiaries (collectively, the "Insurance Policies") which are of a type
and in amounts customarily carried by Persons of similar size and resources
as the Company conducting businesses similar to those of the Company and the
Operating Partnership. There is no material claim by the Company or any of
its Subsidiaries pending under any of the material Insurance Policies as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies.
Section 3.17 "Brokers or Finders." No agent, broker, investment
banker or other firm or person, including any of the foregoing that is an
Affiliate of the Company with which the Company dealt, is or will be entitled
to any broker's or finder's fee or any other commission or similar fee from
the Company in connection with this Agreement or any of the transactions
contemplated hereby for which Buyer will be responsible. Section 3.18 "REOC
Status." (a) The Company was incorporated as a California corporation on June
30, 1986 and from its date of incorporation until January 1, 1987, the
Company conducted no business and owned no assets. The Company subsequently
reorganized as a Maryland corporation in 1997.
Section 3.18 "REOC Status." (a) The Company was incorporated as a
California corporation on June 30, 1986 and from its date of incorporation
until January 1, 1987, the Company conducted no business and owned no assets.
The Company subsequently reorganized as a Maryland corporation in 1997.
32
(b) As of the date of the Company's first long-term investment
that was not a short-term investment of funds pending long-term commitment,
i.e., January 1, 1987 (the "REOC Qualification Date"), and continuously
thereafter to and including the Closing Date, at least 50 percent of the
assets of the Company (other than short-term investments pending long-term
commitment or distribution to investors), valued at cost, have been invested
in real estate which has been under active development or management by the
Company.
(c) The Company has been actively engaged in the management or
development of real estate in the ordinary course of its business at all
times from the REOC Qualification Date to and including the Closing Date.
(d) The "real estate" referenced above which was purchased on the
REOC Qualification Date and thereafter includes the Company Properties except
for any such real estate sold. To the extent any of the Company Properties
are subject to tenant leases (the "Leases"), the Company has substantial
responsibilities under each of the Leases, and none of the Leases provides
that substantially all management and maintenance activities with respect to
the Company Property in question or any portion thereof are the
responsibility of the tenant lessees.
(e) The Company has not merely passively assumed the risks of its
real estate ownership, but the return to its stockholders from its investment
in the Company Properties has been and is based in part on the cash flow and
capital appreciation of the Company Properties, and such return depends in
substantial part on the success of the Company's management and development
efforts with respect to the Company Properties.
(f) The employees of the Company perform most of the development
and management functions of the real estate business described herein, except
that the Company has employed independent contractors, each of which is
terminable without cause and without substantial penalty upon reasonably
short notice, to perform certain of the day-to-day management activities
associated with the Company Properties. In any event, the Company represents
and warrants that it has devoted substantial resources to such management and
development activities and to the oversight of its independent contractors
who perform such activities from the REOC Qualification Date to and including
the Closing Date.
(g) Schedule 3.18(g) sets forth a complete and accurate list of
(i) the Articles of Incorporation and Bylaws, and all amendments to each, of
Xxxxxxx Sleepy Hollow, Inc., the name by which the California corporation
that is the corporate predecessor of the Company (hereinafter, the
"California REIT") was known at the time of its formation, and all amendments
thereto; (ii) all material advisory and management agreements entered into by
the California REIT or the Company, and the Subsidiaries of each, from and
after January 1, 1987 with respect to the assets of the California REIT or
the Company, respectively; and (iii) the annual reports for the California
REIT or the Company, as the case may be, filed with the SEC under the
Exchange Act for the years 1987 to 1996, inclusive, each of which accurately
describes the business of the Company or, as applicable, its predecessor, the
California REIT,
33
and the types and values (by category) of real properties owned and operated
by them during the periods referenced in this Section 3.18(g).
Section 3.19 "Knowledge Defined." As used herein, the phrase "to
the Company's Knowledge" (or words of similar import) means actual knowledge
of those individuals identified in Schedule 3.19, who are all of the
individuals who are directors and executive officers of the Company who knew
or should know as to the matters referenced herein, and includes any facts,
matters or circumstances set forth in any written notice from any Government
Authority or any other material written notice received by the Company or any
Subsidiary, and also includes any matter of which Buyer informs the Company
in writing prior to the date hereof or to which the Company acknowledges or
agrees.
Section 3.20 "Maryland Takeover Law." The terms of Section 3-602
and 3-702 of the Maryland General Corporation Law will not apply to Buyer,
any acquisition of Company Preferred Stock pursuant to this Agreement or as a
result of the exchange, conversion or redemption of Company Preferred Stock
pursuant to this Agreement or the Articles Supplementary, or any other
transaction contemplated by this Agreement. The resolutions substantially in
the form of Exhibit E hereto have been adopted by the Company, remain in full
force and effect on the date hereof and will not be amended, modified,
rescinded or revoked in any manner that would cause such terms to apply to
the Buyer or any such acquisition.
Section 3.21 "Proxy Statement." The proxy statement to be mailed
to holders of the Company Common Stock in connection with the vote of such
holders described in Section 3.22 hereof (as the same may be amended or
supplemented, the "Proxy Statement") and all of the information included or
incorporated by reference therein (other than any information supplied or to
be supplied by for inclusion or incorporation by reference therein) will not,
as of the date the Proxy Statement is first mailed to such holders and as of
the time of the meeting of such holders in connection with the transactions
contemplated hereby, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they are made, not misleading. The Proxy Statement will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations promulgated by the SEC thereunder.
Section 3.22 "Vote Required." The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock
entitled to vote and duly present in person or by proxy at a meeting duly
called (and with each share of Company Common Stock entitled to one vote per
share) at which a quorum is present is the only vote of the holders of any
class or series of Company Stock necessary to approve, for purposes of the
rules of the NYSE or otherwise, the exchange of Operating Partnership
Preferred Units for Company Preferred Stock or Company Common Stock pursuant
to the Operating Partnership Agreement, as amended.
34
Section 3.23 "Exemption from Ownership Restrictions." The Board
of Directors (or a special committee designated by the Board of Directors)
has adopted the resolutions, in the form of Exhibit E, which shall be
delivered to Buyer after the Execution Closing and on or before December 9,
1997, exempting Buyer from ownership restrictions under Section
7.2.1(a)(i)(1) of the Company Charter, based upon representations and
agreements of the Buyer delivered to the Company in the form attached as
Exhibit F, which resolutions remain in full force and effect on the date
hereof and will not be amended, modified, rescinded or revoked without the
prior written consent of Buyer.
ARTICLE 4
Representations and Warranties of Buyer
Xxxxxxxxx Xxxxxxx Holdings, L.L.C. and Xxxxxxxxx Xxxxxxx
Co-Holdings, L.L.C. hereby represent and warrant, jointly and severally, to
the Company as follows:
Section 4.1 "Organization." Each of Xxxxxxxxx Xxxxxxx Holdings,
L.L.C. and Xxxxxxxxx Xxxxxxx Co-Holdings, L.L.C. is a limited liability
company duly organized, validly existing and in good standing under the laws
of the State of Delaware. Buyer has all requisite power and authority to
own, operate, lease and encumber its properties and carry on its business as
now conducted, and to enter into this Agreement and the Registration Rights
Agreement, and to perform its obligations hereunder and thereunder.
Section 4.2 "Due Authorization." The execution, delivery and
performance of this Agreement and the Registration Rights Agreement have been
duly and validly authorized by all necessary action on the part of Buyer.
This Agreement has been duly executed and delivered by Buyer for itself and
constitutes the valid and legally binding obligations of Buyer, enforceable
against Buyer, in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights or general principles of equity.
Section 4.3 "Conflicting Agreements and Other Matters." Neither
the execution and delivery of this Agreement, nor the performance by Buyer of
its obligations hereunder, will conflict with, result in a breach of the
terms, conditions or provisions of, constitute a default under, result in the
creation of any mortgage, security interest, encumbrance, Lien or charge of
any kind upon any of the properties or assets of Buyer, pursuant to, or
require any consent, approval or other action by or any notice to or filing
with any Government Authority pursuant to, the organizational documents or
agreements of Buyer, or any agreement, instrument, order, judgment, decree,
statute, law, rule or regulation by which Buyer is bound, except for filings
after any Stock Purchase under Section 13(d) of the Exchange Act.
Section 4.4 "Acquisition for Investment, Sophistication, Source
of Funds." Buyer is acquiring the Company Preferred Stock being purchased by
it for its own account for the purpose of investment and not with a view to
or for transfer or sale in connection with any
35
distribution thereof, and Buyer has no present intention or plan to effect
any transfer or distribution of shares of Company Preferred Stock (except for
the possible contemplated transfer by Buyer of shares of the Purchased Shares
to its Affiliates and except for the possible transfer by Buyer to the
Operating Partnership Preferred Units Buyer in the event of a mandatory
redemption of Operating Partnership Preferred Units (as contemplated in the
Articles Supplementary) in each case subject to available exemptions under
federal and applicable state security laws), provided that the disposition of
Company Preferred Stock owned by Buyer shall at all times be and remain
within its control, subject to the provisions of this Agreement and the
Registration Rights Agreement. Buyer is able to bear the economic risk, and
will be supplied with the funds for, the acquisition of Company Preferred
Stock pursuant hereto and can afford to sustain a total loss on such
investment, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the proposed
investment, and therefore has the capacity to protect its own interests in
connection with the acquisition of Company Preferred Stock pursuant hereto.
Buyer is an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act.
Section 4.5 "Brokers or Finders." No agent, broker, investment
banker or other firm or person, including any of the foregoing that is an
Affiliate of Buyer with which the Buyer dealt, is or will be entitled to any
broker's or finder's fee or any other commission or similar fee from Buyer in
connection with this Agreement or any of the transactions contemplated hereby
for which the Company will be responsible.
Section 4.6 "REIT Qualification Matters." After giving effect
to Buyer's purchase of Company Preferred Stock hereunder, no person who would
be treated as an "individual" for purposes of Section 542(a)(2) of the Code
(as modified by Section 856(h) of the Code) owns or would be considered to
own (taking into account the ownership attribution rules under Section 544 of
the Code, as modified by Section 856(h) of the Code) in excess of 9.8% of the
value of the outstanding equity interest in Buyer.
Section 4.7 "Investment Company Matters." Buyer is not, and
after giving effect to the purchase of Company Preferred Stock contemplated
hereby, will not be, an "investment company" or an entity "controlled" by an
"investment company," as such terms are defined in the Investment Company Act
of 1940, as amended.
ARTICLE 5
Representations and Covenants Relating to Closing
Section 5.1 "Taking of Necessary Action." Each of Buyer, the
Company and the Operating Partnership, agrees to use commercially reasonable
efforts promptly to take, or cause to be taken, all action and promptly to do
or cause to be done all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement and the Registration Rights
Agreement, subject to the terms and conditions hereof and thereof.
36
Section 5.2 "Preferred Stock, Articles Supplementary; By-laws."
Following authorization by the Board of Directors of the Company, at or
before the Closing, the Company shall cause to be duly executed and filed
with the State Department of Assessments and Taxation of the State of
Maryland, the Articles Supplementary in the form attached as Exhibit A.
Section 5.3 "Public Announcements; Confidentiality." (a)
Subject to each party's disclosure obligations imposed by law and any stock
exchange or similar rules and the confidentiality provisions contained in
Section 5.3(b), the Buyer, jointly and severally, and the Company shall
cooperate with each other in the development and distribution of all news
releases and other public information disclosures with respect to this
Agreement and the Registration Rights Agreement, and any of the transactions
contemplated hereby or thereby. Buyer shall also have the right to review
and, before filing or other public dissemination, or both, approve (which
approval will not be unreasonably withheld or delayed) any statements made or
information provided with respect to Buyer or any Affiliate or to the
transactions contemplated by this Agreement, including, without limitation,
such statements intended to be included in any future Regulatory Filing
prepared by or on behalf of the Company.
(b) Buyer agrees that all information provided to Buyer or any of
its representatives pursuant to this Agreement shall be kept confidential
(except that Buyer may disclose the same to, upon the request of, the
Operating Partnership Preferred Unit Buyer, to which the Company hereby
agrees), and Buyer shall not disclose such information to any persons other
than the directors, officers, employees, financial advisors, legal advisors,
accountants, consultants and affiliates of Buyer who reasonably need to have
access to the confidential information and who are advised of the
confidential nature of such information; provided, however, the foregoing
obligation of Buyer shall not (i) relate to any information that (1) is or
becomes generally available to Buyer or any of its representatives other than
as a result of unauthorized disclosure by Buyer or by Persons to whom Buyer
has made such information available, or (2) is or becomes available to Buyer
or any of its representatives on a non-confidential basis from a third party
that is not bound by any other confidentiality agreement with the Company or
any Subsidiary, or (ii) prohibit disclosure of any information if required by
law, rule, regulation, court order or other legal or governmental process if
prior thereto Buyer uses reasonable efforts to give the Company notice and an
opportunity to object and Buyer shall reasonably cooperate if the Company
chooses to so object.
(c) The Company agrees that all information provided to the
Company or any of its representatives pursuant to this Agreement shall be
kept confidential, and the Company shall not disclose such information to any
Persons other than the directors, officers, employees, financial advisors,
legal advisors, accountants, consultants and affiliates of the Company who
reasonably need to have access to the confidential information and who are
advised of the confidential nature of such information; provided, however,
the foregoing obligation of the Company shall not (i) relate to any
information that (1) is or becomes generally available to the Company or any
of its representatives other than as a result of unauthorized disclosure by
the Company or by Persons to whom the Company has made such information
available, or (2) is or becomes available to the Company on a
non-confidential basis
37
from a third party that is not bound by any other confidentiality agreement
with the Buyer, or (ii) prohibit disclosure of any information if required by
law, rule, regulation, court order or other legal or governmental process if
prior thereto the Company uses reasonable efforts to give Buyer notice and an
opportunity to object and the Company shall reasonably cooperate if Buyer
chooses to object.
Section 5.4 "Conduct of the Business." Except for transactions
contemplated hereby or as disclosed in the Company Reports, during the period
from the date hereof to the date of the Closing, and except for the
following: (a) any financings obtained by the Company in order that the
Company may obtain sufficient funds to finance the Golden State Acquisition,
(b) sales of Common Stock up to $120,000,000 at an offering price to the
ultimate purchaser not less than $13.75 per share, (c) the Company Asset
Transfer and any financings related thereto, (d) the acquisition of real
property or interests therein from time to time in exchange for Operating
Partnership Units, cash and/or the assumption of indebtedness and any
financing related thereto, and (e) the sale of the Company Property located
in Gilroy, California, the Company will, except as otherwise consented to or
approved by Buyer in writing or as permitted or required hereby, which
consent shall not be unreasonably withheld, conduct the business of the
Company and its Subsidiaries and engage in transactions only in the ordinary
course.
Section 5.5 "Information and Access." From the date hereof to
the date on which Buyer shall own less than 250,000 shares of Company
Preferred Stock, the Company and its Subsidiaries shall afford to Buyer and
Buyer's accountants, counsel and other representatives full and reasonable
access during normal business hours (and at such other times as the parties
may mutually agree) to its properties, books, contracts, commitments, records
and personnel and, during such period, shall furnish promptly to Buyer (a) a
copy of each report, schedule and other document filed or received by it
pursuant to the requirements of the Securities Laws, and (b) all other
information concerning their businesses, personnel and the Company Properties
as Buyer may reasonably request. Buyer and its accountants, counsel and
other representatives shall, in the exercise of the rights described in this
Section, not unduly interfere with the operation of the businesses of the
Company or its Subsidiaries. Not by way of limitation of the provisions of
Section 5.3(b), the information acquired by Buyer pursuant to this Section
5.5 shall be subject to the provisions of Section 5.3(b) and, furthermore,
Buyer will use such information and with respect to such information conduct
itself not in violation of applicable securities laws. Buyer will cause any
other Person given access to such information by Buyer (other than the
Operating Partnership Preferred Unit Buyer, which Buyer understands has
separately so confirmed to the Company) to make similar confirmations to the
Company as the Company may reasonably request.
Section 5.6 "Notification of Certain Matters." Until all of the
Company Preferred Stock has been issued, each of Buyer, jointly and
severally, and the Company shall use its good faith efforts to notify the
other party in writing of its discovery of any matter that would render any
of such party's or the other party's representations and warranties contained
herein untrue or incorrect in any material respect, but the failure of either
party so to notify the other party shall not be deemed a breach of this
Agreement.
38
Section 5.7 "Approval of Company Shareholders; Redemption." The
Company shall at its own expense (i) exercise reasonable efforts to advance
in time as much as is reasonably practicable the date of, and duly call, its
1998 annual meeting of shareholders, to a date not later than May 12, 1998,
(ii) duly submit to the vote for approval by a majority of the holders of
Company Common Stock entitled to vote at such meeting thereon, the issuance
of Company Common Stock upon the conversion, exchange or redemption of the
Company Preferred Stock and of the Operating Partnership Preferred Units and
Operating Partnership Common Units, (iii) recommend approval thereof and
exercise best efforts to obtain such approval, including, without limitation,
retaining a soliciting firm for customary services in connection therewith,
and (iv) in the event that such approval is not obtained at said annual
meeting, then the Company may, in its sole discretion, convene a special
meeting of shareholders for such purpose, provided that the same shall be
called and held in sufficient time to enable the Company to satisfy its
obligations set forth in Section 9 of the Articles Supplementary, but in no
event later than ten Business Days prior to June 30, 1998. At such special
meeting thereof, the Company shall submit such matter for approval by the
vote of holders of Company Common Stock, recommend approval thereof and
exercise best efforts to obtain such approval including, without limitation,
retaining a soliciting firm for customary services in connection therewith.
In the event that the approval of such matter by holders of the Company
Common Stock is not obtained, the Company shall redeem the shares of Company
Preferred Stock and Operating Partnership Preferred Units in such aggregate
number (of which 7/12 shall be shares of Company Preferred Stock and 5/12
shall be Operating Partnership Preferred Units) as will result in the
aggregate number of shares of Company Common Stock issuable upon the
conversion, exchange or redemption of Company Preferred Stock, Operating
Partnership Preferred Units and Operating Partnership Common Units (issued
pursuant to the Agreement to Contribute) after such redemption not exceeding
19.9% of the number of shares of Company Common Stock outstanding immediately
prior to the Closing hereunder and under the Agreement to Contribute, in
accordance with Section 9 of the Articles Supplementary, which number of
shares shall be agreed upon by Buyer and the Company at the Closing. In the
event that the Company does not pay to Buyer the Mandatory Redemption Price
(as such term is defined in Section 9 of the Articles Supplementary) on or
before the date such Mandatory Redemption Price is due, the Company shall pay
to Buyer the amount of liquidated damages in accordance with Section 9 of the
Articles Supplementary.
ARTICLE 6
Certain Additional Covenants
The parties hereto agree that the covenants set forth in this
Article 6 shall survive the Closing and shall not be subject to Section 8.1
of this Agreement.
Section 6.1 "Resale." Buyer, jointly and severally,
acknowledges and agrees that as of the Closing Date the Purchased Shares will
not be registered under the Securities Act or the securities laws of any
state and that such Purchased Shares may be sold or otherwise disposed of
only in one or more transactions registered under the Securities Act and,
where applicable, such state securities laws or as to which an exemption from
the registration
39
requirements of the Securities Act and, where applicable, such state
securities laws is available and the certificates representing such Purchased
Shares or any Company Common Stock into which Purchased Shares may be
converted will be legended to such effect.
Section 6.2 "REIT Status." From and after the date hereof, the
Company will elect to be taxed as a REIT in its federal income tax returns,
will comply with all applicable laws, rules and regulations of the Code
relating to a REIT, and will not take any action or fail to take any action
which would reasonably be expected to, alone or in conjunction with any other
factors, result in the loss of its status as a REIT for federal income tax
purposes or the failure of the representations in Section 3.8 hereof to be
true and correct.
Section 6.3 "Payments." The Company acknowledges and agrees to
pay or reimburse from time to time upon the direction of Buyer and the
Operating Partnership Preferred Units Buyer, at and after the Closing,
reasonable expenses of Buyer and the Operating Partnership Preferred Units
Buyer and third-party transaction costs to Buyer and the Operating
Partnership Preferred Units Buyer, up to an aggregate amount equal to
$500,000, incurred or paid by Buyer and the Operating Partnership Preferred
Units Buyer in completing this transaction including, without limitation, any
amendment or modification of, or waiver of, the transaction documents (as
invoiced by reasonably detailed statements or invoices).
Notwithstanding any termination of this Agreement by Buyer pursuant
to Section 9.1(b) or 9.1(d), the Company acknowledges and agrees to make the
payments as set forth above.
Section 6.4 "First Offer Rights." (a) Buyer shall have the
rights set forth in this Section 6.4 as the holder of record and beneficially
of the Purchased Shares. The rights set forth herein are in favor of Buyer
and its successors and assigns, provided that any exercise procedures to be
accomplished hereunder shall be performed by Buyer or its nominee designated
in writing to the Company and no other person may accomplish such procedures
or seek to exercise the rights set forth in this Section 6.4. Absent an
express assignment of the rights of Buyer under this Section 6.4, no transfer
by Buyer of the Purchased Shares shall affect the rights of Buyer hereunder.
(b) In the case of the proposed issuance by the Company of, or the
proposed granting by the Company of shares of, any class of Company Stock, or
any rights to subscribe for or to purchase, or any warrants or options for
the purchase of, Company Stock or any stock or securities convertible into or
exchangeable for Company Stock (collectively, the "Offered Securities"),
other than (i) issuance of interests in the Operating Partnership in
connection with acquisitions, mergers, joint ventures and similar
transactions, and (ii) exchanges by the Company of Company Common Stock for
Operating Partnership Units. Buyer shall have, at any time and from time to
time, the right to purchase such percentage, from which shall be subtracted
the First Offer Reduction as provided in the next sentence (such percentage
in effect from time to time, as hereinafter defined, the "Pro Rata Share")
which shall initially be 19.5%. The First Offer Reduction will only be
determined and applied as a result of an issuance by the Company as to which
Buyer has the right to make an offer to
40
purchase under this Section 6.4 and does not elect to do so in full. As used
herein, the "First Offer Reduction" shall be the product of 19.5%, or such
other Pro Rata Share as shall have previously been determined after
application of a First Offer Reduction, multiplied by the quotient of (A) the
number of shares of Offered Securities, divided by (B) the sum of the number
of shares of Company Common Stock outstanding (computed on a fully-diluted
basis), plus the number of Offered Securities. Buyer may elect to make a
purchase hereunder of a number of shares less than would be determined as
Buyer's Pro Rata Share, in which case Buyer and the Company will make an
adjustment to the Pro Rata Share according to the principles established
here, but reflecting such lesser purchase amount. On each occasion that the
Company proposes to issue any Offered Securities to the public, the Company
shall give to Buyer prior written notice (the "Company Notice") of its
intention, by first class mail, postage prepaid, addressed at its last
address as shown by the records of the Company describing the same, the price
and the specific terms (or in the context of an offering of Offered
Securities, a range of price and terms) upon which the Company proposes to
issue the same. Buyer shall have 15 Business Days (but in the case of a
retail "spot" offering, two Business Days so long as the Company has advised
Buyer that it is considering effecting such an offering, and the material
terms thereof, as promptly as is practical for the Company to do so and in
any event not less than ten days prior to the beginning of such two Business
Day Period) from the date of the receipt by Buyer of the Company Notice to
deliver a notice (the "Rights Exercise Notice") notifying the Company of
Buyer's intention to purchase all or a part of its Pro Rata Share of such
Offered Securities in accordance herewith for the price and upon the terms
specified by the Company Notice and at a price or prices no less favorable to
Buyer than the price or prices at which such Offered Securities are proposed
to be offered for sale to others, less, in the event of any sale other than a
public offering, the per unit amount of any placement fees or commissions, to
the extent that the same are not payable by the Company under the terms of
any placement agent's or other similar agreement applicable to such sale and
provided, however, that the purchase of such Offered Securities shall be
consummated prior to the later of (i) 30 days after the date of the Rights
Exercise Notice and (ii) the date that the Company consummates the issuance
of the Offered Securities described in the Company Notice. If, in connection
with any proposed issue of Offered Securities, the Buyer fails to exercise in
full its rights as set forth in this Section 6.4, then subject to the next
following sentence, the Company may sell the unsold Offered Securities at any
time within 180 days (90 days in the case of a public offering) thereafter at
a price and upon terms no more favorable to the purchasers thereof than
specified in the Company Notice; provided, that the Company shall not sell or
grant, or permit conversion under, any Offered Securities after such 180-day
period (or 90-day period in the case of a public offering) without renewed
compliance with this Section 6.4; provided, further, that in the case of a
widely distributed underwritten public offering of Offered Securities, if in
the good faith opinion of the Company and the underwriter, such renewed
compliance by the Company with the procedural requirements hereunder (i.e.,
timing of notices, etc.) would otherwise materially impede the consummation
of such public offering, the parties agree to take such further action as may
be reasonably necessary to effectuate such offering while preserving Buyer's
substantive rights hereunder. Each Rights Exercise Notice delivered by Buyer
to the Company hereunder shall be irrevocable and binding on Buyer.
41
(c) The provisions of this Section 6.4 shall not apply to (i) any
shares of any class of the Company Stock or convertible securities, issuable
upon the redemption or conversion of the Purchased Shares of the Company,
(ii) any options to purchase shares of Company Stock (determined at the time
of the grant of such options) at an exercise price not less than the fair
market value of such shares on the date of grant issued from time to time to
employees, consultants or directors as compensation or incentives for
services rendered to the Company, or the Operating Partnership, whether under
the Company's amended Stock Option and Incentive Plan or any successor
thereto and (iii) any other issuance or sale of Common Stock as contemplated
by clause (X) of the parenthetical of the first sentence of Section 5(e)(v)
of the Articles Supplementary.
(d) Notwithstanding the foregoing, if and to the extent that Buyer
is prevented or prohibited from the exercise in full or in part of its rights
to purchase any Offered Securities under this Section 6.4 due to restrictions
on the ownership by Buyer (or any group of holders with which such Buyer may
be affiliated or may be deemed to be affiliated) of any thereof, whether
under applicable Maryland law, or the Company Charter or the Amended Company
By-laws, or by reason of restrictions applicable for purposes of the
Company's continued qualification as a REIT for purposes of the Code (the
"Exercise Restriction"), such number of Offered Securities required to be
purchased pursuant to such preemptive right shall automatically be reduced to
such amount as to not exceed the Exercise Restriction, and Buyer from time to
time thereafter may exercise such right up to an aggregate number of Offered
Securities as is equal to such reduction, subject always to the restrictions
as aforesaid.
(e) The rights of Buyer set forth in this Section 6.4 shall
commence on the date hereof and shall expire on that date when Buyer no
longer owns 250,000 or more shares of Company Preferred Stock, except as to
purchases as to which Buyer may make on a deferred basis under Section 6.4(d)
which shall continue without time restriction.
Section 6.5 "Board of Directors." (a) Pursuant to the standards
and procedures set forth in Section 6.5(b), Buyer shall, from time to time
when there exists a vacancy on the Board of Directors with respect to a seat
occupied or to be occupied by the Company Preferred Stock nominee, but not
less often than annually, propose a person for nomination and election to the
Board of Directors (the "Nomination Right"). Such member shall have a seat
on a committee of the Board of Directors, as determined prior to the Closing
as to the initial person selected by Buyer for nomination to the Board of
Directors, and thereafter, as determined by the Board of Directors. If a
vacancy on the Board of Directors should exist prior to the date of the next
annual meeting, a nominee proposed by the holders of Company Preferred Stock
approved by the Nominations Committee (or other committee with appropriate
authority of the Board of Directors) will be appointed to such vacancy in
lieu of waiting until the next annual meeting. The Nomination Right will no
longer be available on the earlier to occur of:
(i) the date on which the sum (referred to herein as "Buyer
Ownership") of (A) Buyer's ownership of shares of Company Preferred Stock
(calculated on an "as-converted"
42
basis), considered in the aggregate, (B) any shares of Company Preferred
Stock then held by the Operating Partnership Preferred Unit Buyer (also
calculated on an "as converted" basis), and (C) the number of Operating
Partnership Preferred Units held by the Operating Partnership Preferred Unit
Buyer and Buyer (in each case, calculated on an "as-converted" basis),
decreases to below 30% of the aggregate number of shares of Company Preferred
Stock and Operating Partnership Preferred Units, in each case issued in the
transaction contemplated hereby and by the Agreement to Contribute,
outstanding (in each case, calculated on an "as converted" basis), but in all
events excluding the effects of any redemption; and
(ii) the date on which (A) Buyer Ownership decreases to below 50%
of the number of shares of Company Preferred Stock and the number of
Operating Partnership Preferred Units issued in the transaction contemplated
hereby and by the Agreement to Contribute then outstanding (in each case,
calculated on an "as-converted" basis), (B) Buyer Ownership, considered in
the aggregate, is less than 2% of outstanding shares of the Company Common
Stock on a fully-diluted basis, and (C) the Current Market Price of the
Company Common Stock has achieved or exceeded 7% per annum price increases
from a price of $14.38 per share of Company Common Stock, measured from the
Closing Date to the date of determination of whether the Nomination Right has
terminated; and
(iii) a publicly underwritten, widely distributed offering (one in
which at least 50% of the shares sold are distributed to retail purchasers)
of Company Preferred Stock.
In addition, the Company will permit each of Xxxxxxxxx Real Estate
Fund II, L.P., and Xxxxxxxxx Real Estate Co-Investment Partnership II, L.P.,
limited rights to consult with and advise management sufficient to permit
ERISA counsel to Xxxxxxxxx Partners, L.L.C., to render favorable advice as to
ERISA matters. Blackacre Capital Group, L.P., and Xxxxxxxxx Partners,
L.L.C., will be permitted each to have representatives attend Board of
Directors and significant committee meetings, except executive sessions of
the Board of Directors or the committees until either of the Nomination Right
terminates or no shares of Company Preferred Stock remain outstanding.
(b) All nominees proposed by Buyer under paragraph (a) of this
Section 6.5 shall be of such character, and shall have such educational
background, experience and knowledge of complex financial and management
issues and matters as to be qualified, and shall otherwise be suitable, for
membership on a board of directors of a publicly held company engaged in real
estate investment. Except as hereinafter provided, the Nomination Committee
(or any other committee with appropriate authority) of the Board of Directors
shall have the right in its discretion to reject any such nominee, provided
that it so notifies Buyer within 20 days after Buyer proposes such nominee.
In the event that the Nomination Committee (or such other committee) rejects
a nominee, Buyer shall have the right to propose three alternate candidates
meeting the criteria set forth in this paragraph, one of which shall be
approved by the Nomination Committee (or such other committee) as promptly as
practicable.
(c) The Company's obligations under this Section 6.5 shall be
subject to the performance by the directors of the Company of their duties in
compliance with Maryland law.
43
Section 6.6 "Shareholders Vote Regarding the Conversion or
Redemption of Company Preferred Stock or Operating Partnership Preferred
Units." Notwithstanding anything to the contrary herein or in the Articles
Supplementary, that holders of shares of Company Preferred Stock will not be
permitted to vote on the matter described in Section 5.7. The Buyer hereby
agrees that it shall not vote its shares of Company Preferred Stock on such
matter and that it shall not transfer any share of Preferred Stock unless the
transferee shall deliver to the Company its written agreement to be bound by
this Section 6.6.
Section 6.7 "Operating Partnership Preferred Units." The Company
and Buyer agree that, for so long as shares of Company Preferred Stock are
outstanding, the Company (i) shall own and hold the Operating Partnership
Preferred Units on behalf of the holders of the Company Preferred Stock in an
amount equal to the number of outstanding shares of Company Preferred Stock
and having in all material respects the same distribution and liquidation
preferences with respect to the Operating Partnership as the Company
Preferred Stock has with respect to the Company which distributions and
preferences shall be applied by the Company exclusively to satisfy the rights
of the holders of the Company Preferred Stock, (ii) shall receive, hold and
pay over to such holders the proceeds of such Operating Partnership Preferred
Units, and (iii) shall act solely at the direction of the holders of a
majority of the Company Preferred Stock in exercising any right or taking any
action requested to be taken by it in its capacity as a holder of the
Company's Operating Partnership Preferred Units.
Section 6.8 "Existing Partners Agreements." Without the
approval of Buyer the Company will not make or permit to occur any amendment
to the Existing Partners Registration Rights Agreement or the Operating
Partnership Agreement, nor waive or fail to observe in any material respect
any provisions thereof, if the effect thereof could adversely affect the
rights of any holder of Company Preferred Stock (with respect to the
Operating Partnership Agreement) or any Person under the Registration Rights
Agreement (with respect to the Existing Partners Registration Rights
Agreement), and the Company will afford any such Person the opportunity to
obtain a similar benefit resulting from any amendment or waiver of, or
failure to observe, any material provisions of such agreements.
Section 6.9 "REOC Status." The Company shall conduct its
business in such fashion that the representations made in Section 3.18 of
this Agreement remain true and correct after the Closing Date. The Company
covenants and warrants that it will comply with all requirements, and take
all actions and cause its subsidiaries to take all actions necessary, to
maintain its status as a "real estate operating company" as such term is
defined in 29 C.F.R. Section 2510.3-101. Specifically, but without
limitation, the Company covenants that it has or it will establish an "annual
valuation period", which will be an annual period of no more than 90 days
that will begin no later than the anniversary of the REOC Qualification Date,
and that on at least one day within each annual valuation period, the Company
will maintain the investment of at least 50 percent of its assets (other than
short-term investments pending long-term commitment or distribution to
investors), valued at cost, in real estate which is under active development
or management by the Company as described above. The Company also covenants
to devote substantial resources to the management of the real estate it owns,
and
44
continuously to remain actively engaged in the management or development of
real estate in the ordinary course of its business. The Company agrees to
cooperate with Buyer and to furnish such additional information as may be
reasonably requested by Buyer to evidence the actions indicated above.
Section 6.10 "Board of Directors Resolutions." The resolutions
of the Board of Directors referenced in Sections 3.20 and 3.23 will not be
amended, modified, rescinded or revoked in contravention of the provisions of
Section 3.20 and Section 3.23, respectively.
ARTICLE 7
Conditions to Closing
Section 7.1 "Conditions of Purchase at Closing." The obligations
of Buyer to purchase and pay for the Purchased Shares at the Closing are
subject to satisfaction or waiver of each of the following conditions
precedent:
(a) "This Agreement and Related Documents." Buyer shall have
received a counterpart of this Agreement and the Related Documents, each duly
executed by each of the parties thereto other than Buyer if an agreement or,
in the case of the Articles Supplementary, duly executed by the appropriate
officers of the Company and receipted as filed and in full force by the
appropriate Government Authority.
(b) "Representations and Warranties; Covenants." The
representations and warranties of the Company and the Operating Partnership
contained herein shall have been true and correct in all material respects on
and as of the date hereof (subject to the Company's right to deliver, amend
or modify any Schedules described herein prior to the Closing), and shall be
true and correct in all material respects on and as of the date of the
Closing (as supplemented by any Schedules delivered prior thereto) with the
same effect as though such representations and warranties had been made on
and as of the Closing (except for representations and warranties that speak
as of a specific date or time other than the Closing (which need only be true
and correct in all material respects as of such date or time)). The
covenants and agreements of the Company to be performed on or before the date
of Closing in accordance with this Agreement shall have been duly performed
in all material respects (except for the Company's obligation to deliver the
Purchased Shares at the Closing). The Company shall have delivered to Buyer
at the Closing a certificate of an appropriate officer in form and substance
reasonably satisfactory to Buyer dated the date of the Closing to such effect.
(c) "Company Preferred Stock; Articles Supplementary." The
Articles Supplementary shall have been duly filed with the State Department
of Assessments and Taxation of the State of Maryland, any other Government
Authority or NYSE and shall be in full force and effect. Buyer shall have
received a certified copy of the Articles Supplementary, as filed with the
State Department of Assessments and Taxation of the State of Maryland.
45
(d) "Amended Company By-laws; Modification of Ownership Limit;
Rights of Holder of Company Preferred Stock; Operating Partnership
Agreement." The amendment to the Company By-laws in the form attached as
Exhibit C (the "Amended Company By-laws") shall have been approved by the
Board of Directors, all as required or permitted by and in accordance with
the Company Charter, duly filed if any filing thereof shall be required by
any Government Authority or NYSE, and shall be in full force and effect. The
Board of Directors resolutions pertaining to this Agreement and matters
referenced in Section 3.23, and the procedures, findings and transactions
contemplated hereby, shall have been duly approved and adopted by the Board
of Directors and the Secretary shall have placed the record of such action in
such records and shall be in form and substance satisfactory to Buyer. The
Operating Partnership Agreement shall have been reasonably modified, if
necessary, (i) so as to create a primary distribution to the Company in order
to enable the Company to receive, on a pari passu basis on its Operating
Partnership Preferred Units, before the Operating Partnership makes other
distributions, amounts sufficient to pay all amounts due from time to time
upon the Company Preferred Stock, and (ii) in all other respects necessary to
permit ERISA counsel to Buyer to confirm, after consultation with the
Company's counsel, to Buyer that its investment in the Company Preferred
Stock is in compliance with the rules and regulations promulgated under and
the provisions of ERISA, and, in particular, that the purchase of Company
Preferred Stock is a qualifying venture capital investment for ERISA purposes.
(e) "HSR Act." Any waiting period applicable to the consummation
of the transactions contemplated hereby under the HSR Act shall have expired
or been terminated, and no action shall have been instituted by the United
States Department of Justice or the United States Federal Trade Commission
challenging or seeking to enjoin the consummation of the transactions
contemplated hereby, which action shall not have been withdrawn or
terminated, or the Company and Buyer shall have mutually concluded that no
filing under the HSR Act is required with respect to the transactions
contemplated hereby and counsel to the Company shall have rendered its
opinion to such effect.
(f) "Consents." The Company shall have obtained the consents set
forth in Schedule 3.4(f) and no approval of the NYSE shall be necessary with
respect to the authorization, issuance or conversion of Company Preferred
Stock which shall not have been obtained.
(g) "Lending Consents." The Company shall have obtained all
necessary consents from lending institutions to the transactions contemplated
by the Agreement to Contribute and by this Agreement (including any consents
required in connection with the Company Asset Transfer).
(h) "Accountants." The Company shall have caused to be supplied
to Buyer a letter, satisfactory to Buyer in scope, form and substance, as to
financial statement matters referenced in Section 3.5(a) of this Agreement.
(i) "Disclosure Schedules." All Schedules referred to in this
Agreement, whether attached hereto at the Execution Closing or delivered in a
separate disclosure volume
46
or volumes, shall have been amended or modified, if necessary, to reflect
completion of Buyer's review thereof and shall otherwise have been determined
by Buyer in its sole and absolute discretion to be satisfactory in scope and
content to the Buyer in all respects, provided that, Buyer shall have
notified the Company of desired changes, if any, within the periods
established in Section 7.1(j).
(j) "Due Diligence." Buyer shall have had completed its due
diligence review, which shall have been determined by Buyer to be
satisfactory in its sole and absolute discretion, as provided in this Section
7.1(j). As to all informational matters set forth in the Schedules hereto,
other than Schedules delivered or information under Section 3.12, Buyer shall
be deemed to have completed its review and arrived at a satisfactory
determination unless Buyer has notified the Company otherwise within five
Business Days after the later of (i) the Execution Closing and (ii) that date
on which all Schedules hereto have been delivered to Buyer and the
representatives and counsel in definitive form. As to matters relating to
Section 3.12, Buyer shall be deemed to have completed its review and arrived
at a satisfactory determination unless Buyer has notified the Company
otherwise within 15 days of the Execution Closing. Matters referenced in
Section 3.11(f) shall be handled as provided therein.
(k) "Operating Partnership." The Company shall have formed the
Operating Partnership, the Operating Partnership Agreement (and all
amendments thereto) of which partnership shall conform to Exhibit D hereto.
(l) "Golden State Acquisition." The Company shall have closed the
Golden State Acquisition and there shall exist no material adverse change
with respect to the Company and the Golden State Acquisition.
(m) "Company Preferred Stock Nominee." The Company and Buyer
shall have consulted and agreed upon an initial Company Preferred Stock
nominee to serve as a member of the Board of Directors, and as to the
Committee of the Board of Directors on which such person shall sit.
(n) "No Injunction." There shall not be in effect any order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby and
there shall be no pending Action with which respect to this Agreement or the
transactions contemplated hereby, which could reasonably be expected to have
a material adverse effect on the ability of the Company to consummate the
transactions contemplated hereby or to issue the Purchased Shares.
(o) "Proceedings." All corporate and other proceedings to be
taken by the Company in connection with the transactions contemplated hereby,
including without limitation Exhibit E hereto, and all documents incident
thereto shall be reasonably satisfactory in form and substance to Buyer and
Buyer shall have received all such counterpart originals or certified or
other copies of such documents as it may reasonably request.
(p) "REIT Status." The Company shall have elected to be taxed as
a REIT in its most recent federal income tax return, and shall be in
compliance with all applicable
47
laws, rules and regulations, including the Code, necessary to permit it to be
taxed as a REIT. The Company shall not have taken any action or have failed
to take any action which would reasonably be expected to, alone or in
conjunction with any other factors, result in the loss of its status as a
REIT for federal income tax purposes.
(q) "Opinion of Counsel." Buyer shall have received opinions from
the following: (i) Loeb & Loeb LLP, special counsel to the Company, (ii)
Xxxxxxx, Procter & Xxxx LLP, counsel to the Company, and (iii) Xxxxxxx Xxxxx
Xxxxxxx & Xxxxxxxxx, special Maryland counsel to the Company, in each case
covering such matters and otherwise in form and substance reasonably
satisfactory to Buyer.
(r) "NYSE Matters." The Company shall have received written
advice from the NYSE to the effect that the transactions contemplated herein
and in the Related Documents will not result in the de-listing of the
Company's Common Stock.
(s) "Rent Roll." Buyer shall have received the Rent Roll, as
updated, to a date not more than five Business Days prior to Closing in
conformity with Section 3.11(f), from the Company.
(t) "Title Policy." New Company Title Policies shall have been
issued and delivered with respect to each of the Company Properties
referenced on Schedule 3.11(a)-(i).
(u) "Operating Partnership Units." Buyer shall have received
Schedule 3.3(b), as updated to the Closing Date. The adjustments to Schedule
3.3(b) shall pertain only to clauses (i) to (v) of the first sentence of
Section 3.3(b), and to the extent that any adjustments are made as to matters
contemplated by the penultimate sentence of Section 3.3(b), Schedule 3.3(b)
as to be delivered at the Closing Date, if to satisfy this Section 7.1(u),
shall be determined by Buyer in its sole and absolute discretion to be
satisfactory in scope and content to Buyer in all respects.
(v) "Articles Supplementary." The form Section 9 of the Articles
Supplementary shall have been agreed to by Buyer on or before the close of
business December 9, 1997.
Section 7.2 "Conditions of Sale at Closing." The obligation of
the Company to issue and sell any Purchased Shares at Closing is subject to
satisfaction or waiver of each of the following conditions precedent:
(a) "This Agreement and Related Documents." The Company shall
have received a counterpart of this Agreement and the Related Documents, as
applicable to Buyer, (other than the Articles Supplementary), each duly
executed by each of the parties thereto.
(b) "Representations and Warranties, Covenants." The
representations and warranties of Buyer contained herein shall have been true
and correct in all respects on and as of the date hereof, and shall be true
and correct in all respects on and as of the relevant Closing Date with the
same effect as though such representations and warranties had been
48
made on and as of the Closing Date (except for representations and warranties
that speak as of a specific date or time other than such Closing Date (which
need only be true and correct in all respects as of such date or time)). The
covenants and agreements of Buyer to be performed on or before the relevant
Closing Date in accordance with this Agreement shall have been duly performed
in all respects (except for Buyer's obligation to pay the related Purchase
Price at such Closing). Buyer shall have delivered to the Company at the
relevant Closing a certificate of an appropriate officer in form and
substance reasonably satisfactory to the Company dated the relevant Closing
Date to such effect.
(c) "HSR Act." Any waiting period applicable to the consummation
of the transactions contemplated hereby under the HSR Act shall have expired
or been terminated, and no action shall have been instituted by the United
States Department of Justice or the United States Federal Trade Commission
challenging or seeking to enjoin the consummation of the transactions
contemplated hereby, which action shall not have been withdrawn or
terminated, or the Company and Buyer shall have mutually concluded that no
filing under the HSR Act is required with respect to the transactions
contemplated hereby.
(d) "Consents." The Company shall have obtained the consents set
forth in Schedule 3.4(f).
(e) "No Injunction." There shall not be in effect any order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby and
there shall be no pending Actions with respect to this Agreement or the
transactions contemplated hereby, which could reasonably be expected to have
a material adverse effect on the ability of Buyer to consummate the
transactions contemplated hereby or to acquire the Purchased Shares.
(f) "Proceedings." All limited liability company and other
proceedings to be taken by Buyer in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Company and the Company shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request.
(g) "Opinion of Counsel." The Company shall have received
opinions from the following: (i) Xxxxxxx Xxx, Esq., general counsel of
Buyer, (ii) McGuire, Woods, Battle & Xxxxxx, special Maryland counsel to
Buyer, and (iii) Cadwalader, Xxxxxxxxxx & Xxxx, special New York counsel to
Buyer, in each case covering such matters and otherwise in form and substance
reasonably satisfactory to the Company.
(h) "Board of Directors Approval." The Board of Directors shall
have approved the Articles Supplementary and the Amended Company By-laws.
(i) "NYSE Matters." The Company shall have received written
advice from the NYSE to the effect that the transactions contemplated herein
and in the Related Documents will not result in the de-listing of the Company
Common Stock.
49
(j) "Articles Supplementary." The form of Article 9 of the
Articles Supplementary shall have been agreed to by the Company on or before
the close of business on December 9, 1997.
ARTICLE 8
Survival; Indemnification
Section 8.1 "Survival." Except as shall be otherwise expressly
stated in this Agreement, all representations, warranties and covenants and
agreements of the parties contained herein, including indemnity or
indemnification agreements contained herein, or in any Schedule or Exhibit
hereto, or any certificate, document or other instrument delivered in
connection herewith shall survive until the second anniversary of the
Closing, except that the representations and warranties contained in Sections
3.11 and 3.12 hereof shall survive only until eighteen months following the
Closing.
Section 8.2 "Indemnification by the Company." (a) Subject to
Section 8.1 and Section 8.4 hereof, from and after any Closing Date, the
Company and the Operating Partnership (collectively, the "Indemnitors"),
jointly and severally, shall indemnify and hold harmless Buyer from and
against any and all debts, damages, claims, losses, expenses, costs,
obligations, and liabilities, together with all unpaid brokerage and leasing
commissions accrued as of the Closing on account of Company Leases, including
liabilities for all reasonable attorneys' fees and expenses (including
attorney and expert fees and expenses incurred to enforce the terms of this
Agreement) suffered or incurred, directly or indirectly, by Buyer by reason
of, or arising out of (i) any breach as of the date made or deemed made or
required to be true of any representation or warranty made by an Indemnitor
in or pursuant to this Agreement or (ii) any failure by an Indemnitor to
perform or fulfill any of its covenants or agreements set forth in this
Agreement (such debts, damages, claims, losses, expenses, costs, obligations,
and liabilities, collectively, "Losses and Expenses"). Notwithstanding any
other provision of this Agreement to the contrary, in no event shall Losses
and Expenses include a party's incidental or consequential damages. The
indemnity set forth in this Article 8 shall inure to the benefit of Buyer and
its successors and assigns, and shall be based upon the assumptions that
Buyer has purchased at the Closing all 2,800,000 shares of Company Preferred
Stock the sale and purchase of which is the subject of this Agreement and
that thereafter that Buyer is the holder of each and every outstanding share
of Company Preferred Stock or Common Stock issued on conversion thereof.
(b) Except with respect to third-party claims being defended in
good faith or claims for indemnification with respect to which there exists a
good faith dispute, each Indemnitor shall satisfy its obligations hereunder
within 30 days of receipt of a notice of claim under this Article 8.
Section 8.3 "Third-Party Claims." If a claim by a third party
is made against Buyer and if Buyer intends to seek indemnity with respect
thereto under this Article, Buyer shall promptly notify the Indemnitors in
writing of such claims setting forth such claims in
50
reasonable detail. The Indemnitors may at any time, after admitting in
writing their indemnification liability hereunder undertake, through counsel
of their own choosing and at their own expense, the settlement or defense
thereof, and such Indemnitee shall cooperate with the Indemnitors in
connection therewith, provided, however, that Buyer may participate in such
settlement or defense through counsel chosen by it, provided that the fees
and expenses of such counsel in such event shall be borne by Buyer. Buyer
shall not pay or settle any claim as to which an Indemnitor has admitted in
writing its indemnification liability hereunder and which such Indemnitor is
contesting, unless such Indemnitee waives its right to indemnification
therefor from the Indemnitors hereunder. Notwithstanding the foregoing, Buyer
shall have the right to pay or settle any such claim, provided that in such
event it shall waive any right to indemnity therefor by the Indemnitors. If
the Indemnitors do not notify Buyer that the Indemnitors admit their
indemnification liability hereunder with respect to such claim and elect to
undertake the defense thereof, such Indemnitee shall have the right to
contest and, after ten day's prior written notice to the Indemnitors, during
which time the Indemnitors may admit liability and assume defense thereof,
settle or compromise the claim but shall not thereby waive any right to
indemnity therefor pursuant to this Agreement.
Section 8.4 "Exclusive Remedy." The indemnification provisions
under this Section 8 shall be the exclusive remedy available to Buyer for the
Losses and Expenses, or any other claim for breach of this Agreement and all
other remedies, if any, hereunder, whether in law or in equity are hereby
waived.
Section 8.5 "Indemnification Limitation." Notwithstanding any
other provision in this Agreement to the contrary, the Indemnitors shall not
be liable to indemnify any Indemnitee hereunder for any Losses or Expenses
arising from any breach of representation or warranty made in Article 3
hereof, unless, until and only to the extent that (i) in the case of any
breach of representation or warranty set forth in Section 3.11 or 3.12
hereof, the aggregate amount of all Losses and Expenses claimed by the Buyer
from time to time under such sections exceeds $1,750,000 or (ii) in the case
of any breach of representation or warranty set forth in any section
contained in Article 3 hereof other than Section 3.11 and Section 3.12, the
aggregate amount of all Losses and Expenses claimed by the Indemnitee from
time to time under such sections (other than Section 3.11 and Section 3.12)
exceeds $1,750,000; provided, however, that no indemnification shall be made
hereunder for any Losses and Expenses based upon or arising out of the Golden
State Acquisition. For purposes of indemnification hereunder, any Losses and
Expenses which could otherwise be categorized as falling under clause (i) or
clause (ii) above shall be deemed to be Losses and Expenses under clause (i)
only.
Section 8.6 "Covenant Between Buyer and Operating Partnership
Preferred Unit Buyer with Respect to Indemnification Agreement." In the
event of a claim by Buyer under this Agreement with respect to a
representation or warranty of the Company under Article 3 hereof, Buyer will,
prior to asserting such claim, first advise the Operating Partnership
Preferred Unit Buyer of its intention to do so and will determine if the
Operating Partnership Preferred Unit Buyer wishes to pursue such claim under
the Agreement to Contribute based on the representations and warranties
established thereunder. If the
51
Operating Partnership Preferred Unit Buyer does not advise Buyer that it
wishes to pursue such claim jointly with Buyer by a written notice to such
effect, including provision for such sharing of expenses as Buyer and the
Operating Partnership Preferred Unit Buyer may jointly determine within 20
Business Days of the date Buyer advises the Operating Partnership Preferred
Unit Buyer of its intention to assert such claim, unless any applicable
statute of limitations shall require the assertion of a claim in a lesser
amount of time, Buyer shall no longer consult with the Operating Partnership
Preferred Unit Buyer as to such claim, its assertion or any resolution
thereof. Buyer acknowledges that, pursuant to Section 7.8 of the Agreement to
Contribute, as in effect on the date hereof, the Operating Partnership
Preferred Unit Buyer has a reciprocal understanding with the Company. Buyer
agrees that, if Buyer shall not have provided to the Operating Partnership
Preferred Unit Buyer written notice of Buyer indicating Buyer's wish to
pursue with the Operating Partnership Preferred Unit Buyer jointly a claim
which the Operating Partnership Preferred Unit Buyer intends to pursue
against the Company, then, if such claim is subsequently asserted in a court
of appropriate jurisdiction and venue, by the Operating Partnership Preferred
Unit Buyer against the Company within 90 days thereafter, Buyer will not seek
separately to assert such claim against the Company, unless and to the extent
that Buyer does not wish to pursue such claim jointly with the Operating
Partnership Preferred Unit Buyer because of defenses or counterclaims which
exist against the Operating Partnership Preferred Unit Buyer under the
Agreement to Contribute which are not available to the Company with respect
to Buyer under this Agreement.
ARTICLE 9
Termination
Section 9.1 "Termination." This Agreement may be terminated at
any time prior to the Closing by:
(a) the mutual consent of the Company and Buyer;
(b) Buyer (if it is not in breach of any of its material
obligations hereunder) in the event of a breach or failure by the Company
that is material in the context of the transactions contemplated hereby of
any representation, warranty, covenant or agreement by the Company contained
herein which has not been, or cannot be, cured within 30 Business Days after
written notice of such breach is given to the Company;
(c) the Company (if it is not in breach of any of its material
obligations hereunder) in the event of a breach or failure by Buyer that is
material in the context of the transactions contemplated hereby of any
representation, warranty, covenant or agreement by Buyer contained herein
which has not been, or cannot be, cured within 30 Business Days after written
notice of such breach is given to Buyer; or
(d) Buyer if the Closing shall not have occurred on or prior to
December 31, 1997, but subject to extension to a date not later than January
31, 1998, as the date contemplated for the closing pursuant to the Agreement
to Contribute may be extended
52
thereunder, unless the failure of such occurrence shall be due to the failure
of Buyer to perform or observe any material covenant or agreement set forth
herein required to be performed or observed by Buyer on or before the Closing.
Section 9.2 "Procedure and Effect of Termination." In the event
of termination of this Agreement by either or both of the Company and Buyer
pursuant to Section 9.1, written notice thereof shall forthwith be given by
the terminating party to the other party hereto, and this Agreement shall
thereupon terminate and become void and have no effect, and the transactions
contemplated hereby shall be abandoned without further action by the parties
hereto, except that the provisions of Sections 5.4 (Public Announcements),
6.3 (Payments), 9.3 (Expenses), 10.2 (Governing Law), and 10.4 (Notices)
shall survive the termination of this Agreement; provided, however, that such
termination shall not relieve any party hereto of any liability for any
breach of this Agreement.
Section 9.3 "Expenses." Except as set forth in Section 6.3 of
this Agreement, whether or not any of the transactions contemplated herein
are consummated, all legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses.
ARTICLE 10
Miscellaneous
Section 10.1 "Counterparts." This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other party. Copies of
executed counterparts transmitted by telecopy, telefax or other electronic
transmission service shall be considered original executed counterparts for
purposes of this Section, provided receipt of copies of such counterparts is
confirmed.
Section 10.2 "Governing Law." THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 10.3 "Entire Agreement." This Agreement (including
agreements incorporated herein) and the Schedules and Exhibits hereto contain
the entire agreement between the parties with respect to the subject matter
hereof and there are no agreements, understandings, representations or
warranties between the parties other than those set forth or referred to
herein. This Agreement is not intended to confer upon any person not a party
hereto (and their successors and assigns) any rights or remedies hereunder.
Section 10.4 "Notices." All notices and other communications
hereunder shall be sufficiently given for all purposes hereunder if in
writing and delivered personally, sent by documented overnight delivery
service or, to the extent receipt is confirmed, telecopy, telefax
53
or other electronic transmission service to the appropriate address or number
as set forth below. Notices to the Company shall be addressed to:
Xxxxxxx Pacific Properties, Inc.
000 Xxxx Xxx Xxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxx
Telecopy Number: 000-000-0000
Xxxxxxx Pacific Operating Partnership, L.P.
000 Xxxx Xxx Xxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxx
Telecopy Number: 000-000-0000
and a copy to:
Loeb & Loeb LLP
0000 Xxxxxxxx Xxxx.
Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxx
Telecopy Number: 000-000-0000
Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxxxxxx X. Xxxxx
Telecopy Number: 000-000-0000
Xxxxxxx, Procter & Xxxx LLP
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxxxxx Xxxx
Telecopy Number: 000-000-0000
or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyer. Notices to Buyer shall be
addressed to:
54
Xxxxxxxxx Xxxxxxx Holdings, L.L.C.
and Xxxxxxxxx Xxxxxxx Co-Holdings, L.L.C.
00000 Xxxxx Xxxxxx Xxxx.
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx Xxxx
Telecopy Number: 000-000-0000
and a copy to:
Xxxxxxxxx Partners, L.L.C.
00000 Xxxx Xxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxx, Esq.
Telecopy Number: 000-000-0000, 000-000-0000
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxx Xxxxx, XX
Telecopy Number: 000-000-0000
Section 10.5 "Successors and Assigns." This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors. Except as specifically provided hereby, Buyer shall
not be permitted to assign any of its rights hereunder to any third party,
other than to one or more Affiliates of Buyer of which Buyer, directly or
indirectly, owns a majority of the voting power, provided that such
Affiliates agree to be bound hereby and Buyer remains obligated hereunder,
and provided that, following Closing Date, any bona fide financial
institution to which any Buyer, or any permitted transferee has transferred
(including upon foreclosure of a pledge) shares of Company Stock for the
purpose of securing bona fide indebtedness of any Buyer and which has agreed
to be bound by this Agreement shall also be entitled to enforce the rights of
Buyer hereunder.
Section 10.6 "Headings." The Section, Article and other headings
contained in this Agreement are inserted for convenience of reference only
and will not affect the meaning or interpretation of this Agreement. All
references to Sections or Articles contained herein mean Sections or Articles
of this Agreement unless otherwise stated.
Section 10.7 "Amendments and Waivers." This Agreement may not be
modified or amended except by an instrument or instruments in writing signed
by the party against whom enforcement of any such modification or amendment
is sought. Either party hereto may, only by an instrument in writing, waive
compliance by the other party hereto with any term or provision hereof on the
part of such other party hereto to be performed or complied with. The waiver
by any party hereto of a breach of any term or provision hereof shall not be
construed as a waiver of any subsequent breach.
55
Section 10.8 "Interpretation; Absence of Presumption." (a) For
the purposes hereof, (i) words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the
other gender as the context requires, (ii) the terms "hereof," "herein," and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including all of the
Schedules and Exhibits hereto) and not to any particular provision of this
Agreement, and Article, Section, paragraph, Exhibit and Schedule references
are to the Articles, Sections, paragraphs, Exhibits and Schedules to this
Agreement unless otherwise specified, (iii) the word "including" and words of
similar import when used in this Agreement shall mean "including, without
limitation," unless the context otherwise requires or unless otherwise
specified, (iv) the word "or" shall not be exclusive.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the
party drafting or causing any instrument to be drafted.
Section 10.9 "Severability." Any provision hereof which is
invalid or unenforceable shall be ineffective to the extent of such
invalidity or unenforceability, without affecting in any way the remaining
provisions hereof.
Section 10.10 "Further Assurances." The Company and Buyer agree
that, from time to time, whether before, at or after the Closing Date, each
of them will execute and deliver such further instruments of conveyance and
transfer and take such other action as may be necessary to carry out the
purposes and intents hereof.
Section 10.11 "Specific Performance." Buyer and the Company each
acknowledge that, in view of the uniqueness of the parties hereto, the
parties hereto would not have an adequate remedy at law for money damages in
the event that this Agreement was not performed in accordance with its terms,
and therefore agree that the parties hereto shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which the
parties hereto may be entitled at law or in equity.
Section 10.12 "Schedules." Any matter set forth on any Schedule
shall be deemed to be referred to on all other Schedules to which such matter
logically relates and where such reference would be appropriate and can
reasonably be inferred from the matters disclosed on the first Schedule as if
set forth on such other Schedules.
Section 10.13 "Submission to Jurisdiction" Each of the parties
hereby irrevocably submits to the jurisdiction of any New York State or
Federal court in the Southern District of the State of New York. Each of the
parties hereby irrevocably waives, to the fullest extent they may effectively
do so, the defense of such action or proceeding and hereby expressly waives
all rights of jurisdiction in any action or proceeding which they may now or
hereafter have by reason of their present or any future domicile.
[SIGNATURE PAGE FOLLOWS]
56
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf
of each of the parties hereto as of the day first above written.
XXXXXXX PACIFIC PROPERTIES, INC.
By: /s/ Xxxxxx X. Xxxxx
________________________________
Name: Xxxxxx X. Xxxxx
Title: Chief Financial Officer
XXXXXXXXX XXXXXXX HOLDINGS, L.L.C.
By: /s/ Xxxxx Xxxx
________________________________
Authorized Signatory
XXXXXXXXX XXXXXXX CO-HOLDINGS,
L.L.C.
By: /s/ Xxxxx Xxxx
________________________________
Authorized Signatory
XXXXXXX PACIFIC OPERATING
PARTNERSHIP, L.P.
By: Xxxxxxx Pacific Properties,
Inc., as general partner,
By: /s/ Xxxxxx X. Xxxxx
________________________________
Name: Xxxxxx X. Xxxxx
Title: Chief Financial Officer
57
