Exhibit W
SUBSCRIPTION AGREEMENT, AND XXXX OF SALE AND AGREEMENT
REGARDING ASSUMPTION OF LIABILITIES
THIS SUBSCRIPTION AGREEMENT, AND XXXX OF SALE AND AGREEMENT REGARDING
ASSUMPTION OF LIABILITIES (the "Agreement") is made and entered into as of
the 3rd day of December, 1997, by and among Federated Development Inc., a
Delaware corporation ("Federated"), Xxxxxxx X. Xxxxxxx ("CEH") (Federated
and CEH collectively referred as the "Subscribers") and Federated
Development Investments, LLC, a Texas limited liability company (the
"Company") in which Subscribers have agreed to become members and unit
holders.
W I T N E S S E T H:
WHEREAS, Subscribers have caused the Company to be formed as a limited
liability company under the Texas Limited Liability Company Act, Tex. Rev.
Civ. Stat Art. 1528n (the "Act"); and
WHEREAS, upon the organization of the Company, Subscribers will be the
only members and unit holders of the Company; and
WHEREAS, in connection with the organization of the Company, and in
consideration of the Company's issuance to the Subscribers of units of
membership in the Company ("Units") (or, in the case of CEH, partially in
consideration of such issuance of Units), the Subscribers have agreed to
contribute, assign, convey and set over to the Company certain of their
respective assets; and,
WHEREAS, in connection with the contribution of assets by CEH, in
addition to its issuance of Units to CEH, the Company has agreed to assume
certain liabilities of CEH in connection therewith; and
WHEREAS, the parties further contemplate that CEH may contribute
additional assets to the Company, in the form of a direct contribution of
such assets or by transferring to the Company ownership of one or more
entities owning such assets; and in the event of such an additional
contribution, the parties' ownership of Units will be adjusted so as to
give retroactive effect to such contribution and the relative value of the
assets so contributed; but in no event will the transactions set forth
herein be subject to or conditioned upon such additional contribution
taking place;
NOW THEREFORE, in consideration of the mutual agreements set forth in
this Agreement, the parties hereto agree as follows, intending to be
legally bound hereby:
SECTION 1. SUBSCRIPTION FOR UNITS. The Subscribers hereby subscribe
for and agree to purchase and acquire, as members of the Company, the
following number of Units of membership, representing in the aggregate the
following respective percentages of ownership of the Company:
SUBSCRIBER NUMBER OF UNITS PERCENTAGE OWNERSHIP
Federated 79 79%
CEH 21 21%
--- ---
Total 100 100%
The Company hereby accepts the above subscription for Units on the terms
set forth in this Agreement.
SECTION 2. CONTRIBUTION BY FEDERATED. In consideration of the
Company's issuance of the above Units to Federated, Federated hereby
grants, sells, transfers, conveys, assigns and delivers to the Company, its
successors and assigns, to have and to hold forever, all of Sellers right,
title and interest in and to that certain promissory note and related
security agreement more particularly described as follows:
Promissory note of Xxxxxxx X. Xxxxxxx, as maker, payable to
Federated Development Company as payee, dated July 6, 1989, in
the original principal amount of $8,500,000, as modified by
allonge dated July 6, 1994, as previously assigned to Federated
Development, Inc., such note having an outstanding principal
balance as of the date hereof in the amount of $2,200,000;
together with all security therefor, as granted pursuant to and
evidenced by a security agreement of CEH dated July 6, 1989 (all
such obligations collectively referred to as the "Note").
In further consideration of the Company's issuance of such Units, Federated
hereby further assigns, transfers and delivers to the Company all of
Federated's interest in the cash, securities or other instruments
representing the margin coverage (the "Margin Fund") in respect of the
"Short Position," as hereinafter defined (Federated having acquired such
Margin Fund from CEH simultaneously with the other transactions set forth
herein pursuant to Section 5 hereof).
The Company hereby accepts and takes delivery of the Note and the Margin
Fund, as Federated's contribution in respect of the Units to be issued to
Federated hereunder, and as full consideration in payment therefor.
SECTION 3. CONTRIBUTION BY CEH. In consideration of the Company's
issuance to CEH of the Units set forth above, and in consideration of the
Company's assumption of certain obligations of CEH as set forth in Section
4 below, CEH hereby grants, sells, transfers, conveys, assigns and delivers
to the Company, its successors and assigns, to have and to hold forever,
all of CEH's right, title and interest in and to the following assets (the
"CEH Contributed Assets"):
(a) Cash in the amount of $2,196,046 (representing proceeds received
by CEH in connection with his establishing the "Short Position"
defined below; and
(b) 60,000 shares of stock of MAXXAM, Inc., a Delaware corporation
("MAXXAM"), having a market value as of the close of business on
December 3, 1997 in the aggregate amount of $2,820,000.
The Company hereby accepts and takes delivery of the CEH Contributed
Assets, as CEH's contribution in respect of the Units to be issued to CEH
hereunder, and as full consideration in payment therefor; and the Company
further agrees to assume certain liabilities of CEH in connection with the
CEH Contributed Assets, as set forth in Section 4 of this Agreement.
SECTION 4. ASSUMPTION OF LIABILITIES BY THE COMPANY. In
consideration of the CEH Contributed Assets acquired by the Company
hereunder, the Company has issued 21 Units to CEH as set forth above; and
as further consideration for the CEH Contributed Assets, the Company hereby
further accepts, assumes and agrees to fully perform all of CEH's
obligations pursuant to and in connection with (a) the Note and (b) the
closing of a short position in respect of U.S. Government securities
established under CEH's account no. 624-12147-2-2-023 with Xxxxx Xxxxxx
(the "Short Position"), which Short Position represented a liability,
measured at the close of business on December 3, 1997, in the amount of
$2,194,500.
SECTION 5. TRANSFER OF SHORT POSITION; ASSIGNMENT OF MARGIN FUND.
CEH and the Company will direct and cause Xxxxx Xxxxxx to transfer the
Short Position, as it exists prior to such transfer, in an "open" status,
and with all obligations intact in respect of closing such position,
together with the entire Margin Fund covering such Short Position, to the
Company's account no. 624-59444-1-5 with Xxxxx Xxxxxx. Simultaneously with
the consummation of the transactions set forth in this Agreement, CEH
assigns, transfers and delivers to Federated all of his right in and to the
Margin Fund; and Federated agrees to pay CEH in consideration thereof
$132,050, which represents the cash value of the Margin Fund as of the date
hereof.
SECTION 6. ADOPTION OF CODE OF REGULATIONS. The Company and the
Subscribers hereby adopt the Code of Regulations attached hereto as Exhibit
A to serve as the regulations governing the operation and direction of the
Company and its business and affairs.
SECTION 7. POSSIBLE ADDITIONAL CONTRIBUTION AND REALLOCATION OF
UNITS. The parties contemplate that at a future date Sage Southwest, Inc.,
a Texas corporation that is owned by CEH and Federated ("Sage") may
contribute additional assets to the Company, either by direct transfer of
such assets or by assigning and transferring to the Company ownership
interests in one or more entities owning such assets. In the event such
additional assets are so contributed to the Company, the additional
contribution would be deemed to take place substantially simultaneously
with the transactions set forth in this Agreement; and to that end, the
parties agree that the number of Units issued to each Subscriber (or to
each Subscriber and Sage), and their proportional ownership of the Company,
would be retroactively revised, effective as of the date hereof, to give
effect to the relative net value of all assets contributed by each
Subscriber (and, if applicable, Sage) after giving effect to such
additional contribution. The parties further acknowledge and confirm,
however, that any such additional contribution of assets would be subject,
among other matters, to (a) the receipt of any third-party consents
necessary to give effect to the transfer of assets effected in connection
with such contribution, and (b) the parties' complete satisfaction with all
terms and conditions of such transfer and contribution. The transactions
contemplated by this Agreement are in no respect contingent upon the
completion, in whole or in part, of any such additional contribution of
assets; and in the event such contribution of assets is for any reason not
effected, the transactions set forth in this Agreement shall continue in
full force and effect, without modification or abatement.
SECTION 8. FURTHER ASSURANCES. From time to time hereafter, the
parties shall each execute and deliver such additional or further
instruments of conveyance, assignment and transfer, or instruments of
assumption, as applicable, and take such actions as the other parties may
reasonably request in order to more effectively convey and transfer the
assets transferred and assigned hereunder, or as applicable, the
obligations assumed hereby, all shall reasonably be necessary or
appropriate in connection with carrying out the purpose of intent of this
Agreement.
SECTION 9. COUNTERPARTS. This Agreement may executed in
counterparts, each of which when executed by the parties hereto shall be
deemed an original and all of which together shall be deemed the same
agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Subscription
Agreement, and Xxxx of Sale and Agreement Regarding Assumption of
Liabilities as of the date first written above.
SUBSCRIBERS:
FEDERATED DEVELOPMENT, INC.
By: /s/ Xxxxx X. Xxxxxx, Xx.
Name: Xxxxx X. Xxxxxx, Xx.
Title: Secretary-Treasurer
/s/ Xxxxxxx X. Xxxxxxx
XXXXXXX X. XXXXXXX
THE COMPANY:
FEDERATED DEVELOPMENT INVESTMENTS, LLC.
By: Federated Development, Inc., its
Manager
By: /s/ Xxxxx X. Xxxxxx, Xx.
Name: Xxxxx X. Xxxxxx, Xx.
Title: Secretary-Treasurer
