<PAGE>
As filed with the Securities and Exchange Commission on April 2, 1998.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): MARCH 31, 1998
EXCEL LEGACY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S><C>
DELAWARE 0-2350 33-0781747
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
Incorporation)
16955 VIA DEL CAMPO, SUITE 100
SAN DIEGO, CALIFORNIA 92127
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(619) 485-9400
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
Page 1 of 176
Exhibit Index on Page 5
<PAGE>
ITEM 1. CHANGE OF CONTROL OF REGISTRANT.
On March 31, 1998, Excel Realty Trust, Inc., a Maryland corporation
("Excel"), consummated its previously-announced spin-off of Excel Legacy
Corporation, a Delaware corporation ("Legacy"), through the distribution to
the holders of record of Excel common stock on March 2, 1998 (the "Record
Date") of all of the common stock of Legacy (the "Distribution"), pursuant to
a Distribution Agreement dated as of March 31, 1998 (the "Distribution
Agreement") among Excel, Legacy and ERT Development Corporation. Each holder
of Excel common stock received one share of Legacy common stock for each
share of Excel common stock owned on the Record Date. No consideration was
paid by the holders of Excel common stock in exchange for the Legacy common
stock. Based on the 23,160,757 shares of Excel common stock outstanding on
the Record Date, 23,160,757 shares of Legacy common stock were distributed to
such holders. The Legacy common stock is currently quoted and traded on the
OTC Bulletin Board under the symbol "XLCY." The Legacy common stock was
registered under the Securities Exchange Act of 1934, as amended, under a
Registration Statement on Form 10 which included an information statement
about the Distribution (the "Information Statement"), copies of which were
mailed to Excel's stockholders. The final version of the Information
Statement was filed by Legacy with the Securities and Exchange Commission as
an exhibit to a Form 8-K dated March 26, 1998. A copy of the Distribution
Agreement is attached hereto as Exhibit 2.1 and is incorporated herein by
reference.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
See Item 1. Additional information concerning the assets and
liabilities transferred to Legacy and the continuing relationship between
Excel and Legacy is contained in the Information Statement. In connection
with the Distribution, the board of directors of Excel determined that the
estimated market value of the common stock of Legacy as of March 31, 1998 was
$2.39, based upon the value of assets being transferred to Legacy. In
connection with the Distribution, and in addition to the Distribution
Agreement, Excel and Legacy entered into an Administrative Services
Agreement, Intercompany Agreement, Tax Sharing Agreement and Transitional
Services Agreement, copies of which are attached hereto as exhibits and are
incorporated herein by reference.
ITEM 5. OTHER EVENTS.
On March 31, 1998, concurrently with the Distribution, Legacy sold
16,784,000 shares of Series A Liquidating Preference Convertible Preferred
Stock due 2005 ("Series A Preferred Stock") in a private placement to certain
qualified institutional buyers ("QIBs") (as such term is defined in Rule 144A
under the Securities Act of 1933, as amended) at a price of $5.00 per share,
for an aggregate purchase price of $83,920,000. In addition, Legacy granted
to two QIBs, in connection with their purchase of Series A Preferred Stock
described above, warrants to purchase an aggregate of 4,497,000 shares of
Series A Preferred Stock at an exercise price of $5.00 per share pursuant to
two warrant agreements, copies of which are attached hereto as exhibits and
incorporated herein by reference. These warrants were exercised in full by
the two QIBs on March 31, 1998, concurrently with the Distribution, for an
aggregate exercise price of $22,485,000.
Additional information concerning the sale of Series A Preferred
Stock by Legacy is contained in the Information Statement. In connection
with the sale of Series A Preferred Stock, and in addition to the warrant
agreements, Legacy and the various purchasers entered into Purchase
Agreements and a Registration Rights Agreement, copies of which are attached
hereto as exhibits and are incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
2
<PAGE>
The financial statements relating to Legacy are contained in, and are
incorporated herein by reference to, pages F-1 through F-16 of the Information
Statement.
(b) PRO FORMA FINANCIAL INFORMATION.
The pro forma financial information relating to Legacy is contained
in, and is incorporated herein by reference to, pages 35 through 38 of the
Information Statement.
(c) EXHIBITS.
2.1 Distribution Agreement, dated as of March 31, 1998, by and
among Excel Realty Trust, Inc., Excel Legacy Corporation and
ERT Development Corporation.
4.1 Certificate of Designations of the Series A Preferred Stock of
Excel Legacy Corporation.
4.2 Warrant to Purchase Shares of Series A Preferred Stock, dated
as of March 31, 1998, issued by Excel Legacy Corporation to
BancBoston Capital Inc.
4.3 Warrant to Purchase Shares of Series A Preferred Stock, dated
as of March 31, 1998, issued by Excel Legacy Corporation to
Southeastern Asset Management, Inc.
10.1 Administrative Services Agreement, dated as of March 31, 1998,
by and between Excel Realty Trust, Inc. and Excel Legacy
Corporation.
10.2 Intercompany Agreement, dated as of March 31, 1998, by and
between Excel Realty Trust, Inc. and Excel Legacy Corporation.
10.3 Tax Sharing Agreement, dated as of March 31, 1998, by and
between Excel Realty Trust, Inc. and Excel Legacy Corporation.
10.4 Transitional Services Agreement, dated as of March 31, 1998, by
and between Excel Realty Trust, Inc. and Excel Legacy
Corporation.
10.5 Purchase Agreement, dated as of March 31, 1998, by and among
Excel Legacy Corporation and the purchasers named therein.
10.6 Registration Rights Agreement, dated as of March 31, 1998, by
and among Excel Legacy Corporation and the purchasers named
therein.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April 2, 1998 EXCEL LEGACY CORPORATION
By: /s/ RICHARD B. MUIR
--------------------------------
Richard B. Muir
Executive Vice President and Secretary
4
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Distribution Agreement, dated as of March 31, 1998, by and
among Excel Realty Trust, Inc., Excel Legacy Corporation and
ERT Development Corporation.
4.1 Certificate of Designations of the Series A Preferred Stock
of Excel Legacy Corporation.
4.2 Warrant to Purchase Shares of Series A Preferred Stock,
dated as of March 31, 1998, issued by Excel Legacy
Corporation to BancBoston Capital Inc.
4.3 Warrant to Purchase Shares of Series A Preferred Stock,
dated as of March 31, 1998, issued by Excel Legacy
Corporation to Southeastern Asset Management, Inc.
10.1 Administrative Services Agreement, dated as of March 31,
1998, by and between Excel Realty Trust, Inc. and Excel
Legacy Corporation.
10.2 Intercompany Agreement, dated as of March 31, 1998, by and
between Excel Realty Trust, Inc. and Excel Legacy
Corporation.
10.3 Tax Sharing Agreement, dated as of March 31, 1998, by and
between Excel Realty Trust, Inc. and Excel Legacy
Corporation.
10.4 Transitional Services Agreement, dated as of March 31, 1998,
by and between Excel Realty Trust, Inc. and Excel Legacy
Corporation.
10.5 Purchase Agreement, dated as of March 31, 1998, by and
among Excel Legacy Corporation and the purchasers named
therein.
10.6 Registration Rights Agreement, dated as of March 31, 1998,
by and among Excel Legacy Corporation and the purchasers
named therein.
5
<PAGE>
DISTRIBUTION AGREEMENT
among
EXCEL REALTY TRUST, INC.
ERT DEVELOPMENT CORPORATION
and
EXCEL LEGACY CORPORATION
dated as of
March 31, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.01 General. . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02. Terms Defined Elsewhere in Agreement. . . . . . . 11
ARTICLE II. TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.01 Transfer of Assets to Legacy . . . . . . . . . . . 11
Section 2.02 Consideration. . . . . . . . . . . . . . . . . . . 12
Section 2.03 Transfers Not Effected Prior to the
Distribution. . . . . . . . . . . . . . . . . . . . 12
Section 2.04 Cooperation Re: Assets. . . . . . . . . . . . . . 13
Section 2.05 No Representations or Warranties; Consents . . . . 14
Section 2.06 Conveyancing and Assumption Instruments. . . . . . 15
Section 2.07. Cash Management . . . . . . . . . . . . . . . . . 15
ARTICLE III. ASSUMPTION AND SATISFACTION OF LIABILITIES. . . . . . . . . . 16
Section 3.01. Assumption and Satisfaction of Liabilities. . . . 17
ARTICLE IV. THE DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.01. Cooperation Prior to the Distribution . . . . . . 17
Section 4.02. Excel and EDV Board Action; Conditions
Precedent to the Distribution . . . . . . . . . . 18
Section 4.03. The Distribution. . . . . . . . . . . . . . . . . 19
Section 4.04. Cash in Lieu of Fractional Shares . . . . . . . . 19
ARTICLE V. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.01. Indemnification by Excel. . . . . . . . . . . . . 19
Section 5.02. Indemnification by EDV. . . . . . . . . . . . . . 20
Section 5.03. Indemnification by Legacy . . . . . . . . . . . . 20
Section 5.04. Insurance Proceeds. . . . . . . . . . . . . . . . 21
Section 5.05. Procedure for Indemnification . . . . . . . . . . 21
Section 5.06. Remedies Cumulative . . . . . . . . . . . . . . . 25
Section 5.07. Survival of Indemnities . . . . . . . . . . . . . 26
ARTICLE VI. CERTAIN ADDITIONAL MATTERS . . . . . . . . . . . . . . . . . . 26
Section 6.01. Legacy Board. . . . . . . . . . . . . . . . . . . 26
Section 6.02. Certificate and Bylaws. . . . . . . . . . . . . . 26
Section 6.03. Certain Post-Distribution Transactions. . . . . . 26
Section 6.04. Notices by Excel. . . . . . . . . . . . . . . . . 28
ARTICLE VII. ACCESS TO INFORMATION AND SERVICES. . . . . . . . . . . . . . 28
Section 7.01. Provision of Corporate Records. . . . . . . . . . 28
Section 7.02. Access to Information . . . . . . . . . . . . . . 29
i
<PAGE>
Section 7.03. Production of Witnesses . . . . . . . . . . . . . 30
Section 7.04. Reimbursement . . . . . . . . . . . . . . . . . . 30
Section 7.05. Retention of Records. . . . . . . . . . . . . . . 30
Section 7.06. Confidentiality . . . . . . . . . . . . . . . . . 31
Section 7.07. Privileged Matters. . . . . . . . . . . . . . . . 31
ARTICLE VIII. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.01. Policies and Rights Included Within the
Legacy Assets . . . . . . . . . . . . . . . . . . 34
Section 8.02. Post-Distribution Date Claims . . . . . . . . . . 35
Section 8.03. Administration and Reserves . . . . . . . . . . . 35
Section 8.04. Agreement for Waiver of Conflict and
Shared Defense. . . . . . . . . . . . . . . . . . 37
ARTICLE IX. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 9.01. Complete Agreement; Construction. . . . . . . . . 37
Section 9.02. Expenses. . . . . . . . . . . . . . . . . . . . . 37
Section 9.03. Governing Law . . . . . . . . . . . . . . . . . . 37
Section 9.04. Notices . . . . . . . . . . . . . . . . . . . . . 38
Section 9.05. Amendments. . . . . . . . . . . . . . . . . . . . 38
Section 9.06. Successors and Assigns. . . . . . . . . . . . . . 38
Section 9.07. Termination . . . . . . . . . . . . . . . . . . . 38
Section 9.08. Subsidiaries. . . . . . . . . . . . . . . . . . . 39
Section 9.09. No Third-Party Beneficiaries. . . . . . . . . . . 39
Section 9.10. Titles and Headings . . . . . . . . . . . . . . . 39
Section 9.11. Exhibits and Schedules. . . . . . . . . . . . . . 39
Section 9.12. Legal Enforceability. . . . . . . . . . . . . . . 39
Section 9.13. Arbitration of Disputes . . . . . . . . . . . . . 40
EXHIBITS
Exhibit A: Administrative Services Agreement
Exhibit B: Legacy Bylaws
Exhibit C: Legacy Certificate
Exhibit D: Legacy Employees
Exhibit E: Tax Sharing Agreement
Exhibit F: Transitional Services Agreement
ii
<PAGE>
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (this "Agreement") is made as of this 31st
day of March, 1998 among Excel Realty Trust, Inc., a Maryland corporation
("Excel"), ERT Development Corporation, a Delaware corporation ("EDV"), and
Excel Legacy Corporation, a Delaware corporation and a wholly-owned subsidiary
of Excel ("Legacy").
RECITALS
WHEREAS, Excel and EDV, of which Excel owns 100% of the outstanding
preferred shares, (i) acquire, develop, own and manage certain real estate
assets, including neighborhood and community shopping centers and other retail
and commercial properties, and (ii) hold certain notes receivable;
WHEREAS, the Boards of Directors of Excel and EDV have each determined
that it is in the best interests of their respective stockholders to transfer to
Legacy certain real properties, notes receivable and related assets and
liabilities currently held by Excel and EDV (the "Asset Transfers"), and
thereafter to distribute all of the outstanding shares of common stock, par
value $.01 per share, of Legacy to the holders of Excel common stock (the
"Distribution");
WHEREAS, in connection with the Distribution, Excel, EDV and Legacy
have determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Asset Transfers and the
Distribution, and to set forth the agreements that will govern certain matters
following the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
<PAGE>
ARTICLE I.
DEFINITIONS
Section 1.01 GENERAL. As used in this Agreement, the following
terms shall have the following meanings:
ACTION: Any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
ADMINISTRATIVE SERVICES AGREEMENT: The Administrative Services
Agreement between Excel and Legacy, which agreement shall be entered into on or
prior to the Distribution Date in substantially the form of Exhibit A attached
hereto.
AFFILIATE: With respect to any specified Person, any other Person
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, such specified Person. For purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the foregoing.
Notwithstanding the foregoing, (i) the Affiliates of Excel shall not include
Legacy or any other Person which would be an Affiliate of Excel by reason of
Excel's ownership of the capital stock of Legacy prior to the Distribution or
the fact that any officer or director of Legacy shall also serve as an officer
or director of Excel, (ii) the Affiliates of EDV shall not include Legacy or any
other Person which would be an Affiliate of EDV by reason of the fact that any
officer or director or Legacy shall also serve as an officer or director of EDV,
and (iii) the Affiliates of Legacy shall not include Excel, EDV or any other
Person which would be an Affiliate of Legacy by reason of Excel's ownership of
the capital stock of Legacy prior to the
2
<PAGE>
Distribution or the fact that any officer or director of Legacy shall also serve
as an officer or director of Excel or EDV.
AGENT: The distribution agent appointed by Excel to distribute the
Legacy Common Stock pursuant to the Distribution.
COMMISSION: The Securities and Exchange Commission.
CONVEYANCING AND ASSUMPTION INSTRUMENTS: Collectively, the various
agreements, instruments and other documents to be entered into to effect the
Asset Transfers and the assumption of Liabilities in the manner contemplated by
this Agreement and the Related Agreements.
DISTRIBUTION DATE: The date determined by the Excel Board as the date
on which the Distribution shall be effected, which Distribution Date is
contemplated by the Excel Board to occur on or about March 31, 1998.
DISTRIBUTION RECORD DATE: The date established by the Excel Board as
the date for taking a record of the Holders of Excel Common Stock entitled to
participate in the Distribution, which Distribution Record Date has been
established as March 2, 1998, subject to the fulfillment on or before March 31,
1998 of certain conditions to the Distribution as provided in Section 4.02.
EDV BOARD: The Board of Directors of EDV.
EDV BOOKS AND RECORDS: The books and records (including computerized
records) of EDV and all books and records owned by Legacy which relate to the
EDV Retained Business or are necessary to operate the EDV Retained Business, or
are required by law to be retained by EDV, all files relating to any Action
pertaining to the EDV Retained Liabilities, original corporate minute books,
stock ledgers and certificates and corporate seals, and all licenses, leases,
agreements and filings, relating to EDV or the EDV Retained Business (but not
including the Legacy Books and Records, provided that EDV shall have access to,
and shall have the right to obtain duplicate copies of, the Legacy Books and
Records in accordance with the provisions of Article VII).
3
<PAGE>
EDV COMMON STOCK: The common stock, par value $.0001 per share, of
EDV.
EDV NOTES: The notes receivable listed on Schedule 1.01(a).
EDV REAL ESTATE ASSETS: The real estate assets listed on Schedule
1.01(b).
EDV RETAINED ASSETS: The assets of EDV other than the Legacy Assets
transferred to Legacy by EDV, including without limitation (i) assets relating
to the EDV Retained Business, (iii) all of the assets expressly allocated to EDV
under this Agreement or the Related Agreements, and (iv) any other assets of EDV
and its Affiliates relating to the EDV Retained Business.
EDV RETAINED BUSINESS: The businesses conducted by EDV pursuant to or
utilizing the EDV Retained Assets, including without limitation, the
acquisition, development, ownership and management of real estate assets.
EDV RETAINED LIABILITIES: (i) All of the Liabilities arising out of
or in connection with the EDV Retained Assets or the EDV Retained Business,
(ii) all of the Liabilities of EDV under, or to be retained or assumed by EDV
pursuant to, this Agreement or any of the Related Agreements, (iii) any
Financing Obligations not constituting Legacy Liabilities or Excel Retained
Liabilities, (iv) all Liabilities for the payment of outstanding drafts of EDV
attributable to the EDV Retained Business existing as of the Distribution Date,
and (v) all other Liabilities of EDV not constituting Legacy Liabilities.
EDV RETAINED POLICIES: All Policies, current or past, which are owned
or maintained by or on behalf of EDV (or any of its predecessors) which relate
to the EDV Retained Business but do not relate to the Legacy Business.
EXCEL BOARD: The Board of Directors of Excel.
EXCEL BOOKS AND RECORDS: The books and records (including
computerized records) of Excel and all books and records owned by Legacy which
relate to the Excel Retained Business or are necessary to operate the Excel
Retained Business, or are required by law to be retained by Excel,
4
<PAGE>
including without limitation, all files relating to any Action pertaining to the
Excel Retained Liabilities, original corporate minute books, stock ledgers and
certificates and corporate seals, and all licenses, leases, agreements and
filings, relating to Excel or the Excel Retained Business (but not including the
Legacy Books and Records, provided that Excel shall have access to, and shall
have the right to obtain duplicate copies of, the Legacy Books and Records in
accordance with the provisions of Article VII).
EXCEL COMMON STOCK: The common stock, par value $.01 per share, of
Excel.
EXCEL NOTES: The notes listed on Schedule 1.01(c).
EXCEL REAL ESTATE ASSETS: The real estate assets listed on Schedule
1.01(d).
EXCEL RETAINED ASSETS: The assets of Excel other than the Legacy
Assets transferred to Legacy by Excel, including without limitation (i) assets
relating to the Excel Retained Business, (iii) all of the assets expressly
allocated to Excel under this Agreement or the Related Agreements, and (iv) any
other assets of Excel and its Affiliates relating to the Excel Retained
Business.
EXCEL RETAINED BUSINESS: The businesses conducted by Excel pursuant
to or utilizing the Excel Retained Assets, including without limitation, the
acquisition, development, ownership and management of real estate assets,
including neighborhood and community shopping centers and other retail and
commercial properties.
EXCEL RETAINED LIABILITIES: (i) All of the Liabilities arising out of
or in connection with the Excel Retained Assets or the Excel Retained Business,
(ii) all Liabilities arising out of or in connection with any lawsuits relating
to the Distribution (other than those Liabilities relating to employee claims
which shall be allocated pursuant to the Administrative Services Agreement),
(iii) all of the Liabilities of Excel under, or to be retained or assumed by
Excel pursuant to, this Agreement or any of the Related Agreements, (iv) any
Financing Obligations not constituting Legacy Liabilities or EDV Retained
Liabilities, (v) all Liabilities for the payment of outstanding drafts of Excel
5
<PAGE>
attributable to the Excel Retained Business existing as of the Distribution
Date, and (vi) all other Liabilities of Excel not constituting Legacy
Liabilities.
EXCEL RETAINED POLICIES: All Policies, current or past, which are
owned or maintained by or on behalf of Excel (or any of its predecessors) which
relate to the Excel Retained Business but do not relate to the Legacy Business.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
FINANCING OBLIGATIONS: All (i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, notes, debentures or similar instruments,
(iii) obligations under capitalized leases and deferred purchase arrangements,
(iv) reimbursement or other obligations relating to letters of credit or similar
arrangements, and (v) obligations to guarantee, directly or indirectly, any of
the foregoing types of obligations on behalf of others.
HOLDERS: The holders of record of Excel Common Stock as of the
Distribution Record Date.
INSURANCE PROCEEDS: Those moneys (i) received by an insured from an
insurance carrier or (ii) paid by an insurance carrier on behalf of the insured,
in either case net of any applicable premium adjustment, retrospectively-rated
premium, deductible, retention, cost or reserve paid or held by or for the
benefit of such insured.
INSURED CLAIMS: Those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the Policies,
whether or not subject to deductibles, co-insurance, uncollectability or
retrospectively-rated premium adjustments, but only to the extent that such
Liabilities are within applicable Policy limits, including aggregates.
LEGACY BOARD: The Board of Directors of Legacy.
LEGACY BOOKS AND RECORDS: The books and records (including
computerized records) of Legacy and all books and records owned by Excel and EDV
which relate to the Legacy Business
6
<PAGE>
or are necessary to operate the Legacy Business, including, without limitation,
all such books and records relating to Legacy Employees, all files relating to
any Action being assumed by Legacy as part of the Legacy Liabilities, original
corporate minute books, stock ledgers and certificates and corporate seals, and
all licenses, leases, agreements and filings, relating to Legacy or the Legacy
Business (but not including the Excel Books and Records or the EDV Books and
Records, provided that Legacy shall have access to, and have the right to obtain
duplicate copies of, the Excel Books and Records and the EDV Books and Records
in accordance with the provisions of Article VII).
LEGACY BYLAWS: The Amended and Restated Bylaws of Legacy,
substantially in the form of Exhibit B, to be in effect at the Distribution
Date.
LEGACY CERTIFICATE: The Amended and Restated Certificate of
Incorporation of Legacy, substantially in the form of Exhibit C, to be in effect
at the Distribution Date.
LEGACY COMMON STOCK: The common stock, par value $.01 per share, of
Legacy.
LEGACY EMPLOYEES: All of the Legacy employees at the time of the
Distribution, as identified on Exhibit D.
LEGACY LIABILITIES: (i) All of the Liabilities of Legacy under, or to
be retained or assumed by Legacy pursuant to, this Agreement or any of the
Related Agreements, including those set forth on Schedule 1.01(e), (ii) all
Liabilities for payment of outstanding drafts of Excel or EDV attributable to
the Legacy Business existing as of the Distribution Date, and (iii) all
Liabilities arising out of or in connection with any of the Legacy Assets or the
Legacy Business.
LEGACY POLICIES: All Policies, current or past, which are owned or
maintained by or on behalf of Excel or EDV or any of their Affiliates or
predecessors, which relate to the Legacy Business but do not relate to the
Retained Businesses, and which Policies are either maintained by Legacy or
assignable to Legacy.
7
<PAGE>
LIABILITIES: Any and all debts, liabilities and obligations, absolute
or contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, including all costs and expenses
relating thereto, and including, without limitation, those debts, liabilities
and obligations arising under any law, rule, regulation, Action, threatened
Action, order or consent decree of any governmental entity or any award of any
arbitrator of any kind, and those arising under any contract, commitment or
undertaking.
NOTES: The Excel Notes and the EDV Notes, collectively.
PERSON: Any individual, corporation, partnership, association, trust,
estate or other entity or organization, including any governmental entity or
authority.
POLICIES: Insurance policies and insurance contracts of any kind
relating to the Legacy Business or the Retained Businesses as conducted prior to
the Distribution Date, including without limitation primary and excess policies,
comprehensive general liability policies, automobile and workers' compensation
insurance policies, and self-insurance and captive insurance company
arrangements, together with the rights, benefits and privileges thereunder.
PRIVILEGES: All privileges that may be asserted under applicable law,
including, without limitation, privileges arising under or relating to the
attorney-client relationship (including but not limited to the attorney-client
and work product privileges), the accountant-client privilege, and privileges
relating to internal evaluative processes.
PRIVILEGED INFORMATION: All Information as to which Excel, EDV,
Legacy or any of their Subsidiaries are entitled to assert the protection of a
Privilege.
RELATED AGREEMENTS: All of the agreements, instruments,
understandings, assignments or other arrangements which are entered into in
connection with the transactions contemplated hereby and which are set forth in
a writing, including, without limitation (i) the Conveyancing and
8
<PAGE>
Assumption Instruments, (ii) the Administrative Services Agreement, (iii) the
Tax Sharing Agreement, and (iv) the Transitional Services Agreement.
RETAINED ASSETS: The Excel Retained Assets and the EDV Retained
Assets, collectively.
RETAINED BUSINESSES: The Excel Retained Business and the EDV Retained
Business, collectively.
RETAINED LIABILITIES: The Excel Retained Liabilities and the EDV
Retained Liabilities, collectively.
RETAINED POLICIES: The Excel Retained Policies and the EDV Retained
Policies, collectively.
SHARED POLICIES: All Policies, current or past, which are owned or
maintained by or on behalf of Excel, EDV or their predecessors which relate to
both the Retained Businesses and the Legacy Business, and all other Policies not
constituting Legacy Policies or Retained Policies.
SUBSIDIARY: With respect to any Person, (a) any corporation of which
at least a majority in interest of the outstanding voting stock (having by the
terms thereof voting power under ordinary circumstances to elect a majority of
the directors of such corporation, irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned or controlled by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries, or (b) any non-corporate entity in which such Person, one or more
Subsidiaries of such Person, or such Person and one or more Subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, has at
least majority ownership interest.
9
<PAGE>
TAX SHARING AGREEMENT: The Tax Sharing Agreement between Legacy and
Excel, which agreement shall be entered into on or prior to the Distribution
Date in substantially the form of Exhibit E attached hereto.
TRANSITIONAL SERVICES AGREEMENT: The agreement to be entered into
between Excel and Legacy on or prior to the Distribution Date, providing for the
furnishing of certain services on a transitional basis after the Distribution
Date, in substantially the form attached hereto as Exhibit F.
10
<PAGE>
Section 1.02. TERMS DEFINED ELSEWHERE IN AGREEMENT.
Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Asset Transfers Recitals
Consents 4.01(c)
Distribution Recitals
EDV/Legacy Indemnifiable Losses 5.02
Excel Recitals
Excel/EDV Indemnitees 5.03
Excel/EDV Indemnifiable Losses 5.03
Excel/Legacy Indemnifiable Losses 5.01
Indemnifiable Losses 5.03
Indemnifying Party 5.04
Indemnitee 5.04
Information 7.02
Legacy Recitals
Legacy Assets 2.01(c)
Legacy Business Recitals
Legacy Indemnitees 5.01
Pending Action 5.05(h)
Third-Party Claim 5.05(a)
ARTICLE II.
TRANSFER OF ASSETS
Section 1.021 TRANSFER OF ASSETS TO LEGACY.
(a) Prior to the Distribution Date, Excel shall take or cause to be
taken all actions necessary to cause the transfer, assignment, delivery and
conveyance to Legacy of all of Excel's right, title and interest in the
following assets:
(i) the Excel Real Estate Assets;
(ii) the Excel Notes;
(iii) the Legacy Books and Records;
(iv) all of the other assets to be assigned to Legacy by Excel
under this Agreement or the Related Agreements; and
11
<PAGE>
(v) all other assets relating to the Legacy Business held by
Excel.
(b) Prior to the Distribution Date, EDV shall take or cause to be
taken all actions necessary to cause the transfer, assignment, delivery and
conveyance to Legacy of all of EDV's right, title and interest in the following
assets:
(i) the EDV Real Estate Assets;
(ii) the EDV Notes;
(iii) the Legacy Books and Records;
(iv) all of the other assets to be assigned to Legacy by EDV
under this Agreement or the Related Agreements; and
(v) all other assets relating to the Legacy Business held by
EDV.
(c) The "Legacy Assets" shall consist of the assets transferred to
Legacy by Excel and EDV pursuant to this Section 2.1.
Section 2.02 CONSIDERATION FOR ASSET TRANSFERS. As consideration for
the foregoing asset transfers:
(a) On or prior to the Distribution Date, Excel shall receive from
Legacy (i) a sufficient number of shares of Legacy Common Stock to effect the
Distribution to the Holders of Excel Common Stock, and (ii) a promissory note
payable to Excel in the amount of $21.4 million.
(b) On or prior to the Distribution Date, EDV shall receive evidence
of the cancellation of certain indebtedness of EDV currently held by Excel in
the amount of $33.3 million.
Section 2.03 TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION. To
the extent that any transfers contemplated by this Article II shall not have
been fully effected on the Distribution Date, the parties shall cooperate to
effect such transfers as promptly as shall be practicable following the
Distribution Date. Nothing herein shall be deemed to require the transfer of
any assets or the assumption of any Liabilities which by their terms or
operation of law cannot be transferred or
12
<PAGE>
assumed; PROVIDED, HOWEVER, that Excel, EDV and Legacy and their respective
Subsidiaries and Affiliates shall cooperate in seeking to obtain any necessary
consents or approvals for the transfer of all assets and Liabilities
contemplated to be transferred pursuant to this Article II. In the event that
any such transfer of assets or Liabilities has not been consummated effective as
of the Distribution Date, the party retaining such asset or Liability shall
thereafter hold such asset in trust for the use and benefit of the party
entitled thereto (at the expense of the party entitled thereto) and retain such
Liability for the account of the party by whom such Liability is to be assumed
pursuant hereto, and take such other actions as may be reasonably required in
order to place the parties, insofar as reasonably possible, in the same position
as would have existed had such asset been transferred or such Liability been
assumed as contemplated hereby. As and when any such asset or Liability becomes
transferable, such transfer and assumption shall be effected forthwith. The
parties agree that, except as set forth in this Section 2.03, as of the
Distribution Date, each party hereto shall be deemed to have acquired complete
and sole beneficial ownership over all of the assets, together with all rights,
powers and privileges incidental thereto, and shall be deemed to have assumed in
accordance with the terms of this Agreement all of the Liabilities, and all
duties, obligations and responsibilities incidental thereto, which such party is
entitled to acquire or required to assume pursuant to the terms of this
Agreement.
Section 2.04 COOPERATION RE: ASSETS. In the case that at any time
after the Distribution Date, Legacy reasonably determines that any of the Excel
Retained Assets or the EDV Retained Assets are essential for the conduct of the
Legacy Business, or Excel reasonably determines that any of the Legacy Assets
are essential for the conduct of the Excel Retained Business, or EDV reasonably
determines that any of the Legacy Assets are essential for the conduct of the
EDV Retained Business, and the nature of such assets makes it impracticable for
Legacy, Excel or EDV, as the case may be, to obtain substitute assets or to make
alternative arrangements on commercially
13
<PAGE>
reasonable terms to conduct their respective businesses, and reasonable
provisions for the use thereof are not already included in the Related
Agreements, then Legacy (with respect to the Legacy Assets), Excel (with respect
to the Excel Retained Assets) and EDV (with respect to the EDV Retained Assets)
shall cooperate to make such assets available to the appropriate party on
commercially reasonable terms, as may be reasonably required for such party to
maintain normal business operations (provided that such assets shall be required
to be made available only until such time as the other party may reasonably
obtain substitute assets or make alternative arrangements on commercially
reasonable terms to permit it to maintain normal business operations).
Section 2.05 NO REPRESENTATIONS OR WARRANTIES; CONSENTS. Each of the
parties hereto understands and agrees that no party hereto is, in this Agreement
or in any other agreement or document contemplated by this Agreement or
otherwise, representing or warranting in any way (i) as to the value or freedom
from encumbrance of, or any other matter concerning, any assets of such party or
(ii) as to the legal sufficiency to convey title to any asset transferred
pursuant to this Agreement or any Related Agreement, including, without
limitation, any Conveyancing and Assumption Instruments. It is also agreed and
understood that there are no warranties, express or implied, as to the
merchantability or fitness of any of the assets either transferred to or
retained by the parties, as the case may be, and all such assets shall be "as
is, where is" and "with all faults" (provided, however, that the absence of
warranties shall have no effect upon the allocation of liabilities under this
Agreement). Similarly, each party hereto understands and agrees that no party
hereto is, in this Agreement or in any other agreement or document contemplated
by this Agreement or otherwise, representing or warranting in any way that the
obtaining of any consents or approvals, the execution and delivery of any
amendatory agreements and the making of any filings or applications contemplated
by this Agreement will satisfy the provisions of any or all applicable laws or
judgments or other instruments or agreements relating to such assets.
Notwithstanding the
14
<PAGE>
foregoing, the parties shall use their good faith efforts to obtain all consents
and approvals, to enter into all reasonable amendatory agreements and to make
all filings and applications which may be reasonably required for the
consummation of the transactions contemplated by this Agreement, and shall take
all such further reasonable actions as shall be reasonably necessary to preserve
for each of Excel, EDV and Legacy, to the greatest extent feasible, the economic
and operational benefits of the allocation of assets and liabilities provided
for in this Agreement. In case at any time after the Distribution Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary or desirable action.
Section 2.06 CONVEYANCING AND ASSUMPTION INSTRUMENTS. In connection
with the Asset Transfers and the assumptions of Liabilities contemplated by this
Agreement, the parties shall execute or cause to be executed by the appropriate
entities the Conveyancing and Assumption Instruments in such forms as the
parties shall reasonably agree, including the transfer of real property with
deeds as may be appropriate, and the assignment of trademarks and other
intellectual property rights. The transfer of capital stock shall be effected
by means of delivery of stock certificates and executed stock powers and
notation on the stock record books of the corporation or other legal entities
involved and, to the extent required by applicable law, by notation on public
registries.
Section 2.07. CASH MANAGEMENT.
(a) CASH MANAGEMENT AFTER THE DISTRIBUTION DATE. Legacy shall
establish and maintain a separate cash management system and accounting records
with respect to the Legacy Business effective as of 12:01 a.m. on the day
following the Distribution Date; thereafter, (i) any payments by Excel or EDV on
behalf of Legacy in connection with the Legacy Business (including, without
limitation, any such payments in respect of Liabilities or other obligations of
Legacy under the Administrative Services Agreement) shall be recorded in the
accounts of Legacy as a payable to
15
<PAGE>
Excel or EDV, as applicable; (ii) any payments by Legacy on behalf of Excel or
EDV in connection with the Excel Retained Business or the EDV Retained Business,
respectively (including, without limitation, any such payments in respect of
Liabilities or other obligations of Excel or EDV under the Administrative
Services Agreement), shall be recorded in the accounts of Excel or EDV, as
applicable, as a payable to Legacy; (iii) any cash payments received by Excel or
EDV relating to the Legacy Business or the Legacy Assets shall be recorded in
the accounts of Excel or EDV, as applicable, as a payable to Legacy; (iv) any
cash payments received by Legacy relating to the Excel Retained Business, the
EDV Retained Business, the Excel Retained Assets or the EDV Retained Assets
shall be recorded in the accounts of Legacy as a payable to Excel or EDV, as
applicable; (v) Excel, EDV and Legacy shall make adjustments for late deposits,
checks returned for not sufficient funds and other post-Distribution Date
transactions as shall be reasonable under the circumstances consistent with the
purpose and intent of this Agreement; and (vi) the net balance due to Excel, EDV
or Legacy, as the case may be, in respect of the aggregate amounts of clauses
(i), (ii), (iii), (iv) and (v) shall be paid by Excel, EDV or Legacy, as
appropriate, as promptly as practicable. For purposes of this Section 2.07(a),
the parties contemplate that the Excel Retained Business, the EDV Retained
Business and the Legacy Business, including but not limited to the
administration of accounts payable and accounts receivable, will be conducted in
the normal course.
(b) All transactions contemplated in this Section 2.07 shall be
subject to audit by the parties, and any dispute thereunder shall be resolved by
Coopers & Lybrand L.L.P. (or, if Coopers & Lybrand L.L.P. is not available, by
such other independent firm of certified public accountants mutually acceptable
to Excel, EDV and Legacy), whose decision shall be final and unappealable.
ARTICLE III.
ASSUMPTION AND SATISFACTION OF LIABILITIES
16
<PAGE>
Section 301. ASSUMPTION AND SATISFACTION OF LIABILITIES. Except as
set forth in the Administrative Services Agreement, the Tax Sharing Agreement or
the other Related Agreements, effective as of and after the Distribution Date,
(a) Legacy shall assume, pay, perform and discharge in due course all of the
Legacy Liabilities, (b) Excel shall pay, perform and discharge in due course all
of the Excel Retained Liabilities, and (c) EDV shall pay, perform and discharge
in due course all of the EDV Retained Liabilities.
ARTICLE IV.
THE DISTRIBUTION
Section 4.01. COOPERATION PRIOR TO THE DISTRIBUTION.
(a) Excel, EDV and Legacy shall cooperate in preparing, filing with
the Commission and causing to become effective any registration statements or
amendments thereof which are appropriate to reflect the establishment of, or
amendments to, any employee benefit plans and other plans contemplated by the
Administrative Services Agreement.
(b) Excel, EDV and Legacy shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of states or
other political subdivisions of the United States in connection with the
transactions contemplated by this Agreement and the Related Agreements.
(c) Excel, EDV and Legacy shall use all reasonable efforts to obtain
any third-party consents or approvals necessary or desirable in connection with
the transactions contemplated hereby ("Consents").
(d) Excel, EDV and Legacy will use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or desirable under applicable law, to consummate the transactions
contemplated under this Agreement and the Related Agreements.
17
<PAGE>
Section 4.02. EXCEL AND EDV BOARD ACTION; CONDITIONS PRECEDENT TO THE
DISTRIBUTION. The Excel Board and the EDV Board shall, in their discretion,
establish any appropriate procedures in connection with the Distribution. In no
event shall the Distribution occur unless the following conditions shall have
been satisfied:
(a) the transactions contemplated by Sections 2.01 and 2.02 shall
have been consummated in all material respects;
(b) the Legacy Board, comprised as contemplated by Section 6.01,
shall have been elected, and the Legacy Certificate and Legacy Bylaws shall have
been adopted and shall be in effect;
(c) Excel, EDV and Legacy shall have obtained all Consents, the
failure of which to obtain would, in the determination of each of the Excel
Board and the EDV Board, have a material adverse effect on Excel, EDV or Legacy;
(d) the Registration Statement on Form 10 under the Exchange Act
filed by Legacy shall have been declared effective by the Commission;
(e) the Legacy Common Stock shall have been approved for quotation
and trading on the OTC Bulletin Board subject to official notice of issuance;
and
(f) Excel, EDV and Legacy shall have entered into the Related
Agreements to which they are a party;
PROVIDED, HOWEVER, that (i) any such condition may be waived by the concurrence
of the Excel Board and the EDV Board in their sole discretion, and (ii) the
satisfaction of such conditions shall not create any obligation on the part of
Excel, EDV or any other party hereto to effect the Distribution or in any way
limit Excel's and EDV's power of termination set forth in Section 9.07 or alter
the consequences of any such termination from those specified in such Section.
18
<PAGE>
Section 4.03. THE DISTRIBUTION. On the Distribution Date, subject to
the conditions and rights of termination set forth in this Agreement, Excel
shall deliver to the Agent a share certificate representing all of the then
outstanding shares of Legacy Common Stock owned by Excel and shall instruct the
Agent to distribute, on or as soon as practicable following the Distribution
Date, such Legacy Common Stock to the Holders. Legacy agrees to provide all
share certificates that the Agent shall require in order to effect the
Distribution.
Section 4.04. CASH IN LIEU OF FRACTIONAL SHARES. No certificate or
scrip representing fractional shares of Legacy Common Stock shall be issued as
part of the Distribution and in lieu thereof, each holder of Excel Common Stock
who would otherwise be entitled to receive a fractional share of Legacy Common
Stock will receive cash for such fractional share. Excel shall instruct the
Agent to determine the number of whole shares and fractional shares of Legacy
Common Stock allocable to each holder of record of Excel Common Stock as of the
Distribution Record Date. Excel shall instruct the Agent to aggregate all such
fractional shares into whole shares and sell the whole shares obtained thereby
in the open market as soon as practicable following the Distribution Date at
then prevailing prices on behalf of Holders who otherwise would be entitled to
receive fractional share interests and to distribute to each such Holder such
Holder's ratable share of the proceeds of such sale as soon as practicable after
the Distribution Date. Excel shall bear the costs of commissions incurred in
connection with such sales.
ARTICLE V.
INDEMNIFICATION
Section 5.01. INDEMNIFICATION BY EXCEL. Except as otherwise
expressly set forth in a Related Agreement, Excel shall indemnify, defend and
hold harmless Legacy and its directors, officers, employees, agents and
Affiliates and each of the heirs, executors, successors and assigns of any of
the foregoing (the "Legacy Indemnitees") from and against the Excel Retained
Liabilities and
19
<PAGE>
any and all losses, Liabilities, damages, including, without limitation, the
costs and expenses of any and all Actions, threatened Actions, demands,
assessments, judgments, settlements and compromises relating to the Excel
Retained Liabilities and attorneys' fees and any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any such
Actions or threatened Actions (collectively, "Excel/Legacy Indemnifiable Losses"
and, individually, an "Excel/Legacy Indemnifiable Loss") of the Legacy
Indemnitees arising out of or due to the failure or alleged failure of Excel or
any of its Affiliates (i) prior to or after the Distribution Date to pay,
perform or otherwise discharge in due course any of the Excel Retained
Liabilities, or (ii) comply with the provisions of Section 6.04.
Section 5.02. INDEMNIFICATION BY EDV. Except as otherwise expressly
set forth in a Related Agreement, EDV shall indemnify, defend and hold harmless
the Legacy Indemnitees from and against the EDV Retained Liabilities and any and
all losses, Liabilities, damages, including, without limitation, the costs and
expenses of any and all Actions, threatened Actions, demands, assessments,
judgments, settlements and compromises relating to the EDV Retained Liabilities
and attorneys' fees and any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any such Actions or threatened
Actions (collectively, "EDV/Legacy Indemnifiable Losses" and, individually, an
"EDV/Legacy Indemnifiable Loss") of the Legacy Indemnitees arising out of or due
to the failure or alleged failure of EDV or any of its Affiliates (i) prior to
or after the Distribution Date to pay, perform or otherwise discharge in due
course any of the EDV Retained Liabilities, or (ii) comply with the provisions
of Section 6.04.
Section 5.03. INDEMNIFICATION BY LEGACY. Except as otherwise
expressly set forth in a Related Agreement, Legacy shall indemnify, defend and
hold harmless Excel and EDV and each of their respective directors, officers,
employees, agents and Affiliates and each of the heirs, executors, successors
and assigns of any of the foregoing (the "Excel and EDV Indemnitees") from and
against
20
<PAGE>
the Legacy Liabilities and any and all losses, Liabilities, damages, including,
without limitation, the costs and expenses of any and all Actions, threatened
Actions, demands, assessments, judgments, settlements and compromises relating
to the Legacy Liabilities and attorneys' fees and any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any such Actions or threatened Actions (collectively, "Excel/EDV Indemnifiable
Losses" and, individually, an "Excel/EDV Indemnifiable Loss") of the Excel and
EDV Indemnitees arising out of or due to the failure or alleged failure of
Legacy or any of its Affiliates (i) prior to or after the Distribution Date to
pay, perform or otherwise discharge in due course any of the Legacy Liabilities
or (ii) comply with the provisions of Section 6.04. The "Excel/Legacy
Indemnifiable Losses," the "EDV/Legacy Indemnifiable Losses," and the "Excel/EDV
Indemnifiable Losses" are collectively referred to as the "Indemnifiable
Losses."
Section 5.04. INSURANCE PROCEEDS. The amount which any party (an
"Indemnifying Party") is or may be required to pay to any other Person (an
"Indemnitee") pursuant to Section 5.01, Section 5.02 or Section 5.03 shall be
reduced (including, without limitation, retroactively) by any Insurance Proceeds
or other amounts actually recovered by or on behalf of such Indemnitee in
reduction of the related Indemnifiable Loss. If an Indemnitee shall have
received the payment required by this Agreement from an Indemnifying Party in
respect of an Indemnifiable Loss and shall subsequently actually receive
Insurance Proceeds, or other amounts in respect of such Indemnifiable Loss as
specified above, then such Indemnitee shall pay to such Indemnifying Party a sum
equal to the amount of such Insurance Proceeds or other amounts actually
received.
Section 5.05. PROCEDURE FOR INDEMNIFICATION.
(a) Except as may be set forth in a Related Agreement, if an
Indemnitee shall receive notice or otherwise learn of the assertion by a Person
(including, without limitation, any governmental entity) who is not a party to
this Agreement or to any of the Related Agreements of any
21
<PAGE>
claim or of the commencement by any such Person of any Action (a "Third-Party
Claim") with respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement, such Indemnitee shall give such
Indemnifying Party written notice thereof promptly after becoming aware of such
Third-Party Claim; PROVIDED that the failure of any Indemnitee to give notice as
required by this Section 5.05 shall not relieve the Indemnifying Party of its
obligations under this Article V, except to the extent that such Indemnifying
Party is prejudiced by such failure to give notice. Such notice shall describe
the Third-Party Claim in reasonable detail, and shall indicate the amount
(estimated if necessary) of the Indemnifiable Loss that has been or may be
sustained by such Indemnitee.
(b) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any Third-Party Claim, provided that the Indemnifying Party
must confirm in writing that it agrees that the Indemnitee is entitled to
indemnification hereunder in respect of such Third-Party Claim. Within 30 days
of the receipt of notice from an Indemnitee in accordance with Section 5.05(a)
(or sooner, if the nature of such Third-Party Claim so requires), the
Indemnifying Party shall notify the Indemnitee of its election whether to assume
responsibility for such Third-Party Claim (provided that if the Indemnifying
Party does not so notify the Indemnitee of its election within 30 days after
receipt of such notice from the Indemnitee, the Indemnifying Party shall be
deemed to have elected not to assume responsibility for such Third-Party Claim),
and such Indemnitee shall cooperate in the defense or settlement or compromise
of such Third-Party Claim. After notice from an Indemnifying Party to an
Indemnitee of its election to assume responsibility for a Third-Party Claim,
such Indemnifying Party shall not be liable to such Indemnitee under this
Article V for any legal or other expenses (except expenses approved in advance
by the Indemnifying Party) subsequently incurred by such Indemnitee in
connection with the defense thereof; PROVIDED that if the defendants in
22
<PAGE>
any such claim include both the Indemnifying Party and one or more Indemnitees
and in such Indemnitees' reasonable judgment a conflict of interest between such
Indemnitees and such Indemnifying Party exists in respect of such claim, such
Indemnitees shall have the right to employ separate counsel and in that event
the reasonable fees and expenses of such separate counsel (but not more than one
separate counsel reasonably satisfactory to the Indemnifying Party) shall be
paid by such Indemnifying Party. If an Indemnifying Party elects not to assume
responsibility for a Third-Party Claim (which election may be made only in the
event of a good faith dispute that a claim was inappropriately tendered under
Section 5.01, 5.02 or 5.03, as the case may be) such Indemnitee may defend or
(subject to the following sentence) seek to compromise or settle such
Third-Party Claim. Notwithstanding the foregoing, an Indemnitee may not settle
or compromise any claim without prior written notice to the Indemnifying Party,
which shall have the option within ten days following the receipt of such notice
(i) to disapprove the settlement and assume all past and future responsibility
for the claim, including reimbursing the Indemnitee for prior expenditures in
connection with the claim, or (ii) to disapprove the settlement and continue to
refrain from participation in the defense of the claim, in which event the
Indemnifying Party shall have no further right to contest the amount or
reasonableness of the settlement if the Indemnitee elects to proceed therewith,
or (iii) to approve the amount of the settlement, reserving the Indemnifying
Party's right to contest the Indemnitee's right to indemnity, or (iv) to approve
and agree to pay the settlement. In the event the Indemnifying Party makes no
response to such written notice from the Indemnitee, the Indemnifying Party
shall be deemed to have elected option (ii).
(c) If an Indemnifying Party chooses to defend or to seek to
compromise any Third-Party Claim, the Indemnitee shall make available to such
Indemnifying Party any personnel and any books, records or other documents
within its control or which it otherwise has the ability to make available that
are necessary or appropriate for such defense.
23
<PAGE>
(d) Notwithstanding anything else in this Section 5.05 to the
contrary, an Indemnifying Party shall not settle or compromise any Third-Party
Claim unless such settlement or compromise contemplates as an unconditional term
thereof the giving by such claimant or plaintiff to the Indemnitee of a written
release from all liability in respect of such Third-Party Claim (and provided
further that such settlement may not provide for any non-monetary relief by
Indemnitee without the written consent of Indemnitee). In the event the
Indemnitee shall notify the Indemnifying Party in writing that such Indemnitee
declines to accept any such settlement or compromise, such Indemnitee may
continue to contest such Third-Party Claim, free of any participation by such
Indemnifying Party, at such Indemnitee's sole expense. In such event, the
obligation of such Indemnifying Party to such Indemnitee with respect to such
Third-Party Claim shall be equal to (i) the costs and expenses of such
Indemnitee prior to the date such Indemnifying Party notifies such Indemnitee of
the offer to settle or compromise (to the extent such costs and expenses are
otherwise indemnifiable hereunder) PLUS (ii) the lesser of (A) the amount of any
offer of settlement or compromise which such Indemnitee declined to accept and
(B) the actual out-of-pocket amount such Indemnitee is obligated to pay
subsequent to such date as a result of such Indemnitee's continuing to pursue
such Third-Party Claim.
(e) Any claim on account of an Indemnifiable Loss which does not
result from a Third-Party Claim shall be asserted by written notice given by the
Indemnitee to the applicable Indemnifying Party. Such Indemnifying Party shall
have a period of 15 days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 15-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 15-day period or rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
party under applicable law or under this Agreement.
24
<PAGE>
(f) In addition to any adjustments required pursuant to Section 5.04,
if the amount of any Indemnifiable Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnitee to the
Indemnifying Party.
(g) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
(h) Notwithstanding anything else in this Section 5.05 to the
contrary, with respect to any Action pending at the time of the Distribution (a
"Pending Action") with respect to which an Indemnifying Party may be obligated
to provide indemnification pursuant to this Agreement, Excel, EDV or Legacy
shall, at the request of any other party, cause the employee(s) who were
handling the defense, compromise or settlement of such Pending Action prior to
the Distribution to continue to handle such defense, compromise or settlement
following the Distribution (subject to the last two sentences of subsection (b)
above). If such employees are employed by the Indemnitee, the Indemnitee shall
keep the Indemnifying Party reasonably informed of the progress of, and the
Indemnifying Party shall cooperate in, such defense, compromise or settlement.
Section 5.06. REMEDIES CUMULATIVE. The remedies provided in this
Article V shall be cumulative and shall not preclude assertion by any Indemnitee
of any other rights or the seeking of any and all other remedies against any
Indemnifying Party.
25
<PAGE>
Section 5.07. SURVIVAL OF INDEMNITIES. The obligations of each of
Excel, EDV and Legacy under this Article V shall survive the sale or other
transfer by it of any assets or businesses or the assignment by it of any
Liabilities with respect to any Indemnifiable Loss of the others related to such
assets, businesses or Liabilities.
ARTICLE VI.
CERTAIN ADDITIONAL MATTERS
Section 6.01. LEGACY BOARD. Excel, EDV and Legacy shall take all
actions which may be required to constitute, effective as of the Distribution
Date, the board of directors of Legacy with the persons listed on Schedule
1.01(f).
Section 6.02. CERTIFICATE AND BYLAWS. On or prior to the
Distribution Date, Legacy shall adopt the Legacy Certificate and the Legacy
Bylaws, and shall file the Legacy Certificate with the Secretary of State of the
State of Delaware.
Section 6.03. CERTAIN POST-DISTRIBUTION TRANSACTIONS.
(a) LEGACY. (i) Legacy shall comply with each representation
and statement made, or to be made, to any taxing authority in connection with
any ruling obtained, or to be obtained, by Excel, EDV and Legacy acting
together, from any such taxing authority with respect to any transaction
contemplated by this Agreement, and (ii) until the second anniversary of the
Distribution Date, Legacy shall not (A) make a material disposition, by means of
a sale or exchange of assets or capital stock, a distribution to stockholders or
otherwise, of any substantial portion of its assets, (B) repurchase or issue any
Legacy capital stock (other than stock issued pursuant to employee plans), or
(C) cease the active conduct of a material portion of its business
independently, with its own employees and without material change, unless, in
each of cases (A), (B) and (C), in the opinion of counsel to Legacy, which
opinion shall be reasonably satisfactory to Excel and EDV, or pursuant to a
favorable supplemental ruling letter reasonably satisfactory to Excel and EDV,
such act or
26
<PAGE>
omission would not adversely affect the tax consequences of the Distribution to
Excel or EDV or the stockholders of Excel or EDV, as set forth in any ruling
issued by any taxing authority.
(b) EXCEL. (i) Excel shall comply with each representation and
statement made, or to be made, to any taxing authority in connection with any
ruling obtained, or to be obtained, by Excel, EDV and Legacy acting together,
from any such taxing authority with respect to any transaction contemplated by
this Agreement, and (ii) until the second anniversary of the Distribution Date,
Excel shall not (A) make a material disposition, by means of a sale or exchange
of assets or capital stock, a distribution to stockholders or otherwise, of any
substantial portion of its assets (other than the Legacy Assets), (B) repurchase
or issue any capital stock of Excel (other than stock issued pursuant to
employee plans), or (C) cease the active conduct of a material portion of its
business independently, with its own employees and without material change,
unless, in each of cases (A), (B) and (C), in the opinion of counsel to Excel,
which opinion shall be reasonably satisfactory to Legacy, or pursuant to a
favorable supplemental ruling letter reasonably satisfactory to Legacy, such act
or omission would not adversely affect the tax consequences of the Distribution
to Legacy or the stockholders of Legacy, as set forth in any ruling issued by
any taxing authority.
(c) EDV. (i) EDV shall comply with each representation and statement
made, or to be made, to any taxing authority in connection with any ruling
obtained, or to be obtained, by Excel, EDV and Legacy acting together, from any
such taxing authority with respect to any transaction contemplated by this
Agreement, and (ii) until the second anniversary of the Distribution Date, EDV
shall not (A) make a material disposition, by means of a sale or exchange of
assets or capital stock, a distribution to stockholders or otherwise, of any
substantial portion of its assets (other than the Legacy Assets), (B) repurchase
or issue any capital stock of EDV (other than stock issued pursuant to employee
plans), or (C) cease the active conduct of a material portion of its business
independently, with its own employees and without material change, unless, in
each of cases (A), (B)
27
<PAGE>
and (C), in the opinion of counsel to EDV, which opinion shall be reasonably
satisfactory to Legacy, or pursuant to a favorable supplemental ruling letter
reasonably satisfactory to Legacy, such act or omission would not adversely
affect the tax consequences of the Distribution to Legacy or the stockholders of
Legacy, as set forth in any ruling issued by any taxing authority.
Section 6.04. NOTICES BY EXCEL. Excel shall provide notice of the
Distribution to all holders of its securities, or options, rights or warrants
convertible into its securities, as may be required by Excel's Certificate of
Incorporation or Bylaws or any agreement to which Excel is a party.
ARTICLE VII.
ACCESS TO INFORMATION AND SERVICES
Section 7.01. PROVISION OF CORPORATE RECORDS.
(a) Except as may otherwise be provided in a Related Agreement, each
of Excel and EDV shall arrange as soon as practicable following the Distribution
Date, to the extent not previously delivered in connection with the transactions
contemplated in Article II, for the transportation (at Legacy's cost) to Legacy
of the Legacy Books and Records in its possession, except to the extent such
items are already in the possession of Legacy. The Legacy Books and Records
shall be the property of Legacy, but shall be available to Excel and EDV for
review and duplication until Excel or EDV shall notify Legacy in writing that
such records are no longer of use to Excel or EDV, respectively.
(b) Except as otherwise provided in a Related Agreement, Legacy shall
arrange as soon as practicable following the Distribution Date, to the extent
not previously delivered in connection with the transactions contemplated in
Article II, for the transportation (at Excel's cost) to Excel of the Excel Books
and Records in its possession, except to the extent such items are already in
the possession of Excel. The Excel Books and Records shall be the property of
Excel, but shall be
28
<PAGE>
available to Legacy for review and duplication until Legacy shall notify Excel
in writing that such records are no longer of use to Legacy.
(c) Except as otherwise provided in a Related Agreement, Legacy shall
arrange as soon as practicable following the Distribution Date, to the extent
not previously delivered in connection with the transactions contemplated in
Article II, for the transportation (at EDV's cost) to EDV of the EDV Books and
Records in its possession, except to the extent such items are already in the
possession of EDV. The EDV Books and Records shall be the property of EDV, but
shall be available to Legacy for review and duplication until Legacy shall
notify EDV in writing that such records are no longer of use to Legacy.
Section 7.02. ACCESS TO INFORMATION. Except as otherwise provided in
a Related Agreement, from and after the Distribution Date, Excel and EDV shall
afford to Legacy and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) and duplicating rights during
normal business hours to all records, books, contracts, instruments, computer
data and other data and information relating to pre-Distribution operations
(collectively, "Information") within Excel's or EDV's possession insofar as such
access is reasonably required by Legacy for the conduct of its business, subject
to appropriate restrictions for classified or Privileged Information.
Similarly, except as otherwise provided in a Related Agreement, Legacy shall
afford to Excel and EDV and their authorized accountants, counsel and other
designated representatives reasonable access (including using reasonable efforts
to give access to persons or firms possessing information) and duplicating
rights during normal business hours to Information within Legacy's possession,
insofar as such access is reasonably required by Excel or EDV for the conduct of
its business, subject to appropriate restrictions for classified or Privileged
Information. Information may be requested under this Article VII for the
legitimate business purposes of either party, including, without limitation,
audit,
29
<PAGE>
accounting, claims (including claims for indemnification hereunder), litigation
and tax purposes, as well as for purposes of fulfilling disclosure and reporting
obligations and for performing this Agreement and the transactions contemplated
hereby.
Section 7.03. PRODUCTION OF WITNESSES. At all times from and after
the Distribution Date, each of Excel, EDV and Legacy shall use reasonable
efforts to make available to the others, upon written request, its and its
Subsidiaries' officers, directors, employees and agents as witnesses to the
extent that such persons may reasonably be required in connection with any
Action.
Section 7.04. REIMBURSEMENT. Except to the extent otherwise
contemplated in any Related Agreement, a party providing Information or witness
services to another party under this Article VII shall be entitled to receive
from the recipient, upon the presentation of invoices therefor, payments of such
amounts, relating to supplies, disbursements and other out-of-pocket expenses
(at cost) and direct and indirect expenses of employees who are witnesses or
otherwise furnish assistance (at cost), as may be reasonably incurred in
providing such Information or witness services.
Section 7.05. RETENTION OF RECORDS. Except as otherwise required by
law or agreed to in a Related Agreement or otherwise in writing, each of Excel,
EDV and Legacy may destroy or otherwise dispose of any of the Information, which
is material Information and is not contained in other Information retained by
Excel, EDV or Legacy, as the case may be, at any time after the tenth
anniversary of this Agreement, provided that, prior to such destruction or
disposal, (a) it shall provide no less than 90 or more than 120 days prior
written notice to the other, specifying in reasonable detail the Information
proposed to be destroyed or disposed of and (b) if a recipient of such notice
shall request in writing prior to the scheduled date for such destruction or
disposal that any of the Information proposed to be destroyed or disposed of be
delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the Information as
was requested at the expense of the party requesting such Information.
30
<PAGE>
Section 7.06. CONFIDENTIALITY. Each of Excel, EDV, Legacy and their
respective Subsidiaries shall hold, and shall cause its consultants and advisors
to hold, in strict confidence, all Information concerning the other parties
hereto in its possession or furnished by the other parties or the other parties'
representatives pursuant to this Agreement (except to the extent that such
Information has been (i) in the public domain through no fault of such party or
(ii) later lawfully acquired from other sources by such party), and each party
shall not release or disclose such Information to any other person, except its
auditors, attorneys, financial advisors, rating agencies, bankers and other
consultants and advisors, unless compelled to disclose by judicial or
administrative process or, as reasonably advised by its counsel or by other
requirements of law, or unless such Information is reasonably required to be
disclosed in connection with (x) any litigation with any third-parties or
litigation between Excel, EDV and Legacy or any of them, (y) any contractual
agreement to which Excel, EDV or Legacy or any of them are currently parties, or
(z) in exercise of any party's rights hereunder.
Section 7.07. PRIVILEGED MATTERS. Excel, EDV and Legacy recognize
that legal and other professional services that have been and will be provided
prior to the Distribution Date have been and will be rendered for the benefit of
each of Excel, EDV and Legacy and that each of Excel, EDV and Legacy should be
deemed to be the client for the purposes of asserting all Privileges. To
allocate the interests of each party in the Privileged Information, the parties
agree as follows:
(a) Excel shall be entitled, in perpetuity, to control the assertion
or waiver of all Privileges in connection with Privileged Information which
relates solely to the Excel Retained Business, whether or not the Privileged
Information is in the possession of or under the control of Excel, EDV or
Legacy. Excel shall also be entitled, in perpetuity, to control the assertion
or waiver of all Privileges in connection with Privileged Information that
relates solely to the subject matter of any claims constituting Excel Retained
Liabilities, now pending or which may be asserted in the
31
<PAGE>
future, in any lawsuits or other proceedings initiated against or by Excel,
whether or not the Privileged Information is in the possession of or under the
control of Excel, EDV or Legacy.
(b) EDV shall be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the EDV Retained Business, whether or not the Privileged Information
is in the possession of or under the control of Excel, EDV or Legacy. EDV shall
also be entitled, in perpetuity, to control the assertion or waiver of all
Privileges in connection with Privileged Information that relates solely to the
subject matter of any claims constituting EDV Retained Liabilities, now pending
or which may be asserted in the future, in any lawsuits or other proceedings
initiated against or by EDV, whether or not the Privileged Information is in the
possession of or under the control of Excel, EDV or Legacy.
(c) Legacy shall be entitled, in perpetuity, to control the assertion
or waiver of all Privileges in connection with Privileged Information which
relates solely to the Legacy Business, whether or not the Privileged Information
is in the possession of or under the control of Excel, EDV or Legacy. Legacy
shall also be entitled, in perpetuity, to control the assertion or waiver of all
Privileges in connection with Privileged Information which relates solely to the
subject matter of any claims constituting Legacy Liabilities, now pending or
which may be asserted in the future, in any lawsuits or other proceedings
initiated against or by Legacy, whether or not the Privileged Information is in
the possession of Legacy or under the control of Excel, EDV or Legacy.
(d) Excel, EDV and Legacy agree that they shall have a shared
Privilege, with equal right to assert or waive, subject to the restrictions in
this Section 7.07, with respect to all Privileges not allocated pursuant to the
terms of Sections 7.07(a), (b) and (c). All Privileges relating to any claims,
proceedings, litigation, disputes or other matters which involve each of Excel,
EDV and Legacy in respect of which Excel, EDV and Legacy retain any
responsibility or liability under this Agreement shall be subject to a shared
Privilege.
32
<PAGE>
(e) No party may waive any Privilege which could be asserted under
any applicable law, and in which any other party has a shared Privilege, without
the consent of the other party, except to the extent reasonably required in
connection with any litigation with third-parties or as provided in subsection
(f) below. Consent shall be in writing, or shall be deemed to be granted unless
written objection is made within 20 days after notice upon the other party
requesting such consent.
(f) In the event of any litigation or dispute between Excel, EDV and
Legacy, or any of them, any party may waive a Privilege in which any other party
has a shared Privilege, without obtaining the consent of the other party,
provided that such waiver of a shared Privilege shall be effective only as to
the use of Information with respect to the litigation or dispute between such
parties, and shall not operate as a waiver of the shared Privilege with respect
to third-parties.
(g) If a dispute arises between the parties regarding whether a
Privilege should be waived to protect or advance the interest of any party, each
party agrees that it shall negotiate in good faith, shall endeavor to minimize
any prejudice to the rights of the other parties, and shall not unreasonably
withhold consent to any request for waiver by the other parties. Each party
specifically agrees that it will not withhold consent to waiver for any purpose
except to protect its own legitimate interests.
(h) Upon receipt by any party of any subpoena, discovery or other
request which arguably calls for the production or disclosure of Information
subject to a shared Privilege or as to which any other party has the sole right
hereunder to assert a Privilege, or if any party obtains knowledge that any of
its current or former directors, officers, agents or employees have received any
subpoena, discovery or other requests which arguably calls for the production or
disclosure of such Privileged Information, such party shall promptly notify the
other party of the existence of the request and shall provide the other party a
reasonable opportunity to review the Information and to assert any
33
<PAGE>
rights it may have under this Section 7.07 or otherwise to prevent the
production or disclosure of such Privileged Information.
(i) The transfer of the Legacy Books and Records, the Excel Books and
Records and the EDV Books and Records and other Information between Excel, EDV,
Legacy and their respective Subsidiaries is made in reliance on the agreement of
Excel, EDV and Legacy, as set forth in Sections 7.06 and 7.07, to maintain the
confidentiality of Privileged Information and to assert and maintain all
applicable Privileges. The access to information being granted pursuant to
Sections 7.01 and 7.02, the agreement to provide witnesses and individuals
pursuant to Section 7.03 and the transfer of Privileged Information between
Excel, EDV, Legacy and their respective Subsidiaries pursuant to this Agreement
shall not be deemed a waiver of any Privilege that has been or may be asserted
under this Agreement or otherwise.
ARTICLE VIII.
INSURANCE
Section 8.01. POLICIES AND RIGHTS INCLUDED WITHIN THE LEGACY ASSETS.
Without limiting the generality of the definition of the Legacy Assets set forth
in Section 2.01 or the effect of Section 2.01, the Legacy Assets shall include
(a) any and all rights of an insured party under each of the Shared Policies,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer, with respect to all injuries, losses, liabilities,
damages and expenses incurred or claimed to have been incurred on or prior to
the Distribution Date by any party in or in connection with the conduct of the
Legacy Business or, to the extent any claim is made against Legacy or any of its
Subsidiaries, the Retained Businesses, and which injuries, losses, liabilities,
damages and expenses may arise out of insured or insurable occurrences or events
under one or more of the Shared Policies; PROVIDED, HOWEVER, that nothing in
this Section 8.01 shall be deemed to
34
<PAGE>
constitute (or to reflect) the assignment of the Shared Policies, or any of
them, to Legacy, and (b) the Legacy Policies.
Section 8.02. POST-DISTRIBUTION DATE CLAIMS. If, subsequent to the
Distribution Date, any person, corporation, firm or entity shall assert a claim
against Legacy with respect to any injury, loss, liability, damage or expense
incurred or claimed to have been incurred on or prior to the Distribution Date
in or in connection with the Distribution or the conduct of the Legacy Business
or, to the extent any claim is made against Legacy or any of its Subsidiaries,
the Retained Businesses, and which injury, loss, liability, damage or expense
may arise out of insured or insurable occurrences or events under one or more of
the Shared Policies, Excel and/or EDV, as appropriate, shall at the time such
claim is asserted be deemed to assign, without need of further documentation, to
Legacy any and all rights of an insured party under the applicable Shared Policy
with respect to such asserted claim, specifically including rights of indemnity
and the right to be defended by or at the expense of the insurer; PROVIDED,
HOWEVER, that nothing in this Section 8.02 shall be deemed to constitute (or to
reflect) the assignment of the Shared Policies, or any of them, to Legacy.
Section 8.03. ADMINISTRATION AND RESERVES.
(a) Notwithstanding the provisions of Article III, but subject to any
contrary provisions of any Related Agreement, from and after the Distribution
Date:
(i) Legacy shall be entitled to any reserves established by
Excel, EDV or any of their Subsidiaries, or the benefit of reserves held by
any insurance carrier, with respect to the Legacy Liabilities;
(ii) Excel shall be entitled to any reserves established by
Excel or any of its Subsidiaries, or the benefit of reserves held by any
insurance carrier, with respect to the Excel Retained Liabilities; and
35
<PAGE>
(iii) EDV shall be entitled to any reserves established by EDV
or any of its Subsidiaries, or the benefit of reserves held by any
insurance carrier, with respect to the EDV Retained Liabilities.
(b) INSURANCE PREMIUMS. Legacy shall have the right but not the
obligation to pay the premiums, to the extent that Excel and EDV do not pay
premiums with respect to Retained Liabilities (retrospectively-rated or
otherwise), with respect to Shared Policies and the Legacy Policies, as required
under the terms and conditions of the respective Policies, whereupon Excel and
EDV shall forthwith reimburse Legacy for that portion of such premiums paid by
Legacy as are attributable to the Retained Liabilities. Each of Excel and EDV
shall provide continued coverage under its director and officer liability
insurance policy, if any, for a period of not less than three years for acts
which took place or were alleged to have taken place prior to the Distribution
Date covering persons who were directors and officers of Excel or EDV,
respectively, prior to the Distribution Date. Fifty percent of the additional
premiums, if any, for such coverage shall be reimbursed by Legacy within 15 days
of the Distribution Date.
(c) ALLOCATION OF INSURANCE PROCEEDS. Insurance Proceeds received
with respect to claims, costs and expenses under the Policies shall be paid to
Legacy with respect to the Legacy Liabilities, to Excel with respect to the
Excel Retained Liabilities and to EDV with respect to the EDV Retained
Liabilities. Payment of the allocable portions of indemnity costs of Insurance
Proceeds resulting from the liability policies will be made to the appropriate
party upon receipt from the insurance carrier. In the event that the aggregate
limits on any Shared Policies are exceeded, the parties agree to provide an
equitable allocation of Insurance Proceeds received after the Distribution Date
based upon their respective bona fide claims. The parties agree to use their
best efforts to cooperate with respect to insurance matters.
36
<PAGE>
Section 8.04. AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE.
In the event that Insured Claims of Excel, EDV and Legacy, or any two of them,
exist relating to the same occurrence, such parties agree to jointly defend and
to waive any conflict of interest necessary to the conduct of that joint
defense. Nothing in this Section 8.04 shall be construed to limit or otherwise
alter in any way the indemnity obligations of the parties to this Agreement,
including those created by this Agreement, by operation of law or otherwise.
ARTICLE IX.
MISCELLANEOUS
Section 9.01. COMPLETE AGREEMENT; CONSTRUCTION. This Agreement,
including the Schedules and Exhibits and the Related Agreements and other
agreements and documents referred to herein, shall constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and shall supersede all previous negotiations, commitments and writings
with respect to such subject matter. Notwithstanding any other provisions in
this Agreement to the contrary, in the event and to the extent that there shall
be a conflict between the provisions of this Agreement and the provisions of the
Related Agreements, the Related Agreements shall control.
Section 9.02. EXPENSES. Except as otherwise set forth in this
Agreement or any Related Agreement, all costs and expenses in connection with
the preparation, execution, delivery and implementation of this Agreement, the
Distribution and with the consummation of the transactions contemplated by this
Agreement shall be charged to the party for whose benefit the expenses are
incurred, with any expenses which cannot be allocated on such basis to be split
equally between the parties.
Section 9.03. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to the principles of conflicts of laws thereof.
37
<PAGE>
Section 9.04. NOTICES. All notices and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the date on which such
notice is received:
To Legacy:
Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, California 92127
Attention: Gary B. Sabin
To Excel:
Excel Realty Trust, Inc.
16955 Via Del Campo, Suite 100
San Diego, California 92127
Attention: Gary B. Sabin
To EDV:
ERT Development Corporation
16955 Via Del Campo, Suite 100
San Diego, California 92127
Attention: Gary B. Sabin
Section 9.05. AMENDMENTS. This Agreement may not be modified or
amended except by an agreement in writing signed by the parties.
Section 9.06. SUCCESSORS AND ASSIGNS. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns. The parties acknowledge
and agree that any party into which Excel, EDV or Legacy merges or which
acquires all or substantially all of Excel's, EDV's or Legacy's assets in a sale
transaction would constitute a permitted assign for purposes of this Section
9.06.
Section 9.07. TERMINATION. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of the Excel Board
38
<PAGE>
and the EDV Board without the approval of Legacy or of the stockholders of Excel
or EDV. In the event of such termination, no party shall have any liability to
any other party pursuant to this Agreement.
Section 9.08. SUBSIDIARIES. Each of the parties hereto shall cause
to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein to be performed by any Subsidiary of
such party which is contemplated to be a Subsidiary of such party on and after
the Distribution Date.
Section 9.09. NO THIRD-PARTY BENEFICIARIES. Except for the
provisions of Article V relating to Indemnities, this Agreement is solely for
the benefit of the parties hereto and their respective Subsidiaries and
Affiliates and should not be deemed to confer upon third-parties any remedy,
claim, Liability, reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
Section 9.10. TITLES AND HEADINGS. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
Section 9.11. EXHIBITS AND SCHEDULES. The Exhibits and Schedules
shall be construed with and as an integral part of this Agreement to the same
extent as if the same had been set forth verbatim herein.
Section 9.12. LEGAL ENFORCEABILITY. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an
39
<PAGE>
inadequate remedy for any breach of the provisions of this Agreement and agrees
that the obligations of the parties hereunder shall be specifically enforceable.
Section 9.13. ARBITRATION OF DISPUTES.
(a) Any controversy or claim arising out of this Agreement, or any
breach of this Agreement, including any controversy relating to a determination
of whether specific assets constitute Legacy Assets or Retained Assets or
whether specific Liabilities constitute Legacy Liabilities or Retained
Liabilities, shall be settled by arbitration in accordance with the Rules of the
American Arbitration Association then in effect, as modified by this Section
9.13 or by the further agreement of the parties.
(b) Such arbitration shall be conducted in San Diego, California.
(c) Any judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. The arbitrators shall have
the authority to award to the prevailing party its attorneys' fees and costs
incurred in such arbitration. The arbitrators shall not, under any
circumstances, have any authority to award punitive, exemplary or similar
damages, and may not, in any event, make any ruling, finding or award that does
not conform to the terms and conditions of this Agreement.
(d) Nothing contained in this Section 9.13 shall limit or restrict in
any way the right or power of a party at any time to seek injunctive relief in
any court and to litigate the issues relevant to such request for injunctive
relief before such court (i) to restrain any other party from breaching this
Agreement or (ii) for specific enforcement of this Section 9.13. The parties
agree that any legal remedy available to a party with respect to a breach of
this Section 9.13 will not be adequate and that, in addition to all other legal
remedies, each party is entitled to an order specifically enforcing this
Section 9.13.
40
<PAGE>
(e) The parties hereby consent to the jurisdiction of the federal
courts located in San Diego, California for all purposes under this Agreement.
(f) Neither the parties nor the arbitrators may disclose the
existence or results of any arbitration under this Agreement or any evidence
presented during the course of the arbitration without the prior written consent
of the parties, except as required to fulfill applicable disclosure and
reporting obligations, or as otherwise required by law.
(g) Except as provided in Section 9.13(c), each party shall bear its
own costs incurred in the arbitration. If any party refuses to submit to
arbitration any dispute required to be submitted to arbitration pursuant to this
Section 9.13, and instead commences any other proceeding, including, without
limitation, litigation, then the party who seeks enforcement of the obligation
to arbitrate shall be entitled to its attorneys' fees and costs incurred in any
such proceeding.
41
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
EXCEL REALTY TRUST, INC.
By: /s/ GARY B. SABIN
-----------------------------------------
Name: GARY B. SABIN
-----------------------------------------
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
-----------------------------------------
ERT DEVELOPMENT CORPORATION
By: /s/ GARY B. SABIN
-----------------------------------------
Name: GARY B. SABIN
-----------------------------------------
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
-----------------------------------------
EXCEL LEGACY CORPORATION
By: /s/ GARY B. SABIN
-----------------------------------------
Name: GARY B. SABIN
-----------------------------------------
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
-----------------------------------------
S-1
<PAGE>
EXHIBITS
Exhibit A: Administrative Services Agreement
Exhibit B: Legacy Bylaws
Exhibit D: Legacy Certificate
Exhibit D: Legacy Employees
Exhibit E: Tax Sharing Agreement
Exhibit F: Transitional Services Agreement
<PAGE>
SCHEDULES
Schedule 1.01(a): EDV Notes
Schedule 1.01(b): EDV Real Estate Assets
Schedule 1.01(c): Excel Notes
Schedule 1.01(d): Excel Real Estate Assets
Schedule 1.01(e): Legacy Liabilities
Schedule 1.01(f): Legacy Board
<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
SERIES A LIQUIDATING PREFERENCE CONVERTIBLE
PREFERRED STOCK DUE 2005
OF
EXCEL LEGACY CORPORATION
-------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------------------
Excel Legacy Corporation, a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article Fourth of its
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation by unanimous written consent dated December 12, 1997, adopted the
following resolution which resolution remains in full force and effect on the
date hereof:
RESOLVED, that there is hereby established a series of authorized
preferred stock having a par value of $.01 per share, which series shall be
designated as "Series A Liquidating Preference Convertible Preferred Stock due
2005" (the "Series A Preferred Stock"), shall consist of 25,000,000 shares and
shall have the following voting powers, preferences and relative, participating,
optional and other special rights, and qualifications, limitations and
restrictions thereof as follows:
1. CERTAIN DEFINITIONS.
Unless the context otherwise requires, the terms defined in this
paragraph 1 shall have, for all purposes of this resolution, the meanings herein
specified (with terms defined in the singular having comparable meanings when
used in the plural).
BUSINESS DAY. The term "Business Day" shall mean a day other than a
Saturday or Sunday or any federal holiday.
COMMON STOCK. The term "Common Stock" shall mean the common stock,
par value $.01 per share, of the Corporation.
CONVERSION RATE. The term "Conversion Rate" shall initially mean
$5.00 and thereafter shall be subject to adjustment from time to time pursuant
to the terms of paragraph 4 below.
<PAGE>
DIVIDEND PAYMENT DATE. The term "Dividend Payment Date" shall have
the meaning set forth in subparagraph 2(a) below.
DIVIDEND PERIOD. The term "Dividend Period" shall mean the period
from, and including, the Initial Issue Date to, but not including, the first
Dividend Payment Date and thereafter, each quarterly period from, and including,
the Dividend Payment Date to, but not including the next Dividend Payment Date.
INITIAL ISSUE DATE. The term "Initial Issue Date" shall mean the date
that shares of Series A Preferred Stock are first issued by the Corporation.
JUNIOR STOCK. The term "Junior Stock" shall mean, for purposes of
paragraph 2 below, Common Stock and any class or series of stock of the
Corporation authorized after the Initial Issue Date which is not entitled to
receive any dividends in any Dividend Period unless all dividends required to
have been paid or declared and set apart for payment on the Series A Preferred
Stock shall have been so paid or declared and set apart for payment, and for
purposes of paragraph 3 below, shall mean Common Stock and any class or series
of stock of the Corporation authorized after the Initial Issue Date which is not
entitled to receive any assets upon liquidation, dissolution or winding up of
the affairs of the Corporation until the Series A Preferred Stock shall have
received the entire amount to which such stock is entitled upon such
liquidation, dissolution or winding up.
LIQUIDATION PREFERENCE. With respect to each share of Series A
Preferred Stock, the term "Liquidation Preference" shall mean $5.00 per share,
plus a premium in an amount equal to a seven percent (7%) annual total return on
a share of Series A Preferred Stock from the Initial Issue Date until the date
such Liquidation Preference is paid by the Corporation.
PARITY STOCK. The term "Parity Stock" shall mean, for purposes of
paragraph 2 below, any class or series of stock of the Corporation authorized
after the Initial Issue Date which is entitled to receive payment of dividends
on a parity with the Series A Preferred Stock, and for purposes of paragraph 3
below, shall mean any class or series of stock of the Corporation authorized
after the Initial Issue Date which is entitled to receive assets upon
liquidation, dissolution or winding up of the affairs of the Corporation on a
parity with the Series A Preferred Stock.
QUOTED PRICE. The term "Quoted Price" with respect to either the
Common Stock or Series A Preferred Stock, shall mean the average of the closing
bid and ask prices of the applicable security as reported by the National
Association of Securities Dealers, Inc. Automatic Quotations System, National
Market System, or, if the applicable security is listed or admitted for trading
on a securities exchange, the average of the closing bid and ask prices of the
applicable security on the principal exchange on which the applicable security
is listed or admitted for trading (which shall be for consolidated trading if
applicable to such exchange), or if neither so reported or listed or admitted
for trading, the average of the closing bid and ask prices of the applicable
security in the over-the-counter market. In the event that the Quoted Price
cannot be determined as aforesaid, the Board of Directors of the Corporation
shall determine the Quoted Price on the basis of such quotations as it in good
faith considers appropriate.
RECORD DATE. The term "Record Date" shall mean the date designated by
the Board of Directors of the Corporation at the time a dividend is declared;
provided, however, that such Record Date shall not be more than thirty (30) days
nor less than ten (10) days prior to the respective Dividend Payment Date or
such other date designated by the Board of Directors for the payment of
dividends.
2
<PAGE>
REDEMPTION DATE. The term "Redemption Date" shall have the meaning
set forth in subparagraph 5(a) below.
SENIOR STOCK. The term "Senior Stock" shall mean, for purposes of
paragraph 2 below, any class or series of stock of the Corporation authorized
after the Initial Issue Date ranking senior to the Series A Preferred Stock in
respect of the right to receive dividends, and for purposes of paragraph 3
below, shall mean any class or series of stock of the Corporation authorized
after the Initial Issue Date ranking senior to the Series A Preferred Stock in
respect of the right to participate in any distribution upon liquidation,
dissolution or winding up of the affairs of the Corporation.
STATED VALUE. The term "Stated Value" shall have the meaning set
forth in subparagraph 4(a) below.
TRADING DAY. The term "Trading Day" with respect to either the Common
Stock or Series A Preferred Stock, shall mean any day on which any market in
which the applicable security is then traded and in which a Quoted Price may be
ascertained is open for business.
2. DIVIDENDS.
(a) Holders of shares of Series A Preferred Stock will be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the payment of dividends, cumulative quarterly cash dividends
equal to the per share Common Stock Dividend Amount, payable in arrears on
January 15, April 15, July 15 and October 15 of each year, commencing on the
first such day after the Issuance Date (each a "Dividend Payment Date"). The
"Common Stock Dividend Amount" applicable as of any Dividend Payment Date shall
mean the amount which is the product of (i) the dollar amount of the dividend
paid per share of Common Stock on the dividend payment date with respect to the
shares of Common Stock (other than a distribution payable solely in shares of
Common Stock) which occurs on such Dividend Payment Date or, if no such dividend
payment date occurs on such Dividend Payment Date, the dividend payment date
with respect to the shares of Common Stock next preceding such Dividend Payment
Date, and (ii) the number of shares of Common Stock into which each share of
Series A Preferred Stock is entitled to be converted, at the Conversion Price
then in effect and otherwise as set forth in this Certificate of Designation, as
of the Record Date established for such Dividend Payment Date (determined, for
purposes of this computation, to the fourth decimal place). The dividend
payable to a holder of a share of Series A Preferred Stock on the first Dividend
Payment Date after the share is issued will be the accrued dividend calculated
from the day the share is issued to such Dividend Payment Date. If any Dividend
Payment Date is not a Business Day, the dividend due on that Dividend Payment
Date will be paid on the Business Day immediately succeeding that Dividend
Payment Date. Each Dividend Payment Date will be on a date which is the date
fixed for payment of dividends with respect to the shares of Common Stock or is
not more than five Business Days after the date fixed for payment of dividends
with respect to the shares of Common Stock.
(b) Each dividend will be payable to holders of record of the Series
A Preferred Stock on the Record Date selected by the Board of Directors with
respect to the relevant Dividend Payment Date. Dividends shall be paid to the
holders of record of the Series A Preferred Stock as their names shall appear on
the share register of the Corporation on the Record Date for such dividend.
Dividends payable in any Dividend Period which is less than a full Dividend
Period in length will be computed on the basis of a ninety (90) day quarterly
period and actual days elapsed in such Dividend Period. Dividends on account of
arrears for any past Dividend Periods may be declared and paid at any time to
holders of record on the Record Date therefor.
3
<PAGE>
(c) So long as any shares of Series A Preferred Stock shall be
outstanding, the Corporation shall not declare, pay or set apart for payment on
any Junior Stock any dividends whatsoever, whether in cash, property or
otherwise (other than dividends payable in shares of the class or series upon
which such dividends are declared or paid, or payable in shares of Common Stock
with respect to Junior Stock other than Common Stock, together with cash in lieu
of fractional shares), nor shall the Corporation make any distribution on any
Junior Stock, nor shall any Junior Stock be purchased, redeemed or otherwise
acquired by the Corporation or any of its subsidiaries of which it owns not less
than a majority of the outstanding voting power, nor shall any monies be paid or
made available for a sinking fund for the purchase or redemption of any Junior
Stock, unless all dividends to which the holders of Series A Preferred Stock
shall have been entitled for all previous Dividend Periods shall have been paid
or declared and a sum of money sufficient for the payment thereof has been set
apart.
(d) In the event that full dividends are not paid or made available
to the holders of all outstanding shares of Series A Preferred Stock and of any
Parity Stock and funds available for payment of dividends shall be insufficient
to permit payment in full to holders of all such stock of the full preferential
amounts to which they are then entitled, then the entire amount available for
payment of dividends shall be distributed ratably among all such holders of
Series A Preferred Stock and of any Parity Stock in proportion to the full
amount to which they would otherwise be respectively entitled.
(e) Notwithstanding anything contained herein to the contrary, no
dividends on shares of Series A Preferred Stock shall be declared by the Board
of Directors of the Corporation or paid or set apart for payment by the
Corporation if such declaration or payment shall be restricted or prohibited by
law.
(f) Any dividend paid with regard to shares of Series A Preferred
Stock will be paid equally with regard to each outstanding share of Series A
Preferred Stock, except to the extent that shares of Series A Preferred Stock
are outstanding for differing amounts of time during the relevant dividend
period.
3. DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or other winding up of the affairs of the Corporation, subject to
the prior preferences and other rights of any Senior Stock as to liquidation
preferences, but before any payment or distribution shall be made to the holders
of Junior Stock, the holders of Series A Preferred Stock shall be entitled to be
paid out of the assets of the Corporation in cash or property at its fair market
value as determined by the Board of Directors of the Corporation the Liquidation
Preference per share plus an amount equal to all dividends accrued and unpaid
thereon to the date of such liquidation or dissolution or such other winding up.
Except as provided in this paragraph, holders of Series A Preferred Stock shall
not be entitled to any distribution in the event of liquidation, dissolution or
winding up of the affairs of the Corporation.
(b) If, upon any such liquidation, dissolution or other winding up of
the affairs of the Corporation the assets of the Corporation shall be
insufficient to permit the payment in full of the Liquidation Preference per
share plus an amount equal to all dividends accrued and unpaid on the Series A
Preferred Stock and the full liquidating payments on all Parity Stock, then the
assets of the Corporation remaining after the distributions to holders of any
Senior Stock of the full amounts to which they may be entitled shall be ratably
distributed among the holders of Series A Preferred Stock and of any Parity
Stock in proportion to the full amounts to which they would otherwise be
respectively entitled if all amounts thereon were paid in full.
4
<PAGE>
(c) A sale, conveyance or disposition of all or substantially all of
the assets of the Corporation shall be deemed to be a liquidation, dissolution
or winding up within the meaning of this paragraph 3.
4. CONVERSION RIGHTS.
(a) (i) A holder of shares of Series A Preferred Stock may convert
such shares into Common Stock at any time in whole or from time to time in part
before such shares are redeemed by giving notice to such effect (a "Notice of
Election to Convert") to the Corporation. For the purposes of conversion, each
share of Series A Preferred Stock shall be valued at $5.00 per share (the
"Stated Value"), which shall be divided by the Conversion Rate in effect on the
Conversion Date to determine the number of shares issuable upon conversion.
Immediately following such conversion, the rights of the holders of converted
Series A Preferred Stock shall cease and the persons entitled to receive the
Common Stock upon the conversion of Series A Preferred Stock shall be treated
for all purposes as having become the owners of such Common Stock.
(ii) To convert Series A Preferred Stock, a holder must (A)
surrender the certificate or certificates evidencing the shares of Series A
Preferred Stock to be converted, duly endorsed in a form satisfactory to the
Corporation, at the office of the Corporation or transfer agent for the Series A
Preferred Stock, (B) provide a Notice of Election to Convert to the Corporation
at such office and include therein the number of shares such holder wishes to
convert, (C) state in writing the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued, and (D) pay
any transfer or similar tax if required. In the event that a holder fails to
notify the Corporation of the number of shares of Series A Preferred Stock which
such holder wishes to convert in the Notice of Election to Convert delivered to
the Corporation, such holder shall be deemed to have elected to convert all
shares represented by the certificate or certificates surrendered for
conversion.
(b) If, at any time after the Initial Issue Date, the Quoted Price of
the Common Stock on each of at least thirty (30) consecutive Trading Days
immediately prior to the Notice of Mandatory Conversion shall be equal to or
greater than the price per share set forth below (each such price being
effective for a period of 90 days commencing on the first day of each quarter
(i.e., each 90-day period immediately following the Initial Issue Date)
indicated below), the Corporation shall have the right to convert all of the
outstanding shares of Series A Preferred Stock into a number of shares of Common
Stock (calculated to the nearest 1/100th of a share) equal to the product of (i)
the number of shares of Series A Preferred Stock to be converted multiplied by
(ii) the Stated Value divided by the Conversion Rate then in effect, such that
each share of Series A Preferred Stock is valued as set forth in clause (a)(i)
in consideration for Common Stock issued in conversion priced at the Conversion
Rate calculated in accordance with this paragraph 4. For purposes hereof, the
30-day period referred to in the previous sentence need not fall entirely within
the same quarter, but instead may overlap quarters so long as the Quoted Price
of the Common Stock on each Trading Day within the 30-day period is equal to or
greater than the price per share set forth below with respect to each such
quarter.
<TABLE>
<CAPTION>
Year 1 Price
------ -----
<S> <C>
1st Qtr. . . . . . . . . . . . . . . . . . . . . . . . $5.0000
2nd Qtr. . . . . . . . . . . . . . . . . . . . . . . . 5.0875
3rd Qtr. . . . . . . . . . . . . . . . . . . . . . . . 5.1750
4th Qtr. . . . . . . . . . . . . . . . . . . . . . . . 5.2625
5
<PAGE>
<CAPTION>
Year 2
------
<S> <C>
1st Qtr. . . . . . . . . . . . . . . . . . . . . . . . 5.3500
2nd Qtr. . . . . . . . . . . . . . . . . . . . . . . . 5.4375
3rd Qtr. . . . . . . . . . . . . . . . . . . . . . . . 5.5250
4th Qtr. . . . . . . . . . . . . . . . . . . . . . . . 5.6125
Year 3
------
<S> <C>
1st Qtr. . . . . . . . . . . . . . . . . . . . . . . . 5.7000
2nd Qtr. . . . . . . . . . . . . . . . . . . . . . . . 5.7875
3rd Qtr. . . . . . . . . . . . . . . . . . . . . . . . 5.8750
4th Qtr. . . . . . . . . . . . . . . . . . . . . . . . 5.9625
Year 4
------
<S> <C>
1st Qtr. . . . . . . . . . . . . . . . . . . . . . . . 6.0500
2nd Qtr. . . . . . . . . . . . . . . . . . . . . . . . 6.1375
3rd Qtr. . . . . . . . . . . . . . . . . . . . . . . . 6.2250
4th Qtr. . . . . . . . . . . . . . . . . . . . . . . . 6.3125
Year 5
------
<S> <C>
1st Qtr. . . . . . . . . . . . . . . . . . . . . . . . 6.4000
2nd Qtr. . . . . . . . . . . . . . . . . . . . . . . . 6.4875
3rd Qtr. . . . . . . . . . . . . . . . . . . . . . . . 6.5750
4th Qtr. . . . . . . . . . . . . . . . . . . . . . . . 6.6625
Year 6
------
<S> <C>
1st Qtr. . . . . . . . . . . . . . . . . . . . . . . . 6.7500
2nd Qtr. . . . . . . . . . . . . . . . . . . . . . . . 6.8375
3rd Qtr. . . . . . . . . . . . . . . . . . . . . . . . 6.9250
4th Qtr. . . . . . . . . . . . . . . . . . . . . . . . 7.0125
Year 7
------
<S> <C>
1st Qtr. . . . . . . . . . . . . . . . . . . . . . . . 7.1000
2nd Qtr. . . . . . . . . . . . . . . . . . . . . . . . 7.1875
3rd Qtr. . . . . . . . . . . . . . . . . . . . . . . . 7.2750
4th Qtr. . . . . . . . . . . . . . . . . . . . . . . . 7.3625
</TABLE>
In order to elect to effect the mandatory conversion of Series A Preferred
Stock, the Corporation shall issue a notice as to the date of the intended
conversion and number of shares of Series A Preferred Stock which are to be
converted into shares of Common Stock (the "Notice of Mandatory Conversion") to
all holders of outstanding shares of Series A Preferred Stock on a date (the
"Mandatory Conversion Notice Date") at least ninety (90) but not more than one
hundred twenty (120) days prior to the conversion date specified in the Notice
of Mandatory Conversion (the "Mandatory Conversion Date"), which Notice of
Mandatory Conversion specifies a record date (the "Mandatory Conversion Record
Date") selected by the Board of Directors which is not less than twenty (20) nor
more than forty-five (45) days before the Mandatory Conversion Date. If the
Corporation gives a Notice of Mandatory Conversion, then, provided that the
computation set forth in the Notice of Mandatory Conversion is not clearly
erroneous, the number of the outstanding shares of Series A Preferred Stock
which are the subject of such Notice of Mandatory Conversion will be
automatically converted into shares of Common Stock at the close of business on
the Mandatory Conversion Date regardless of whether the holders of such shares
of Series A Preferred Stock
6
<PAGE>
actually surrender the certificates representing their shares of Series A
Preferred Stock for conversion. At the close of business on the Mandatory
Conversion Date, (i) the certificates representing the shares of Series A
Preferred Stock will cease to represent anything other than the shares of Common
Stock into which the shares of Series A Preferred Stock were automatically
converted and (ii) the Corporation shall, at its option (the exercise of which
will be described in the Notice of Mandatory Conversion), either (A) deliver
certificates representing the shares of Common Stock to which the holders of the
Series A Preferred Stock are entitled without requiring the surrender of the
certificates which formerly represented shares of Series A Preferred Stock, or
(B) deliver certificates representing the shares of Common Stock to which the
holders of Series A Preferred Stock are entitled when the holder surrenders the
certificates representing Series A Preferred Stock issued before the Mandatory
Conversion Date and complies with the other requirements of subparagraph
4(a)(ii) (excluding the completion of the Notice of Election to Convert).
(c) The effective time of the conversion under subparagraph 4(a)
shall be immediately prior to the close of business on the day when all the
conditions in subparagraph 4(a)(ii) have been satisfied. The effective time of
the conversion under subparagraph 4(b) shall be the close of business on the
Mandatory Conversion Date. Except as otherwise permitted in clause (ii)(B) of
the last sentence of subparagraph 4(b), as soon as practical after the effective
time for conversion of shares of Series A Preferred Stock, the Corporation shall
deliver through the transfer agent a certificate for the number of full shares
of Common Stock issuable upon the conversion, a check for any fractional share
and a new certificate representing the unconverted portion, if any, of the
shares of Series A Preferred Stock represented by the certificate or
certificates surrendered for conversion. Except in the case of a conversion
pursuant to subparagraph 4(b) above, no payment or adjustment will be made for
accrued and unpaid dividends on converted shares of Series A Preferred Stock or
dividends on any Common Stock issued. However, dividends will be paid on any
Dividend Payment Date with respect to Series A Preferred Stock surrendered for
conversion after a record date for the payment of a dividend to the registered
holder of Series A Preferred Stock on such record date. If a holder of Series A
Preferred Stock converts more than one share at a time the number of full shares
of Common Stock issuable upon conversion shall be based on the total value of
all shares of Series A Preferred Stock converted. If the last day on which
Series A Preferred Stock may be converted is not a Business Day in a place where
the Corporation or the transfer agent is located, Series A Preferred Stock may
be surrendered for conversion on the next succeeding day that is a Business Day.
Each conversion will be deemed to have been effected at the effective time
provided above, and the person in whose name a certificate for shares of Common
Stock is to be issued upon a conversion will be deemed to have become the holder
of record of the shares of Common Stock represented by that certificate at such
effective time.
(d) The Corporation will not issue a fractional share of Common Stock
upon conversion of Series A Preferred Stock. Instead the Corporation will
deliver its check for the current market value of the fractional share. The
current market value of a fraction of a share is determined as follows:
Multiply the current market price of a full share by the fraction. Round the
result to the nearest cent. The current market price of a share of Common Stock
is the Quoted Price of the Common Stock on the last Trading Day prior to the
date of conversion.
(e) If a holder converts shares of Series A Preferred Stock, the
Corporation shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of shares of Common Stock upon the conversion. However, the
holder shall pay any such tax which is due because the shares are issued in name
other than the holder's name.
7
<PAGE>
(f) The Corporation has reserved and shall continue to reserve out of
its authorized but unissued Common Stock or its Common Stock held in treasury
enough shares of Common Stock to permit the conversion of the Series A Preferred
Stock in full. All shares of Common Stock which may be issued upon conversion
of Series A Preferred Stock shall be fully paid and nonassessable. The
Corporation will use its best efforts to comply with all securities laws
regulating the offer and delivery of shares of Common Stock upon conversion of
Series A Preferred Stock and will use its best efforts to list such shares on
each national securities exchange on which the Common Stock is listed.
(g) If the Corporation:
(i) pays a dividend or makes a distribution on any shares of
its capital stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares; or
(iv) issues by reclassification of its Common Stock any shares
of its capital stock;
then the Conversion Rate in effect immediately prior to such action shall be
adjusted so that the holder of Series A Preferred Stock thereafter converted may
receive the number of shares of capital stock of the Corporation which he would
have owned immediately following such action if he had converted Series A
Preferred Stock immediately prior to such action. The adjustment shall become
effective immediately after the record date in the case of dividend or
distribution and immediately after the effective date of a subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur. If, after an adjustment referred
to in clauses (i) through (iv) above, a holder of Series A Preferred Stock upon
conversion of it may receive shares of two or more classes of capital stock of
the Corporation, the Corporation shall determine the allocation of the adjusted
Conversion Rate between the classes of capital stock. After such allocation,
the Conversion Rate of each class of capital stock shall thereafter be subject
to adjustment on terms comparable to those applicable to Common Stock in this
subparagraph (g).
(h) If the Corporation distributes any rights or warrants to all
holders of its Common Stock entitling them for a period expiring within sixty
(60) days after the record date mentioned below to purchase shares of Common
Stock at a price per share less than the current market price per
8
<PAGE>
share on that record date, the Conversion Rate shall be adjusted in accordance
with the following formula:
N X P
-----
O + M
--------
C'= C x O + N
where:
C' = the adjusted Conversion Rate.
C = the then current Conversion Rate.
O = the number of shares of Common Stock outstanding on the
record date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares of
Common Stock.
M = the current market price per share of Common Stock on the
record date.
The adjustment shall be made successively whenever any such rights or warrants
are issued and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the rights or warrants. If at
the end of the period during which such warrants or rights are exercisable, not
all warrants or rights shall have been exercised, the Conversion Rate shall be
immediately readjusted to what it would have been if "N" in the above formula
had been the number of shares actually issued.
(i) If the Corporation distributes to all holders of shares of its
Common Stock (i) any shares of any class of capital stock of the Corporation
other than its Common Stock, (ii) any evidence of indebtedness of the
Corporation or any subsidiary of the Corporation, (iii) any other assets of the
Corporation, or (iv) any rights, options or warrants to acquire any of the
foregoing (other than rights, options or warrants referred to in subparagraph
4(h) above), which shares, evidences of indebtedness, other assets or rights,
options or warrants have an aggregate fair market value on the date of such
distribution in excess of the permitted dividend amount (as defined below), the
Conversion Rate shall be adjusted in accordance with the following formula:
M - F
-------
C'= C x M
where:
C' = the adjusted Conversion Rate.
C = the then current Conversion Rate.
M = the current market price per share of Common Stock on the
record date mentioned below.
9
<PAGE>
F = the fair market value on the record date of the capital
stock, indebtedness, rights, options or warrants applicable
to one share of Common Stock. The Board of Directors of the
Corporation shall determine the fair market value.
The adjustment shall be made successively whenever any such distribution is made
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution. The
permitted dividend amount on any date shall be an amount equal to or less than
(x) five percent (5%) of the product of the current market price of the Common
Stock on the date of declaration by the Board of Directors of the Corporation of
such dividend or distribution times the number of shares of Common Stock
outstanding on such date, minus (y) the aggregate of the value of all dividends
or distributions (other than dividends or distributions referred to in
subparagraphs 4(g) and 4(h) above) paid to holders of Common Stock during the
twelve-month period ending on such date. Notwithstanding the foregoing, the
permitted dividend amount shall be zero with respect to any dividends or
distributions not paid out of consolidated current earnings as shown on the
books of the Corporation.
(j) If the Corporation issues shares of Common Stock for a
consideration per share less than the current market price per share on the date
the Corporation fixes the offering price of such additional shares, the
Conversion Rate shall be adjusted in accordance with the following formula:
O + P
----
M
-------
C'= C x A
where:
C' = the adjusted Conversion Rate.
C = the then current Conversion Rate.
O = the number of shares outstanding immediately prior to the
issuance of such additional shares.
P = the aggregate consideration received for the issuance of
such additional shares.
M = the current market price per share on the date of issuance
of such additional shares.
A = the number of shares outstanding immediately after the
issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance. This
subparagraph 4(j) does not apply to (i) any transaction or issuance described in
subparagraph 4(h) or 4(i) above or subparagraph 4(k) below, (ii) the conversion
of Series A Preferred Stock, or the conversion, exchange or exercise of other
securities convertible into or exchangeable or exercisable for Common Stock,
(iii) Common Stock issued to the Corporation's employees under bona fide
employee benefit plans adopted by the Board of Directors of the Corporation and
approved by the holders of Common Stock when required by law, if such Common
10
<PAGE>
Stock would otherwise by covered by this subparagraph 4(j), (iv) Common Stock
issued to acquire, or in the acquisition of, all or any portion of a business as
a going concern, in an arm's-length transaction between the Corporation and an
unaffiliated third party, whether such acquisition shall be effected by purchase
of assets, exchange of securities, merger, consolidation or otherwise, or (v)
Common Stock issued in a bona fide public offering pursuant to a firm commitment
underwriting.
(k) If the Corporation issues any options, warrants or other
securities convertible into or exchangeable or exercisable for Common Stock
(other than Series A Preferred Stock or securities issued in transactions
described in subparagraph 4(h) or 4(i) above) and for a consideration per share
of Common Stock initially deliverable upon conversion, exchange or exercise of
such securities less than the current market price per share on the date of
issuance of such securities, the Conversion Rate shall be adjusted in accordance
with the following formula:
O + P
-
M
------
C'= C x O + D
where:
C' = the adjusted Conversion Rate.
C = the then current Conversion Rate.
O = the number of shares outstanding immediately prior to the
issuance of such securities.
P = the aggregate consideration received for the issuance of
such securities.
M = the current market price per share on the date of issuance
of such securities.
D = the maximum number of shares deliverable upon conversion or
in exchange for or upon exercise of such securities at the
initial conversion, exchange or exercise rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance. If all of
the Common Stock deliverable upon conversion, exchange or exercise of such
securities has not been issued when such securities are no longer outstanding,
then the Conversion Rate shall promptly be readjusted to the Conversion Rate
which would then be in effect had the adjustment upon the issuance of such
securities been made on the basis of the actual number of shares of Common Stock
issued upon conversion, exchange or exercise of such securities. This
subparagraph 4(k) does not apply to (i) the issuance of any such securities to
acquire, or in the acquisition of, all or any portion of a business as a going
concern, in an arm's-length transaction between the Corporation and an
unaffiliated third party, whether such acquisition shall be effected by purchase
of assets, exchange of securities, merger, consolidation or otherwise, (ii) the
issuance of any such securities in a bona fide public offering pursuant to a
firm commitment underwriting, or (iii) the issuance of any such securities to
the Corporation's employees under bona fide employee benefit plans adopted by
the Board of Directors of the Corporation and approved by the holders of Common
Stock when required by law, if such securities would otherwise by covered by
this subparagraph 4(k).
11
<PAGE>
(l) In subparagraphs 4(h), 4(i), 4(j) and 4(k) above, the current
market price per share of Common Stock on any date is the average of the Quoted
Prices for thirty (30) consecutive Trading Days commencing forty-five (45)
Trading Days before the date in question.
(m) For purposes of any computation respecting consideration received
pursuant to subparagraphs 4(j) and 4(k) above, the following shall apply:
(i) in case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in
no case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Corporation for any underwriting of the issue or
otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined by the Board of Directors of the Corporation (irrespective of
the accounting treatment thereof); and
(iii) in the case of the issuance of options, warrants or other
securities convertible into or exchangeable or exercisable for shares, the
aggregate consideration received therefor shall be deemed to be the
consideration received by the Corporation for the issuance of such options,
warrants or other securities plus the additional minimum consideration, if
any, to be received by the Corporation upon the conversion or exchange or
exercise thereof (the consideration in each case to be determined in the
same manner as provided in clauses (i) and (ii) of this subparagraph 4(m)).
(n) No adjustment in the Conversion Rate need be made unless the
adjustment would require an increase or decrease of at least one percent (1%) in
the Conversion Rate. Any adjustments that are not made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this paragraph 4 shall be made to the nearest cent or to the nearest 1/100th of
a share, as the case may be.
(o) No adjustment in the Conversion Rate need be made under this
paragraph 4 for (i) rights to purchase Common Stock pursuant to a Corporation
plan for reinvestment of dividends or interest, or (ii) any change in the par
value or no par value of the Common Stock, and in no event shall any adjustment
made under this paragraph 4 reduce the Conversion Rate below the par value of
the Common Stock. If an adjustment is made to the Conversion Rate upon the
establishment of a record date for a distribution subject to subparagraphs 4(h)
or 4(i) above and if such distribution is subsequently cancelled, the Conversion
Rate then in effect shall be readjusted, effective as of the date when the Board
of Directors of the Corporation determines to cancel such distribution, to the
Conversion Rate which would have been in effect if such record date had not been
fixed. No adjustment in the Conversion Rate need be made under subparagraphs
4(h) and 4(i) above if the Corporation issues or distributes to each holder of
Series A Preferred Stock the shares of Common Stock, evidences of indebtedness,
assets, rights, options or warrants referred to in those subparagraphs which
each holder would have been entitled to receive had Series A Preferred Stock
been converted into Common Stock prior to the happening of such event or the
record date with respect thereto.
(p) Whenever the Conversion Rate is adjusted, the Corporation shall
promptly mail to holders of Series A Preferred Stock, first class, postage
prepaid, a notice of the adjustment. The Corporation shall file with the
transfer agent, if any, for Series A Preferred Stock a certificate from the
12
<PAGE>
Corporation's independent public accountants briefly stating the facts requiring
the adjustment and the manner of computing it. Subject to subparagraph 4(u)
below, the certificate shall be conclusive evidence that the adjustment is
correct.
(q) The Corporation from time to time may reduce the Conversion Rate
by any amount for any period of time if the period is at least twenty (20)
Business Days and if the reduction is irrevocable during the period, but in no
event may the Conversion Rate be less than the par value of a share of Common
Stock. Whenever the Conversion Rate is reduced, the Corporation shall mail to
holders of Series A Preferred Stock a notice of the reduction. The Corporation
shall mail, first class, postage prepaid, the notice at least 15 days before the
date the reduced conversion price takes effect. The notice shall state the
reduced conversion price and the period it will be in effect. A reduction of
the Conversion Rate does not change or adjust the Conversion Rate otherwise in
effect for purposes of subparagraphs 4(g), 4(h), 4(i), 4(j) and 4(k) above.
(r) If:
(i) the Corporation takes any action which would require an
adjustment in the Conversion Rate pursuant to subparagraph 4(h) or 4(i)
above, or clause (iv) of subparagraph 4(g) above;
(ii) the Corporation consolidates or merges with, or transfers
all or substantially all of its assets to, another corporation, and
stockholders of the Corporation must approve the transaction; or
(iii) there is a dissolution or liquidation of the Corporation;
a holder of Series A Preferred Stock may want to convert such stock into shares
of Common Stock prior to the record date for or the effective date of the
transaction so that he may receive the rights, warrants, securities or assets
which a holder of shares of Common Stock on that date may receive. Therefore,
the Corporation shall mail to such holders, first class, postage prepaid, a
notice stating the proposed record or effective date, as the case may be. The
Corporation shall mail the notice at least ten (10) days before such date.
Failure to mail the notice or any defect in it shall not affect the validity of
any transaction referred to in clause (i), (ii) or (iii) of this subparagraph
4(h). If a conversion of any shares of Series A Preferred Stock is to be made
in connection with any transaction referred to in clause (i), (ii) or (iii) of
this subparagraph 4(q), such conversion may at the election of the holder be
conditioned upon the consummation of such transaction, in which case such
conversion shall not be deemed to be effective until immediately prior to the
consummation of such transaction.
(s) If the Corporation is party to a consolidation, merger, transfer
or lease which reclassifies or changes its Common Stock, upon consummation of
such transaction Series A Preferred Stock shall automatically become convertible
into the kind and amount of securities, cash or other assets which the holder of
Series A Preferred Stock would have owned immediately after the consolidation,
merger, transfer or lease if such holder had converted Series A Preferred Stock
immediately before the effective date of the transaction, appropriate adjustment
(as determined by the Board of Directors of the Corporation) shall be made in
the application of the provisions herein set forth with respect to the rights
and interests thereafter of the holders of Series A Preferred Stock, to the end
that the provisions set forth herein (including provisions with respect to
changes in and other adjustment of the Conversion Rate) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other
13
<PAGE>
securities or property thereafter deliverable upon the conversion of Series A
Preferred Stock. If this subparagraph 4(s) applies, subparagraph 4(g) does not
apply.
(t) In any case in which this paragraph 4 shall require that an
adjustment as a result of any event become effective from and after a record
date, the Corporation may elect to defer until after the occurrence of such
event (i) the issuance to the holder of any shares of Series A Preferred Stock
converted after such record date and before the occurrence of such event of the
additional shares of Common Stock issuable upon such conversion over and above
the shares issuable on the basis of the Conversion Rate in effect immediately
prior to adjustment and (ii) a check for any remaining fractional shares of
Common Stock as provided in subparagraph 4(d) above.
(u) Except as provided in the immediately following sentence, any
determination that the Corporation or its Board of Directors must make pursuant
to this paragraph 4 shall be conclusive. Whenever the Corporation or its Board
of Directors shall be required to make a determination under this paragraph 4,
such determination shall be made in good faith and may be challenged in good
faith by a majority of the holders of Series A Preferred Stock, and any dispute
shall be resolved, at the Corporation's expense, by an investment banking firm
of recognized national standing selected by the Corporation and acceptable to
such holders of Series A Preferred Stock.
(v) All shares of Series A Preferred Stock converted pursuant to this
paragraph 4 shall be retired and shall be restored to the status of authorized
and unissued shares of preferred stock, without designation as to series and may
thereafter be reissued as shares of any series of preferred stock.
5. REDEMPTION BY THE CORPORATION.
(a) On March 31, 2005 (the "Redemption Date"), the Corporation shall
be required to redeem (subject to the legal availability of funds therefor) all
outstanding shares of Series A Preferred Stock at a price in cash equal to the
Stated Value, plus accumulated and unpaid dividends, if any, to the date of
redemption (such amount, the "Redemption Price"). The Series A Preferred Stock
may not be redeemed at the option of the Corporation on or prior to the
Redemption Date. The Corporation shall take all actions required or permitted
under the General Corporation Law of the State of Delaware to permit such
redemption.
(b) Notice of any redemption shall be sent by or on behalf of the
Corporation not more than sixty (60) days nor less than thirty (30) days prior
to the Redemption Date, by first class mail, postage prepaid, to all holders of
record of the Series A Preferred Stock at their respective last addresses as
they shall appear on the books of the Corporation; provided, however, that no
failure to give such notice or any defect therein or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any shares of
Series A Preferred Stock except as to the holder to whom the Corporation has
failed to give notice or except as to the holder to whom notice was defective.
In addition to any information required by law or by the applicable rules of any
exchange upon which Series A Preferred Stock may be listed or admitted to
trading, such notice shall state: (i) the Redemption Date; (ii) the Redemption
Price; (iii) the place or places where certificates for such shares are to be
surrendered for payment of the Redemption Price; (iv) that dividends on the
shares to be redeemed will cease to accrue on the Redemption Date; (v) the
Conversion Rate; (vi) that Series A Preferred Stock called for redemption may be
converted at any time before the close of business on the Redemption Date; and
(vii) that holders of Series A Preferred Stock must satisfy the requirements of
subparagraph 4(a) above if such holders desire to convert such shares.
14
<PAGE>
(c) If notice has been mailed in accordance with subparagraph 5(b)
above and provided that on or before the Redemption Date specified in such
notice, all funds necessary for such redemption shall have been set aside by the
Corporation, separate and apart from its other funds in trust for the pro rata
benefit of the holders of the shares so called for redemption, so as to be, and
to continue to be available therefor, then, from and after the Redemption Date,
dividends on the shares of the Series A Preferred Stock so called for redemption
shall cease to accrue, and said shares shall no longer be deemed to be
outstanding and shall not have the status of shares of Series A Preferred Stock,
and all rights of the holders thereof as stockholders of the Corporation (except
the right to receive from the Corporation the Redemption Price) shall cease.
Upon surrender, in accordance with said notice, of the certificates for any
shares so redeemed (properly endorsed or assigned for transfer, if the
Corporation shall so require and the notice shall so state), such shares shall
be redeemed by the Corporation at the Redemption Price.
(d) Any funds deposited with a bank or trust company for the purpose
of redeeming Series A Preferred Stock shall be irrevocable except that:
(i) the Corporation shall be entitled to receive from such
bank or trust company the interest or other earnings, if any, earned on any
money so deposited in trust, and the holders of any shares redeemed shall
have no claim to such interest or other earnings; and
(ii) any balance of monies so deposited by the Corporation and
unclaimed by the holders of the Series A Preferred Stock entitled thereto
at the expiration of two (2) years from the applicable Redemption Date
shall be repaid, together with any interest or other earnings earned
thereon, to the Corporation, and after any such repayment, the holders of
the shares entitled to the funds so repaid to the Corporation shall look
only to the Corporation for payment without interest or other earnings.
(e) No Series A Preferred Stock may be redeemed except with funds
legally available for the payment of the Redemption Price.
(f) All shares of Series A Preferred Stock redeemed pursuant to this
paragraph 5 shall be retired and shall be restored to the status of authorized
and unissued shares of preferred stock, without designation as to series and may
thereafter be reissued as shares of any series of preferred stock other than
shares of Series A Preferred Stock.
6. VOTING RIGHTS.
(a) The holders of shares of Series A Preferred Stock will have the
right to vote on all matters on which the holders of shares of the Common Stock
are entitled to vote, or give written consent in lieu of a vote, on an "as
converted" basis with holders of shares of the Common Stock, as though part of
the same class as holders of Common Stock. Each person in whose name shares of
Series A Preferred Stock shall be registered on the record date for determining
the holders of the Series A Preferred Stock entitled to vote at any meeting of
stockholders (or adjournment thereof) or to consent to corporate action in
writing without a meeting shall be entitled to, at such meeting or with respect
to such action, one vote for each share of Common Stock of the Corporation into
which each share of Series A Preferred Stock registered in the name of such
person on such record date could be converted (with any fractional share
determined on an aggregate conversion basis being rounded to the nearest whole
share) on such record date. The holders of shares of Series A Preferred Stock
shall receive all notices of meetings of the holders of shares of Common Stock,
and all other notices and correspondence to the
15
<PAGE>
holders of shares of Common Stock provided by the Corporation, and shall be
entitled to take such actions, and shall have such rights, as are set forth in
this Certificate of Designation or are otherwise available to the holders of
shares of Common Stock in the Certificate of Incorporation and in the Bylaws of
the Corporation as are in effect on the date hereof, in each case with the same
effect as would be taken by holders of Series A Preferred Stock if deemed to be
holders of such number of shares of Common Stock as determined aforesaid. The
foregoing shall apply whether or not such holder actually converts such
securities.
(b) In addition to any vote or consent of stockholders required by
law or the Certificate of Incorporation, the consent of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the shares of Series A Preferred
Stock at the time outstanding, given in person or by proxy, either in writing
without a meeting or by vote at any meeting called for the purpose, shall be
necessary for effecting or validating:
(i) Any amendment, alteration or repeal of any of the
provisions of the Certificate of Incorporation, or of the by-laws of the
Corporation, which affects adversely the voting powers, preferences and
relative, participating, optional and other special rights of the holders
of shares of Series A Preferred Stock; provided, however, that the
amendment of the provisions of the Certificate of Incorporation so as to
authorize or create, or to increase the authorized amount of, or to issue
any class or any security convertible into any shares ranking on a parity
with or junior to the Series A Preferred Stock in the distribution of
assets on any liquidation, dissolution, or winding up of the Corporation or
in the payment of dividends, shall not be deemed to affect adversely the
voting powers, preferences and relative, participating, optional and other
special rights of the holders of shares of Series A Preferred Stock; or
(ii) Any authorization or creation of, or increase in the
authorized amount of, or issuance of, any shares of any class or any
security convertible into shares of any class ranking senior to shares of
Series A Preferred Stock in the distribution of assets on any liquidation,
dissolution, or winding up of the Corporation or in the payment of
dividends or otherwise.
(c) In addition to any vote or consent of stockholders required by
law or the Certificate of Incorporation, the consent of each holder, if any, of
at least $50,000,000 of Stated Value of the Series A Preferred Stock at the time
outstanding, given in person or by proxy, either in writing without a meeting or
by vote at any meeting called for the purpose, shall be necessary for effecting
any issuance of shares of Common Stock or any security convertible into shares
of Common Stock, but only if such issuance would result in the number of issued
and outstanding shares of Common Stock at the time outstanding (on a fully
diluted basis, after giving effect to such issuance) exceeding 100 million (as
appropriately adjusted for any stock dividends, splits, reverse splits,
combinations, recapitalizations and the like occurring after the Initial Issue
Date).
7. EXCLUSION OF OTHER RIGHTS.
Except as may otherwise be required by law, the shares of Series A
Preferred Stock shall not have any voting powers, preferences and relative,
participating, optional or other special rights, other than those specifically
set forth in this resolution (as such resolution may be amended from time to
time) and in the Certificate of Incorporation.
16
<PAGE>
8. HEADINGS OF SUBDIVISIONS.
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
9. SEVERABILITY OF PROVISIONS.
If any voting powers, preferences and relative, participating,
optional and other special rights of the Series A Preferred Stock and
qualifications, limitations and restrictions thereof set forth in this
resolution (as such resolution may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, all other voting powers, preferences and relative, participating,
optional and other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof set forth in this
resolution (as so amended) which can be given effect without the invalid,
unlawful or unenforceable voting powers, preferences and relative,
participating, optional and other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof shall, nevertheless, remain
in full force and effect, and no voting powers, preferences and relative,
participating, optional or other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof herein set forth shall be
deemed dependent upon any other such voting powers, preferences and relative,
participating, optional or other special rights of Series A Preferred Stock and
qualifications, limitations and restrictions thereof unless so expressed herein.
17
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
duly executed by Gary B. Sabin, its President and Chief Executive Officer, and
attested by Richard B. Muir, its Secretary, this 26th day of March, 1998.
EXCEL LEGACY CORPORATION
By: /s/ Gary B. Sabin
----------------------------------------
Gary B. Sabin, President and
Chief Executive Officer
ATTEST:
By: /s/ Richard B. Muir
---------------------------
Richard B. Muir, Secretary
18
<PAGE>
WARRANT TO PURCHASE SERIES A PREFERRED STOCK
OF
EXCEL LEGACY CORPORATION
This is to certify that, FOR VALUE RECEIVED, BANCBOSTON CAPITAL INC.
("BBC"), or assigns (the "Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from EXCEL LEGACY CORPORATION, a Delaware
corporation (the "Company"), 241,000 fully paid, validly issued and
nonassessable shares of Series A Liquidating Preference Convertible Preferred
Stock due 2005, par value $.01 per share, of the Company (the "Series A
Preferred Stock") at a price of $5.00 per share. Subject to Section (f) below,
the number of shares of Series A Preferred Stock to be received upon the
exercise of this Warrant may be adjusted upward from time to time as hereinafter
set forth, and the price to be paid for each share of Series A Preferred Stock
may be adjusted downward from time to time as hereinafter set forth. The shares
of Series A Preferred Stock deliverable upon such exercise, and as adjusted from
time to time, are hereinafter sometimes referred to as "Warrant Shares" and the
exercise price for a share of Series A Preferred Stock in effect at any time and
as adjusted from time to time is hereinafter sometimes referred to as the
"Exercise Price." All provisions of the Registration Rights Agreement of even
date herewith between the Company and BBC shall apply to the Warrant Shares and
to any shares of common stock, par value $.01 per share, of the Company (the
"Common Stock"), into which the Warrant Shares may be convertible, and the
Warrant Shares and the shares of Common Stock into which the Warrant Shares may
be convertible shall be included in any Registration Statement filed pursuant to
such Registration Rights Agreement.
<PAGE>
(a) EXERCISE OF WARRANT
(1) The Holder may exercise this Warrant in whole or in part at any
time or from time to time on or after the date hereof and until 5:00 p.m. (New
York time) on the earlier of seven days following the effective date of this
Warrant or April 30, 1998; provided, however, that if either such day is a
holiday or a day on which banking institutions in the State of New York are
authorized by law to close, then 5:00 p.m. (New York time) on the next
succeeding day which shall not be such a day; provided, further, that
notwithstanding any other provisions of this Warrant to the contrary, neither
Holder nor any of its affiliates shall be entitled to exercise the rights or
obligations under this Warrant to purchase securities of the Company pursuant to
this paragraph if, as a result of such purchase, Holder and all affiliates of
Holder, taken together, would own, control or have power to vote securities of
the Company in violation or contravention of any law or regulation or any
judgment, decree or order of any governmental authority then applicable to
Holder and its affiliates. For the purposes of this paragraph, a written
statement of Holder or of any of its affiliates exercising this Warrant,
delivered to the Company upon surrender of this Warrant, to the effect that
Holder or its affiliates, as the case may be, is legally entitled to exercise
its rights under this Warrant to purchase securities of the Company and that
such purchase will not violate or contravene any law or regulation or any
judgment, decree or order of any governmental authority then applicable to
Holder and its affiliates, shall be conclusive and binding upon the Company and
shall absolutely obligate and bind the Company to deliver, in accordance with
the other terms and provisions hereof, certificates or other appropriate
instruments representing the securities so purchased.
(2) The exercise of this Warrant shall be effected through the
presentation and surrender of the Warrant to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the Purchase
Form annexed hereto duly executed and accompanied by payment of the Exercise
Price for the number of Warrant Shares specified in such form. As soon as
practicable after each such exercise of this Warrant, but not later than seven
days from the date of such exercise, the
2
<PAGE>
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Series A Preferred Stock issuable
upon such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Series A
Preferred Stock shall not then be physically delivered to the Holder. The
Company shall pay all documentary, stamp or similar taxes and other governmental
charges that may be imposed with respect to the issuance of this Warrant, or the
issuance or delivery of any shares of Series A Preferred Stock upon exercise of
this Warrant; provided, however, that if shares of Series A Preferred Stock are
to be delivered in a name other than the name of the registered holder of the
Warrant being exercised, then no such delivery shall be made unless the person
requesting the same has paid to the Company the amount of transfer taxes or
charges incident thereto, if any.
(b) RESERVATION OF SHARES; FULLY PAID AND NONASSESSABLE; ETC. The Company
shall at all times reserve for issuance and/or delivery upon exercise of this
Warrant such number of shares of its Series A Preferred Stock as shall be
required for issuance and delivery upon exercise of the Warrant. Upon such
issuance the Warrant Shares shall be fully paid and nonassessable, free and
clear of all liens, claims, taxes, encumbrances and charges whatsoever with
respect to the issue thereof and free from all preemptive or similar rights.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market price of a share, which shall be deemed to be
the closing price on the
3
<PAGE>
last business day prior to the date of exercise of this Warrant. The closing
price shall be the average of the closing bid and ask prices of the Series A
Preferred Stock as reported by the National Association of Securities Dealers,
Inc. Automated Quotation System, National Market System, or, if the Series A
Preferred Stock is listed or admitted for trading on a securities exchange, the
average of the closing bid and ask prices of the Series A Preferred Stock on the
principal exchange on which the Series A Preferred Stock is listed or admitted
for trading (which shall be for consolidated trading if applicable to such
exchange), or if neither so reported or listed or admitted for trading, the
average of the closing bid and ask prices of the Series A Preferred Stock in the
over-the-counter market. In the event that the market price cannot be
determined as aforesaid, the Board of Directors of the Company shall determine
the market price on the basis of such quotations as it in good faith considers
appropriate.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Series
A Preferred Stock purchasable hereunder. Upon surrender of this Warrant to the
Company at its principal office or at the office of its stock transfer agent, if
any, with the Assignment Form annexed hereto duly executed and funds sufficient
to pay any transfer tax, the Company shall, without charge, execute and deliver
a new Warrant in the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other warrants which carry the same rights upon presentation
hereof at the principal office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term "Warrant" as used herein includes any Warrants into which this
Warrant may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification,
4
<PAGE>
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new Warrant of like tenor and date. Any such new
Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not this Warrant so lost,
stolen, destroyed, or mutilated shall be at any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) ANTI-DILUTION PROVISIONS. As provided in the introductory paragraph
of this Warrant, the Exercise Price in effect at any time may be decreased but
may not be increased, and the number and kind of securities purchasable upon the
exercise of this Warrant may be increased but not decreased from time to time
upon the happening of any of the following events if either or both such
adjustments would be required upon application of the following provisions;
PROVIDED that the foregoing shall not prevent an increase in the Exercise Price
or a decrease in the number and kind of securities purchasable upon the exercise
of this Warrant in the event of a stock split by the Company:
(1) In case the Company shall (i) pay a dividend or make a
distribution on any shares of its capital stock in shares of its Series A
Preferred Stock, (ii) subdivide its outstanding shares of Series A Preferred
Stock into a greater number of shares, (iii) combine its outstanding shares of
Series A Preferred Stock into a smaller number of shares, or (iv) issue by
reclassification of its Series A Preferred Stock any shares of its capital
stock, the Exercise Price in effect immediately prior to such action shall be
adjusted so that the Holder may receive the number of shares of Series A
Preferred Stock of the Company which he would have owned immediately following
such action if he had exercised this Warrant immediately prior to such action.
The adjustment shall become effective immediately after the record date in the
case of a dividend or distribution and immediately after the effective date of a
subdivision,
5
<PAGE>
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(2) In case the Company distributes any rights or warrants to all
holders of its Series A Preferred Stock entitling them for a period expiring
within 60 days after the record date mentioned below to purchase shares of
Series A Preferred Stock at a price (the "Subscription Price") less than the
current market price of such Series A Preferred Stock (as defined in Subsection
(8) below) on the record date, the Exercise Price shall be adjusted so that the
same shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the date of such issuance by a fraction, the
numerator of which shall be the sum of the number of shares of Series A
Preferred Stock outstanding on the record date mentioned below and the number of
additional shares of Series A Preferred Stock which the aggregate offering price
of the total number of shares of Series A Preferred Stock so offered would
purchase at such current market price per share of the Series A Preferred Stock,
and the denominator of which shall be the sum of the number of shares of Series
A Preferred Stock outstanding on such record date and the number of additional
shares of Series A Preferred Stock offered for subscription or purchase. Such
adjustment shall be made successively whenever such rights or warrants are
issued and shall become effective immediately. After the expiration of such
rights or warrants the Exercise Price shall be readjusted to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of Series A Preferred Stock (or securities convertible into Series A
Preferred Stock) actually delivered.
(3) In case the Company shall hereafter distribute to all holders of
its Series A Preferred Stock (i) any shares of any class of capital stock of the
Company other than its Series A Preferred Stock, (ii) any evidence of
indebtedness of the Company or any subsidiary of the Company (excluding cash
dividends or distributions and dividends or distributions referred to in
Subsection (1) above), (iii) any other assets of the Company, or (iv) any
rights, options or warrants (excluding those referred to in Subsection (2)
above), then in each such case the Exercise Price in effect thereafter shall
6
<PAGE>
be determined by multiplying the Exercise Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the current market price
per share of Series A Preferred Stock (as defined in Subsection (8) below) on
the record date mentioned below, less the fair market value on such record date
(as determined by the Company's Board of Directors) of said capital stock,
assets or evidences of indebtedness so distributed or of such rights, options or
warrants applicable to one share of Series A Preferred Stock, and the
denominator of which shall be the current market price per share of Series A
Preferred Stock on such record date. Such adjustment shall be made successively
whenever such a record date is fixed. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
distribution.
(4) In case the Company shall issue shares of its Series A Preferred
Stock excluding shares issued (i) in any of the transactions described in
Subsection (1) above, (ii) upon exercise of options granted to the Company's
employees under a plan or plans adopted by the Company's Board of Directors and
approved by its stockholders, if such shares would otherwise be included in this
Subsection (4) (but only to the extent that the exercise price per share of such
options is not less than the current market price per share of Series A
Preferred Stock (as defined in Subsection (8) below) on the date of grant),
(iii) pursuant to those certain Purchase Agreements dated as of March 31, 1998,
by and among the Company, the Holder and certain other parties listed on the
signature pages thereto, (iv) pursuant to that certain Warrant to Purchase
4,256,000 Shares of Series A Preferred Stock issued concurrently herewith to
Southeastern Asset Management, Inc., (v) to stockholders of any corporation
which merges into the Company in proportion to their stock holdings of such
corporation immediately prior to such merger, upon such merger, (vi) in a bona
fide public offering pursuant to a firm commitment underwriting where the
offering price per share of Series A Preferred Stock offered is not less than
the current market price per share of Series A Preferred Stock (as defined in
Subsection (8) below) on the date of such issuance, but only if no adjustment is
required pursuant to any other specific subsection of this Section (f) (without
7
<PAGE>
regard to Subsection (9) below) with respect to the transaction giving rise to
such rights, for a consideration per share (the "Offering Price") less than the
current market price per share (as defined in Subsection (8) below) on the date
the Company fixes the offering price of such additional shares, the Exercise
Price shall be adjusted immediately thereafter so that it shall equal the price
determined by multiplying the Exercise Price in effect immediately prior thereto
by a fraction, the numerator of which shall be the sum of the number of shares
of Series A Preferred Stock outstanding immediately prior to the issuance of
such additional shares and the number of shares of Series A Preferred Stock
which the aggregate consideration received determined as provided in Subsection
(7) below for the issuance of such additional shares would purchase at such
current market price per share of Series A Preferred Stock, and the denominator
of which shall be the number of shares of Series A Preferred Stock outstanding
immediately after the issuance of such additional shares.
(5) In case the Company shall issue any securities convertible into
or exchangeable for its Series A Preferred Stock (including warrants or options
to purchase Series A Preferred Stock) excluding securities issued in
transactions described in Subsections (2) and (3) above for a consideration per
share of Series A Preferred Stock (the "Conversion Price") initially deliverable
upon conversion or exchange of such securities determined as provided in
Subsection (7) below less than the current market price per share (as defined in
Subsection (8) below) in effect immediately prior to the issuance of such
securities, the Exercise Price shall be adjusted immediately thereafter so that
it shall equal the price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which shall be the sum
of the number of shares of Series A Preferred Stock outstanding immediately
prior to the issuance of such securities and the number of shares of Series A
Preferred Stock which the aggregate consideration received determined as
provided in Subsection (7) below for such securities would purchase at such
current market price per share of Series A Preferred Stock, and the denominator
of which shall be the sum of the number of shares of Series A Preferred Stock
outstanding immediately prior to such issuance and the maximum number of shares
of Series A Preferred Stock of
8
<PAGE>
the Company deliverable upon conversion of or in exchange for such securities at
the initial conversion or exchange price or rate.
(6) Whenever the Exercise Price payable upon exercise of each Warrant
is adjusted pursuant to Subsections (1), (2), (3), (4) and (5) above, the number
of Warrant Shares purchasable upon exercise of this Warrant shall simultaneously
be adjusted by multiplying the number of Warrant Shares then issuable upon
exercise of this Warrant by the Exercise Price then in effect and dividing the
product so obtained by the Exercise Price, as adjusted.
(7) For the purpose of any computation under Subsections (4) and (5)
above, the following shall apply:
(A) in the case of the issuance of shares of Series A Preferred
Stock for cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions, discounts or
other expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(B) in the case of the issuance of shares of Series A Preferred
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors of the Company (irrespective
of the accounting treatment thereof) on the basis of a record of values of
similar property or services; and
(C) in the case of the issuance of securities convertible into
or exchangeable for shares of Series A Preferred Stock, the aggregate
consideration received therefor shall be deemed to be the consideration received
by the Company for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the conversion or
exchange thereof, in each case to be determined in the same manner as provided
in clauses (A) and (B) of this Subsection (7).
9
<PAGE>
(8) For the purpose of any computation under Subsections (2), (3),
(4) and (5) above, the current market price per share of Series A Preferred
Stock at any date shall be deemed to be the average of the closing prices for 30
consecutive business days commencing 45 business days before such date. The
closing price for each day shall be the average of the closing bid and ask
prices of the Series A Preferred Stock as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System, National Market System,
or, if the Series A Preferred Stock is listed or admitted for trading on a
securities exchange, the average of the closing bid and ask prices of the Series
A Preferred Stock on the principal exchange on which the Series A Preferred
Stock is listed or admitted for trading (which shall be for consolidated trading
if applicable to such exchange), or if neither so reported or listed or admitted
for trading, the average of the closing bid and ask prices of the Series A
Preferred Stock in the over-the-counter market. In the event that the market
price cannot be determined as aforesaid, the Board of Directors of the Company
shall determine the market price on the basis of such quotations as it in good
faith considers appropriate.
(9) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least one percent in such
price; provided, however, that any adjustments which by reason of this
Subsection (6) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Section (f) shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in this Section
(f) to the contrary notwithstanding, the Company shall be entitled, but shall
not be required, to make such changes in the Exercise Price, in addition to
those required by this Section (f), as it shall determine, in its sole
discretion, to be advisable in order that any dividend or distribution in shares
of Series A Preferred Stock, or any subdivision, reclassification or combination
of Series A Preferred Stock, hereafter made by the Company shall not result in
any Federal income tax liability to the holders of Series A Preferred Stock or
securities convertible into Series A Preferred Stock (including this Warrant).
10
<PAGE>
(10) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 10 days after any request for such an
adjustment by the Holder, cause a notice setting forth the adjusted Exercise
Price and adjusted number of Warrant Shares issuable upon exercise of each
Warrant, and if requested, information describing the transactions giving rest
to such adjustments, to be mailed to the Holders at their last addresses
appearing in the Warrant Register, and shall cause a certified copy thereof to
be mailed to its transfer agent, if any. In the event the Company does not
provide the Holder with such notice and information within 10 days of a request
by the Holder, then notwithstanding the provisions of this Section (f), the
Exercise Price shall be immediately adjusted to equal the lowest Offering Price,
Subscription Price or Conversion Price, as applicable, since the date of this
Warrant, and the number of shares issuable upon exercise of this Warrant shall
be adjusted accordingly. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any computation required by this
Section (f), and a certificate signed by such firm shall be conclusive evidence
of the correctness of such adjustment.
(11) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (1) above, the Holder of this Warrant thereafter shall
become entitled to receive any shares of the Company, other than Series A
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Series A Preferred Stock contained in Subsections (1) to (6),
inclusive above.
(12) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
11
<PAGE>
(13) Notwithstanding the foregoing, in no event shall the Exercise
Price be adjusted pursuant to this Section (f) to an amount in excess of the
Exercise Price then in effect, except in the case of a reverse-split or other
combination of the outstanding shares of Series A Preferred Stock.
(g) OFFICERS CERTIFICATE. Whenever the Exercise Price shall be adjusted
as required by the provisions of the foregoing Section, the Company shall
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Exercise Price determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment,
including a statement of the number of additional shares of Series A Preferred
Stock, if any, and such other facts as shall be necessary to show the reason for
and the manner of computing such adjustment. Each such officer's certificate
shall be made available at all reasonable times for inspection by the Holder or
any holder of a Warrant executed and delivered pursuant to Section (a) and the
Company shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Holder or any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Series A Preferred Stock, or (ii) if the Company shall offer to the
holders of Series A Preferred Stock for subscription or purchase by them any
share of any class or any other rights, or (iii) if any capital reorganization
of the Company, reclassification of the capital stock of the Company,
consolidation or merger of the Company with or into another corporation, sale,
lease or transfer of all or substantially all of the property and assets of the
Company to another corporation, or voluntary or involuntary dissolution,
liquidation or winding up of the Company shall be effected, or (iv) if action is
to be taken by holders of the Company's Series A Preferred Stock at a meeting or
by written consent, then in any such case, the Company shall cause to be mailed
by certified mail to the Holder, at least fifteen days prior the date specified
in (x), (y) or (z) below or, if earlier, the date a notice is sent to the
holders of the Company's Series A Preferred Stock with respect to such action,
as the case may be, a notice containing a brief description of the proposed
12
<PAGE>
action and stating the date on which (x) a record is to be taken for the purpose
of such dividend, distribution or rights, or (y) such reclassification,
reorganization, consolidation, merger, conveyance, lease, dissolution,
liquidation or winding up is to take place and the date, if any is to be fixed,
as of which the holders of Series A Preferred Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up, or (z) the stockholder action whether at a meeting or by written
consent is to take place.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Series A Preferred Stock of the Company, or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Series A Preferred Stock issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, the
Company or such successor, leasing or purchasing entity, as the case may be,
shall as a condition precedent to such transaction, cause effective provisions
to be made so that the Holder shall have the right thereafter by exercising this
Warrant at any time prior to the expiration of the Warrant, to purchase the kind
and number of shares of stock and other securities and amount of property
receivable upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Series A Preferred Stock which might have been purchased upon exercise of this
Warrant immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The foregoing provisions of this
Section (i) shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Series A Preferred Stock and to
successive consolidations, mergers, sales or
13
<PAGE>
conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Series A Preferred Stock shall be issued in exchange,
conversion, substitution or payment, in whole or in part, for a security of the
Company other than Series A Preferred Stock, any such issue shall be treated as
an issue of Series A Preferred Stock covered by the provisions of Subsection (1)
of Section (f) hereof.
(j) MISCELLANEOUS. This Warrant contains the entire agreement of the
Holder and the Company with respect to the subject matter hereof, and no
provision of this Warrant may be amended, modified, supplemented, changed,
waived, discharged or terminated unless both parties consent thereto in
writing. In case any one or more of the provisions contained in this Warrant
should be held to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. This Warrant shall
be binding upon and inure to the benefit of the Holder, the Company and their
respective successors and assigns. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Warrant as of the day
and year below written.
Dated: March 31, 1998
EXCEL LEGACY CORPORATION
By: /s/ Gary B. Sabin
------------------------------------
Name: Gary B. Sabin
------------------------------------
Title: President and Chief Executive Officer
------------------------------------
BANCBOSTON CAPITAL INC.
By: /s/ BancBoston Capital Inc.
------------------------------------
Name: BancBoston Capital Inc.
------------------------------------
Title: BancBoston Capital Inc.
------------------------------------
S-1
<PAGE>
PURCHASE FORM
Dated
-----------, -----
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _____________ shares of Series A Preferred Stock and
hereby makes payment of _____________ in payment of the actual exercise price
thereof.
Signature
------------------------
A-1
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________ hereby sells, assigns and transfers unto
Name
--------------------------------
(Please typewrite or print in block letters)
Address
-----------------------------
the right to purchase Series A Preferred Stock represented by this Warrant to
the extent of _______________ shares as to which such right is exercisable and
does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the same on the books of the Company with full power of substitution in
the premises.
Date
---------------, -----
Signature
---------------------------
A-2
<PAGE>
VOID AFTER 5:00 P.M. NEW YORK TIME, ON MARCH 21, 2000
WARRANT TO PURCHASE 4,256,000 SHARES OF SERIES A PREFERRED STOCK
WARRANT TO PURCHASE SERIES A PREFERRED STOCK
OF
EXCEL LEGACY CORPORATION
This is to certify that, FOR VALUE RECEIVED, SOUTHEASTERN ASSET MANAGEMENT,
INC., a Delaware corporation ("Southeastern"), for and on behalf of its
assignee, LONGLEAF PARTNERS REALTY FUND, A SERIES OF LONGLEAF PARTNERS FUNDS
TRUST, a Massachusetts business trust, or assigns (the "Holder"), is entitled to
purchase, subject to the provisions of this Warrant, from EXCEL LEGACY
CORPORATION, a Delaware corporation (the "Company"), 4,256,000 fully paid,
validly issued and nonassessable shares of Series A Liquidating Preference
Convertible Preferred Stock due 2005, par value $.01 per share, of the Company
(the "Series A Preferred Stock") at a price of $5.00 per share. Subject to
Section (f) below, the number of shares of Series A Preferred Stock to be
received upon the exercise of this Warrant may be adjusted upward from time to
time as hereinafter set forth, and the price to be paid for each share of Series
A Preferred Stock may be adjusted downward from time to time as hereinafter set
forth. The shares of Series A Preferred Stock deliverable upon such exercise,
and as adjusted from time to time, are hereinafter sometimes referred to as
"Warrant Shares" and the exercise price for a share of Series A Preferred Stock
in effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price." All provisions of the Registration Rights
Agreement of even date herewith between the Company and Southeastern or its
assignee, the Holder, shall apply to the Warrant Shares and to any shares of
common stock, par value $.01 per share, of the Company (the "Common Stock"),
into which the Warrant Shares may be convertible, and the Warrant Shares and the
shares of Common Stock into which the Warrant
<PAGE>
Shares may be convertible shall be included in any Registration Statement filed
pursuant to such Registration Rights Agreement.
(a) EXERCISE OF WARRANT
(1) The Holder may exercise this Warrant in whole or in part at any
time or from time to time on or after the date hereof and until 5:00 p.m. (New
York time) on the earlier of the second anniversary date of the effective date
of this Warrant or ninety days after the Company has issued additional common or
preferred equity in a public offering at an adjusted price of not less than
$5.00 per share; provided, however, that if either such day is a holiday or a
day on which banking institutions in the State of New York are authorized by law
to close, then 5:00 p.m. (New York time) on the next succeeding day which shall
not be such a day.
(2) Within seven days following written request by the Company
delivered to the Holder at any time or from time to time during the Exercise
Period, the Holder shall exercise this Warrant in whole or in part (as requested
by the Company), subject to each of the following pre-conditions:
(i) The Company shall have issued additional common or
preferred equity in a public offering at an adjusted price of not less than
$5.00 per share.
(ii) The Holder shall not be obligated to exercise this Warrant
if, after giving effect to such exercise, the exercise thereof would cause it to
violate any applicable provision of the Investment Company Act of 1940 or any
rule or regulation thereunder and, in addition, its Percentage Ownership (as
defined below) of the voting securities of the Company, including without
limitation, the Series A Preferred Stock, the Common Stock, the Warrant Shares,
any other shares of voting securities which may be outstanding, and any options
for voting securities exercisable within three years of the date of exercise of
the Warrant (collectively, the "Voting Securities") would exceed 20% of such
Voting Securities. For purposes hereof, "Percentage Ownership" at any date
shall equal a fraction, expressed as a percentage, the numerator of which shall
be the number of Voting Securities owned by the Holder
2
<PAGE>
on such date (giving effect to the whole or partial exercise of this Warrant, as
requested by the Company), and the denominator of which shall be the total
number of Voting Securities outstanding on such date (giving effect to the whole
or partial exercise of this Warrant, as requested by the Company).
(iii) After giving effect to the exercise of the Warrant as of
the date of the proposed exercise, the percentage of assets of the Holder which
would then be invested in "restricted" or "illiquid" securities (as defined in
and limited by the Holder's investment restrictions as stated in its Prospectus
or under any applicable provisions of the Investment Company Act of 1940 or
interpretations thereof by the Securities and Exchange Commission or its
Division of Investment Management), would not then exceed the maximum allowable
limitation. If this subsection (a)(2)(iii) would have the effect of limiting
the number of Warrant Shares which the Holder could otherwise acquire, the
Company, in its absolute discretion, will consider accepting and the Holder will
consider exchanging, subject to compliance with any applicable provisions of
law, other shares of stock then held by the Holder which are classified as
"restricted" or "illiquid" in order to facilitate the exercise of the Warrant
with respect to any Warrant Shares which would otherwise be limited by the
provisions hereof. If such an exchange of stock cannot be accomplished for any
reason, the Holder shall not be obligated to exercise the Warrant except to the
extent the exercise would otherwise be required hereunder. Nothing in this
subsection (a)(2)(iii) shall be construed as requiring the Company to accept
"restricted" or "illiquid" securities from the Holder in order to facilitate the
exercise of the Warrant.
(3) If during the Exercise Period and pursuant to the Certificate of
Designation of the Series A Preferred Stock, all of the outstanding shares of
Series A Preferred Stock are converted into shares of Common Stock and any part
of this Warrant remains unexercised at the time of such conversion, then such
part shall be automatically converted without any action on the part of the
Holder or the Company into the right to purchase, subject to the provisions of
this Warrant, the number of shares of Common Stock into which the Warrant Shares
deliverable upon exercise of this Warrant are then convertible, as the same may
have been adjusted from time to time, at a price per share equal to the
3
<PAGE>
Exercise Price, as the same may have been adjusted from time to time. Following
such conversion, all references herein to "Series A Preferred Stock" shall be
deemed to refer to "Common Stock," all references herein to "Warrant Shares"
shall be deemed to refer to the shares of Common Stock deliverable upon exercise
of this Warrant, and all references herein to "Exercise Price" shall be deemed
to refer to the exercise price for a share of Common Stock. The number of
shares of Common Stock to be received upon the exercise of this Warrant and the
price to be paid for each share of Common Stock may thereafter be adjusted from
time to time as hereinafter set forth.
(4) The exercise of this Warrant shall be effected through the
presentation and surrender of the Warrant to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the Purchase
Form annexed hereto duly executed and accompanied by payment of the Exercise
Price for the number of Warrant Shares specified in such form. As soon as
practicable after each such exercise of this Warrant, but not later than seven
days from the date of such exercise, the Company shall issue and deliver to the
Holder a certificate or certificates for the Warrant Shares issuable upon such
exercise, registered in the name of the Holder or its designee. If this Warrant
should be exercised in part only, the Company shall, upon surrender of this
Warrant for cancellation, execute and deliver a new Warrant evidencing the
rights of the Holder thereof to purchase the balance of the Warrant Shares
purchasable thereunder. Upon receipt by the Company of this Warrant at its
office, or by the stock transfer agent of the Company at its office, in proper
form for exercise, the Holder shall be deemed to be the holder of record of the
shares of Series A Preferred Stock issuable upon such exercise, notwithstanding
that the stock transfer books of the Company shall then be closed or that
certificates representing such shares of Series A Preferred Stock shall not then
be physically delivered to the Holder. The Company shall pay all documentary,
stamp or similar taxes and other governmental charges that may be imposed with
respect to the issuance of this Warrant, or the issuance or delivery of any
shares of Series A Preferred Stock upon exercise of this Warrant; provided,
however, that if shares of Series A Preferred Stock are to be delivered in a
name other than the name of the registered holder of the Warrant
4
<PAGE>
being exercised, then no such delivery shall be made unless the person
requesting the same has paid to the Company the amount of transfer taxes or
charges incident thereto, if any.
(b) RESERVATION OF SHARES; FULLY PAID AND NONASSESSABLE; ETC. The Company
shall at all times reserve for issuance and/or delivery upon exercise of this
Warrant such number of shares of its Series A Preferred Stock as shall be
required for issuance and delivery upon exercise of the Warrant. Upon such
issuance the Warrant Shares shall be fully paid and nonassessable, free and
clear of all liens, claims, taxes, encumbrances and charges whatsoever with
respect to the issue thereof and free from all preemptive or similar rights.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market price of a share, which shall be deemed to be
the closing price on the last business day prior to the date of exercise of this
Warrant. The closing price shall be the average of the closing bid and ask
prices of the Series A Preferred Stock as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System, National Market System,
or, if the Series A Preferred Stock is listed or admitted for trading on a
securities exchange, the average of the closing bid and ask prices of the Series
A Preferred Stock on the principal exchange on which the Series A Preferred
Stock is listed or admitted for trading (which shall be for consolidated trading
if applicable to such exchange), or if neither so reported or listed or admitted
for trading, the average of the closing bid and ask prices of the Series A
Preferred Stock in the over-the-counter market. In the event that the market
price cannot be determined as aforesaid, the Board of Directors of the Company
shall determine the market price on the basis of such quotations as it in good
faith considers appropriate.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other warrants of different
5
<PAGE>
denominations entitling the holder thereof to purchase in the aggregate the same
number of shares of Series A Preferred Stock purchasable hereunder. Upon
surrender of this Warrant to the Company at its principal office or at the
office of its stock transfer agent, if any, with the Assignment Form annexed
hereto duly executed and funds sufficient to pay any transfer tax, the Company
shall, without charge, execute and deliver a new Warrant in the name of the
assignee named in such instrument of assignment and this Warrant shall promptly
be cancelled. This Warrant may be divided or combined with other warrants which
carry the same rights upon presentation hereof at the principal office of the
Company or at the office of its stock transfer agent, if any, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued and signed by the Holder hereof. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new Warrant of like tenor and date. Any such new Warrant executed and
delivered shall constitute an additional contractual obligation on the part of
the Company, whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) ANTI-DILUTION PROVISIONS. As provided in the introductory paragraph
of this Warrant, the Exercise Price in effect at any time may be decreased but
may not be increased, and the number and kind of securities purchasable upon the
exercise of this Warrant may be increased but not decreased from time to time
upon the happening of any of the following events if either or both such
adjustments would be required upon application of the following provisions;
PROVIDED that the foregoing
6
<PAGE>
shall not prevent an increase in the Exercise Price or a decrease in the number
and kind of securities purchasable upon the exercise of this Warrant in the
event of a stock split by the Company:
(1) In case the Company shall (i) pay a dividend or make a
distribution on any shares of its capital stock in shares of its Series A
Preferred Stock, (ii) subdivide its outstanding shares of Series A Preferred
Stock into a greater number of shares, (iii) combine its outstanding shares of
Series A Preferred Stock into a smaller number of shares, or (iv) issue by
reclassification of its Series A Preferred Stock any shares of its capital
stock, the Exercise Price in effect immediately prior to such action shall be
adjusted so that the Holder may receive the number of shares of Series A
Preferred Stock of the Company which he would have owned immediately following
such action if he had exercised this Warrant immediately prior to such action.
The adjustment shall become effective immediately after the record date in the
case of a dividend or distribution and immediately after the effective date of a
subdivision, combination or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur.
(2) In case the Company distributes any rights or warrants to all
holders of its Series A Preferred Stock entitling them for a period expiring
within 60 days after the record date mentioned below to purchase shares of
Series A Preferred Stock at a price (the "Subscription Price") less than the
current market price of such Series A Preferred Stock (as defined in Subsection
(8) below) on the record date, the Exercise Price shall be adjusted so that the
same shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the date of such issuance by a fraction, the
numerator of which shall be the sum of the number of shares of Series A
Preferred Stock outstanding on the record date mentioned below and the number of
additional shares of Series A Preferred Stock which the aggregate offering price
of the total number of shares of Series A Preferred Stock so offered would
purchase at such current market price per share of the Series A Preferred Stock,
and the denominator of which shall be the sum of the number of shares of Series
A Preferred Stock outstanding on such record date and the number of additional
shares of Series A Preferred Stock offered for subscription or purchase.
7
<PAGE>
Such adjustment shall be made successively whenever such rights or warrants are
issued and shall become effective immediately. After the expiration of such
rights or warrants the Exercise Price shall be readjusted to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of Series A Preferred Stock (or securities convertible into Series A
Preferred Stock) actually delivered.
(3) In case the Company shall hereafter distribute to all holders of
its Series A Preferred Stock (i) any shares of any class of capital stock of the
Company other than its Series A Preferred Stock, (ii) any evidence of
indebtedness of the Company or any subsidiary of the Company (excluding cash
dividends or distributions and dividends or distributions referred to in
Subsection (1) above), (iii) any other assets of the Company, or (iv) any
rights, options or warrants (excluding those referred to in Subsection (2)
above), then in each such case the Exercise Price in effect thereafter shall be
determined by multiplying the Exercise Price in effect immediately prior thereto
by a fraction, the numerator of which shall be the current market price per
share of Series A Preferred Stock (as defined in Subsection (8) below) on the
record date mentioned below, less the fair market value on such record date (as
determined by the Company's Board of Directors) of said capital stock, assets or
evidences of indebtedness so distributed or of such rights, options or warrants
applicable to one share of Series A Preferred Stock, and the denominator of
which shall be the current market price per share of Series A Preferred Stock on
such record date. Such adjustment shall be made successively whenever such a
record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
distribution.
(4) In case the Company shall issue shares of its Series A Preferred
Stock excluding shares issued (i) in any of the transactions described in
Subsection (1) above, (ii) upon exercise of options granted to the Company's
employees under a plan or plans adopted by the Company's Board of Directors and
approved by its stockholders, if such shares would otherwise be included in this
Subsection (4) (but
8
<PAGE>
only to the extent that the exercise price per share of such options is not less
than the current market price per share of Series A Preferred Stock (as defined
in Subsection (8) below) on the date of grant), (iii) pursuant to those certain
Purchase Agreements dated as of March 31, 1998, by and among the Company, the
Holder and certain other parties listed on the signature pages thereto, (iv)
pursuant to that certain Warrant to Purchase 241,000 Shares of Series A
Preferred Stock issued concurrently herewith to BancBoston Capital Inc., (v) to
stockholders of any corporation which merges into the Company in proportion to
their stock holdings of such corporation immediately prior to such merger, upon
such merger, (vi) in a bona fide public offering pursuant to a firm commitment
underwriting where the offering price per share of Series A Preferred Stock
offered is not less than the current market price per share of Series A
Preferred Stock (as defined in Subsection (8) below) on the date of such
issuance, but only if no adjustment is required pursuant to any other specific
subsection of this Section (f) (without regard to Subsection (9) below) with
respect to the transaction giving rise to such rights, for a consideration per
share (the "Offering Price") less than the current market price per share (as
defined in Subsection (8) below) on the date the Company fixes the offering
price of such additional shares, the Exercise Price shall be adjusted
immediately thereafter so that it shall equal the price determined by
multiplying the Exercise Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of the number of shares of
Series A Preferred Stock outstanding immediately prior to the issuance of such
additional shares and the number of shares of Series A Preferred Stock which the
aggregate consideration received determined as provided in Subsection (7) below
for the issuance of such additional shares would purchase at such current market
price per share of Series A Preferred Stock, and the denominator of which shall
be the number of shares of Series A Preferred Stock outstanding immediately
after the issuance of such additional shares.
(5) In case the Company shall issue any securities convertible into
or exchangeable for its Series A Preferred Stock (including warrants or options
to purchase Series A Preferred Stock) excluding securities issued in
transactions described in Subsections (2) and (3) above for a consideration
9
<PAGE>
per share of Series A Preferred Stock (the "Conversion Price") initially
deliverable upon conversion or exchange of such securities determined as
provided in Subsection (7) below less than the current market price per share
(as defined in Subsection (8) below) in effect immediately prior to the issuance
of such securities, the Exercise Price shall be adjusted immediately thereafter
so that it shall equal the price determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, the numerator of which shall be
the sum of the number of shares of Series A Preferred Stock outstanding
immediately prior to the issuance of such securities and the number of shares of
Series A Preferred Stock which the aggregate consideration received determined
as provided in Subsection (7) below for such securities would purchase at such
current market price per share of Series A Preferred Stock, and the denominator
of which shall be the sum of the number of shares of Series A Preferred Stock
outstanding immediately prior to such issuance and the maximum number of shares
of Series A Preferred Stock of the Company deliverable upon conversion of or in
exchange for such securities at the initial conversion or exchange price or
rate.
(6) Whenever the Exercise Price payable upon exercise of each Warrant
is adjusted pursuant to Subsections (1), (2), (3), (4) and (5) above, the number
of Warrant Shares purchasable upon exercise of this Warrant shall simultaneously
be adjusted by multiplying the number of Warrant Shares then issuable upon
exercise of this Warrant by the Exercise Price then in effect and dividing the
product so obtained by the Exercise Price, as adjusted.
(7) For the purpose of any computation under Subsections (4) and (5)
above, the following shall apply:
(A) in the case of the issuance of shares of Series A Preferred
Stock for cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions, discounts or
other expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
10
<PAGE>
(B) in the case of the issuance of shares of Series A Preferred
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors of the Company (irrespective
of the accounting treatment thereof) on the basis of a record of values of
similar property or services; and
(C) in the case of the issuance of securities convertible into
or exchangeable for shares of Series A Preferred Stock, the aggregate
consideration received therefor shall be deemed to be the consideration received
by the Company for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the conversion or
exchange thereof, in each case to be determined in the same manner as provided
in clauses (A) and (B) of this Subsection (7).
(8) For the purpose of any computation under Subsections (2), (3),
(4) and (5) above, the current market price per share of Series A Preferred
Stock at any date shall be deemed to be the average of the closing prices for 30
consecutive business days commencing 45 business days before such date. The
closing price for each day shall be the average of the closing bid and ask
prices of the Series A Preferred Stock as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System, National Market System,
or, if the Series A Preferred Stock is listed or admitted for trading on a
securities exchange, the average of the closing bid and ask prices of the Series
A Preferred Stock on the principal exchange on which the Series A Preferred
Stock is listed or admitted for trading (which shall be for consolidated trading
if applicable to such exchange), or if neither so reported or listed or admitted
for trading, the average of the closing bid and ask prices of the Series A
Preferred Stock in the over-the-counter market. In the event that the market
price cannot be determined as aforesaid, the Board of Directors of the Company
shall determine the market price on the basis of such quotations as it in good
faith considers appropriate.
11
<PAGE>
(9) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least one percent in such
price; provided, however, that any adjustments which by reason of this
Subsection (6) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Section (f) shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in this Section
(f) to the contrary notwithstanding, the Company shall be entitled, but shall
not be required, to make such changes in the Exercise Price, in addition to
those required by this Section (f), as it shall determine, in its sole
discretion, to be advisable in order that any dividend or distribution in shares
of Series A Preferred Stock, or any subdivision, reclassification or combination
of Series A Preferred Stock, hereafter made by the Company shall not result in
any Federal income tax liability to the holders of Series A Preferred Stock or
securities convertible into Series A Preferred Stock (including this Warrant).
(10) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 10 days after any request for such an
adjustment by the Holder, cause a notice setting forth the adjusted Exercise
Price and adjusted number of Warrant Shares issuable upon exercise of each
Warrant, and if requested, information describing the transactions giving rest
to such adjustments, to be mailed to the Holders at their last addresses
appearing in the Warrant Register, and shall cause a certified copy thereof to
be mailed to its transfer agent, if any. In the event the Company does not
provide the Holder with such notice and information within 10 days of a request
by the Holder, then notwithstanding the provisions of this Section (f), the
Exercise Price shall be immediately adjusted to equal the lowest Offering Price,
Subscription Price or Conversion Price, as applicable, since the date of this
Warrant, and the number of shares issuable upon exercise of this Warrant shall
be adjusted accordingly. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may be the regular
accountants employed by the Company) to make any
12
<PAGE>
computation required by this Section (f), and a certificate signed by such firm
shall be conclusive evidence of the correctness of such adjustment.
(11) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (1) above, the Holder of this Warrant thereafter shall
become entitled to receive any shares of the Company, other than Series A
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Series A Preferred Stock contained in Subsections (1) to (6),
inclusive above.
(12) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
(13) Notwithstanding the foregoing, in no event shall the Exercise
Price be adjusted pursuant to this Section (f) to an amount in excess of the
Exercise Price then in effect, except in the case of a reverse-split or other
combination of the outstanding shares of Series A Preferred Stock.
(g) OFFICERS CERTIFICATE. Whenever the Exercise Price shall be adjusted
as required by the provisions of the foregoing Section, the Company shall
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Exercise Price determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment,
including a statement of the number of additional shares of Series A Preferred
Stock, if any, and such other facts as shall be necessary to show the reason for
and the manner of computing such adjustment. Each such officer's certificate
shall be made available at all reasonable times for inspection by the Holder or
any holder of a Warrant executed and delivered pursuant to Section (a) and the
Company shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Holder or any such holder.
13
<PAGE>
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Series A Preferred Stock, or (ii) if the Company shall offer to the
holders of Series A Preferred Stock for subscription or purchase by them any
share of any class or any other rights, or (iii) if any capital reorganization
of the Company, reclassification of the capital stock of the Company,
consolidation or merger of the Company with or into another corporation, sale,
lease or transfer of all or substantially all of the property and assets of the
Company to another corporation, or voluntary or involuntary dissolution,
liquidation or winding up of the Company shall be effected, or (iv) if action is
to be taken by holders of the Company's Series A Preferred Stock at a meeting or
by written consent, then in any such case, the Company shall cause to be mailed
by certified mail to the Holder, at least fifteen days prior the date specified
in (x), (y) or (z) below or, if earlier, the date a notice is sent to the
holders of the Company's Series A Preferred Stock with respect to such action,
as the case may be, a notice containing a brief description of the proposed
action and stating the date on which (x) a record is to be taken for the purpose
of such dividend, distribution or rights, or (y) such reclassification,
reorganization, consolidation, merger, conveyance, lease, dissolution,
liquidation or winding up is to take place and the date, if any is to be fixed,
as of which the holders of Series A Preferred Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up, or (z) the stockholder action whether at a meeting or by written
consent is to take place.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Series A Preferred Stock of the Company, or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Series A Preferred Stock issuable upon exercise of this
Warrant) or in case of any
14
<PAGE>
sale, lease or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, the Company or such successor, leasing
or purchasing entity, as the case may be, shall as a condition precedent to such
transaction, cause effective provisions to be made so that the Holder shall have
the right thereafter by exercising this Warrant at any time prior to the
expiration of the Warrant, to purchase the kind and number of shares of stock
and other securities and amount of property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Series A
Preferred Stock which might have been purchased upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Section (i) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Series A Preferred Stock and to successive consolidations,
mergers, sales or conveyances. In the event that in connection with any such
capital reorganization or reclassification, consolidation, merger, sale or
conveyance, additional shares of Series A Preferred Stock shall be issued in
exchange, conversion, substitution or payment, in whole or in part, for a
security of the Company other than Series A Preferred Stock, any such issue
shall be treated as an issue of Series A Preferred Stock covered by the
provisions of Subsection (1) of Section (f) hereof.
(j) MISCELLANEOUS. This Warrant contains the entire agreement of the
Holder and the Company with respect to the subject matter hereof, and no
provision of this Warrant may be amended, modified, supplemented, changed,
waived, discharged or terminated unless both parties consent thereto in
writing. In case any one or more of the provisions contained in this Warrant
should be held to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. This Warrant shall
be binding upon and inure to the benefit of the Holder, the Company and their
respective successors and
15
<PAGE>
assigns. This Warrant shall be governed by and construed in accordance with the
laws of the State of New York.
16
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Warrant as of the day
and year below written.
Dated: March 31, 1998
EXCEL LEGACY CORPORATION
By: /s/ GARY B. SABIN
-----------------------------------
Name: GARY B. SABIN
-----------------------------------
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
-----------------------------------
SOUTHEASTERN ASSET MANAGEMENT,
INC.
By: /s/ CHARLES D. REAVES
-----------------------------------
Name: CHARLES D. REAVES
-----------------------------------
Title: VICE PRESIDENT AND GENERAL COUNSEL
-----------------------------------
S-1
<PAGE>
PURCHASE FORM
Dated
----------, ----
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _____________ shares of Series A Preferred Stock and
hereby makes payment of _____________ in payment of the actual exercise price
thereof.
Signature
----------------------------
A-1
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ____________________ hereby sells, assigns and
transfers unto
Name
--------------------------------
(Please typewrite or print in block letters)
Address
------------------------------
the right to purchase Series A Preferred Stock represented by this Warrant to
the extent of _______________ shares as to which such right is exercisable and
does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the same on the books of the Company with full power of substitution in
the premises.
Date
--------------, ------
Signature
----------------------------
B-1
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement") is made and entered
into as of March 31, 1998, by and between EXCEL REALTY TRUST, INC., a Maryland
corporation ("Excel"), and EXCEL LEGACY CORPORATION, a Delaware corporation
("Legacy," and collectively with Excel, the "Parties"), effective as of the
Distribution Date (as hereinafter defined).
R E C I T A L S
WHEREAS, subject to certain conditions, Excel intends to spin-off certain
businesses and assets by distributing to Excel stockholders a special dividend
of one share of Legacy Common Stock for each share of Excel Common Stock held as
of the close of business on the Record Date (the "Distribution");
WHEREAS, in connection with the Distribution, Excel and Legacy have entered
into a Distribution Agreement of even date herewith (the "Distribution
Agreement");
WHEREAS, after the Distribution, Legacy will need certain management and
administrative services to be provided by Excel to Legacy for a period of time
from and after the Distribution Date; and
WHEREAS, in connection with the Distribution, Legacy has requested Excel to
provide, and Excel has agreed to provide, certain management and administrative
services to Legacy from and after the Distribution Date pursuant to the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Excel and Legacy agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings indicated below:
Distribution: the spin-off of Legacy pursuant to the Distribution
Agreement.
Distribution Agreement: the agreement described in the second recital of
this Agreement.
Distribution Date: the date on which the Distribution occurs.
<PAGE>
Employee Benefit Plan: any plan, policy, arrangement, contract or
agreement providing compensation benefits for any group of Excel Employees or
former Excel Employees or individual Excel Employee or former Excel Employee, or
the dependents or beneficiaries of any such Excel Employee or former Excel
Employee, whether formal or informal or written or unwritten, and including,
without limitation, any means, whether or not legally required, pursuant to
which any benefit is provided by Excel to any Excel Employee or former Excel
Employee or the beneficiaries of any such Excel Employee or former Excel
Employee, adopted or entered into by Excel prior to, upon or after the
Distribution. The term "Employee Benefit Plan" as used in this Agreement does
not include any contract, agreement or understanding entered into by Excel
relating to settlement of actual or potential Excel Employee related litigation
claims.
Excel Employee: any individual who is an employee or director of Excel and
is not a Legacy Employee and has not been designated as a Legacy Individual
under Section 6.2 hereof.
First Month: In the event that the Distribution Date does not fall on the
first day of a month, the month that includes the Distribution Date.
Full Month: A full calendar month during the Term (as defined in
Section 3).
Last Month: In the event that the Termination Date does not fall on the
last day of a month, the month that includes the Termination Date (as defined in
Section 3).
Legacy Business: any business or operation of Legacy which is, pursuant to
the Distribution Agreement, to be conducted by Legacy after the Distribution.
Legacy Employee: any individual who (i) is independently hired by Legacy
after the Distribution Date as an employee of Legacy, and (ii) is not an
employee or director of Excel.
Legacy Individual: any individual who (i) is designated in writing by
Excel and Legacy as a "Legacy Individual" for purposes of this Agreement in
accordance with Section 6.2 hereof and was an Excel Employee prior to such
designation, and (ii) is not a Legacy Employee or an Excel Employee.
Month: a Full Month, First Month or Last Month, as the case may be.
Monthly Fee: The amount payable by Legacy to Excel under Section 4.1
herein with respect to a particular Full Month or any First Month or Last Month.
Record Date: March 2, 1998.
2. ENGAGEMENT OF EXCEL. During the term of this Agreement, Excel shall
provide to Legacy certain management and administrative services ("Services"),
as more
2
<PAGE>
fully described and defined below, as may be necessary or desirable, or as
Legacy may reasonably request or require, in connection with the business,
operations and affairs of Legacy. "Services" means and includes, without
limitation, the furnishing of advice, assistance, guidance, equipment and the
services of Excel Employees and Legacy Individuals in connection with, among
other things, (i) the Legacy Business and (ii) the use of Excel's management
information and accounting system, the administration of insurance and worker's
compensation programs, legal and employee benefit services and the preparation
of payrolls.
3. TERM; TERMINATION. This Agreement shall commence as of the date hereof
and continue thereafter unless and until terminated by either party at any time
for any reason upon not less than thirty (30) days' prior written notice to the
other (the "Termination Date", with the term of this Agreement as set forth in
this Section 3 being referred to as the "Term").
4. PAYMENTS TO EXCEL.
4.1 GENERALLY.
(a) FULL MONTH. With respect to each Full Month, in
consideration of the Services provided by Excel hereunder, Legacy shall pay to
Excel fees equal to the product of:
(i) 1.15; and
(ii) the sum of (x) one-third of the aggregate amount
of all wages and salaries paid to Excel Employees during the Full Month, and (y)
two-thirds of the aggregate amount of all wages and salaries paid to Legacy
Individuals during the Full Month.
(b) FIRST MONTH AND LAST MONTH. With respect to any First
Month or Last Month, in consideration of the Services provided by Excel
hereunder, Legacy shall pay to Excel fees equal to the product of:
(i) 1.15;
(ii) the sum of (x) one-third of the aggregate amount
of all wages and salaries paid to Excel Employees during the First Month or Last
Month, as the case may be, and (y) two-thirds of the aggregate amount of all
wages and salaries paid to Legacy Individuals during the First Month or Last
Month, as the case may be; and
(iii) the number of days in the First Month or the Last
Month, as the case may be, which are included in the Term, divided by the total
number of days in the First Month or the Last Month, as the case may be.
3
<PAGE>
4.2 STATEMENT FROM EXCEL. Promptly and in any event not later than
ten (10) days following the end of each Month, Excel shall provide to Legacy a
statement setting forth (i) a list of the Excel Employees, (ii) a list of the
Legacy Individuals, (iii) the aggregate amount of all wages and salaries paid to
Excel Employees during the Month, and (iv) the aggregate amount of all wages and
salaries paid to Legacy Individuals during the Month.
4.3 PAYMENT BY LEGACY. Promptly and in any event not later than five
(5) days after delivery by Excel of each statement referred to in Section 4.2,
Legacy shall pay to Excel the Monthly Fee applicable to the Month to which such
statement relates.
5. EMPLOYEE BENEFIT PLANS. From and after the Distribution Date, Excel
shall (i) permit the Excel Employees to continue to participate in the Employee
Benefit Plans on the same basis as such persons participated immediately prior
to the Distribution Date, and (ii) permit each Legacy Individual to participate
in the Employee Benefit Plans after the Distribution Date on the same basis as
Excel Employees participated immediately prior to the date such Legacy
Individual was designated as such; provided, however, nothing contained in this
Agreement shall prohibit Excel from modifying or terminating any one or more of
the Employee Benefit Plans so long as such modification or termination shall
apply to all participants in such Employee Benefit Plans. Excel shall provide
Legacy with sixty (60) days' prior written notice of its intent to terminate any
Employee Benefit Plan or effect the modification thereof in a manner adverse to
either Legacy or a Legacy Individual; provided that no such notice shall be
required for any Employee Benefit Plan which terminates by its terms without any
action by Excel.
6. EMPLOYEES.
6.1 LEGACY'S HIRING OF EMPLOYEES. Nothing in this Agreement shall
prohibit Legacy from independently hiring one or more Legacy Employees;
provided, however, that (i) all wages, salaries, payroll taxes, and employee
benefits with respect to Legacy Employees shall be Legacy's sole responsibility,
and (ii) Legacy Employees shall not be subject to this Agreement.
6.2 EXCEL EMPLOYEE BECOMING LEGACY INDIVIDUAL. From time to time
after the Distribution Date, at such time as an Excel Employee regularly spends
more than 50% of his or her working time performing services for Legacy, he or
she may be designated in writing by Excel and Legacy as a "Legacy Individual"
for purposes of the Agreement (a "Designation"). For purposes of Section 4.1,
the Designation shall be effective on the first day of the month following the
date such writing is fully executed by Excel and Legacy. In addition, unless
otherwise agreed to in writing by Excel and Legacy, all Legacy Individuals will
remain employees of Excel and will not be Legacy Employees.
4
<PAGE>
7. GENERAL.
7.1 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the Parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
Parties, it being understood and agreed that no provision contained herein, and
no act of the Parties, shall be deemed to create any relationship between the
Parties other than the relationship set forth herein.
7.2 ACCESS TO INFORMATION; COOPERATION. Excel and Legacy and their
authorized agents shall be given reasonable access to and may take copies of all
information relating to the subjects of this Agreement (to the extent permitted
by federal and state confidentiality laws) in the custody of the other Party,
including any agent, contractor, subcontractor, agent or any other person or
entity under the contract of such Party.
7.3 ASSIGNMENT. Neither Party shall, without the prior written
consent of the other, have the right to assign any rights or delegate any
obligations under this Agreement.
7.4 HEADINGS. The headings used in this Agreement are inserted only
for the purpose of convenience and reference, and in no way define or limit the
scope or intent of any provision or part hereof.
7.5 SEVERABILITY OF PROVISIONS. Neither Excel nor Legacy intend to
violate statutory or common law by executing this Agreement. If any section,
sentence, paragraph, clause or combination of provisions in this Agreement is in
violation of any law, such sections, sentences, paragraphs, clauses or
combinations shall be inoperative and the remainder of this Agreement shall
remain in full force and effect and shall be binding upon the Parties.
7.6 PARTIES BOUND. This Agreement shall inure to the benefit of and
be binding upon the Parties hereto and their respective successors and permitted
assigns. Nothing herein, expressed or implied, shall be construed to give any
other person any legal or equitable rights hereunder.
7.7 NOTICES. All notices, consents, approvals and other
communications given or made pursuant hereto shall be in writing and shall be
deemed to have been duly given when delivered personally or by overnight courier
or three days after being mailed by registered or certified mail (postage
prepaid, return receipt requested) to the named representatives of the Parties
at the following addresses or at such other address for a Party as shall be
specified by like notice, except that notices of changes of address shall be
effective upon receipt):
5
<PAGE>
(a) if to Excel:
Excel Realty Trust, Inc.
16955 Via Del Campo, Suite 100
San Diego, California 92127
Attention: Gary B. Sabin
(b) if to Legacy:
Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, California 92127
Attention: Richard B. Muir
Legacy and Excel agree that, upon the request of either Party, the requested
Party will give copies of all of its notices, consents, approvals and other
communications hereunder to any lender to the requesting Party or other person
specified by such requesting Party.
7.8 FURTHER ACTION. Legacy and Excel each shall cooperate in good
faith and take such steps and execute such papers as may be reasonably requested
by the other Party to implement the terms and provisions of this Agreement.
7.9 WAIVER. Legacy and Excel each agree that the waiver of any
default under any term or condition of this Agreement shall not constitute a
waiver of any subsequent default or nullify the effectiveness of that term or
condition.
7.10 GOVERNING LAW. All controversies and disputes arising out of or
under this Agreement shall be determined pursuant to the laws of the State of
California, regardless of the laws that might be applied under applicable
principles of conflicts of laws.
7.11 ENTIRE AGREEMENT. This Agreement and the Distribution Agreement
constitute the entire understanding between the Parties hereto, and supersede
all prior written or oral communications, relating to the subject matter covered
by said agreements. To the extent that the terms of this Agreement and similar
terms of the Distribution Agreement are in conflict, this Agreement shall
govern. No amendment, modification, extension or failure to enforce any
condition of this Agreement by either Party shall be deemed a waiver of any of
its rights herein. This Agreement shall not be amended except by a writing
executed by the Parties.
7.12 DISPUTE RESOLUTION. Any dispute arising under this Agreement
shall be resolved by binding arbitration in the manner contemplated by Section
9.13 of the Distribution Agreement, including the attorneys fees provisions
referred to therein.
{SIGNATURE PAGE FOLLOWS}
6
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
EXCEL REALTY TRUST, INC., a Maryland
corporation
By: /s/ Gary B. Sabin
---------------------------------
Name: GARY B. SABIN
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
EXCEL LEGACY CORPORATION, a Delaware
corporation
By: /s/ Gary B. Sabin
---------------------------------
Name: GARY B. SABIN
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
S-1
<PAGE>
INTERCOMPANY AGREEMENT
This INTERCOMPANY AGREEMENT (the "Agreement") is made and entered into
as of the 31st day of March, 1998, by and between Excel Realty Trust, Inc., a
Maryland corporation ("Excel"), and Excel Legacy Corporation, a Delaware
corporation ("Legacy").
W I T N E S E T H:
WHEREAS, Excel may in certain circumstances determine that it is
precluded from pursuing, or is limited in the manner in which it pursues,
various business opportunities due to its status as a real estate investment
trust ("REIT") under Sections 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code");
WHEREAS, Legacy is a newly-formed corporation which was organized by
Excel for the purpose of identifying and making opportunistic real estate
investments that are not generally available to REITs; and
WHEREAS, in light of the purpose for which Legacy was formed, Excel
and Legacy desire to enter into this Agreement in order to provide to each other
a right of first opportunity and notification right with respect to certain
investment opportunities.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
1. DEFINITIONS. Except as otherwise may be expressly provided herein,
the following terms shall have the meanings set forth below:
(a) "Change in Control" shall mean a change in ownership or control
of a party effected through either of the following transactions:
(i) any person or related group of persons (other than such
party or a Controlled Affiliate of such party) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of securities possessing more
than fifty percent (50%) of the total combined voting power of such party's
outstanding securities; or
(ii) there is a change in the composition of such party's Board
of Directors over a period of thirty-six (36) consecutive months (or less)
such that a majority of the Board members (rounded up to the nearest whole
number) ceases, by reason of one or more proxy contests for the election of
Board members, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time such election or nomination was approved
by the Board; or
<PAGE>
(iii) there is a change in the composition of such party's
senior executive management such that both Gary B. Sabin and Richard B.
Muir cease to be employed by such party.
(b) "Controlled Affiliate" shall mean, with respect to a party, any
entity controlled by, controlling or under common control with such party.
(c) "Notice" shall have the meaning set forth in Section 2(a)(i)
hereof.
(d) "REIT Opportunity" shall mean a direct or indirect opportunity to
invest in neighborhood and community shopping centers, power centers, malls or
other conventional retail properties (including without limitation the
opportunity to provide services related to such real estate and to invest in
entities that invest primarily in or have a substantial portion of their assets
in such real estate), but not including office and industrial properties, single
tenant retail properties, entertainment/ retail/mixed-use development projects,
real estate mortgages, real estate derivatives, or entities that invest
primarily in or have a substantial portion of their assets in such real estate
assets. Excel shall have the right from time to time to provide written notice
to Legacy specifying certain criteria for a REIT Opportunity in addition to the
criteria specified above in this definition of REIT Opportunity. Any such
written notice from Excel may be modified or canceled by written notice given by
Excel at any time. This definition of REIT Opportunity shall be modified as
appropriate from time to time in accordance with any such written notices sent
by Excel.
(e) "Ten-Day Period" shall have the meaning set forth in Section
2(a)(i) hereof.
(f) "Withdrawal Date" shall have the meaning set forth in Section
2(a)(ii) hereof.
2. RIGHT OF FIRST OPPORTUNITY; NOTIFICATION RIGHT.
(a) RIGHT OF FIRST OPPORTUNITY.
(i) During the term of this Agreement, if Legacy develops a
REIT Opportunity, or if any REIT Opportunity otherwise becomes available to
Legacy, Legacy shall first offer such REIT Opportunity to Excel. The offer
shall be made by written notice (the "Notice") from Legacy to Excel, which
Notice shall contain a detailed description of the material terms and
conditions of the REIT Opportunity. Excel shall have ten days (the
"Ten-Day Period") from the date of receipt of the Notice to notify Legacy
in writing that it has accepted or rejected the REIT Opportunity. If Excel
does not respond by the end of the Ten-Day Period, Excel shall be deemed to
have rejected the REIT Opportunity. If Excel accepts a REIT Opportunity,
but subsequently decides not to pursue such opportunity or for any other
reason fails to consummate such opportunity, Excel shall immediately
provide written notice that it is no longer pursuing such REIT Opportunity
to Legacy.
(ii) If Excel rejects a REIT Opportunity, or accepts such REIT
Opportunity but thereafter provides, or is required by the provisions
hereof to provide, written notice to Legacy that it is no longer pursuing
such REIT Opportunity, Legacy shall, for a period of one year after the
Withdrawal Date (as hereinafter defined), be entitled to acquire the REIT
Opportunity (A) at a price, and on terms and conditions, that are not more
favorable to Legacy
2
<PAGE>
in any material respect than the price and terms and conditions set forth
in the Notice relating to such REIT Opportunity or (B) if Excel, at any
time after the Notice, negotiated a different price, terms or conditions
with the seller, then at a price, and on terms and conditions, that are not
more favorable to Legacy in any material respect than the price and terms
and conditions negotiated by Excel with the seller. If Legacy does not
enter into a binding agreement to acquire the REIT Opportunity within such
one-year period, or if the price and terms and conditions are more
favorable to Legacy in any material respect than the price and terms and
conditions set forth in the Notice (or, if applicable, than the price and
terms and conditions negotiated by Excel with the seller subsequent to the
Notice), Legacy shall again be required to comply with the procedures set
forth above in Section 2(a)(i) if it desires to acquire such REIT
Opportunity. The "Withdrawal Date" means any one of the following dates,
as applicable: (A) the date that Excel notifies Legacy that it has
rejected the REIT Opportunity, (B) if Excel does not respond to Legacy
regarding the REIT Opportunity, the expiration date of the Ten-Day Period,
or (C) if Excel accepts the REIT Opportunity but subsequently ceases to
pursue the opportunity, the earlier of (1) thirty (30) days after the date
on which Excel ceases to pursue the REIT Opportunity or (2) the date of
receipt by Legacy of written notice from Excel that it is no longer
pursuing the REIT Opportunity.
(b) NOTIFICATION RIGHT. In the event that either party hereto
develops or becomes aware of any investment opportunity during the term of this
Agreement (other than a REIT Opportunity), and such party is not interested in
pursuing such opportunity, or the opportunity is otherwise unavailable to such
party, such party shall immediately notify the other party of such opportunity
and provide to the other party a copy of all written information, and a
description of all material terms not set forth in writing, available to such
party concerning such opportunity.
3. GENERAL TERMS AND CONDITIONS FOR FIRST OPPORTUNITY/NOTIFICATION
RIGHTS.
(a) Unless waived or unless agreed to as part of an investment, each
party hereto shall bear its own expenses with respect to any opportunity to
which this Agreement is applicable, and each party agrees that it shall not be
entitled to any compensation from the other party with respect to any such
opportunity.
(b) A party shall not be required to comply with the right of first
opportunity and notification requirements set forth in this Agreement during any
period in which the other party or any Controlled Affiliate of such other party
is in default of this Agreement or any other agreement entered into by the
parties hereto or any of their Controlled Affiliates, if such default is
material and remains uncured for fifteen (15) days after receipt of notice
thereof.
(c) Any opportunity which is offered to and accepted by Excel under
this Agreement may be entered into by or on behalf of Excel or by any designee
which is a Controlled Affiliate of Excel. Any opportunity which is offered to
and accepted by Legacy under this Agreement may be entered into by or on behalf
of Legacy or by any designee which is a Controlled Affiliate of Legacy.
(d) All first opportunity and notification rights set forth in this
Agreement shall be subordinated to any seller consent and confidentiality
requirements; no party shall be required to comply with the first opportunity
and notification rights set forth in this Agreement to the extent such
compliance would violate any seller consent or confidentiality requirements.
3
<PAGE>
(e) While it is the intention of the parties to align their
businesses in accordance with the terms of this Agreement, each party shall act
independently in its own best interests, and neither party shall be considered a
partner or agent of the other party or owe any fiduciary or other common law
duties to the other party.
4. SPECIFIC PERFORMANCE. Each party hereto hereby acknowledges that the
obligations undertaken by it pursuant to this Agreement are unique and that the
other party would likely have no adequate remedy at law if such party shall fail
to perform its obligations hereunder, and such party therefor confirms that the
other party's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the other party. Accordingly,
in addition to any other remedies that a party hereto may have at law or in
equity, such party shall have the right to have all obligations, covenants,
agreements and other provisions of this Agreement specifically performed by the
other party hereto and the right to obtain a temporary restraining order or a
temporary or permanent injunction to secure specific performance and to prevent
a breach or threatened breach of this Agreement by the other party.
5. TERM. The term of this Agreement shall commence as of the date of
this Agreement and shall terminate upon the earlier of (a) the tenth (10th)
anniversary of the date of this Agreement, or (b) a Change in Control of either
party hereto. Notwithstanding the foregoing, a party hereto may terminate this
Agreement if the other party or any Controlled Affiliate of such other party is
in default of this Agreement or any other agreement entered into by the parties
hereto or any of their Controlled Affiliates, if such default is material and
remains uncured for fifteen (15) days after receipt of notice thereof.
6. MISCELLANEOUS.
(a) NOTICES. Notices shall be sent to the parties at the following
addresses:
Excel Realty Trust, Inc.
16955 Via Del Campo, Suite 100
San Diego, California 92127
Attn: Gary B. Sabin
Facsimile: (619) 485-8530
Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, California 92127
Attn: Richard B. Muir
Facsimile: (619) 485-8530
Notices may be hand-delivered or sent by certified mail, return
receipt requested, Federal Express or comparable overnight delivery service, or
facsimile. Notice shall be deemed received at the time delivered by hand, on
the fourth business day following deposit in the U.S. mail, and on the first
business day following deposit with Federal Express or other delivery service,
or transmission by facsimile. Any party to this Agreement may change its
address for notice by giving written notice to the other party at the address
and in accordance with the procedures provided above.
4
<PAGE>
(b) REASONABLE AND NECESSARY RESTRICTIONS. Each of the parties
hereto hereby acknowledges and agrees that the restrictions, prohibitions and
other provisions of this Agreement are reasonable, fair and equitable in scope,
term and duration, and are necessary to protect the legitimate business
interests of the parties hereto. Each party covenants that it will not sue to
challenge the enforceability of this Agreement or raise any equitable defense to
its enforcement.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. This Agreement shall not be assigned without the
express written consent of each of the parties hereto.
(d) AMENDMENTS; WAIVERS. No termination, cancellation, modification,
amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless such change or waiver is specifically set forth
in a writing signed by the party or parties to be bound thereby. The waiver of
any right or remedy with respect to any occurrence on one occasion shall not be
deemed a waiver of such right or remedy with respect to such occurrence on any
other occasion.
(e) CHOICE OF LAW. This Agreement and the rights and obligations of
the parties hereunder shall be governed by the laws of the State of California,
without regard to the principles of choice of law thereof.
(f) SEVERABILITY. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
(g) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(i) constitutes the entire agreement and supersedes all prior agreements,
understandings, negotiations and discussions, whether written or oral, between
the parties hereto with respect to the subject matter hereof, so that no such
external or separate agreement relating to the subject matter of this Agreement
shall have any effect or be binding, unless the same is referred to specifically
in this Agreement or is executed by the parties after the date hereof; and (ii)
is not intended to confer upon any other person any rights or remedies
hereunder, and shall not be enforceable by any party not a signatory to this
Agreement.
(h) HEADINGS. The headings of the sections hereof are inserted for
convenience of reference only and are not intended to be a part of or affect the
meaning or interpretation of this Agreement or of any term or provision hereof.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
5
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by one of its duly authorized officers, as of the date
first written above.
EXCEL REALTY TRUST, INC.
By: /s/ GARY B. SABIN
-------------------------------------------
Name: GARY B. SABIN
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
EXCEL LEGACY CORPORATION
By: /s/ GARY B. SABIN
-------------------------------------------
Name: GARY B. SABIN
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
S-1
<PAGE>
TAX SHARING AGREEMENT
TAX SHARING AGREEMENT, dated as of March 31, 1998, between Excel
Realty Trust, Inc., a Maryland corporation ("Excel"), and Excel Legacy
Corporation, a Delaware corporation and wholly-owned subsidiary of Excel
("Legacy").
WHEREAS, Excel is the parent corporation of an affiliated group of
corporations that join in filing consolidated federal Income Tax Returns and
certain consolidated, combined or unitary state Income Tax Returns;
WHEREAS, Legacy is a wholly-owned subsidiary of Excel and a member of
the Excel Group;
WHEREAS, pursuant to the Distribution Agreement (as hereinafter
defined), Excel presently intends to distribute all the common stock of Legacy
to its stockholders (the "Distribution"); and
WHEREAS, Excel and Legacy desire on behalf of themselves, their
subsidiaries and their successors to set forth their respective rights and
obligations with respect to Taxes (as hereinafter defined).
NOW THEREFORE, in consideration of their mutual promises, the parties
hereby agree as follows:
1. DEFINITIONS.
When used herein the following terms shall have the following
meanings:
"CLOSING DATE" -- the date the Distribution is consummated pursuant to
the terms of the Distribution Agreement.
"CODE" -- the Internal Revenue Code of 1986, as amended, or any
successor thereto, as in effect for the taxable year in question.
"DISTRIBUTION AGREEMENT" -- the Distribution Agreement dated March 31,
1998 between Excel and Legacy.
"EXCEL ASSETS" -- the retail properties and other assets (together
with any related liabilities) retained by Excel pursuant to the Distribution
Agreement.
"EXCEL GROUP" -- for any taxable year or period, Excel and each
corporation filing a consolidated federal Income Tax Return with Excel as the
parent corporation.
<PAGE>
"INCOME TAX(ES)" -- with respect to any corporation or group of
corporations, any and all Taxes to the extent based upon or measured by net
income (regardless of whether denominated as an "income tax," a "franchise tax"
or otherwise), imposed by any Taxing Authority, together with any related
interest, penalties or other additions thereto.
"IRS" -- the U.S. Internal Revenue Service.
"LEGACY ASSETS" -- the retail properties and other assets (together
with any related liabilities) distributed to Legacy pursuant to the Distribution
Agreement.
"LEGACY GROUP" -- Legacy and each corporation filing a consolidated
federal Income Tax Return with Legacy as the parent corporation.
"OTHER TAXES" -- Taxes other than Income Taxes.
"OVERDUE RATE" -- a rate of interest per annum that fluctuates with
the federal short-term rate established from time to time pursuant to Code
Section 6621(b).
"TAX(ES)" -- any net income, gross income, gross receipts, sales, use,
excise, franchise, transfer, payroll, premium, property or windfall profits tax,
alternative or add-on minimum tax, or other tax, fee or assessment, together
with any interest and any penalty, addition to tax or other additional amount
imposed by any Taxing Authority, whether any such tax is imposed directly or
through withholding.
"TAXING AUTHORITY" -- the IRS and any other domestic or foreign
governmental authority responsible for the administration of any Tax.
"TAX RETURN(S)" -- all returns, reports, estimates, information
statements, declarations and other filings relating to, or required to be filed
by any taxpayer in connection with, its liability for, or its payment or receipt
of any refund of, any Tax.
2. PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES
a. Excel shall prepare and timely file, or cause to be prepared
and timely filed, with the appropriate Taxing Authorities (i) all federal and
state Income and Other Tax Returns of the Excel Group and any member or members
thereof for all taxable years and periods ending on or before the Closing Date;
and (ii) all federal and state Income and Other Tax Returns of Excel for all
taxable years and periods beginning after the Closing Date. Excel shall pay, or
cause to be paid, all Taxes due with respect to Tax Returns described in this
subsection (a). Excel shall be entitled to all Tax refunds received or
receivable with respect to any and all Income and Other Taxes attributable to
the Excel Assets for all taxable years and periods.
b. Legacy shall prepare and timely file, or cause to be
prepared and timely filed, with the appropriate Taxing Authorities, all federal
and state Income and Other Tax Returns of the Legacy Group and any member or
members thereof for taxable years and periods
2
<PAGE>
beginning after the Closing Date. Legacy shall pay, or cause to be paid, all
Taxes due with respect to Tax Returns described in this subsection (b). Legacy
shall be entitled to all Tax refunds received or receivable with respect to any
and all Income and Other Taxes attributable to the Legacy Assets for all taxable
years and periods.
3. PAYMENTS.
a. METHOD. Unless the parties otherwise agree, all payments
made by a party pursuant to this Agreement shall be made by wire transfer to a
bank account designated from time to time by the other party. The paying party
shall also provide a notice of payment to the recipient.
b. INTEREST. If any payment is not timely paid, interest shall
accrue on the unpaid amount at the Overdue Rate. A payment will be deemed to be
timely paid only if actually received by the payee within five (5) days of the
receipt of notice from the other party that such payment is due.
c. CHARACTERIZATION. Any payment (other than interest thereon)
made hereunder shall be treated by all parties for all purposes as a nontaxable
intercompany settlement of liabilities existing immediately before the
Distribution or, to the extent appropriate, as a non-taxable dividend
distribution or capital contribution.
4. CONTESTS AND AUDITS; INDEMNIFICATION.
a. NOTICE. Upon the receipt by Excel or Legacy, as the case
may be, of notice of any pending or threatened Tax audit or assessment which may
affect the liability for Taxes that are subject to indemnification hereunder,
Excel or Legacy, as the case may be, shall promptly notify the other in writing
of the receipt of such notice.
b. CONTROL AND SETTLEMENT. From and after the Closing Date,
Excel shall have full control over, and the right to represent the interests of,
Excel and all other corporations involved in or affected by any Tax audit or
administrative, judicial or other proceeding relating, in whole or in part, to
Taxes that are subject to indemnification by Excel hereunder. Excel shall have
the right to employ counsel of its choice at its expense, and shall have the
ultimate control of the contest and any settlement or other resolution thereof.
Any liability for Taxes established pursuant to such proceeding shall be
allocated and paid in accordance with Section 2 of this Agreement.
c. AMENDMENT OF TAX RETURNS. Excel shall have sole control
over the preparation and filing of any and all amendments to Tax Returns
described in Section 2(a).
d. INDEMNIFICATION. Excel shall indemnify and hold harmless
Legacy and the Legacy Group against any and all Income and Other Taxes
specifically attributable to the Excel Assets for all taxable years and periods.
Legacy shall indemnify and hold harmless Excel
3
<PAGE>
against any and all Income and Other Taxes specifically attributable to the
Legacy Assets for all taxable years and periods.
5. COOPERATION; DOCUMENT RETENTION; CONFIDENTIALITY.
a. COOPERATION. Upon reasonable request, Excel and Legacy
shall promptly provide (and shall cause their respective affiliates to provide)
the requesting party with such cooperation and assistance, documents, and other
information, without charge, as may be necessary or reasonably helpful in
connection with (i) the preparation and filing of any original or amended Tax
Return, (ii) the conduct of any audit, appeal, protest or other examination or
any judicial or administrative proceeding involving to any extent Taxes or Tax
Returns within the scope of this Agreement, or (iii) the verification by a party
of an amount payable hereunder to, or receivable hereunder from, another party.
Such cooperation and assistance shall include, without limitation: (a) the
provision on demand of books, records, Tax Returns, documentation or other
information relating to any relevant Tax Return; (b) the execution of any
document that may be necessary or reasonably helpful in connection with the
filing of any Tax Return, or in connection with any audit, appeal, protest,
proceeding, suit or action of the type generally referred to in the preceding
sentence, including, without limitation, the execution of powers of attorney and
extensions of applicable statutes of limitations; (c) the prompt and timely
filing of appropriate claims for refund; and (d) the use of reasonable best
efforts to obtain any documentation from a governmental authority or a third
party that may be necessary or helpful in connection with the foregoing. Each
party shall make its employees and facilities available on a mutually convenient
basis to facilitate such cooperation.
b. RETENTION. Excel and Legacy shall retain or cause to be
retained all Tax Returns, and all books, records, schedules, workpapers, and
other documents relating thereto, which Tax Returns and other materials are
within the scope of this Agreement, until the expiration of the later of (i) all
applicable statutes of limitations (including any waivers or extensions
thereof), and (ii) any retention period required by law or pursuant to any
record retention agreement. The parties hereto shall notify each other in
writing of any waivers, extensions or expirations of applicable statutes of
limitations, and shall provide at least thirty (30) days prior written notice of
any intended destruction of the documents referred to in the preceding sentence.
A party giving such a notification shall not dispose of any of the foregoing
materials without first allowing the other party a reasonable opportunity to
copy them at such other party's expense.
c. CONFIDENTIALITY. Except as required by law or with the
prior written consent of the other party, all Tax Returns, documents, schedules,
work papers and similar items and all information contained therein, which Tax
Returns and other materials are within the scope of this Agreement, shall be
kept confidential by the parties hereto and their representatives, shall not be
disclosed to any other person or entity and shall be used only for the purposes
provided herein.
4
<PAGE>
6. MISCELLANEOUS.
a. EFFECTIVENESS. This Agreement shall be effective from and
after the Closing Date and shall survive until the expiration of all applicable
statutes of limitations with respect to taxable years and periods ending on or
before or including the Closing Date.
b. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter hereof.
This Agreement cancels and supersedes, as of the Closing Date, any and all other
agreements with respect to Taxes between Excel and Legacy.
c. SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby. In the event that any such provision is hereafter
held to be invalid, void or unenforceable, the parties hereto agree to use their
reasonable best efforts to find and employ an alternate means to achieve the
same or substantially the same result as that contemplated by such provision.
d. INDULGENCES, ETC. Neither the failure nor any delay on the
part of any party hereto to exercise any right under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right preclude any other or further exercise of the same or any other right, nor
shall any waiver of any right with respect to any occurrence be construed as a
waiver of such right with respect to any other occurrence.
e. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California
without regard to the conflict of law principles thereof, except with respect to
matters of law concerning the internal corporate affairs of any corporate entity
which is a party to or subject of this Agreement, and as to those matters the
law of the jurisdiction under which the respective entity derives its powers
shall govern.
f. NOTICES. All notices, requests, demands, statements, bills
and other communications under this Agreement shall be delivered in accordance
with Section 9.04 of the Distribution Agreement.
g. MODIFICATION OR AMENDMENT. This Agreement may be amended at
any time by written agreement executed and delivered by duly authorized officers
of Legacy and Excel.
h. SUCCESSORS AND ASSIGNS. Except by operation of law or in
connection with the sale of all or substantially all the assets of a party
hereto, a party's rights and obligations under this Agreement may not be
assigned without the prior written consent of the other party. All of the
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and permitted assigns.
5
<PAGE>
i. THIRD-PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto and shall not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without this Agreement.
j. OTHER. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all of such counterparts shall together constitute one and the same
instrument. The section numbers and captions herein are for convenience of
reference only, do not constitute part of this Agreement and shall not be deemed
to limit or otherwise affect any of the provisions hereof.
k. PREDECESSORS AND SUCCESSORS. To the extent necessary to
give effect to the purposes of this Agreement, any reference to any corporation
shall also include any predecessor or successor thereto, by operation of law or
otherwise.
l. TAX ELECTIONS. Nothing in this Agreement is intended to
change or otherwise affect any previous tax election made by or on behalf of the
Excel Group, and Excel shall have sole discretion to make or change any and all
elections affecting the Excel Group or any member or members thereof for all
taxable years and periods ending on or before the Closing Date.
m. COSTS AND EXPENSES. Unless otherwise specifically provided
herein, each party agrees to pay its own costs and expenses resulting from the
fulfillment of its respective obligations hereunder.
n. DISPUTES. Any dispute between the parties hereunder shall
be resolved in accordance with Section 9.13 of the Distribution Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
EXCEL REALTY TRUST, INC., A MARYLAND
CORPORATION.
By: /s/ GARY B. SABIN
---------------------------------
Name: GARY B. SABIN
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
EXCEL LEGACY CORPORATION, A DELAWARE
CORPORATION
By: /s/ GARY B. SABIN
---------------------------------
Name: GARY B. SABIN
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
S-1
<PAGE>
TRANSITIONAL SERVICES AGREEMENT
This Transitional Services Agreement (this "Agreement") is made as of this
31st day of March, 1998, between Excel Realty Trust, Inc., a Maryland
corporation ("Excel"), and Excel Legacy Corporation, a Delaware corporation
("Legacy").
RECITALS
WHEREAS, pursuant to a Distribution Agreement dated as of March 31, 1998,
(the "Distribution Agreement") between Excel, Legacy and ERT Development
Corporation, a Delaware corporation ("EDV"), Excel and EDV will (i) transfer
certain real properties (the "Properties"), notes receivable (the "Notes"), and
all other assets and liabilities of Excel and EDV related thereto (collectively,
the "Legacy Business") to Legacy; (ii) a distribution by Legacy of all of the
outstanding shares of common stock, par value $.0001 per share, of Legacy (the
"Legacy Common Stock") to Excel; and (iii) a special dividend by Excel to the
stockholders of record of Excel's common stock, consisting of the distribution
on a one-for-one basis, of all of the outstanding shares of Legacy Common Stock
(the "Distribution"); and
WHEREAS, a condition of the closing of the transactions contemplated
by the Distribution Agreement is that Excel and Legacy enter into, among other
things, a transitional services agreement pursuant to which Excel shall provide
certain services to Legacy and Legacy shall provide certain services to Excel.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, and intending to be legally bound hereby, the
parties agree as follows:
1. SERVICES. Excel and Legacy hereby agree, subject to Section 6 below, to
cause their respective employees and to use their respective assets to provide
certain services to the other, including without limitation, cash management
services, certain accounting services, litigation management, real estate
services and any other similar services that Excel or Legacy may request.
Nothing contained herein shall be deemed to restrict either party to this
Agreement from procuring any of the services to be provided hereunder from
outside vendors or from developing an in-house capability to provide such
services internally.
2. CHARGES FOR SERVICES. The charge for each service to be provided
hereunder shall be equal to the cost (which shall include indirect costs as well
as direct out of pocket expenses) of providing such service. The cost of
providing a service shall be determined in good faith by the party to provide
such service (the "providing party"). Prior to providing a service, the
providing party shall give an estimate of the cost thereof to the other party,
so that the other party shall have the opportunity to decide whether to accept
such service before it is performed.
3. INVOICE AND PAYMENT. Each party shall invoice the other once each month
for the services performed during the prior month and each party shall pay the
other for such services not later than ten (10) days from the receipt of
invoice.
4. OUTSIDE SERVICES. In the event that the providing party is required to
retain outside consultant/contractor assistance to perform any of the services
hereunder, the providing party shall
<PAGE>
first obtain the consent of the other party to such retention and the other
party shall pay directly the fees of such consultant/contractor. The providing
party shall not be held responsible for the performance of such
consultant/contractor services and the other party assumes the risk thereof.
5. CONTRACTUAL RELATIONSHIP. The relationship between Excel and Legacy
under this Agreement shall be that of principal and agent in respect of the
services to be performed hereunder. In no event is the relationship of the
parties intended to be that of employer and employee and in no event is either
party to be deemed or purported to be the partner or joint venturer of the other
for any purpose whatsoever.
6. TERM. The term of this Agreement shall expire on December 15, 1998;
provided, however, that each party shall have the right, upon fourteen (14) days
advance notice to the other, to terminate all or part of the services it
performs hereunder. Upon the termination of all services, payment therefor and
payment of all consultants/contractors, this Agreement shall terminate.
7. LIMITATION OF LIABILITY. Neither party shall have any liability
whatsoever to the other party or to any third party for any loss, liability,
damage, cost or deficiency (collectively, "Losses"), or for any claim for
Losses, including, without limitation, Losses or claims for personal injury,
death or property damage, warranty, tort or products liability, resulting from,
caused by or arising out of a party's performance under this Agreement except
for claims arising out of the negligence or willful default or breach of such
party hereunder. In no event shall any party have liability to the other party
or to any third party for indirect, special or consequential damages or loss of
profits (except with respect to its willful default or breach), or for punitive
damages for any reason whatsoever.
8. NOTICES. All notices and other communications hereunder shall be in
writing and shall be delivered by hand or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other addresses for a party as shall be specified by like notice) and shall be
deemed given on the date on which such notice is received:
To Legacy:
Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, California 92127
Attention: Richard B. Muir
To Excel:
Excel Realty Trust, Inc.
16955 Via Del Campo, Suite 100
San Diego, California 92127
Attention: Gary B. Sabin
9. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other party (other than to an
affiliate). Any purported assignment in violation of the provisions hereof
shall be void.
2
<PAGE>
10. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California (regardless of the laws that might otherwise govern under
applicable California conflict of laws principles) as to all matters, including
but not limited to matters of validity, construction, effect, performance and
remedies.
11. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12. INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
13. SEVERANCE. In the event that any provision of this Agreement is
declared illegal, invalid or unenforceable or contrary to law, it shall not
affect any other provision in the Agreement.
14. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter hereof.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to the transactions contemplated hereby.
15. DISPUTES. Any disputes arising under this Agreement shall be resolved
by binding arbitration in the manner contemplated by Section 9.13 of the
Distribution Agreement, including the attorneys' fees provision referenced
therein.
3
<PAGE>
IN WITNESS WHEREOF, each of Excel and Legacy has caused this Agreement to
be executed by its duly authorized officer as of the date first above written.
EXCEL REALTY TRUST, INC.
By: /s/ GARY B. SABIN
------------------------------------
Name: GARY B. SABIN
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
EXCEL LEGACY CORPORATION
By: /s/ GARY B. SABIN
------------------------------------
Name: GARY B. SABIN
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
S-1
<PAGE>
EXCEL LEGACY CORPORATION
Series A Liquidating Preference Convertible
Preferred Stock due 2005
PURCHASE AGREEMENT
Dated as of March 31, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
----
SECTION 1. PURCHASE AND SALE OF SECURITIES. . . . . . . . . . . . . . . . . 1
1.1 Issue of Securities. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale and Purchase of the Securities; the Closing . . . . . . . . . . 2
1.3 Purchaser's Representations; Source of Funds . . . . . . . . . . . . 3
1.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.5 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.6 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.7 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.8 Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . 6
1.9 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Opinions of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Representations and Warranties True. . . . . . . . . . . . . . . . . 8
2.3 Compliance with this Agreement . . . . . . . . . . . . . . . . . . . 8
2.4 Officers' Certificates . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Your Purchase Permitted by Applicable Laws; Legal Investment . . . . 8
2.6 The Certificate of Designation . . . . . . . . . . . . . . . . . . . 9
2.7 The Registration Rights Agreement. . . . . . . . . . . . . . . . . . 9
2.8 Subsequent Agreements. . . . . . . . . . . . . . . . . . . . . . . . 9
2.9 Completion of Other Transactions . . . . . . . . . . . . . . . . . . 9
2.10 Consents and Permits . . . . . . . . . . . . . . . . . . . . . . . . 9
2.11 Private Placement Number . . . . . . . . . . . . . . . . . . . . . . 9
2.12 Changes in Corporate Structure . . . . . . . . . . . . . . . . . . . 10
2.13 Proceedings and Documents. . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3. PURCHASER'S SPECIAL RIGHTS . . . . . . . . . . . . . . . . . . . 10
3.1 Delivery Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Issue Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Direct Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Lost, etc. Securities. . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Delivery of Financial Statements and Reports . . . . . . . . . . . . 11
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 11
4.1 Organization, Standing and Qualification . . . . . . . . . . . . . . 11
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3 Authorization of Agreement and Other Documents . . . . . . . . . . . 13
4.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.6 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 14
4.8 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.10 Title to and Condition of Properties . . . . . . . . . . . . . . . . 15
i
<PAGE>
Page
----
4.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.12 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.13 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . 16
4.14 Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . . 16
4.15 No Violation of Regulations of Board of Governors of
Federal Reserve System . . . . . . . . . . . . . . . . . . . . . . . 16
4.16 Private Offering . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.17 Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.18 Governmental Regulations . . . . . . . . . . . . . . . . . . . . . . 17
4.19 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . 17
4.20 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.21 Foreign Assets Control Regulations, etc. . . . . . . . . . . . . . . 18
4.22 Restrictions on Dividends. . . . . . . . . . . . . . . . . . . . . . 18
4.23 Survival of Representations and Warranties . . . . . . . . . . . . . 18
SECTION 5. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 21
6.3 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.9 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.10 Public Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . 22
ANNEX A CERTIFICATE OF DESIGNATION
ANNEX B REGISTRATION RIGHTS AGREEMENT
ANNEX C OPINION OF COUNSEL TO THE COMPANY
ANNEX D OPINION OF SPECIAL COUNSEL TO THE PURCHASERS
ii
<PAGE>
Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, California 92127
-----------------
PURCHASE AGREEMENT
Series A Liquidating Preference Convertible
Preferred Stock due 2005
March 31, 1998
To Each of the Purchasers
Named on the Signature
Pages Hereof
Dear Sirs:
Excel Legacy Corporation, a Delaware corporation (the "Company"),
hereby agrees with you as follows:
SECTION 1. PURCHASE AND SALE OF SECURITIES
1.1 ISSUE OF SECURITIES
On or before the Closing (as hereinafter defined), the Company will
have authorized the issue of 16,784,000 shares of Series A Liquidating
Preference Convertible Preferred Stock due 2005, $.01 par value (the
"Securities"), having the rights, designations and preferences set forth in a
certificate of designation in substantially the form attached hereto as Annex A
(herein, together with all amendments and modifications thereto from time to
time, called the "Certificate of Designation"). Capitalized terms used herein
without definition shall have the meanings specified in Section 5 hereof.
The Securities will be offered and sold to you pursuant to an
exemption from the registration requirements under the Securities Act of 1933,
as amended (the "Securities Act"). Upon original issuance thereof, and until
such time as the holder thereof delivers a legal opinion (which may be that of
internal counsel for the holder) satisfactory in form and substance to the
Company and its counsel that the same is no longer required under the applicable
requirements of the Securities Act, the Securities (and all securities issued in
substitution thereof or upon conversion thereof) shall bear the following
legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND
THE SECURITY EVIDENCED HEREBY AND ANY SHARES OF COMMON STOCK ISSUED
UPON CONVERSION HEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH
<PAGE>
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY AND ANY SHARES OF COMMON STOCK ISSUED
UPON CONVERSION HEREOF MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) (A) INSIDE THE UNITED STATES TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, OR IN ACCORDANCE WITH RULE 144
UNDER THE SECURITIES ACT, OR PURSUANT TO ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (B) TO THE COMPANY,
(C) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (D)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (2) IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OR
ANY COMMON STOCK ISSUED UPON CONVERSION HEREOF OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
You will have the registration rights with respect to the Securities
set forth in the Registration Rights Agreement in substantially the form
attached hereto as Annex B (the "Registration Rights Agreement").
1.2 SALE AND PURCHASE OF THE SECURITIES; THE CLOSING
In reliance upon your representations made in Section 1.3 hereof and
subject to the terms and conditions set forth herein and in the other Documents,
the Company hereby agrees to sell to you the Securities set forth on the
signature pages hereof, for the purchase price(s) set forth thereon. In
reliance upon the representations and warranties of the Company contained herein
and in the other Documents, and subject to the terms and conditions set forth
herein and therein, you hereby agree to purchase such Securities from the
Company.
The Company is executing other purchase agreements (the "Other
Purchase Agreements") substantially identical to this Agreement with the other
purchasers (the "Other Purchasers") named on the signature pages thereof,
pursuant to which the Company will issue and sell Securities to such Other
Purchasers in the respective amounts set forth on the signature pages thereof.
The Other Purchasers may include the Placement Agent or persons who may be
deemed affiliated or associated with the Placement Agent; neither the Placement
Agent nor any such person, however, has any obligation or commitment to purchase
any of the Securities. The sales of Securities to you and the Other Purchasers
are to be separate sales, and this Agreement and the Other Purchase Agreements
are to be separate agreements,
2
<PAGE>
but references to this "Agreement" shall include the Other Purchase Agreements
where the context so permits, together with all modifications hereof and
thereof.
The sale and purchase of the Securities shall take place at a closing
(the "Closing") at the offices of Latham & Watkins, 701 "B" Street, Suite 2100,
San Diego, California 92101, on the earliest practicable date as of which all of
the conditions set forth in Section 2 hereof have been satisfied or duly waived
(the "Closing Date"), but in no event later than April 15, 1998. At the
Closing, one or more Securities in definitive form, registered in the name of
Cede & Co., as nominee of the Depository Trust Company ("DTC"), shall be
delivered by the Company to you and the Other Purchasers, against payment by you
and the Other Purchasers of the purchase price therefor by wire transfer of
immediately available funds. The Securities in definitive form shall be made
available to you for inspection not later than 9:30 a.m. on the business day
immediately preceding the Closing Date.
1.3 PURCHASER'S REPRESENTATIONS; SOURCE OF FUNDS
(a) You represent that you are purchasing the Securities to be
purchased by you solely for your own account and not as nominee or agent for any
other person and not with a view to, or for offer or sale in connection with,
any distribution thereof (within the meaning of the Securities Act) that would
be in violation of the securities laws of the United States of America or any
state thereof, without prejudice, however, to your right at all times to sell or
otherwise dispose of all or any part of said Securities under a registration
under the Securities Act or under an exemption from such registration available
under such Act.
You further represent that you are knowledgeable, sophisticated and
experienced in business and financial matters; that you have previously invested
in securities similar to the Securities and fully understand the limitations on
transfer described in Section 1.3(b) hereof; that you are able to bear the
economic risk of your investment in the Securities and are presently able to
afford the complete loss of such investment; and that you have been afforded
access to information about the Company and the Company's financial condition,
results of operations, business, property, management and prospects sufficient
to enable you to evaluate your investment in the Securities.
You further represent that you are a "qualified institutional buyer,"
as defined in Rule 144A under the Securities Act ("QIB"), with such knowledge
and experience in financial matters as are necessary in order to evaluate the
merits and risks of an investment in the Securities.
You acknowledge receipt of the Private Placement Memorandum and
further acknowledge that you have been afforded the opportunity (i) to ask such
questions as you have deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities and (ii) to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy and completeness of the information contained
in the Private Placement Memorandum.
You also understand that the Company, the Placement Agent, and, for
purposes of the opinion to be delivered to the Purchasers pursuant to Section
2.1 hereof, Latham & Watkins, will rely upon the accuracy and truth of the
foregoing representations and you hereby consent to such reliance.
(b) If you desire to sell or otherwise dispose of all or any part of
the Securities (other than pursuant to an effective registration statement under
the Securities Act or a sale or other disposition
3
<PAGE>
made pursuant to Rule 144), if requested by the Company, you will deliver to the
Company an opinion of counsel (which may include internal counsel), reasonably
satisfactory in form and substance to the Company, that an exemption from
registration under the Securities Act is available.
(c) You represent, if you are an insurance company, that no part of
the funds to be used to purchase the Securities to be purchased by you
constitutes assets allocated to any separate account maintained by you such that
the use of such funds constitutes a transaction in violation of Section 406 of
ERISA or a prohibited transaction, as such term is defined in Section 4975 of
the Code, which could be subject to, respectively, a civil penalty assessed
pursuant to Section 502 of ERISA or a tax imposed by Section 4975 of the Code.
If you are not an insurance company, you represent that no part of the funds to
be used to purchase the Securities to be purchased by you constitutes assets
allocated to any trust which contains the assets of any employee pension benefit
plan listed on Schedule 1.3(c) with respect to which the Company or any
corporation considered an affiliate of the Company within the meaning of Section
407(d)(7) of ERISA (an "Affiliate") is a party in interest or disqualified
person.
The representation made by you in one of the preceding two sentences
is made in reliance upon your review of the list set forth on Schedule 1.3(c) of
the employee pension benefit plans with respect to which the Company or any
corporation considered an Affiliate of the Company is a party in interest or a
disqualified person.
As used in this Section 1.3(c), the terms "employee pension benefit
plan," "separate account" and "party in interest" shall have the meanings
assigned to such terms in Section 3 of ERISA and the terms "disqualified person"
and "prohibited transaction" shall have the meanings assigned to such terms in
Section 4975 of the Code.
You represent that you are not a "Creditor" as such term is defined in
Regulation T of the Board of Governors of the Federal Reserve System.
1.4 EXPENSES
Whether or not the Securities are sold, the Company will pay or
reimburse all expenses relating to this Agreement, including but not limited to:
(a) the cost of printing and reproducing this Agreement, the
Securities, the other Documents and any other documents contemplated hereby or
thereby;
(b) the fees and other charges of Latham & Watkins, counsel to the
Company, in connection herewith;
(c) the fees and other charges of Brown & Wood LLP, special counsel
to the Purchasers, in connection herewith;
(d) all fees and expenses (including the fees and expenses of
counsel) in connection with any registration or qualification of the Securities
for offer and sale under the securities or "blue sky" laws of any jurisdictions
requiring such registration or qualification or in connection with obtaining any
exemptions from such requirements;
4
<PAGE>
(e) all expenses and listing fees in connection with the application
for quotation of the Securities in the National Association of Securities
Dealers, Inc. Automated Quotation System - PORTAL ("PORTAL");
(f) all fees and expenses (including fees and expenses of counsel) of
the Company in connection with approval of the Securities by DTC for
"book-entry" transfer;
(g) all of your out-of-pocket expenses (including the fees and
expenses of counsel) relating to any amendment, or modification of, or any
waiver, or consent or preservation of rights under, or any work-out or
restructuring of the transactions contemplated by this Agreement and the other
Documents and any other documents contemplated hereby or thereby; and
(h) all other expenses, including counsel's fees, incurred by the
Company in connection with the transactions contemplated by this Agreement.
1.5 INDEMNIFICATION
In addition to any and all obligations of the Company to indemnify you
pursuant to the Registration Rights Agreement or any of the other Documents, the
Company shall, without limitation as to time, indemnify you and your Agents,
against, and hold you and them harmless from, all losses, claims, damages,
liabilities, costs (including the costs of preparation and attorneys' fees) and
expenses (collectively, "Losses") incurred by you or them pursuant to any
investigation or proceeding against any one or more of the Company, you or your
Agents, arising out of or in connection with this Agreement or the other
Documents (or any other document or instrument executed herewith or pursuant
hereto or thereto), whether or not the transactions contemplated by this
Agreement are consummated, which investigation or proceeding requires the
participation of, or is commenced or filed against, one or more of you and your
Agents because of this Agreement or the other Documents and the transactions
contemplated hereby or thereby, other than any Losses resulting from action on
the part of you or your Agents which is finally determined in such proceeding to
be wrongful and which (i) is unrelated to any wrongful act by the Company or its
representatives and (ii) was not taken by you or your Agents in reliance upon
any of the Company's warranties, covenants or promises herein or in the other
Documents or in any other documents contemplated hereby or thereby, including
certificates delivered by the Company pursuant hereto or thereto. The
obligations of the Company under this Section 1.5 shall survive the redemption
of the Securities, the conversion of the Securities, any transfer of the
Securities by you and the termination of this Agreement and the other Documents.
1.6 CONTRIBUTION
If the indemnification provided for in Section 1.5 from an
indemnifying party is unavailable to you or your Agents in respect of any Losses
referred to therein, then an indemnifying party, in lieu of indemnifying such
persons, shall contribute to the amount paid or payable by such persons as a
result of such Losses in such proportion as is appropriate to reflect the
relative fault of such indemnifying parties and you or your Agents in connection
with the actions which resulted in such Losses as well as any other relevant
equitable considerations. The amount paid or payable by a party as a result of
the Losses referred to above shall be deemed to include, subject to the
limitations set forth in Section 1.5, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation, lawsuit
or legal or administrative action or proceeding.
5
<PAGE>
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 1.6 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
1.7 FURTHER ACTION
During the period from the date hereof to the Closing Date, the
Company shall use all reasonable efforts and take all action reasonably
necessary or appropriate to cause its representations and warranties contained
in Section 4 hereof to be true as of the Closing Date, after giving effect to
the transactions contemplated by this Agreement, as if made on and as of such
date.
1.8 AFFIRMATIVE COVENANTS
The Company further covenants and agrees that so long as any of the
Securities are outstanding:
(a) INTEGRATION. The Company will not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Securities Act) that would be integrated with the sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale to you or the Other Purchasers of the Securities.
(b) INFORMATION. For so long as any of the Securities remain
outstanding and during any period in which the Company is not subject to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Company will make available to you and any Other Purchaser or
beneficial owner of Securities in connection with any sale thereof and any
prospective purchaser of such Securities, the information required by Rule
144A(d)(4) under the Securities Act.
(c) COMPLIANCE WITH AGREEMENTS. The Company will comply with its
agreements in the Registration Rights Agreement, and all agreements set forth in
the representation letters of the Company to DTC relating to the approval of the
Securities by DTC for "book-entry" transfer.
(d) PORTAL. The Company will use all reasonable efforts to effect
the inclusion of the Securities in PORTAL.
(e) COMPLIANCE WITH LAW. The Company will comply with all laws,
ordinances or governmental rules or regulations to which it is subject,
including, without limitation, Environmental Laws, and will obtain and maintain
in effect all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of its properties or to the conduct of
its business to the extent necessary to ensure that non-compliance with such
laws, ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the business or
financial condition of the Company.
(f) INSURANCE. The Company will maintain, with financially sound and
reputable insurers, insurance with respect to its properties and business
against such casualties and contingencies, of such types, on such terms and in
such amounts (including deductibles, coinsurance and self-insurance,
6
<PAGE>
if adequate reserves are maintained with respect thereto) as is customary in the
case of entities of established reputations engaged in the same or a similar
business and similarly situated.
(g) MAINTENANCE OF PROPERTIES. The Company will maintain and keep,
or cause to be maintained and kept, its properties in reasonably good repair,
working order and condition (other than ordinary wear and tear), so that the
business carried on in connection therewith may be properly conducted at all
times.
(h) PAYMENT OF TAXES AND CLAIMS. The Company will file all tax
returns required to be filed in any jurisdiction and to pay and discharge all
taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on it or any of its
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company; PROVIDED that the Company
need not pay any such tax or assessment or claim if (i) the amount,
applicability or validity thereof is contested by the Company on a timely basis
in good faith and in appropriate proceedings, and the Company has established
adequate reserves therefor in accordance with generally accepted accounting
principles on the books of the Company, or (ii) the nonpayment of all such taxes
and assessments in the aggregate could not reasonably be expected to have a
material adverse effect on the business or financial condition of the Company.
(i) CORPORATE EXISTENCE. The Company will at all times preserve and
keep in full force and effect its corporate existence.
1.9 NEGATIVE COVENANTS
The Company further covenants and agrees that so long as any of the
Securities are outstanding:
(a) TRANSACTIONS WITH AFFILIATES. The Company will not enter into
directly or indirectly any transaction or material group of related transactions
(including without limitation the purchase, lease, sale or exchange of
properties of any kind or the rendering of any service) with any Affiliate
except in the ordinary course and pursuant to the reasonable requirements of the
Company's business and upon fair and reasonable terms no less favorable to the
Company than would be obtainable in a comparable arm's-length transaction with a
Person not an Affiliate.
(b) NATURE OF BUSINESS. The Company will not undertake or invest in
any types of business other than those described in or contemplated by the
Private Placement Memorandum.
(c) MERGER, CONSOLIDATION, ETC. The Company will not consolidate
with or merge with any other corporation or convey, transfer or lease
substantially all of its assets in a single transaction or series of
transactions to any Person unless the successor formed by such consolidation or
the survivor of such merger or the Person that acquires by conveyance, transfer
or lease substantially all of the assets of the Company as an entirety, as the
case may be, shall be a solvent corporation organized and existing under the
laws of the United States or any State thereof (including the District of
Columbia), and, if the Company is not such corporation, (i) such corporation
shall have executed and delivered to each holder of any Securities its
assumption of the due and punctual performance and observance of each covenant
and condition of this Agreement and the other Documents, and (ii) shall have
caused to be delivered to each holder of any Securities an opinion of nationally
recognized independent counsel, or other
7
<PAGE>
independent counsel reasonably satisfactory to such holders, to the effect that
all agreements or instruments effecting such assumption are enforceable in
accordance with their terms and comply with the terms hereof.
SECTION 2. CLOSING CONDITIONS
Your obligation to purchase and pay for the Securities to be delivered
to you at the Closing shall be subject to the satisfaction of the following
conditions on or before the Closing Date:
2.1 OPINIONS OF COUNSEL
You shall have received the favorable opinions, dated the Closing Date
and addressed to you, from Latham & Watkins, counsel to the Company, and from
Brown & Wood LLP, special counsel to the Purchasers, in substantially the forms
attached hereto as Annex C and Annex D, respectively.
In rendering the foregoing opinions, such counsel may rely as to
factual matters upon certificates or other documents furnished by officers and
directors of the Company (copies of which shall be delivered to you) and by
government officials, and upon such other documents as such counsel deem
appropriate as a basis for their opinions.
2.2 REPRESENTATIONS AND WARRANTIES TRUE
The Company's representations and warranties contained in Section 4
hereof shall be true at and as of the Closing Date, after giving effect to the
transactions contemplated by this Agreement, as if made on and as of such date.
2.3 COMPLIANCE WITH THIS AGREEMENT
The Company shall have performed and complied with all agreements,
covenants and conditions contained herein, in the other Documents and any other
document contemplated hereby or thereby which are required to be performed or
complied with by the Company on or before the Closing Date.
2.4 OFFICERS' CERTIFICATES
You shall have received (i) a certificate, dated the Closing Date and
signed by each of the Chief Executive Officer and the Chief Financial Officer of
the Company, certifying that the conditions set forth in Sections 2.2 and 2.3
hereof are satisfied on and as of such date and further certifying as to such
other matters as you may request in the exercise of your reasonable discretion,
and (ii) a certificate, dated the Closing Date and signed by the Secretary of
the Company, certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery of
the Securities and the Documents.
2.5 YOUR PURCHASE PERMITTED BY APPLICABLE LAWS; LEGAL INVESTMENT
Your purchase of and payment for the Securities to be purchased by you
(a) shall not be prohibited by any applicable law or governmental regulation
(including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System and without recourse to the so-called
"basket provisions" permitting certain limited investments by insurance
companies), (b) shall not
8
<PAGE>
subject you to any penalty, liability or other onerous condition under or
pursuant to any applicable law or governmental regulation, and (c) shall be
permitted by the laws and regulations of the jurisdictions to which you are
subject.
2.6 THE CERTIFICATE OF DESIGNATION
The Certificate of Designation shall have been filed with the
Secretary of State of Delaware.
2.7 THE REGISTRATION RIGHTS AGREEMENT
The Company shall have entered into the Registration Rights Agreement
for your benefit and the benefit of the Other Purchasers, and you shall have
received an original, duly executed by the Company, and counterparts, conformed
as executed, of the Registration Rights Agreement.
2.8 SUBSEQUENT AGREEMENTS
The Company shall not have entered into any other agreements relating
to the sale of the Securities to any other party on terms differing from those
contained herein, unless the Company shall have offered such differing terms to
you.
2.9 COMPLETION OF OTHER TRANSACTIONS
Simultaneously with the sale to you of the Securities to be purchased
by you at the Closing, the Company shall have:
(a) Sold and received payment for the Securities to be purchased by
the Other Purchasers pursuant to the Other Purchase Agreements, which Other
Purchase Agreements shall be the same as this Agreement and which Securities
shall be substantially the same as the Securities being delivered to you; and
(b) Consummated the asset transfers to the Company and the
distribution of the Company's Common Stock to the stockholders of Excel Realty
Trust, Inc., substantially as described in or contemplated by the Private
Placement Memorandum.
2.10 CONSENTS AND PERMITS
The Company shall have received all consents, permits and other
authorizations, and made all such filings and declarations, as may be required
from any Person pursuant to any law, statute, regulation or rule (federal,
state, local and foreign), or pursuant to any agreement, order or decree to
which the Company is a party or to which it is subject, in connection with the
transactions contemplated by this Agreement.
2.11 PRIVATE PLACEMENT NUMBER
A Private Placement Number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the
Securities.
9
<PAGE>
2.12 CHANGES IN CORPORATE STRUCTURE
Except as described in the Private Placement Memorandum, the Company
shall not have changed its jurisdiction of incorporation or been a party to any
merger or consolidation and shall not have succeeded to all or any substantial
part of the liabilities of any other entity, at any time following the date of
the financial statements referred to in Section 4.7 hereof.
2.13 PROCEEDINGS AND DOCUMENTS
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be reasonably satisfactory to you and your
special counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
they may reasonably request.
SECTION 3. PURCHASER'S SPECIAL RIGHTS
The provisions of this Section 3 shall apply, notwithstanding anything
to the contrary in this Agreement, or the other Documents or any other document
contemplated hereby or thereby; provided that the provisions of this Section 3
shall apply with respect to Transfer Restricted Securities only; and further
provided that the Company's obligations set forth in this Section 3 that are
outstanding with respect to any Security at the time such Security ceases to be
a Transfer Restricted Security shall survive until such time as all such
obligations with respect to such Security shall have been satisfied in full.
3.1 DELIVERY EXPENSES
If you surrender any Security to the Company for any reason, the
Company will pay the cost of delivering to or from your office or to or from the
office of your designee from or to the Company, insured to your reasonable
satisfaction, the surrendered Security and each Security issued in substitution
or replacement for the surrendered Security, and any Common Stock issued on
conversion of all or any part of a surrendered Security.
3.2 ISSUE TAXES
The Company will pay all taxes in connection with the issuance, sale,
delivery or transfer by the Company to the Purchasers of the Securities and the
execution and delivery of the Documents and any other agreements and instruments
contemplated thereby and any modification of any of such Securities, Documents
or such other agreements and instruments and will save you harmless without
limitation as to time against any and all liabilities with respect to all such
taxes.
3.3 DIRECT PAYMENT
The Company will pay or cause to be paid all amounts payable with
respect to any Transfer Restricted Security by crediting by federal funds bank
wire transfer to the holder's account in any bank in the United States as may be
designated and specified in writing by such holder. Your initial bank account
for this purpose is on your signature page hereof.
10
<PAGE>
3.4 LOST, ETC. SECURITIES
If any Transfer Restricted Security of which a Purchaser or any other
institutional holder (or nominee thereof) which is a transferee is the owner, is
mutilated, destroyed, lost or stolen, then the affidavit of such Purchaser's or
such holder's treasurer or assistant treasurer (or other responsible official),
setting forth the circumstances with respect to such mutilation, destruction,
loss or theft, shall be accepted as satisfactory evidence thereof, and no
indemnity, security or payment of charges or expenses shall be required as a
condition to the execution and delivery by the Company or its transfer agent of
new Securities in substitution therefor, other than the Purchaser's or such
holder's unsecured written agreement reasonably satisfactory to indemnify the
Company or its transfer agent.
3.5 DELIVERY OF FINANCIAL STATEMENTS AND REPORTS
The Company will deliver to each Purchaser of Transfer Restricted
Securities the following:
(a) as soon as available, but in any event not later than 45 days
after the last day of each fiscal quarter, a balance sheet of the Company as of
the end of such quarter and related statements of operations, changes in
financial position and changes in stockholders' equity of the Company for such
quarter and for the portion of the fiscal year through such date, all in
reasonable detail and prepared in accordance with generally accepted accounting
principles consistently applied;
(b) as soon as available, but in any event not later than 120 days
after the close of each fiscal year, an audited balance sheet of the Company as
of the close of such fiscal year, and related audited statements of operations,
changes in financial position and changes in stockholders' equity of the Company
for such fiscal year, reported on without qualification arising from the scope
of the audit by a nationally recognized firm of independent certified public
accountants and prepared in accordance with generally accepted accounting
principles consistently applied; and
(c) as soon as available, one copy of (i) each financial statement,
report, notice or proxy statement sent by the Company to public securities
holders generally, (ii) each regular or periodic report, each registration
statement, and each prospectus and all amendments thereto filed by the Company
with the Commission, and (iii) all press releases or other statements made
available generally by the Company to the public concerning material
developments.
The Company will deliver to each Purchaser of Transfer Restricted
Securities, with reasonable promptness, such other data and information relating
to the business, operations, affairs, financial condition, assets or properties
of the Company or relating to the ability of the Company to perform its
obligations hereunder and under the other Documents as may from time to time be
reasonably requested by any such Purchaser.
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to you as follows:
4.1 ORGANIZATION, STANDING AND QUALIFICATION
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation; has all
requisite power and authority to own
11
<PAGE>
or lease and operate its properties and to carry on its business as now
conducted and as proposed to be conducted; and is duly qualified or licensed to
do business as a foreign corporation in good standing in all jurisdictions in
which it owns or leases property or in which the conduct of its business
requires it to so qualify or be licensed, except for such jurisdictions where
the failure to so qualify or be licensed would not have a material adverse
effect on the business or financial condition of the Company. The Company has
heretofore delivered to your counsel complete and correct copies of its Charter
Documents as presently in effect and has identified on Schedule 4.1(a) all
jurisdictions in which it is qualified or licensed to do business as a foreign
corporation.
(b) The Company has all requisite power and authority to enter into
and perform all of its obligations under this Agreement and the other Documents,
to issue the Securities and to carry out the transactions contemplated hereby
and thereby.
(c) The Company has no Subsidiaries.
4.2 CAPITALIZATION
As of the Closing, the authorized capital stock of the Company will
consist of 50,000,000 shares of Preferred Stock, $.01 par value, of which no
shares will be issued and outstanding, and 150,000,000 shares of Common Stock,
$.01 par value, of which approximately 30,000,000 shares (subject to adjustment
as necessary or appropriate to effect the distribution of the Company's Common
Stock to the stockholders of Excel Realty Trust, Inc., as contemplated by the
Private Placement Memorandum) will be issued and outstanding.
As of the Closing, all such outstanding shares will have been duly and
validly issued and will be fully paid and nonassessable.
As of the Closing, except as set forth on Schedule 4.2 hereto, and
except as contemplated by the Certificate of Designation, (a) there will be no
outstanding subscriptions, warrants, options, calls or commitments of any
character relating to or entitling any Person to purchase or otherwise acquire
any stock of the Company; (b) there will be no obligations or securities
convertible into or exchangeable or exercisable for shares of any stock of the
Company or any commitments of any character relating to or entitling any Person
to purchase or otherwise acquire any such obligations or securities; and (c)
there will be no preemptive or similar rights to subscribe for or to purchase
any stock of the Company.
As of the Closing, the Securities will have been duly and validly
authorized and when sold and paid for in accordance with this Agreement will be
validly issued, fully paid, nonassessable and free of all Liens.
As of the Closing, all shares of Common Stock to which you and the
Other Purchasers will be entitled upon conversion of the Securities (a) will be
duly authorized by the Company's Charter Documents, (b) will have been duly
authorized by the Company's Board of Directors to be issued upon the conversion
of the Securities from time to time in whole or in part, in accordance with the
terms of the Securities, (c) will at the time of the conversion of the
Securities be, duly and validly issued, fully paid and nonassessable and free of
all Liens, and (d) will not at the time of receipt by such holder be subject to
any restrictions on transfer or sale, including any restrictions imposed by
applicable securities laws.
12
<PAGE>
Except as disclosed in the Registration Rights Agreement, the Company
has not entered into any agreement to register its equity or debt securities
under the Securities Act.
4.3 AUTHORIZATION OF AGREEMENT AND OTHER DOCUMENTS
The Company has taken all actions necessary to authorize it to enter
into and perform its obligations under this Agreement, the Securities and the
other Documents and to consummate the transactions contemplated hereby and
thereby. This Agreement is, and, as of the Closing Date, the Documents and the
Securities will be, legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except for (a) the effect
upon the Documents and the Securities of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting the rights of
creditors generally and (b) limitations imposed by federal or state law or
equitable principles upon the specific enforceability of any of the remedies,
covenants or other provisions of the Documents and the Securities and upon the
availability of injunctive relief or other equitable remedies.
4.4 NO VIOLATION
Neither the execution or delivery of the Documents nor the issuance,
sale or delivery of the Securities, nor the performance by the Company of its
obligations under the Documents and the Securities, nor the consummation of the
transactions contemplated hereby and thereby, will
(a) violate any provision of the Charter Documents of the
Company;
(b) violate any statute or law or any judgment, decree, order,
regulation or rule of any court or governmental authority to which the
Company or any of its properties may be subject;
(c) cause the acceleration of the maturity of any debt or
obligation of the Company; or
(d) violate, or be in conflict with, or constitute a default
under, or permit the termination of, or require the consent of any Person
under, or result in the creation of any Lien upon any property of the
Company under, any material agreement to which the Company is a party or by
which the Company (or its properties) may be bound.
The Company is not in default (without giving effect to any grace or
cure period or notice requirement) under any agreement to which it is a party,
which default would reasonably be expected to have a material adverse effect on
the business or financial condition of the Company.
4.5 USE OF PROCEEDS
The net proceeds from the sale of the Securities will be used solely
for the purposes set forth in the Private Placement Memorandum.
4.6 INDEBTEDNESS
Schedule 4.6 hereto sets forth and identifies in reasonable detail all
outstanding short-term and long-term indebtedness of the Company, prior to and
after giving effect to the transactions contemplated by Section 4.5 hereof.
13
<PAGE>
4.7 FINANCIAL STATEMENTS
You have been furnished an unaudited pro forma balance sheet of the
Company as of October 31, 1997 and an unaudited pro forma statement of
operations for the year ended July 31, 1997.
Except as otherwise stated in the notes thereto, such financial
statements (which reflect all adjustments, consisting only of normally recurring
accruals which, in the opinion of the Company, are necessary for fair
presentation) have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis through all the periods
involved and fairly present the financial position and results of operations of
the Company as of the dates and for the periods indicated.
Except as reflected in such financial statements and except as
contemplated by this Agreement, the Company has no material liabilities,
absolute or contingent, other than ordinary course liabilities incurred since
the last date of such financial statements in connection with the conduct,
consistent with past practices, of the business of the Company.
4.8 FULL DISCLOSURE
The Company has delivered to you and to each Other Purchaser a copy of
the Private Placement Memorandum relating to the transactions contemplated
hereby. The Private Placement Memorandum fairly describes, in all material
respects, the general nature of the business and principal properties of the
Company. Neither this Agreement, nor any of the other Documents, nor any
document contemplated hereby or thereby or furnished by or on behalf of the
Company to you in connection with the negotiation and the sale of the
Securities, nor the financial statements referred to in Section 4.7 hereof, nor
the Private Placement Memorandum, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Company which the Company has not
disclosed to you in the Private Placement Memorandum or herein which materially
adversely affects, or insofar as the Company can reasonably foresee will
materially adversely affect, the properties, business, prospects, operations,
earnings, assets, liabilities or condition (financial or otherwise) of the
Company or the ability of the Company to perform its obligations under this
Agreement, the Securities, the other Documents or any document contemplated
hereby or thereby.
4.9 LITIGATION
There is no action, proceeding or investigation pending, or to the
best knowledge of the Company, threatened, against or affecting the Company in
any court or before any governmental authority or arbitration board or tribunal,
foreign or domestic, except for such actions which, if adversely determined,
singly and in the aggregate, would not have a material adverse effect on the
Company, and there is no such action seeking to restrain, enjoin, prevent the
consummation of or otherwise challenge this Agreement or any of the other
Documents or the transactions contemplated hereby or thereby.
The Company is not subject to any judgment, order, decree, rule or
regulation of any court, governmental authority or arbitration board or tribunal
which has materially adversely affected or which can reasonably be expected to
have a material adverse effect on its business.
14
<PAGE>
4.10 TITLE TO AND CONDITION OF PROPERTIES
Schedule 4.10 hereto sets forth and identifies in reasonable detail
all real properties, notes receivable and other assets to be owned by the
Company as of the Closing. Except for such defects of title or Liens as are
immaterial in the aggregate to the business of the Company, and except as
disclosed in the Company's pro forma financial statements for the year ended
July 31, 1997, the Company will have as of the Closing good and marketable title
to all of the real properties, notes receivable and other assets listed on
Schedule 4.10, free and clear of all Liens.
All material leases and other material agreements to which the Company
will be a party as of the Closing are valid and binding and in full force and
effect, no default has occurred or is continuing thereunder and no consent need
be obtained (other than consents which have been or will be obtained prior to
the Closing) from any Person in respect of any such lease or agreement in
connection with the transactions contemplated hereby.
None of the properties or assets, the value of which is reflected in
the balance sheet referred to in Section 4.7 hereof, is held under any lease or
as conditional vendee under any conditional sale or other title retention
agreement.
Except for such assets as are immaterial in the aggregate to the
business of the Company, all tangible assets to be owned by the Company as of
the Closing are in good condition and repair and are adequate, in the Company's
reasonable opinion, for the uses to which they are being put or would be put in
the ordinary course of business; and none of such assets is in need of
maintenance or repair, except for routine maintenance and repair.
4.11 TAXES
All tax returns required to be filed by the Company in any
jurisdiction (including foreign jurisdictions) have been so filed, and all
taxes, assessments, fees and other charges due or claimed to be due from the
Company which are due and payable have been paid, other than those being
contested in good faith or those currently payable without penalty or interest.
The Company does not know of any actual or proposed material additional tax
assessments for any fiscal period against it. The Company knows of no basis for
any other tax or assessment that could reasonably be expected to have a material
adverse effect on the business or financial condition of the Company. None of
the Company's tax returns are under audit, and no waivers of the statute of
limitations or extensions of time with respect to any tax returns have been
granted by the Company.
4.12 ERISA
(a) The execution and delivery of this Agreement, the other Documents and
the sale of the Securities to be purchased by you will not involve any
prohibited transaction within the meaning of ERISA or Section 4975 of the Code.
The representation made by the Company in the preceding sentence is made in
reliance upon and subject to the accuracy of your representation in Section 1.3
hereof as to the source of the funds to be used by you to purchase said
Securities.
(b) The Company is in compliance in all material respects with any
applicable provisions of ERISA and the Code and the regulations and published
interpretations thereunder with respect to all employee pension benefit plans
(collectively, "Pension Plans") and all employee welfare benefit plans
(collectively, "Welfare Plans") maintained or contributed to by the Company. No
reportable event has
15
<PAGE>
occurred or is reasonably expected to occur with respect to any Pension Plan.
The Company has no obligation to make any payment to or with respect to any
former employee of the Company pursuant to any retiree medical benefit or other
Welfare Plan.
As used in this Section 4.12, the terms "employee pension benefit
plan," "employee welfare benefit plan" and "reportable event" shall have the
meanings assigned to such terms in ERISA.
4.13 COMPLIANCE WITH LAWS
The Company is not in violation of any statutes, laws, ordinances,
governmental rules or regulations or any judgment, order or decree (federal,
state, local or foreign) to which it is subject, nor has it failed to obtain any
licenses, permits, franchises or other governmental authorizations necessary to
the ownership or operation of its properties or the conduct of its business,
except for such violations and failures to obtain that are immaterial to the
properties, business, prospects, operations, earnings, assets, liabilities or
condition (financial or otherwise) of the Company.
4.14 GOVERNMENTAL CONSENTS
Neither the nature of the Company nor of any of its businesses or
properties, nor any relationship between the Company and any other Person, nor
any circumstance in connection with the offer, issuance, sale or delivery of the
Securities or the Common Stock issuable upon conversion of the Securities, as
contemplated hereby and in the other Documents, is such as to require a consent,
approval or authorization of, or filing, registration or qualification with, any
governmental authority on the part of the Company as a condition to the
execution and delivery of this Agreement or the offer, issuance, sale or
delivery of the Securities at the Closing, or the Common Stock issuable upon
conversion of the Securities, other than the filings, registrations or
qualifications under the state securities laws or "blue sky" laws of any state
of the United States of America that may be required to be made or obtained, all
of which either shall have been made and obtained on the Closing Date (and
copies of which delivered to you) or shall have no bearing on the validity and
enforceability of this Agreement, the other Documents and the Securities.
4.15 NO VIOLATION OF REGULATIONS OF BOARD OF GOVERNORS OF FEDERAL RESERVE SYSTEM
None of the transactions contemplated by this Agreement (including,
without limitation, the use of the proceeds from the sale of the Securities)
will violate or result in a violation of Section 7 of the Exchange Act or any
regulation issued pursuant thereto, including, without limitation, Regulations
G, T, U and X of the Board of Governors of the Federal Reserve System. None of
the proceeds from the sale of the Securities will be used to purchase or carry
(or refinance any borrowing the proceeds of which were used to purchase or
carry) any "security" within the meaning of the Exchange Act. The services
provided by the Placement Agent in connection with the offer and sale of the
Securities by the Company have been provided as part of the investment banking
services rendered to the Company by the Placement Agent.
4.16 PRIVATE OFFERING
Assuming that your representations set forth in Section 1.3 hereof are
true and correct, the sale of the Securities hereunder is exempt from the
registration and prospectus delivery requirements of the Securities Act. In the
case of each offer or sale of the Securities, no form of general solicitation or
general advertising was used by the Company or its representatives, including,
but not limited to,
16
<PAGE>
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
You and the Other Purchasers are the sole purchasers of the
Securities. No securities of the same class as the Securities have been issued
and sold by the Company within the six-month period immediately prior to the
date hereof. The Company agrees that neither it, nor anyone acting on its
behalf, will offer the Securities so as to bring the issuance and sale of the
Securities within the provisions of Section 5 of the Securities Act nor offer
any similar securities for issuance or sale to, or solicit any offer to acquire
any of the same from, or otherwise approach or negotiate with respect thereto
with, anyone if the sale of the Securities and any such securities would be
integrated as a single offering for the purposes of the Securities Act,
including, without limitation, Regulation D thereunder.
4.17 LABOR RELATIONS
The Company is not engaged in any unfair labor practice which would
have a material adverse effect on the Company. There is (a) no unfair labor
practice complaint pending or threatened against the Company before the National
Labor Relations Board and no grievance or arbitration proceeding arising out of
or under collective bargaining agreements is so pending or threatened, (b) no
strike, labor dispute, slowdown or stoppage pending or threatened against the
Company, and (c) no union representation question existing with respect to the
employees of the Company and no union organizing activities are taking place.
4.18 GOVERNMENTAL REGULATIONS
The Company is not subject to regulation under the Investment Company
Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as
amended, the Federal Power Act, the Interstate Commerce Act or to any federal or
state statute or regulation limiting its ability to incur indebtedness for
borrowed money.
4.19 ENVIRONMENTAL MATTERS
Except in all cases as, in the aggregate, have not had and could not
reasonably be expected to have a material adverse effect on the business or
financial condition of the Company, the Company (a) has obtained all applicable
permits, licenses and other authorizations which are required to be obtained
under all applicable federal, state or local laws or any regulation, code, plan,
order, decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, or hazardous or toxic wastes into ambient
air, surface water, ground water, or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials or wastes ("Environmental Laws") by the Company; (b) is in compliance
with all terms and conditions of such required permits, licenses and
authorizations, and also is in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in applicable Environmental Laws; (c) is not
aware of nor has received notice of any past or present violations of
Environmental Laws or any event, condition, circumstance, activity, practice,
incident, action or plan which is reasonably likely to interfere with or prevent
continued compliance with or which could give rise to any common law or
statutory liability, or otherwise form the basis of any claim, action, suit or
proceeding, against the Company based on or resulting from the manufacture,
17
<PAGE>
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge or release into the environment, of any
pollutant, contaminant or hazardous or toxic material or waste; and (d) has
taken all actions necessary under applicable Environmental Laws to register any
products or materials required to be registered by the Company thereunder.
4.20 BROKERS
The Company has dealt with no broker, finder, commission agent or
other Person in connection with the sale of the Securities and the transactions
contemplated by this Agreement, other than BancBoston Securities Inc., and the
Company is under no obligation to pay any broker's fee or commission in
connection with such transactions, other than a fee payable to BancBoston
Securities Inc. for investment banking services rendered in connection with such
transactions, which fee is the sole obligation of the Company.
4.21 FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Securities by the Company hereunder nor its
use of the proceeds thereof will violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United States
Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
4.22 RESTRICTIONS ON DIVIDENDS
The Company is not a party to, or otherwise subject to, any legal
restriction or any agreement (other than this Agreement and customary
limitations imposed by corporate law statutes) restricting the ability of the
Company to pay dividends out of profits or make any other similar distributions
of profits.
4.23 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All statements contained in any certificate or other document
delivered to you by or on behalf of the Company pursuant to or in connection
with this Agreement or the other Documents shall be deemed to constitute
representations and warranties under this Agreement with the same force and
effect as the representations and warranties expressly set forth herein. All
the Company's representations and warranties thereunder and hereunder shall
survive the execution and delivery of the same, any investigation by you and the
issuance of the Securities.
SECTION 5. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
AFFILIATE: See Section 1.3(c).
AGENT: Any person authorized to act and who acts on behalf of any of
the Purchasers with respect to the transactions contemplated by the Documents.
AGREEMENT: See Section 1.2.
18
<PAGE>
CERTIFICATE OF DESIGNATION: See Section 1.1.
CHARTER DOCUMENTS: The Certificate of Incorporation and Bylaws, as
amended or restated (or both) to date, of the Company.
CLOSING: See Section 1.2.
CLOSING DATE: See Section 1.2.
CODE: The Internal Revenue Code of 1986, as amended.
COMMISSION: Securities and Exchange Commission.
COMMON STOCK: The common stock, $.01 par value, of the Company.
COMPANY: See preamble hereto.
DOCUMENTS: This Agreement, the Registration Rights Agreement and the
Certificate of Designation, collectively, together with any exhibits, schedules
or other attachments thereto.
DTC: See Section 1.2.
ENVIRONMENTAL LAWS: See Section 4.19.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended from time to time.
EXCHANGE ACT: See Section 1.8(b).
LIEN: Any material mortgage, pledge, lien, encumbrance, charge or
adverse claim affecting title or resulting in a charge against real or personal
property, or security interest of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, any option or
other agreement to sell and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
LOSSES: See Section 1.6.
OTHER PURCHASE AGREEMENTS: See Section 1.2.
OTHER PURCHASERS: See Section 1.2.
PENSION PLANS: See Section 4.12(b).
PERSON: An individual, partnership, corporation, trust or
unincorporated organization or a government or agency or political subdivision
thereof.
PLACEMENT AGENT: BancBoston Securities Inc.
PORTAL: See Section 1.4(d).
19
<PAGE>
PRIVATE PLACEMENT MEMORANDUM: The Private Placement Memorandum dated
December 1997 and all exhibits, schedules or other attachments thereto.
PURCHASERS: Those Persons who have executed a counterpart of this
Agreement.
QIB: See Section 1.3(a).
REGISTRATION RIGHTS AGREEMENT: See Section 1.1.
RULE 144: Rule 144 as promulgated by the Commission under the
Securities Act, and any successor rule or regulation thereto.
SECURITIES: See Section 1.1.
SECURITIES ACT: See Section 1.1.
SUBSIDIARY: Any corporation, a majority of the outstanding voting
securities of which is owned, directly or indirectly, by the Company.
TRANSFER RESTRICTED SECURITIES: Securities acquired by the holder
thereof other than pursuant to an effective registration under Section 5 of the
Securities Act or pursuant to Rule 144; a Security that has ceased to be a
Transfer Restricted Security cannot thereafter become a Transfer Restricted
Security.
WELFARE PLANS: See Section 4.12(b).
SECTION 6. MISCELLANEOUS
6.1 NOTICES
Prior to the Closing, and thereafter with respect to matters
pertaining to this Agreement only, all notices and other communications provided
for or permitted hereunder shall be made by hand-delivery, first-class mail,
telex, telecopier, or overnight air courier guaranteeing next day delivery:
(a) if to you at your address set forth on the signature page
hereof; and
(b) if to the Company, at its address set forth on the first
page of this Agreement, Attention: Chief Executive Officer, with a copy to
Latham & Watkins, 701 "B" Street, Suite 2100, San Diego, California 92101,
Attention: Scott N. Wolfe, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back if telexed; when receipt acknowledged, if telecopied; and the next
business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
From and after the Closing, the foregoing notice provisions shall be
superseded by any notice provisions of the Document under which notice is given.
20
<PAGE>
6.2 SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties, including without limitation and
without the need for an express assignment, subsequent holders of Transfer
Restricted Securities.
6.3 AMENDMENT AND WAIVER
(a) Prior to the Closing Date, this Agreement and the other Documents
may be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may be given, provided that the same are in writing
and signed by you and the Company. Thereafter, the Documents (other than this
Agreement) may only be so amended, and such waivers be given, in accordance with
the provisions of the applicable Document.
(b) The Company will provide each Purchaser of the Securities
(irrespective of the number of Securities then held by it) with reasonably
sufficient information, at least five business days (or such shorter period as
is mutually acceptable to the Company and such Purchaser) prior to the date a
decision is required, to enable such holder to make an informed and considered
decision with respect to any proposed amendment, waiver or consent in respect of
any of the provisions hereof or of the Registration Rights Agreement or of the
Certificate of Designation. The Company will deliver executed or true and
correct copies of each amendment, waiver or consent effected pursuant to the
provisions of this Section 6.3 to each Purchaser of outstanding Securities
promptly following the date on which it is executed and delivered by, or
receives the consent or approval of, the requisite holders of Securities.
(c) The Company will not directly or indirectly pay or cause to be
paid any remuneration in any form whatsoever, or grant any security, to any
Purchaser of Securities as consideration for or as an inducement to the entering
into by any Purchaser of Securities of any waiver or amendment of any of the
terms and provisions hereof or of the Registration Rights Agreement or of the
Certificate of Designation unless such remuneration is concurrently paid, or
security is concurrently granted, on the same terms, ratably to each Purchaser
of Securities then outstanding even if such Purchaser did not consent to such
waiver or amendment.
6.4 COUNTERPARTS
This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
6.5 HEADINGS
The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
6.6 GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
21
<PAGE>
6.7 ENTIRE AGREEMENT
This Agreement, together with the other Documents and the Securities,
is intended by the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein and
therein. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement,
together with the other Documents and the Securities, supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
6.8 SEVERABILITY
In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that all of your rights and privileges shall be enforceable to the
fullest extent permitted by law.
6.9 DELIVERY
Each Purchaser hereby appoints the Placement Agent to accept delivery
of the Securities to be purchased by such Purchaser at the Closing and execute a
receipt for such Securities on such Purchaser's behalf.
6.10 PUBLIC DISCLOSURES
The Company covenants that it will take all reasonable actions
necessary to keep your identity confidential, and will not disclose your
identity as an investor in the Company in any public announcement, governmental
filing or otherwise without your prior written consent unless such disclosure is
compelled by law or by order of a court of competent jurisdiction; in which case
prior to making such disclosure the Company will give written notice to you
describing in all reasonable detail the proposed content of such disclosure and
will afford you an opportunity to suggest modifications in the form and
substance of such proposed disclosure.
[Signature pages follow]
22
<PAGE>
If this Agreement is satisfactory to you, please so indicate by
signing the acceptance at the foot of a counterpart of this Agreement and
deliver such counterpart to the Company whereupon this Agreement will become
binding between us in accordance with its terms.
Very truly yours,
EXCEL LEGACY CORPORATION
By: /s/ Gary B. Sabin
-------------------------------
Name: Gary B. Sabin
Title: President and Chief Executive Officer
23
<PAGE>
Accepted and Agreed as of the
date first written above:
LONGLEAF PARTNERS REALTY FUND
- ---------------------------------
(Print or type name of Purchaser)
By: Southeastern Asset Management, Inc.
---------------------------------------
(If an institution is executing
this Agreement as agent for the
Purchaser, type or print name
of institution)
By: /s/ Charles D. Reaves
-------------------------
(Signature of individual
executing on behalf of Purchaser
or institutional agent of Purchaser)
Print or Type
Name: Charles D. Reaves
Title: Executive Vice President - Longleaf Partners Realty Fund
Vice President & General Counsel - Southeastern Asset
Management, Inc.
Number of Securities to
be purchased by you:
10,344,000 shares at $5.00 per share
Name and Address Longleaf Partners Realty Fund
of Purchaser: 6410 Poplar Ave., Suite 900; Memphis, TN
------------- 38119
Attention: Charles D. Reaves
Telephone: (901) 761-2474
Telecopy No: (901) 818-5210
Tax I.D. No: 62-1616883
(If registered in the name of
a Nominee, the Nominee's
Tax I.D. Number)
State of Principal Place of Business:
Longleaf Partners Realty Fund is a
series of a Massachusetts business trust,
Longleaf Partners Funds Trust
Nominee (Name in which Securities are
to be registered if different than name
of Purchaser): Keypunch & Co.
(Nominee name used by
State Street Bank & Trust
Co. for Longleaf Partners
Realty Fund)
24
<PAGE>
Accepted and Agreed as of the
date first written above:
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
(Print or type name of Purchaser)
By:
-------------------------------------
(If an institution is executing
this Agreement as agent for the
Purchaser, type or print name
of institution)
By: /s/ Carson D. Keyes
-----------------------
(Signature of individual
executing on behalf of Purchaser
or institutional agent of Purchaser)
Print or Type
Name: Carson D. Keyes
Title: Vice President
Number of Securities to
be purchased by you:
2,000,000 shares at $5 per share
Name and Address SEE EXHIBIT A
of Purchaser:
-------------
Attention:
Telephone: ( ) ____-_________
Telecopy No: ( ) ____-_________
Tax I.D. No: 39-0509570
(If registered in the name of
a Nominee, the Nominee's
Tax I.D. Number)
State of Principal Place of Business:
WISCONSIN
Nominee (Name in which Securities are
to be registered if different than name
of Purchaser):
-------------
25
<PAGE>
Accepted and Agreed as of the
date first written above:
ALLSTATE INSURANCE COMPANY
(Print or type name of Purchaser)
By:
------------------------------------
(If an institution is executing
this Agreement as agent for the
Purchaser, type or print name
of institution)
By: /s/ Allstate Insurance Company By: /s/ Allstate Insurance Company
------------------------------ ------------------------------
(Signature of individual Authorized Signatory
executing on behalf of Purchaser
or institutional agent of Purchaser)
Print or Type
Name:
-----------------------------------
Title: Authorized Signatory
Number of Securities to * Up to 2,000,000 Securities, at $5.00 per share,
be purchased by you: provided, however, in no event shall Allstate
Insurance Company's ownership interest in the
* shares Securities exceed 9.99%. In addition to the
- ------- aforementioned ownership limitation, the dollar
amount of Allstate's investment in the Securities
shall not exceed $10,000,000. Notwithstanding the
above, the dollar amount of Allstate's investment
shall not be less than $8,205,000.
Name and Address 3075 Sanders Road, Suite G5B
of Purchaser: Northbrook, Illinois 60062
-------------
Attention: Director, Real Estate Equity Investments
Telephone: 847-402-5000
Telecopy No: 847-402-1797
Tax I.D. No: 36-0719665
(If registered in the name of
a Nominee, the Nominee's
Tax I.D. Number)
State of Principal Place of Business:
Illinois
Nominee (Name in which Securities are
to be registered if different than name
of Purchaser):
--------------
26
<PAGE>
Accepted and Agreed as of the
date first written above:
BANC BOSTON CAPITAL INC.
(Print or type name of Purchaser)
By: /s/ Banc Boston Capital Inc.
----------------------------
(If an institution is executing
this Agreement as agent for the
Purchaser, type or print name
of institution)
By:
----------------------------
(Signature of individual
executing on behalf of Purchaser
or institutional agent of Purchaser)
Print or Type
Name:
---------------------------------
Title:
------------------------------
Number of Securities to
be purchased by you:
2,440,000 shares at $5 per share
Name and Address
of Purchaser:
-------------
Attention:
Telephone: 617-434-7890
Telecopy No: 617-434-1153
Tax I.D. No: 04-2511-291
(If registered in the name of
a Nominee, the Nominee's
Tax I.D. Number)
State of Principal Place of Business:
Massachusetts
Nominee (Name in which Securities are
to be registered if different than name
of Purchaser):
-------------
27
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Dated as of March 31, 1998
by and among
Excel Legacy Corporation
and
the Purchasers Listed on the Signature
Pages of the Purchase Agreement
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of March 31, 1998, by and among Excel Legacy Corporation, a
Delaware corporation (the "Company"), and the purchasers (herein referred to
collectively as the "Purchasers" and individually as a "Purchaser") whose names
are set forth on the signature pages of the Purchase Agreement (as defined
below).
This Agreement is made pursuant to the Purchase Agreements between the
Company and the Purchasers (collectively and individually, the "Purchase
Agreement"). In order to induce the Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement. The execution of this Agreement is a condition to the
Closing under the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
AGENT: Any Person authorized to act and who acts on behalf of any of
the Purchasers with respect to the transactions contemplated by this Agreement.
COMMON STOCK: The common stock, $.01 par value, of the Company.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended from
time to time.
NASD: National Association of Securities Dealers, Inc.
NMS: NASDAQ National Market System.
NOTICE OF ACCEPTANCE: See Section 9(b) hereof.
OFFER: See Section 9(a) hereof.
OFFERED SECURITIES: See Section 9(a) hereof.
PERSON: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
PIGGYBACK NOTICE: See Section 4(a) hereof.
PREFERRED SHARES: The Series A Liquidating Preference Convertible
Preferred Stock due 2005, $.01 par value, of the Company being issued and sold
pursuant to the Purchase Agreement.
PROSPECTUS: The prospectus included in the Registration Statement, as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus.
<PAGE>
REFUSED SECURITIES: See Section 9(b) hereof.
REGISTRATION EXPENSES: See Section 7(a) hereof.
REGISTRABLE SECURITIES: (i) The Preferred Shares, (ii) the shares of
Common Stock issued or issuable upon conversion of the Preferred Shares, (iii)
the Warrant Shares, (iv) the shares of Common Stock into which the Warrant
Shares may be convertible, and (v) any securities issued or issuable with
respect to the Common Stock referred to in clause (ii) or (iv) by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization; provided that a
security ceases to be a Registrable Security when it is no longer a Transfer
Restricted Security.
REGISTRATION STATEMENT: Any registration statement of the Company
which covers Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, and all exhibits
and all material incorporated by reference in such Registration Statement.
SECURITIES ACT: The Securities Act of 1933, as amended from time to
time.
SEC: The Securities and Exchange Commission.
TRANSFER RESTRICTED SECURITIES: Securities acquired by the holder
thereof other than pursuant to an effective registration under Section 5 of the
Securities Act or pursuant to Rule 144; provided that a Security that has ceased
to be a Transfer Restricted Security cannot thereafter become a Transfer
Restricted Security.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
WARRANT SHARES: The shares of Series A Preferred Stock deliverable
upon the exercise of (i) that certain Warrant to Purchase 241,000 shares of
Series A Preferred Stock issued concurrently herewith to BancBoston Capital Inc.
and (ii) that certain Warrant to Purchase 4,256,000 shares of Series A Preferred
Stock issued concurrently herewith to Southeastern Asset Management, Inc., for
and on behalf of its assignee, Longleaf Partners Realty Fund, a Series of
Longleaf Partners Funds Trust.
2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) REGISTRABLE SECURITIES. The securities entitled to the benefits of
this Agreement are the Registrable Securities.
(b) HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to be a holder
of Registrable Securities whenever such Person owns Registrable Securities or
has the right to acquire such Registrable Securities, whether or not such
acquisition has actually been effected and disregarding any legal restrictions
upon the exercise of such right.
3. SHELF REGISTRATION.
(a) TIMING OF FILING, EFFECTIVENESS AND PERIOD OF USABILITY. As promptly
as practicable and in any event within 60 days following the date of initial
issuance of the Preferred Shares, the Company
2
<PAGE>
shall file a "shelf" Registration Statement on any appropriate form pursuant to
Rule 415 (or similar rule that may be adopted by the SEC) under the Securities
Act for all the Registrable Securities, which form shall be available for the
sale of the Registrable Securities in accordance with the intended method or
methods of distribution thereof. The Company agrees to use its best efforts to
cause the Registration Statement to become effective within 60 days following
the date of filing with the SEC.
The Company agrees to use its best efforts to keep the Registration
Statement continuously effective and usable for resale of Registrable
Securities, for a period of two years from the date on which the SEC declares
such Registration Statement effective, or in the event that a holder which
beneficially owns not less than five percent (5.0%) of any class of equity
securities of the Company so requests in writing not less than 30 days prior to
the termination of such two-year period, for a period of five years from such
effective date, or such shorter period which will terminate when all the
Registrable Securities covered by such Registration Statement have been sold
pursuant to such Registration Statement.
The Company agrees to apply to have the Registrable Securities listed
on NMS promptly following the qualification of such securities (i.e., in terms
of share price, market value, public float, etc.) to be so listed, and to use
its best efforts to cause the listing to become effective. If after 150 days
following the date on which the SEC declares the Registration Statement
effective, the Registrable Securities still do not qualify for listing on NMS,
the Company will seek a waiver from NMS of any applicable provisions then
preventing listing. If the waiver is not granted, the Company agrees to pursue
all reasonable options to have the Registrable Securities qualify for listing
which are not detrimental to stockholders of the Company, including the
possibility of obtaining a listing on another national stock exchange.
(b) SELECTION OF UNDERWRITERS. If at any time or from time to time any of
the holders of the Registrable Securities covered by the Registration Statement
desire to sell Registrable Securities in an underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the holders of a majority of the
Registrable Securities included in such offering; PROVIDED that such investment
bankers and managers must be reasonably satisfactory to the Company.
4. PIGGYBACK REGISTRATIONS.
(a) PARTICIPATION. Subject to Section 4(b) hereof, if at any time after
the date hereof the Company files a registration statement under the Securities
Act with respect to an offering of any equity securities by the Company for its
own account or for the account of any of its equity holders (other than (i) a
registration on Form S-4 or S-8 or any successor form to such Forms, or (ii) any
registration of securities as it relates to an offering and sale to management
of the Company pursuant to any employee stock plan or other employee benefit
plan arrangement) with respect to an offering that includes any shares of Common
Stock, then the Company shall give prompt notice (the "Piggyback Notice") to the
holders of the Registrable Securities and such holders shall be entitled to
include in such registration statement the Registrable Securities held by them.
The Piggyback Notice shall offer the holders of the Registrable Securities the
opportunity to register such number of shares of Registrable Securities as each
such holder may request and shall set forth (1) the anticipated filing date of
such registration statement and (2) the number of shares of Common Stock that is
proposed to be included in such registration statement. The Company shall
include in such registration statement such shares of Registrable Securities for
which it has received written requests to register such shares within ten
business days after the Piggyback Notice has been given.
3
<PAGE>
(b) UNDERWRITER'S CUTBACK. Notwithstanding the foregoing, if a
registration pursuant to this Section 4 involves an underwritten offering and
the managing underwriters of such proposed underwritten offering deliver an
opinion to the holders of the Registrable Securities that the total or kind of
securities that such holders and any other Person intend to include in such
offering would be reasonably likely to adversely affect the price, timing or
distribution of the securities offered in such offering, then the Company shall
include in such registration (i) 100% of the securities that the Person (which
may be the Company) initiating such registration proposes to sell, and (ii)
second, to the extent of the amount of securities that all other holders have
requested to be included in such registration, which, in the opinion of the
managing underwriters, can be sold without such adverse effect referred to
above, such amount to be allocated pro rata among all other holders based upon
the relative aggregate amount of gross proceeds to be received by any other
holders in the offering.
(c) COMPANY CONTROL. The Company may decline to file a registration
statement after giving the Piggyback Notice, or withdraw a registration
statement after filing and after such Piggyback Notice, but prior to the
effectiveness of the registration statement, provided that the Company shall
promptly notify each holder of the Registrable Securities in writing of any such
action and provided further that the Company shall bear all reasonable expenses
incurred by each such holder or otherwise in connection with such withdrawn
registration statement.
5. HOLD-BACK AGREEMENTS
(a) RESTRICTIONS ON PUBLIC SALE BY HOLDER OF REGISTRABLE SECURITIES. Each
holder of Registrable Securities whose Registrable Securities are covered by a
Registration Statement filed pursuant to Section 3 or 4 hereof agrees, if
requested by the managing underwriters in an underwritten offering, not to
effect any public sale or distribution of Registrable Securities, including a
sale pursuant to Rule 144 under the Securities Act (except as part of such
underwritten registration), during the 10-day period prior to, and during the
90-day period beginning on, the closing date of each underwritten offering made
pursuant to such Registration Statement, to the extent timely notified in
writing by the Company or the managing underwriters.
The foregoing provisions shall not apply to any holder of Registrable
Securities if such holder is prevented by applicable statute or regulation from
entering any such agreement; PROVIDED that any such holder shall undertake, in
its request to participate in any such underwritten offering, not to effect any
public sale or distribution of Registrable Securities commencing on the date of
sale of Registrable Securities unless it has provided 45 days' prior written
notice of such sale or distribution to the underwriter or underwriters.
(b) RESTRICTIONS ON PUBLIC SALE BY THE COMPANY AND OTHERS. The Company
agrees:
(1) not to effect any public or private sale or distribution of its
equity securities, including a sale pursuant to Regulation D under the
Securities Act, during the 10-day period prior to, and during the 90-day
period beginning on, the closing date of any underwritten offering made
pursuant to a Registration Statement filed under Section 3 or 4 hereof, to
the extent timely requested in writing by the managing underwriters (except
(i) as part of such underwritten registration, (ii) pursuant to a
registration on Form S-4 or S-8 or any successor form to such Forms, or
(iii) pursuant to any registration of securities as it relates to an
offering and sale to management of the Company pursuant to any employee
stock plan or other employee benefit plan arrangement), and
4
<PAGE>
(2) to cause each holder of privately placed equity securities issued
by the Company at any time on or after the date of this Agreement to agree
not to effect any public sale or distribution of any such securities during
such period, including a sale pursuant to Rule 144 under the Securities Act
(except as part of such underwritten registration, if permitted).
6. REGISTRATION PROCEDURES
In connection with the Company's obligations to file a Registration
Statement pursuant to Section 3 or 4 hereof, the Company will use its best
efforts to effect such registration to permit the sale of such Registrable
Securities in accordance with the intended method or methods of disposition
thereof, including sales pursuant to Rule 144 under the Securities Act, and
pursuant thereto the Company will as promptly as practicable:
(a) before filing the Registration Statement or Prospectus or any
amendments or supplements thereto, furnish to the holders of the
Registrable Securities covered by such Registration Statement and the
underwriters, if any, copies of all such documents proposed to be filed,
which documents will be subject to the review of such holders and
underwriters, and the Company will not file any Registration Statement or
amendment thereto or any Prospectus or any supplement thereto to which the
holders of a majority of the Registrable Securities covered by such
Registration Statement or the underwriters, if any, shall reasonably
object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement, and such supplements to the
Prospectus, as may be required by the rules, regulations or instructions
applicable to the registration form utilized by the Company or by the
Securities Act or rules and regulations thereunder for shelf registration
or otherwise necessary to keep the Registration Statement effective for the
applicable period and cause the Prospectus as so supplemented to be filed
pursuant to Rule 424 under the Securities Act; and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable
period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Registration Statement or supplement to
the Prospectus;
(c) notify the holders of the Registrable Securities covered by such
Registration Statement and the managing underwriters, if any, at least 24
hours in advance of the proposed effective date of the Registration
Statement;
(d) notify the holders of the Registrable Securities covered by such
Registration Statement and the managing underwriters, if any, IMMEDIATELY
(i.e., on the same day and, if effectiveness has been declared prior to
such time, before the close of the New York Stock Exchange on such day), of
the effectiveness of the Registration Statement or any post-effective
amendment thereto;
(e) notify the selling holders of Registrable Securities and the
managing underwriters, if any, promptly,
(1) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed,
5
<PAGE>
(2) of any request by the SEC for amendments or supplements to
the Registration Statement or the Prospectus or for additional
information,
(3) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose,
(4) if at any time the representations and warranties of the
Company contemplated by paragraph (k) below cease to be true and
correct, of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and
(5) of the existence of any fact which results in the
Registration Statement, the Prospectus or any document incorporated
therein by reference containing an untrue statement of material fact
or omitting to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
(f) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(g) upon request, furnish to each selling holder of Registrable
Securities and each managing underwriter, without charge, at least one
signed copy of the Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those
incorporated by reference);
(h) deliver to each selling holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons may reasonably request; the Company consents to the
use of the Prospectus or any amendment or supplement thereto by each of the
selling holders of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered
by the Prospectus or any amendment or supplement thereto;
(i) prior to any public offering of Registrable Securities, register
or qualify or cooperate with the selling holders of Registrable Securities,
the underwriters, if any, and their respective counsel in connection with
the registration or qualification of such Registrable Securities for offer
and sale under the securities or blue sky laws of such jurisdictions as any
seller or underwriter reasonably requests in writing and do any and all
other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by
the Registration Statement; PROVIDED that the Company will not be required
to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to general
service of process in any such jurisdiction where it is not then so
subject;
(j) cooperate with the selling holders of Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends; and enable such Registrable Securities
to be in such denominations and registered in such names as the managing
6
<PAGE>
underwriters may request at least two business days prior to any sale of
Registrable Securities to the underwriters;
(k) if any fact contemplated by paragraph (c)(5) above shall exist,
prepare a supplement or post-effective amendment to the Registration
Statement or the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities, the Prospectus
will not contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading;
(l) cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange on which similar
securities issued by the Company are then listed if requested by the
holders of a majority of such Registrable Securities or the managing
underwriters, if any;
(m) upon the effectiveness of the Registration Statement, and again
upon each sale of any Registrable Securities in an underwritten offering,
enter into agreements (including underwriting agreements) and take all
other appropriate actions in order to expedite or facilitate the
disposition of such Registrable Securities and in such connection:
(1) make such representations and warranties to the underwriters
or the selling holders, as applicable, in form, substance and scope as
are customarily made by issuers to underwriters in primary
underwritten offerings;
(2) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, substance and scope)
shall be reasonably satisfactory to the managing underwriters or the
selling holders, as applicable) addressed to the underwriters or the
selling holders, as applicable, covering the matters customarily
covered in opinions requested in underwritten offerings;
(3) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the
underwriters or the selling holders (PROVIDED that such letters are
delivered by the accountants to Persons such as the selling holders,
and PROVIDED FURTHER that the selling holders deliver to the
accountants all information and documentation requested by the
accountants in connection therewith), as applicable, such letters to
be in customary form and covering matters of the type customarily
covered in "cold comfort" letters by underwriters in connection with
primary underwritten offerings;
(4) if an underwriting agreement is entered into, cause the same
to set forth in full the indemnification provisions and procedures of
Section 8 hereof with respect to all parties to be indemnified
pursuant to said Section; and
(5) deliver such documents and certificates as may be reasonably
requested by the managing underwriters or the selling holders, as
applicable, to evidence compliance with any customary conditions
contained in the underwriting agreement or other agreement entered
into by the Company.
7
<PAGE>
(n) make available for inspection by a representative of the holders
of a majority of the Registrable Securities, any underwriter participating
in any disposition pursuant to such Registration Statement, and any
attorney or accountant retained by the sellers or underwriter, all
pertinent financial and other records, corporate documents and properties
of the Company, and cause the Company's officers, directors and employees
to supply all information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with the registration;
PROVIDED that any records, information or documents that are designated by
the Company in writing as confidential shall be kept confidential by such
Persons unless disclosure of such records, information or documents is
required by court or administrative order; and
(o) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter" that is
required to be retained in accordance with the rules and regulations of the
NASD).
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such securities as the Company may
from time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 6(i) hereof, such holder
will forthwith discontinue disposition of Registrable Securities until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(i) hereof, or until it is advised in writing by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by reference in
the Prospectus, and, if so directed by the Company, such holder will deliver to
the Company all copies of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the time periods mentioned in Section 3(a) hereof shall be
extended by the number of days during the period from and including the date of
the giving of such notice to and including the date when each seller of
Registrable Securities covered by such Registration Statement either receives
the copies of the supplemented or amended prospectus contemplated by Section
6(i) hereof or is advised in writing by the Company that the use of the
Prospectus may be resumed; provided that nothing herein shall relieve the
Company from its obligation pursuant to Section 3(a) hereof to file a
Registration Statement within 60 days following the date of initial issuance of
the Preferred Shares; and provided further that the aggregate length of all
discontinuances pursuant to this paragraph in any 12-month period shall not
exceed 120 days.
7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be paid by the Company, regardless whether the
Registration Statement becomes effective, including without limitation:
(1) all registration and filing fees (including with respect to
filings required to be made with the NASD);
(2) fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of counsel for the underwriters or
selling holders in connection with blue sky qualifications of the
Registrable Securities and determination of their eligibility for
investment
8
<PAGE>
under the laws of such jurisdictions as the managing underwriters or
holders of a majority of the Registrable Securities being sold may
designate);
(3) printing (including expenses of printing certificates for the
Registrable Securities in a form eligible for deposit with Depositary Trust
Company and of printing prospectuses), messenger, telephone and delivery
expenses;
(4) fees and disbursements of counsel for the Company, the
underwriters and for the sellers of the Registrable Securities (subject to
the provisions of Section 7(b) hereof);
(5) fees and disbursements of all independent certified public
accountants of the Company (including the expenses of any special audit and
"cold comfort" letters required by or incident to such performance);
(6) fees and disbursements of underwriters (excluding discounts,
commissions or fees of underwriters, selling brokers, dealer managers or
similar securities industry professionals relating to the distribution of
the Registrable Securities or legal expenses of any Person other than the
Company, the underwriters and the selling holders); and
(7) fees and expenses of other Persons retained by the Company (all
such expenses being herein called "Registration Expenses").
The Company will, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the securities to
be registered on each securities exchange on which similar securities issued by
the Company are then listed, rating agency fees and the fees and expenses of any
Person, including special experts, retained by the Company.
(b) In connection with the Registration Statement required hereunder, the
Company will reimburse the holders of Registrable Securities being registered
pursuant to such Registration Statement for the reasonable fees and
disbursements of not more than one counsel (or more than one counsel if a
conflict exists among such selling holders in the exercise of the reasonable
judgment of counsel for the selling holders and counsel for the Company) chosen
by the holders of a majority of such Registrable Securities.
8. INDEMNIFICATION
(a) INDEMNIFICATION BY COMPANY. The Company agrees to indemnify and hold
harmless each holder of Registrable Securities, its officers, directors,
trustees, representatives, employees and Agents and each Person who controls or
is controlled by such holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each such person being
sometimes hereinafter referred to as an "Indemnified Holder") from and against
all losses, claims, damages, liabilities and expenses (including reasonable
costs of investigation and legal expenses) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses arise out of or
are based upon any such untrue statement or omission or
9
<PAGE>
allegation thereof based upon information furnished in writing to the Company by
such holder expressly for use therein; PROVIDED, HOWEVER, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any preliminary
prospectus if (i) such holder failed to send or deliver a copy of the Prospectus
with or prior to the delivery of written confirmation of the sale of Registrable
Securities and (ii) the Prospectus would have completely corrected such untrue
statement or omission; and PROVIDED FURTHER, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission in the Prospectus, if
such untrue statement or alleged untrue statement, omission or alleged omission
is completely corrected in an amendment or supplement to the Prospectus and if,
having previously been furnished by or on behalf of the Company with copies of
the Prospectus as so amended or supplemented, such holder thereafter fails to
deliver such Prospectus as so amended or supplemented, prior to or concurrently
with the sale of a Registrable Security to the person asserting such loss,
claim, damage, liability or expense who purchased such Registrable Security
which is the subject thereof from such holder. This indemnity will be in
addition to any liability which the Company may otherwise have. The Company
will also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers and directors and each Person who controls such Persons (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
to the same extent as provided above with respect to the indemnification of the
Indemnified Holders of Registrable Securities.
If any action or proceeding (including any governmental investigation
or inquiry) shall be brought or asserted against an Indemnified Holder in
respect of which indemnity may be sought from the Company, such Indemnified
Holder shall promptly notify the Company in writing, and the Company shall
assume the defense thereof, including the employment of counsel satisfactory to
such Indemnified Holder and the payment of all expenses. Such Indemnified
Holder shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be the expense of such Indemnified Holder unless (a) the Company has
agreed to pay such fees and expenses or (b) the Company shall have failed to
assume the defense of such action or proceeding and has failed to employ counsel
satisfactory to such Indemnified Holder in any such action or proceeding or (c)
the named parties to any such action or proceeding (including any impleaded
parties) include both such Indemnified Holder and the Company, and such
Indemnified Holder shall have been advised by counsel that there may be one or
more legal defenses available to such Indemnified holder which are different
from or additional to those available to the Company (in which case, if such
Indemnified Holder notifies the Company in writing that it elects to employ
separate counsel at the expense of the Company, the Company shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Holder, it being understood, however, that the Company shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys at any time for
such Indemnified Holder and any other Indemnified Holders, which firm shall be
designated in writing by such Indemnified Holders). The Company shall not be
liable for any settlement of any such action or proceeding effected without its
written consent, but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such action or proceeding, the Company agrees
to indemnify and hold harmless such Indemnified Holders from and against any
loss or liability by reason of such settlement or judgment. The Company will
not agree to any settlement or consent judgment requiring any action other than
the payment of cash without the written consent of the Indemnified Holders.
10
<PAGE>
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. Each holder of
Registrable Securities agrees to indemnify and hold harmless the Company, its
directors and officers and each Person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such holder, but only with respect to information relating to such holder
furnished in writing by such holder expressly for use in any Registration
Statement or Prospectus, or any amendment or supplement thereto, or any
preliminary prospectus. In case any action or proceeding shall be brought
against the Company or its directors or officers or any such controlling person,
in respect of which indemnity may be sought against a holder of Registrable
Securities, such holder shall have the rights and duties given the Company and
the Company or its directors or officers or such controlling person shall have
the rights and duties given to each holder by the preceding paragraph. In no
event shall the liability of any selling holder of Registrable Securities
hereunder be greater in amount than the dollar amount of the proceeds received
by such holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus or Registration Statement or any
amendment or supplement thereto, or any preliminary prospectus.
(c) CONTRIBUTION. If the indemnification provided for in this Section 8
is unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and of the Indemnified Holder on the other in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of the Company on the one hand and of the Indemnified Holder
on the other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Indemnified Holder and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in the second paragraph
of Section 8(a), any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim.
The Company and each holder of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 8(c)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
8(c), an Indemnified Holder shall not be required to contribute any amount in
excess of the amount by which the total price at which the Securities sold by
such Indemnified Holder or its affiliated Indemnified Holders and distributed to
the public were offered to the public exceeds the amount of any damages which
such Indemnified Holder, or its affiliated Indemnified Holder, has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
11
<PAGE>
9. PREEMPTIVE RIGHTS
(a) For so long as any of the Preferred Shares remain outstanding, the
Company shall not issue or sell, agree to issue or sell, or reserve or set aside
for issuance or sale, any Preferred Shares or any other equity securities of the
Company ranking on a parity with the Preferred Shares which have substantially
similar preferences, rights and privileges as the Preferred Shares
(collectively, the "Offered Securities"), unless the Company shall have first
offered (each such offer, an "Offer") to sell to each holder of then outstanding
Preferred Shares such shares of the Offered Securities in proportion to its then
existing holdings of outstanding Preferred Shares, on the same terms and
conditions and for the same consideration as the Company proposes to issue the
Offered Securities to Persons other than such holders.
(b) Notice of each holder's intention to accept, in whole or in part, an
Offer shall be evidenced by a writing signed by such holder and delivered to the
Company within ten business days following receipt of such Offer, setting forth
such portion of the Offered Securities as such holder elects to purchase (each
such writing, a "Notice of Acceptance"). In the event that Notices of
Acceptance are not given by the holders of outstanding Preferred Shares in
respect of all of the Offered Securities, the Company shall have 120 days from
the expiration of the foregoing ten-day period to sell all or any part of such
Offered Securities as to which Notices of Acceptance have not been given by the
holders (the "Refused Securities") to any other Person or Persons, but only upon
terms and conditions which are no more favorable, in the aggregate, to such
other Person or Persons than those set forth in the Offer. Upon the closing of
the sale of the Refused Securities, the holders shall purchase from the Company,
and the Company shall sell to the holders, the Offered Securities in respect of
which Notices of Acceptance were delivered to the Company, on the terms
specified in the Offer.
10. RULE 144
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder (or, if the Company is not required to
file such reports, it will, upon the request of any holder of Registrable
Securities, make publicly available such information as is necessary to permit
sales pursuant to Rule 144 under the Securities Act), and it will take such
further action as any holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC.
11. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Person may participate in any underwritten registration hereunder
unless such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements, and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
12. MISCELLANEOUS
(a) REMEDIES. Each holder of Registrable Securities, in addition to being
entitled to exercise all rights provided herein, in the Purchase Agreement and
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that
12
<PAGE>
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company will not on or after the date
of this Agreement enter into any agreement with respect to its securities which
is inconsistent with the rights granted to the holders of Registrable Securities
in this Agreement or otherwise conflicts with the provisions hereof. The
Company has not previously entered into any agreement with respect to its
securities granting any registration rights to any Person.
(c) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will not
take any action, or permit any change to occur, with respect to the Registrable
Securities which would (i) adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement, or (ii) adversely affect the
marketability of such Registrable Securities in any such registration.
(d) TRANSFER AGENT. The Company will establish and maintain a transfer
agent for the Registrable Securities for so long as such securities are
outstanding.
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of holders of at least
a majority of the outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of holders of Registrable Securities whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other holders of Registrable
Securities may be given by the holders of a majority of the Registrable
Securities being sold.
(f) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or air courier guaranteeing overnight
delivery:
(i) if to a holder of Registrable Securities, at the most current
address given by such holder to the Company in accordance with the
provisions of this Section 12(f), which address initially is, with respect
to each Purchaser, the address set forth on such Purchaser's signature page
of the Purchase Agreement; and
(ii) if to the Company, initially at its address set forth in the
Purchase Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 12(f), with a copy
to Latham & Watkins, 701 "B" Street, Suite 2100, San Diego, California
92101, Attention: Scott N. Wolfe, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for
13
<PAGE>
an express assignment, subsequent holders of Registrable Securities; provided,
however, that after the Closing this Agreement shall not inure to the benefit of
or be binding upon a successor or assign of a holder of Preferred Shares unless
and to the extent such successor or assign acquired Registrable Securities from
such holder.
(h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(k) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
The Company: EXCEL LEGACY CORPORATION
By: /s/ Gary B. Sabin
------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
Purchaser: SOUTHEASTERN ASSET MANAGEMENT,
INC.
By: /s/ Charles D. Reaves
---------------------
Title: Vice President and General Counsel
----------------------------------
Purchaser: ALLSTATE INSURANCE COMPANY
By: /s/ Authorized Signatory
------------------------
Title: Authorized Signatory
--------------------
Purchaser: BANCBOSTON CAPITAL INC.
By: /s/ BancBoston Capital Inc.
---------------------------
Title: BancBoston Capital Inc.
-----------------------
Purchaser: THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Carson D. Keyes
-------------------
Title: Vice President
--------------
15
