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) July 15, 1997
CAPITAL TRUST
(Exact Name of Registrant as Specified in its Charter)
California 1-8063 94-6181186
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(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
incorporation)
885 Third Avenue, 12th Floor
New York, NY 10022
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(Address of Principal Executive Offices) (Zip Code)
(212) 593-5400
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(Registrant's Telephone Number, Including Area Code)
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(Former name or former address, if changed since last report)
612385.1
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ITEM 1. Changes in Control Registrant
On July 15, 1997, following the Registrant's annual meeting of
shareholders, Veqtor Finance Company, LLC ("Veqtor") purchased from the
Registrant 12,267,658 class A 9.5% cumulative convertible preferred shares of
beneficial interest, $1.00 par value, in the Registrant (the "Class A Preferred
Shares") pursuant to the terms of the preferred share purchase agreement, dated
as of June 16, 1997, by and between the Registrant and Veqtor. The aggregate
purchase price for the Class A Preferred Shares was $33,000,000. In addition,
concurrently with the foregoing, pursuant to the terms of a common share
purchase agreement, Veqtor purchased from CalREIT Investors Limited Partnership
("CRIL") 6,959,593 common shares of beneficial interest, $1.00 par value, in the
Registrant (such shares were reclassified on July 15, 1997 as class A common
shares of beneficial interest, $1.00 par value, upon the execution of the
amended and restated declaration of trust of the Registrant (the "Restated
Declaration") that was approved at the annual meeting (the "Class A Common
Shares")). The aggregate purchase price for the Class A Common Shares was
$21,298,815.
As a result of the foregoing transactions, Veqtor beneficially owns
19,227,251 or approximately 90% of the outstanding voting shares of the
Registrant. With such voting power Veqtor will therefore have the ability to
control the election of trustees of the Registrant and the vote on actions
requiring shareholder approval including (i) amendments to the Restated
Declaration and (ii) mergers or sales of all or substantially all of the assets
of the Registrant, and will otherwise be in a position to control the policies
and affairs of the Registrant.
The sole managing members of Veqtor are CRIL and V2 Holdings LLC
("V2H"). The general partner of CRIL is SZ Investments, LLC, the sole
managing member of which is Zell General Partnership, Inc. The Samuel Zell
Revocable Trust, for which Samuel Zell serves as trustee, is the sole
stockholder of Zell General Partnership, Inc. John R. Klopp and Craig M. Hatkoff
are the sole members of V2H. Veqtor funded the $54,298,815 aggregate purchase
price for the Class A Preferred Shares and the Class A Common Shares with funds
obtained from the $5,000,000 of capital contributions of its members and from
the $50,000,000 of borrowings under notes issued to BankAmerica Investment
Corporation, Banc Boston Investments, Inc., First Chicago Capital Corporation
and Wells Fargo & Company.
Veqtor is a party to the VFC Investment Agreement, among Veqtor, CRIL,
V2H, and Messrs. Klopp and Hatkoff, dated as of July 15, 1997 (the "Investment
Agreement"). The Investment Agreement contains buy/sell provisions pursuant to
which one member of Veqtor may purchase from or sell to the other member its
interests in Veqtor or one member of V2H or CRIL may purchase the other V2H
member's interest in V2H. A transfer of the membership interests in either
Veqtor or V2H could result in a change in voting control of the Registrant. A
copy of the Investment Agreement is filed as Exhibit 99.1 (by means of
incorporation by reference and is incorporated herein by reference).
612385.1
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ITEM 2. Acquisition or Disposition of Assets
On July 15, 1997, pursuant to an Interest Purchase Agreement, dated as
of June 16, 1997 (the "Interest Purchase Agreement"), by and between John R.
Klopp ("Klopp"), Craig M. Hatkoff ("Hatkoff") and Valentine Wildove & Company,
Inc. ("Valentine" and collectively with Klopp and Hatkoff, the "Sellers")) and
the Registrant, the Registrant acquired all of the partnership interests in and
to Victor Capital Group, L.P.; (ii) all membership interests in and to 970
Management LLC; (iii) all membership interests in and to Victor Asset Management
Partners, L.L.C.; and (iv) all membership interests in and to VP Metropolis
Services, L.L.C. (collectively, the "Interests"). The aggregate purchase price
for the Interests was $5,000,000 which was paid by delivery to the Sellers of
non-interest bearing notes (the "Acquisition Notes"). The purchase price was
determined through arms length negotiations. The board of trustees of the
Registrant received a fairness opinion, dated May 23, 1997, from Coopers &
Lybrand L.L.C. that stated that the consideration paid by the Registrant was
fair, from a financial point of view, to the Registrant.
The Acquisition Notes will provide for ten semi-annual principal
amortization payments in equal installments. Messrs. Klopp and Hatkoff each
received an Acquisition Note in the principal amount of $2,162,500. Valentine
Wildove & Company, Inc., in which Messrs. Klopp and Hatkoff are each 50% owners,
received $675,000 in principal amount of the Acquisition Notes.
ITEM 7. Financial Statements and Exhibits.
(c) Exhibits.
2.1 Interest Purchase Agreement, dated as of June 16, 1997, by and
between John R. Klopp, Craig M. Hatkoff, and Valentine Wildove &
Company, Inc. and the Registrant.
10.1 Preferred Share Purchase Agreement, dated as of June 16, 1997,
by and between the Registrant and Veqtor Finance Company, LLC.
10.2 Non-Negotiable Notes of the Registrant payable to John R. Klopp,
Craig M. Hatkoff and Valentine Wildove & Company, Inc.
99.1. VFC Investment Agreement, dated as of July 15, 1997, among Veqtor
Finance Company, LLC, CalREIT Investors Limited Partnership, V2
Holdings LLC, John R. Klopp and Craig M. Hatkoff (Incorporated
by reference to Exhibit 4 to the Schedule 13D filed by Veqtor
Finance Company, LLC, CalREIT Investors Limited Partnership, SZ
Investments, LLC, Zell General Partnership, Inc., Samuel Zell
Revocable Trust, Samuel Zell, John R. Klopp and Craig M. Hatkoff
on July 25, 1997) .
612385.1
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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.
CAPITAL TRUST
(Registrant)
Date: July 30, 1997 By: /s/ John R. Klopp
----------------------------------------
Name: John R. Klopp
Title: Chief Executive Officer
612385.1
Exhibit 2.1
INTEREST PURCHASE AGREEMENT
dated as of June 16, 1997
by and between
John R. Klopp, Craig M. Hatkoff and
Valentine Wildove & Company, Inc.,
a Delaware corporation, as sellers
and
California Real Estate Investment Trust, a
business trust organized under the laws of the State of
California, as buyer
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS.............................................................................1
ARTICLE 2 PURCHASE AND SALE.......................................................................4
Section 2.1 Purchase and Sale of Interests..........................................................4
Section 2.2 Purchase Price..........................................................................4
Section 2.3 Closing and Closing Date................................................................5
Section 2.4 Conditions to Closing...................................................................5
Section 2.5 Additional Closing Deliveries...........................................................6
Section 2.6 Pre-Closing Distributions...............................................................8
Section 2.7 Assumption by Valentine of Certain Obligations to Employees of
VCG; Guarantee by Klopp and Hatkoff of Valentine Assumption
Obligation..............................................................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF SELLERS..............................................................................8
Section 3.1 Existence and Authority of Valentine....................................................9
Section 3.2 Authority of Individual Sellers.........................................................9
Section 3.3 Ownership of the Interests..............................................................9
Section 3.4 No Consents, Approvals, Violations or Breaches.........................................10
Section 3.5 Organizational Documents...............................................................11
Section 3.6 Taxes..................................................................................11
Section 3.7 Financial Statements...................................................................12
Section 3.8 Litigation; Legal and Governmental Proceedings and Judgments;
Licenses and Permits...................................................................12
Section 3.9 Employee Benefit Plans; Employment and Consulting Agreements;
Loans and Advances; Other Affiliated Transactions......................................13
Section 3.10 Material Contracts.....................................................................13
Section 3.11 Brokers................................................................................13
Section 3.12 No Material Change.....................................................................13
Section 3.13 Compliance with Laws...................................................................14
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER................................................14
Section 4.1 Existence and Authority of Buyer.......................................................14
Section 4.2 Investment Intent......................................................................14
Section 4.3 No Consents, Approvals, Violations or Breaches.........................................15
Section 4.4 Brokers................................................................................15
</TABLE>
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ARTICLE 5 COVENANTS OF SELLERS...................................................................15
Section 5.1 Operations in Ordinary Course..........................................................15
Section 5.2 Investigations.........................................................................16
Section 5.3 Conditions to Closing..................................................................16
ARTICLE 6 COVENANTS OF BUYER.....................................................................16
Section 6.1 Conditions to Closing..................................................................16
ARTICLE 7 FURTHER AGREEMENTS.....................................................................16
Section 7.1 Further Assurances.....................................................................16
Section 7.2 Costs and Expenses.....................................................................17
Section 7.3 Sellers' Access to Records.............................................................17
Section 7.4 Confidentiality........................................................................17
ARTICLE 8 TERMINATION............................................................................17
Section 8.1 Termination Events.....................................................................17
Section 8.2 Effect of Termination..................................................................18
ARTICLE 9 INDEMNIFICATION; REMEDIES..............................................................18
Section 9.1 Survival...............................................................................18
Section 9.2 Indemnification by Sellers.............................................................18
Section 9.3 Indemnification by Buyer...............................................................19
Section 9.4 Time Limitations.......................................................................19
Section 9.5 Procedure for Indemnification..........................................................19
ARTICLE 10 MISCELLANEOUS..........................................................................20
Section 10.1 Assignment; Transfer of Interests......................................................20
Section 10.2 Notices................................................................................20
Section 10.3 Entire Agreement.......................................................................22
Section 10.4 No Waiver..............................................................................22
Section 10.5 Governing Law..........................................................................22
Section 10.6 Counterparts...........................................................................22
Section 10.7 Public Announcements...................................................................22
Section 10.8 Availability of Equitable Remedies.....................................................22
Section 10.9 Construction...........................................................................22
Section 10.10 Arbitration.................................................................................23
</TABLE>
EXHIBITS
Exhibit A Form of Non-Negotiable Note
Exhibit B Form of Assignment Agreement
Exhibit C Form of Employment Agreement
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DISCLOSURE SCHEDULES
Schedule 2.1 Retained Contract Rights
Schedule 2.7 Assumed Obligations to Employees
Schedule 3.5 Organizational Documents
Schedule 3.7 Liabilities
Schedule 3.8 Litigation
Schedule 3.9 Employment Agreements; Loans
Schedule 3.10 Material Contracts
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INTEREST PURCHASE AGREEMENT
INTEREST PURCHASE AGREEMENT, dated as of June 16, 1997, by and
among JOHN R. KLOPP, CRAIG M. HATKOFF, VALENTINE WILDOVE & COMPANY, INC., a
Delaware corporation, and CALIFORNIA REAL ESTATE INVESTMENT TRUST, a business
trust organized under the laws of the State of California.
Preliminary Statement
Capitalized terms used in this agreement are defined in
article 1 hereof. VCG is a Delaware limited partnership, of which Valentine is
the sole general partner and Individual Sellers are the sole limited partners.
VCG Montreal is a New York corporation and currently has issued and outstanding
1,000 shares of Common Stock, which shares are owned beneficially and of record
by VCG. 970M is a New York limited liability company, of which Individual
Sellers are the only members. VAMP is a New York limited liability company, of
which Individual Sellers are the only members. VPMS is a New Jersey limited
liability company, of which Individual Sellers are the only members.
Sellers desire to sell to Buyer and Buyer desires to purchase
from Sellers all of Sellers' partnership interests in and to VCG, and all of
Individual Sellers' membership interests in and to 970M, VAMP and VPMS, subject
to the terms and conditions set forth herein.
Accordingly, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person.
"Assignment Agreement" has the meaning set forth in section
2.3 hereof.
"Business Day" means a day other than a Saturday, a Sunday or
a day on which banking institutions in the City of New York, New York are
authorized or obligated by law or executive order to close.
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"Buyer" means California Real Estate Investment Trust, a
business trust organized under the laws of the State of California, whose name
is intended to be changed to Capital Trust.
"Closing" has the meaning set forth in section 2.3 hereof.
"Closing Date" has the meaning set forth in section 2.3
hereof.
"Common Stock" means the VCG Montreal Common Stock.
"Companies" means, collectively, VCG, VCG Montreal, 970M, VAMP
and VPMS.
"control" including, with correlative meanings, the terms
"controlled by" and "under common control with," means, as to any Person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Damages" has the meaning set forth in section 9.2 hereof.
"Disclosure Schedules" means the disclosure schedules referred
to in articles 2 and 3 hereof and delivered in connection with the execution of
this agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974 or any successor law, and regulations and rules issued pursuant to that Act
or any successor law.
"Financial Statements" has the meaning set forth in section
3.7 hereof.
"GAAP" means those generally accepted accounting principles
and practices which are recognized as such by the American Institute of
Certified Public Accountants acting through its Accounting Principles Board or
by the Financial Accounting Standards Board or through other appropriate boards
or committees thereof and which are consistently applied for all periods after
the date hereof so as to properly reflect the financial condition, results of
operations and changes in financial position of any Person, except that any
accounting principle or practice required to be changed by such Accounting
Principles Board or Financial Accounting Standards Board (or other appropriate
board or committee of such Boards) in order to continue as a generally accepted
accounting principle or practice may be so changed.
"Indemnified Party" has the meaning set forth in section 9.5
hereof.
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"Indemnifying Party" has the meaning set forth in section 9.5
hereof.
"Individual Sellers" means John R. Klopp and Craig M. Hatkoff,
collectively.
"Interests" has the meaning set forth in section 2.1 hereof.
"Lien" means any lien, mortgage, security interest, tax lien,
pledge, encumbrance, conditional sale or title retention arrangement, or any
other interest in property designated to secure the repayment of indebtedness,
whether arising by agreement or under any statute or law, or otherwise.
"970M" means 970 Management LLC, a New York limited liability
company.
"Notes" has the meaning set forth in section 2.2 hereof.
"Organizational Documents" has the meaning set forth in
section 3.5 hereof.
"Person" means an individual, a corporation, a partnership, a
limited liability company, a joint venture, an association, a joint-stock
company, a trust, a business trust, a government or any agency or any political
subdivision, any unincorporated organization or any other entity.
"Preferred Share Purchase Agreement" has the meaning set
forth in section 2.3 hereof.
"Purchase Price" has the meaning set forth in section 2.2
hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Sellers" means Individual Sellers and Valentine,
collectively.
"Taxes" has the meaning set forth in section 3.6 hereof.
"Valentine" means Valentine Wildove & Company, Inc., a
Delaware corporation.
"VAMP" means Victor Asset Management Partners, L.L.C., a New
York limited liability company.
"VCG" means Victor Capital Group, L.P., a Delaware limited
partnership.
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"VCG Montreal" means VCG Montreal Management, Inc., a New York
corporation.
"VPMS" means VP Metropolis Services, L.L.C., a New Jersey
limited liability company.
ARTICLE 2
PURCHASE AND SALE
Section 2.1 Purchase and Sale of Interests. (a) On the terms
and subject to the conditions of this agreement, and in reliance upon the
representations and warranties contained herein, at the Closing Buyer shall
purchase from Sellers, and Sellers shall sell to Buyer, for the consideration
specified in section 2.2 hereof: (i) all of Sellers' general and limited
partnership interests in and to VCG; (ii) all of Individual Sellers' membership
interests in and to 970M; (iii) all of Individual Sellers' membership interests
in and to VAMP; and (iv) all of Individual Sellers' membership interests in and
to VPMS. Such partnership and membership interests are referred to herein,
collectively, as the "Interests."
(b) Buyer expressly acknowledges that it is not purchasing and
that Sellers shall retain the right to receive certain future potential revenues
and deferred fees, identified on Schedule 2.1 hereto, accruing under certain
contracts which were entered into and fully performed by the Companies prior to
the Closing Date.
Section 2.2 Purchase Price. (a) The aggregate purchase price
to be paid by Buyer to Sellers for the Interests shall be $5,000,000 (the
"Purchase Price"), payable:
(i) $2,162,500 to each of the Individual Sellers, of
which $1,912,500 is allocated to the purchase of each Individual
Seller's partnership interest in VCG and $250,000 is allocated to the
purchase of each Individual Seller's membership interests in 970M, VAMP
and VPMS; and
(ii) $675,000 to Valentine.
(b) At the Closing, the Purchase Price shall be tendered to
Sellers in the form of promissory notes (the "Notes") delivered to each of the
Sellers on the Closing Date, each substantially in the form attached hereto as
Exhibit A.
Section 2.3 Closing and Closing Date. Subject to the
conditions in section 2.4 hereof, the closing of the sale and purchase of the
Interests (the "Closing")
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will take place in a mutually acceptable manner and on the date (the "Closing
Date"), which is the date of the closing of the transactions contemplated by
that certain Preferred Share Purchase Agreement, dated as of June 16, 1997,
between Buyer and Veqtor Finance Company LLC, a Delaware limited liability
company (the "Preferred Share Purchase Agreement"). At the Closing, Sellers
shall deliver to Buyer, free and clear of any lien, charge, encumbrance or
expense against delivery of the Purchase Price therefor pursuant to section 2.2
hereof, an assignment agreement (the "Assignment Agreement") in the form of
Exhibit B hereto, transferring ownership of the Interests to Buyer.
Section 2.4 Conditions to Closing. (a) The obligation of Buyer
to close the transactions contemplated hereunder is subject to the satisfaction
on or prior to the Closing Date of the following conditions:
(i) no order, injunction or decree issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition (A) preventing the consummation of the closing of the
transactions contemplated by this agreement or (B) which is reasonably
likely to materially adversely affect the business, properties or
assets of the Companies or the transactions contemplated by this
agreement, shall be in effect;
(ii) each of the terms, covenants and conditions of
this agreement to be complied with and performed by Sellers on or prior
to the Closing Date shall have been duly complied with and performed in
all material respects, or Buyer shall have waived such compliance or
performance, and all documents to be delivered or actions to be taken
by Sellers pursuant to section 2.5 hereof shall have been delivered or
performed;
(iii) each of the representations and warranties made
by Sellers herein shall be true and correct in all material respects as
of the date hereof and as of the Closing Date (unless such
representation and warranty is made as of a specific date and then
shall be true and correct as of such date) with the same force and
effect as though such representations and warranties had been made as
of the Closing Date;
(iv) the transactions contemplated by the
Preferred Share Purchase Agreement shall have been consummated; and
(v) the form and substance of all instruments and
documents required to be delivered pursuant to this agreement by
Sellers shall be reasonably satisfactory in all respects to Buyer.
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(b) The obligation of Sellers to close the transactions
contemplated hereunder is subject to the satisfaction on or prior to the Closing
Date of the following conditions:
(i) no order, injunction or decree issued by any
court or agency of competent jurisdiction or other legal restraint or
prohibition (A) preventing the consummation of the closing of the
transactions contemplated by this agreement or (B) which is reasonably
likely to materially adversely affect the business, properties or
assets of the Companies or the transactions contemplated by this
agreement, shall be in effect;
(ii) each of the terms, covenants and conditions of
this agreement to be complied with and performed by Buyer on or prior
to the Closing Date shall have been duly complied with and performed in
all material respects, or Sellers shall have waived such compliance or
performance, and all documents to be delivered or actions to be taken
by Buyer pursuant to section 2.5 hereof shall have been delivered or
performed;
(iii) each of the representations and warranties made
by Buyer herein shall be true and correct in all material respects as
of the date hereof and as of the Closing Date (unless such
representation and warranty is made as of a specific date and then
shall be true and correct as of such date) with the same force and
effect as though such representations and warranties had been made as
of the Closing Date;
(iv) the transactions contemplated by the
Preferred Share Purchase Agreement shall have been consummated; and
(v) the form and substance of all instruments and
documents required to be delivered pursuant to this agreement by Buyer
shall be reasonably satisfactory in all respects to Sellers.
Section 2.5 Additional Closing Deliveries. (a) On or prior to
the Closing Date, Sellers shall deliver or cause to be delivered to Buyer the
documents listed below, in form and substance satisfactory to Buyer:
(i) an Assignment Agreement in the form of
Exhibit B hereto executed by or on behalf of the Sellers;
(ii) employment agreements substantially in the
form of Exhibit C hereto executed by each of Messrs. Hatkoff and Klopp;
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(iii) copies of the certificate of incorporation of
Valentine and the certificate of limited partnership of VCG, each
certified by the Secretary of State of the State of Delaware, the
articles of organization of 970M and VAMP, each certified by the
Secretary of the State of New York, and the certificate of formation of
VPMS, certified by the Secretary of the State of New Jersey;
(iv) resolutions of the board of directors of
Valentine approving and authorizing this agreement and the transactions
contemplated hereby, certified as of the Closing Date by its secretary
or assistant secretary as being in full force and effect without
modification or amendment;
(v) signature and incumbency certificates of the
officers of Valentine executing this agreement and any other documents
executed and delivered in connection herewith;
(vi) a certificate executed by or on behalf of
Sellers representing and warranting to Buyer that each of the
representations and warranties made by Sellers herein is true and
correct in all material respects as of the date hereof and as of the
Closing Date (unless such representation and warranty is made as of a
specific date and then shall be true and correct as of such date) with
the same force and effect as though such representations and warranties
had been made as of the Closing Date; and
(vii) an opinion of Coopers & Lybrand Securities
L.L.C., in form and substance satisfactory to Buyer, to the effect that
the consideration to be paid by the Buyer for the Interests is fair to
the Buyer from a financial point of view.
(b) On or prior to the Closing Date, Buyer shall deliver or
cause to be delivered to Sellers the documents listed below, in form and
substance satisfactory to Sellers:
(i) the Notes payable to Sellers in the aggregate
principal amount of $5,000,000 and substantially in the form attached
hereto as Exhibit A; (ii) an Assignment Agreement in the form of
Exhibit B hereto executed on behalf of Buyer;
(iii) employment agreements substantially in the
form of Exhibit C hereto executed on behalf of Buyer; and
(iv) a certificate executed on behalf of Buyer
representing and warranting to Sellers that each of the
representations and warranties made by
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Buyer herein is true and correct in all material respects as of the
date hereof and as of the Closing Date (unless such representation and
warranty is made as of a specific date and then shall be true and
correct as of such date) with the same force and effect as though such
representations and warranties had been made as of the Closing Date.
Section 2.6 Pre-Closing Distributions. Immediately prior to
the Closing Date, Sellers shall cause each of the Companies to declare a
dividend or make a distribution in cash, other assets or obligations of the
Companies such that the combined net worth of each of the Companies as of the
Closing Date (determined in accordance with GAAP) shall equal zero.
Section 2.7 Assumption by Valentine of Certain Obligations to
Employees of VCG; Guarantee by Klopp and Hatkoff of Valentine Assumption
Obligation. Valentine hereby assumes, effective on the Closing Date, all of the
obligations of VCG to past and present employees of VCG under the letter
agreements listed in Schedule 2.7 hereof and agrees to indemnify and hold
harmless VCG from and against all claims made by any past and present employees
of VCG under any such letter. The Individual Sellers hereby jointly and
severally guarantee the obligations of Valentine under this section 2.7, such
guarantee to terminate automatically with respect to any obligation assumed by
Valentine under this section 2.7 from which VCG is fully released in a written
document signed by the obligee under any such obligation, a copy of which
release has been delivered to VCG.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF SELLERS
Sellers, jointly and severally, represent and warrant to
Buyer, as of the date hereof and as of the Closing Date, as follows:
Section 3.1 Existence and Authority of Valentine. (a)
Valentine is a corporation duly formed, validly existing and in good standing
under the laws of the State of Delaware. Valentine has full corporate power and
authority to enter into this agreement and to perform its obligations hereunder.
The execution, delivery and performance of this agreement and the Assignment
Agreement by Valentine and the consummation by Valentine of the transactions
contemplated hereby have been duly authorized by all necessary proceedings on
the part of Valentine. This agreement has been duly executed and delivered, and
the Assignment Agreement when delivered will have been duly executed, on behalf
of Valentine and constitute valid and legally
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binding obligations of Valentine, enforceable against Valentine in accordance
with their terms, except to the extent that their enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and by general equitable
principles.
(b) Valentine has full corporate power to carry on the
business in which it is currently engaged, and to own and use the properties
owned and used by it.
Section 3.2 Authority of Individual Sellers. This agreement
has been duly executed and delivered, and the Assignment Agreement when
delivered will have been duly executed, by each of Individual Sellers and
constitute legal, valid and binding obligations of each of Individual Sellers
enforceable against each of them in accordance with their terms, except to the
extent that their enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and by general equitable principles.
Section 3.3 Ownership of the Interests. (a) Valentine is the
record and beneficial owner of the sole general partner interest in VCG.
Individual Sellers are the record and beneficial owners of the sole limited
partner interests in VCG. Individual Sellers and Valentine have good and valid
title to the Interests in VCG and, upon the transfer of the general and limited
partnership interests in VCG in accordance with this agreement, Buyer will
receive good and valid title to the Interests in VCG free and clear of Liens
other than restrictions on transfer imposed by the Securities Act and applicable
state securities or "Blue Sky" laws.
(b) The authorized equity securities of VCG Montreal consist
of 1,000 shares of common stock, par value $1.00 per share, of which 1,000
shares are issued and outstanding and constitute the Common Stock. VCG is the
record and beneficial owner of all of the outstanding Common Stock. VCG has good
and valid title to the Common Stock and, upon the transfer of the general and
limited partnership interests in VCG, VCG will continue to hold good and valid
title to the Common Stock free and clear of Liens other than restrictions on
transfer imposed by the Securities Act and applicable state securities or "Blue
Sky" laws.
(c) Individual Sellers are the record and beneficial owners of
all of the outstanding membership interests in 970M. Individual Sellers have
good and valid title to the Interests in 970M and, upon the transfer of the
Interests in 970M in accordance with this agreement, Buyer will receive good and
valid title to the Interests in 970M free and clear of Liens other than
restrictions on transfer imposed by the Securities Act and applicable state
securities or "Blue Sky" laws.
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(d) Individual Sellers are the record and beneficial owners of
all of the outstanding membership interests in VAMP. Individual Sellers have
good and valid title to the Interests in VAMP and, upon the transfer of the
Interests in VAMP in accordance with this agreement, Buyer will receive good and
valid title to the Interests in VAMP free and clear of Liens other than
restrictions on transfer imposed by the Securities Act and applicable state
securities or "Blue Sky" laws.
(e) Individual Sellers are the record and beneficial owners of
all of the outstanding membership interests in VPMS. Individual Sellers have
good and valid title to the Interests in VPMS and, upon the transfer of the
Interests in VPMS in accordance with this agreement, Buyer will receive good and
valid title to the Interests in VPMS free and clear of Liens other than
restrictions on transfer imposed by the Securities Act and applicable state
securities or "Blue Sky" laws.
(f) There are no options, warrants, rights, calls,
commitments, conversion rights, rights of exchange or other agreements of any
character, contingent or otherwise, providing for the purchase, issuance or sale
of any Interests, or any arrangements that require or permit any Interests to be
voted by or at the discretion of anyone other than Sellers or VCG..
(g) The Interests are duly authorized, validly issued, fully
paid and non-assessable interests in the respective entities that have issued
the Interests.
(h) The Companies comprise all of the entities through which
the business and operations reflected in the financial statements of the
Companies referred to in section 3.7 hereof are held and conducted.
Section 3.4 No Consents, Approvals, Violations or Breaches.
Neither the execution and delivery by Sellers of this agreement, nor the
consummation by Sellers of the transactions contemplated hereby, will (i)
require any consent, approval, authorization or permit of, or filing,
registration or qualification with or notification to, any governmental or
regulatory authority under any law of the United States, any state or any
political subdivision thereof applicable to Sellers, other than any action
required to be taken by Buyer, (ii) assuming no violation on the part of Buyer,
violate any statute, law, ordinance, rule or regulation of the United States,
any state or any political subdivision thereof, or any judgment, order, writ,
decree or injunction applicable to Sellers or any of their properties or assets
or (iii) assuming no violation on the part of Buyer, violate, conflict with or
result in a material breach of any provisions of, or constitute a material
default (or any event which, with or without due notice or lapse of time, or
both, would constitute a material default) under, or result in the termination
of, or accelerate the performance required by, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other
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instrument or obligation to which Sellers are a party or by which any of their
respective properties or assets may be bound.
Section 3.5 Organizational Documents. Each of the Companies is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of formation, with full power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under applicable
contracts. Each of the Companies is duly qualified to do business as a foreign
entity and is in good standing under the laws of each state or other
jurisdiction in which the failure to so qualify is reasonably likely to
materially adversely affect the business, properties or assets of such Company.
Schedule 3.5 identifies each document pursuant to which each of the Companies is
organized and governed, including all certificates of incorporation,
certificates of limited partnership, certificates of formation, by-laws,
agreements of limited partnership, operating agreements and all amendments
thereto and all other agreements among any record or beneficial owners of
interests in the Companies (collectively, the "Organizational Documents"). The
Organizational Documents are in full force and effect. None of the Companies,
nor any stockholder, partner or member of the Companies, is in default of any of
its obligations under the Organizational Documents, and no event has occurred or
is continuing, and no condition exists, which, with the passage of time or the
giving of notice or both, would constitute a default by any such Person.
Section 3.6 Taxes. (a) Each of the Sellers and the Companies
has timely filed all federal, state, local and foreign tax returns and reports
required to be filed by or with respect to each of the Companies in respect of
all taxes, assessments or other governmental charges, including, without
limitation, income, estimated income, business, occupation, franchise, gross
income, gross receipts, alternative minimum, property, sales, transfer, gains,
value-added, use, ad valorem, intangibles, document, employment, commercial rent
or withholding taxes, including interest, penalties and additions in connection
therewith ("Taxes"). The returns and information filed with respect to any Taxes
are accurate in all material respects.
(b) All Taxes with respect to the Companies for which Sellers
or any of the Companies are or may be liable (whether disputed, incurred or
which may be incurred) in respect of periods or portions thereof ending on or
before the Closing Date shall have been paid to the proper taxing authority or
an adequate reserve (in conformity with GAAP) established therefor, and the
Companies do not have any material liability for Taxes for such periods in
excess of the amounts so paid or reserved. All Taxes that the Companies have
been required to collect or withhold have been duly collected or withheld.
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Section 3.7 Financial Statements. (a) Sellers have delivered
to Buyer copies of the audited combined balance sheets of the Companies as of
December 31, 1996 and 1995, and the related combined statements of income,
changes in partners' and members' capital (deficiency), and cash flows for each
of the three years in the period ended December 31, 1996, certified by David
Berdon & Company, independent certified public accountants (collectively, the
"Financial Statements"). The Financial Statements present fairly, in all
material respects, the financial position of the Companies as of December 31,
1996 and 1995, and the combined results of their operations and their cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with GAAP.
(b) Sellers have delivered to Buyer copies of the combined
balance sheet of the Companies as of March 31, 1997, and the related combined
statements of income, changes in partners' and members' capital (deficiency),
and cash flows for the fiscal quarter ended on such date. The first quarter
financial statements present fairly, in all material respects, the financial
position of the Companies as of March 31, 1997 and the combined results of their
operations and their cash flows for the period ending on such date, in
conformity with GAAP.
(c) The Companies have no liabilities or obligations,
contingent or otherwise, other than (i) liabilities and obligations reflected in
the combined balance sheet of the Companies as of March 31, 1997 referred to in
section 3.7(b) hereof, (ii) liabilities incurred by the Companies in the
ordinary course of business since March 31, 1997 and (iii) liabilities and
obligations listed or referred to or described in Schedule 3.7 hereof.
Section 3.8 Litigation; Legal and Governmental Proceedings and
Judgments; Licenses and Permits. (a) Except as set forth in Schedule 3.8, (i)
there is no claim, suit, action or legal, administrative, arbitration or other
proceeding or governmental investigation pending, or to the knowledge of Sellers
threatened, against any of the Companies; (ii) to the knowledge of Sellers,
neither any of the Companies nor any employee of the Companies is a target or
subject of any pending or threatened criminal investigation or proceeding; and
(iii) none of the Companies is the subject of any order, judgment, stipulation
or decree which has not been subsequently reversed, suspended or vacated.
(b) Each of the Companies has all material licenses, permits
and similar authorizations from all federal, state and local and all foreign
authorities which is required in connection with its business.
Section 3.9 Employee Benefit Plans; Employment and Consulting
Agreements; Loans and Advances; Other Affiliated Transactions. (a) Except as
set forth in Schedule 3.9, none of the Companies maintains, sponsors,
participates in or
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contributes to any Plan (within the meaning given in ERISA section 3(3)). None
of the Companies is a party to, and none of their employees are subject to, any
collective bargaining agreements.
(b) Except as set forth in Schedule 3.9, neither Sellers nor
any of the Companies has any employment or consulting agreements or
understandings (whether written or oral) with any Person.
(c) Except as set forth in Schedule 3.9, there are (i) no
outstanding loans or advances between any of the Companies and any employees or
Affiliates of the Companies and (ii) no contractual arrangements between any of
the Companies and any employees or Affiliates of the Companies.
Section 3.10 Material Contracts. (a) Schedule 3.10 sets
forth a list of all material contracts to which any of the Companies is a party.
(b) Sellers have provided Buyer with copies of all material
contracts in existence as of the Closing Date. Except as set forth on Schedule
3.10, all of the material contracts are valid, binding and enforceable
obligations of the Companies, as applicable, and each of the Companies is not,
and to the best of knowledge of Sellers, the other party thereto is not, in
breach of or default under any such material contract.
Section 3.11 Brokers. Sellers have not engaged any broker in
connection with the transactions contemplated by this agreement and no Person
acting on behalf of Sellers or any of the Companies is or will be entitled to
any brokerage fee, commission, finder's fee or financial advisory fee, directly
or indirectly, from Sellers or any of the Companies in connection with the
transactions contemplated by this agreement.
Section 3.12 No Material Change. Since March 31, 1997, and
except as otherwise disclosed in this agreement, there has not been any material
adverse change in the financial position, operations, assets, liabilities or the
business of the Companies taken as a whole.
00
Section 3.13 Compliance with Laws. Each of the Companies is in
substantial compliance with, and has conducted its business in all material
respects so as to comply with, all applicable laws and regulations.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers, as of the date
hereof and as of the Closing Date, as follows:
Section 4.1 Existence and Authority of Buyer. (a) Buyer is a
business trust duly formed and validly existing under the laws of the State of
California. Buyer has full trust power and authority to enter into this
agreement and to perform its obligations hereunder. The execution, delivery and
performance of this agreement, the Notes and the Assignment Agreement by Buyer
and the consummation by Buyer of the transactions contemplated hereby have been
duly authorized by all necessary proceedings on the part of Buyer. This
agreement has been duly executed and delivered, and the Notes and the Assignment
Agreement when delivered will have been duly executed, on behalf of Buyer and
constitute valid and legally binding obligations of Buyer, enforceable against
Buyer in accordance with their terms, except to the extent that their
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equitable principles.
(b) Buyer has full trust power to carry on the business in
which it is currently engaged, and to own and use the properties owned and used
by it.
Section 4.2 Investment Intent. The Interests will be held by
Buyer for its own account for investment and not with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act, nor with any present intention of distributing or selling the same. Buyer
understands that the Interests to be purchased by it have not been registered
under the Securities Act or any other applicable statute regulating the purchase
and sale of securities and are being sold to it in a transaction that is exempt
from the registration requirements of the Securities Act and any other
applicable statute regulating the purchase and sale of securities and that the
Interests it is purchasing must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available.
Section 4.3 No Consents, Approvals, Violations or Breaches.
Neither the execution and delivery of this agreement by Buyer, nor the
consummation by Buyer of the transactions contemplated hereby, will (i) require
any consent, approval, authorization or permit of, or filing, registration or
qualification with or notification to, any governmental or regulatory authority
under any law of the United States, any state or any political subdivision
thereof applicable to Buyer, other than any action required to be taken by
Sellers, (ii) violate any provision of the declaration of trust of Buyer, (iii)
assuming no violations on the part of Sellers, violate any statute, law,
ordinance,
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rule or regulation of the United States, any state or any political subdivision
thereof, or any judgment, order, writ, decree or injunction applicable to Buyer
or any of its prop erties or assets, the violation of which would have a
material adverse effect upon Buyer or (iv) assuming no violation on the part of
Sellers, violate, conflict with, or result in a breach of any provisions of, or
constitute a default (or any event which, with or without due notice or lapse of
time, or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Buyer is a party or
by which Buyer or any of its properties or assets may be bound which would have
a material adverse effect upon Buyer.
Section 4.4 Brokers. Buyer has not engaged any broker in
connection with the transactions contemplated by this agreement and no Person
acting on behalf of Buyer is or will be entitled to any brokerage fee,
commission, finder's fee or financial advisory fee, directly or indirectly, from
Buyer in connection with the transactions contemplated by this agreement.
ARTICLE 5
COVENANTS OF SELLERS
During the period from the date hereof to the Closing Date,
Sellers covenant and agree as follows:
Section 5.1 Operations in Ordinary Course. None of the
Companies shall:
(i) conduct its business and operations in such a manner as to
impair Sellers' ability to consummate the transactions contemplated
hereunder or
(ii) engage in any transaction, take any action or omit to take
any action, which could reasonably be expected to impair Sellers'
ability to consummate the transactions contemplated hereunder.
Section 5.2 Investigations. Sellers shall permit Buyer and its
agents to inspect the properties, assets, operations, books and records of the
Companies at reasonable times and upon reasonable notice; provided, however,
that any such inspection shall be conducted in such manner at such times and
upon such notice as is reasonably acceptable to Sellers. In addition, Sellers
shall furnish Buyer and its agents with copies of such documents and records
with respect to the Companies,
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their properties, assets, operations, books and records as Buyer shall from time
to time reasonably request.
Section 5.3 Conditions to Closing. Sellers shall use their
reasonable best efforts to satisfy, as expeditiously as reasonably possible, all
of the conditions to the obligations of Sellers hereunder reasonably within
Sellers' control, including obtaining all consents, approvals and agreements
which are required in order to consummate the transactions contemplated hereby.
ARTICLE 6
COVENANTS OF BUYER
Section 6.1 Conditions to Closing. Buyer shall use its
reasonable best efforts to satisfy, as expeditiously as reasonably possible, all
of the conditions to the obligations of Buyer hereunder reasonably within
Buyer's control, including obtaining all consents, approvals and agreements
which are required in order to consummate the transactions contemplated hereby.
ARTICLE 7
FURTHER AGREEMENTS
Section 7.1 Further Assurances. Each party to this agreement
shall, at the request of another party to this agreement, at any time and from
time to time following the Closing hereunder, execute and deliver or cause to be
executed and delivered all such further instruments and take or cause to be
taken all such further action as may be reasonably necessary or appropriate in
order more effectively to sell, assign, transfer and convey to Buyer the
Interests, or otherwise to confirm or carry out the provisions of this
agreement.
Section 7.2 Costs and Expenses. Each party to this agreement
shall bear its own respective costs and expenses incurred in connection with the
negotiation, preparation, execution, delivery and enforcement of this agreement
and the consummation of the transactions contemplated hereby.
Section 7.3 Sellers' Access to Records. From and after the
Closing Date, Buyer shall afford, and shall cause each of the Companies to
afford, each of Sellers and their authorized representatives access during
normal business hours to the Companies' respective properties, books and
records, and shall cause the Companies' officers, employees, accountants and
other authorized representatives to
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furnish such additional financial and other information as Sellers shall from
time to time reasonably request.
Section 7.4 Confidentiality. Except to the extent disclosure
is required by law, or in response to any governmental authority, or in
connection with any litigation relating to an alleged breach of this agreement,
each party shall maintain the confidentiality of all information obtained from
the other party hereto other than information that is otherwise publicly
available and shall use such information only for purposes reasonably related to
this agreement and the transactions contemplated hereby. The covenant contained
in this section 7.4 shall terminate and be of no further force and effect
following the Closing.
ARTICLE 8
TERMINATION
Section 8.1 Termination Events. This agreement may, by
notice given prior to or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material breach of any
provision of this agreement has been committed by the other party and such
breach has not been waived;
(b) (i) by Buyer if any of the conditions in section 2.4(a)
hereof has not been satisfied as of September 30, 1997 or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this agreement) and Buyer has not
waived such condition on or before September 30, 1997; or (ii) by Sellers, if
any of the conditions in section 2.4(b) hereof has not been satisfied as of
September 30, 1997 or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Sellers to comply with their
obligations under this agreement) and Sellers have not waived such condition on
or before September 30, 1997;
(c) by mutual consent of Buyer and Sellers; or
(d) by either Buyer or Sellers if the Closing has not occurred
(other than through the failure of any party seeking to terminate this agreement
to comply fully with its obligations under this agreement) on or before
September 30, 1997 or such later date as the parties may agree upon.
Section 8.2 Effect of Termination. Each party's right of
termination under section 8.1 hereof is in addition to any other rights it may
have under this agreement or
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otherwise, and the exercise of a right of termination will not be an election of
remedies. If this agreement is terminated pursuant to section 8.1 hereof, all
further obligations of the parties under this agreement will terminate, except
that the obligations in sections 7.2 and 7.4 hereof will survive; provided,
however, that if this agreement is terminated by a party because of the breach
of the agreement by the other party or because one or more of the conditions to
the terminating party's obligations under this agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
ARTICLE 9
INDEMNIFICATION; REMEDIES
Section 9.1 Survival.
(a) All representations and warranties (other than the
representations and warranties contained in section 3.6 hereof), and the
covenants and obligations in this agreement will survive the Closing until June
30, 1999.
(b) The representations and warranties contained in section
3.6 hereof will survive the Closing until June 30, 2001.
Section 9.2 Indemnification by Sellers. Sellers, jointly and
severally, will indemnify and hold Buyer harmless, and will pay to Buyer the
amount of, any loss, liability, claim, damage, expense (including costs of
investigation and defense and reasonable attorneys' fees) or diminution of
value, whether or not involving a third-party claim (collectively, "Damages"),
arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by
Sellers in this agreement;
(b) any breach by any Seller of any covenant or obligation of
such Seller in this agreement; or
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with any Seller or any of the
Companies (or any Person acting on their behalf) in connection with any of the
transactions contemplated by this agreement.
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Section 9.3 Indemnification by Buyer. Buyer will indemnify and
hold Sellers harmless, and will pay to Sellers the amount of any Damages
arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by
Buyer in this agreement;
(b) any breach by Buyer of any covenant or obligation of
Buyer in this agreement; or
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the transactions contemplated by this
agreement.
Section 9.4 Time Limitations. Sellers will have no liability
(for indemnification or otherwise) with respect to any representation and
warranty (other than the representations and warranties contained in section 3.6
hereof), covenant or obligation hereunder unless on or before June 30, 1999 (or,
in the case of the representations and warranties contained in section 3.6
hereof, June 30, 2001) Buyer notifies Sellers of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Buyer.
Buyer will have no liability (for indemnification or otherwise) with respect to
any representation, warranty, covenant or obligation hereunder unless on or
before June 30, 1999 Sellers notify Buyer of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Sellers.
Section 9.5 Procedure for Indemnification. Each party entitled
to indemnification under this article (the "Indemnified Party") shall give
notice to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom;
provided, that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld); and, provided, further, that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this article, except to
the extent that such failure to give notice prejudices the Indemnifying Party;
and provided, further, that the Indemnifying Party shall have acknowledged that
one or more of the claims as to which indemnity may be sought are the subject of
indemnification hereunder. The Indemnified Party may participate in such defense
at such party's expense; provided, however, that the Indemnifying Party shall
pay the expense of one law firm for the Indemnified Party if representation of
the Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to
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actual or potential differing interests between the Indemnified Party and any
other party represented by such counsel in such proceeding. No Indemnifying
Party, in the defense of any such claim or litigation shall, except with the
consent of the Indemnified Party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation, and no Indemnified Party
shall consent to entry of any judgment or settle such claim or litigation
without the prior written consent of the Indemnifying Party.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Assignment; Transfer of Interests. This agreement
may not be assigned by any party hereto without the prior written consent of the
other party except that Buyer may assign its rights to purchase Interests
hereunder to a wholly-owned subsidiary. This agreement shall be binding upon and
inure to the benefit of the parties hereto, their successors in interest and
permitted assigns.
Section 10.2 Notices. Any notices or other communications
required or permitted hereunder shall be sufficient if in writing and delivered
by hand or sent by telecopy, or sent, postage prepaid, by registered, certified
or express-mail, or by recognized overnight air courier service and shall be
deemed given when so delivered by hand or telecopied, or if mailed or sent by
overnight courier service, on the fifth (5) Business Day after mailing (one
Business Day in the case of express mail or overnight courier service) to the
parties at the following addresses:
(a) If to Buyer to:
California Real Estate Investment Trust
131 Steuart Street, #200
San Francisco, California 94105
Attention: Frank A. Morrow
Telecopy: (415) 543-6269
with a copy to:
Greenberg Glusker Fields Claman & Machtinger LLP
1900 Avenue of the Stars, #2100
Los Angeles, California 90067
Attention: Paula Peters
Telecopy: (310) 553-0687
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and:
Equity Group Investments, Inc.
2 North Riverside Plaza, 6th Floor
Chicago, Illinois 60606
Attention: Gary R. Garrabrant
Telecopy: (312) 454-0157
and:
Rosenberg & Liebentritt, P.C.
2 North Riverside Plaza, 15th Floor
Chicago, Illinois 60606
Attention: Alisa M. Singer
Telecopy: (312) 454-0335
(b) If to Sellers, to:
Victor Capital Group, L.P.
885 Third Avenue, 12th Floor
New York, New York 10002
Attention: John R. Klopp and Craig M. Hatkoff
Telecopy: (212) 593-0316
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein.
Section 10.3 Entire Agreement. This agreement, including the
Disclosure Schedules and Exhibits hereto, constitutes the entire understanding
of the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings, whether oral or written. No amendment or
modification of the terms of this agreement shall be binding or effective unless
expressed in writing and signed by each party.
Section 10.4 No Waiver. The waiver by any party of the breach
of any of the terms and conditions of, or any right under, this agreement shall
not be deemed to constitute the waiver of any other breach of the same or any
other term or condition or of any similar right. No such waiver shall be binding
or effective unless expressed in writing and signed by the party giving such
waiver.
Section 10.5 Governing Law. This agreement shall be governed
by and construed in accordance with the laws of the State of New York applicable
to agreements executed and to be fully performed in such State.
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Section 10.6 Counterparts. This agreement may be executed in
one or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
Section 10.7 Public Announcements. Sellers and Buyer agree to
consult with each other prior to issuing any press release or otherwise making
any public statement (including without limitation any filing with the
Securities and Exchange Commission) with respect to the transactions
contemplated hereby. Buyer will consult with Sellers prior to issuing any press
release or otherwise making any public statement with respect to the Companies.
Section 10.8 Availability of Equitable Remedies. Since a
breach of the provisions of this agreement could not adequately be compensated
by money damages, any party to this agreement shall be entitled, in addition to
any other right or remedy available to it, to an injunction restraining such
breach or a threatened breach and to specific performance of any such provision
of this agreement, and in either case no bond or other security shall be
required in connection therewith, and the parties hereby consent to the issuance
of such an injunction and to the ordering of specific performance.
Section 10.9 Construction. The article and section headings
contained in this agreement are inserted for reference purposes only and shall
not affect the meaning or interpretation of this agreement.
Section 10.10 Arbitration. Any dispute or controversy between
Sellers and Buyer arising under, out of, in connection with, or in relation to
this agreement shall be determined and settled by arbitration in New York City
by a panel of three members in accordance with the Commercial Rules of the
American Arbitration Association as in effect for New York City. In the event of
any dispute with respect to any calculation, such calculation shall be
determined by an accountant from a "Big Six" accounting firm selected by
agreement of the parties (which accounting firm shall have no material
relationship with any party hereto or any of their Affiliates) or, in the event
the parties are unable to agree upon such accountant, an accountant selected in
accordance with the procedures established by the Commercial Rules of the
American Arbitration Association as in effect for New York City. Any
determination rendered therein shall be final and binding upon the parties and
their legal representatives.
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IN WITNESS WHEREOF, the parties hereto have executed this
agreement as of the day and year first above written.
SELLERS:
/s/ John R. Klopp
JOHN R. KLOPP
/s/ Craig M. Hatkoff
CRAIG M. HATKOFF
VALENTINE WILDOVE & COMPANY, INC.
/s/ John R. Klopp
By:
Name: John R. Klopp
Title: Co-President
BUYER:
CALIFORNIA REAL ESTATE INVESTMENT TRUST
/s/ John R. Klopp
By:
Name: John R. Klopp
Title: Chief Executive Officer
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Exhibit 10.1
PREFERRED SHARE PURCHASE AGREEMENT
dated as of June 16, 1997
by and between
California Real Estate Investment Trust,
a trust organized under the laws of the State of California
and
Veqtor Finance Company, LLC,
a Delaware limited liability company
1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE 1 DEFINITIONS..................................................................................-1
ARTICLE 2 SALE AND PURCHASE............................................................................-4
Section 2.1 Sale of Class A Preferred Shares....................................................-4
Section 2.2 Purchase Price......................................................................-4
Section 2.3 Closing and Closing Date............................................................-4
Section 2.4 Conditions to Closing...............................................................-4
Section 2.5 Additional Closing Deliveries.......................................................-5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................-6
Section 3.1 Existence and Authority.............................................................-6
Section 3.2 Capitalization; Consolidated Subsidiaries...........................................-6
Section 3.3 Securities Act and Exchange Act Filings.............................................-7
Section 3.4 No Consents, Approvals, Violations or Breaches......................................-7
Section 3.5 Taxes...............................................................................-7
Section 3.6 Financial Statements................................................................-8
Section 3.7 Litigation; Legal and Governmental Proceedings and Judgments;
Licenses and Permits..............................................................-8
Section 3.8 Brokers.............................................................................-8
Section 3.9 No Material Change..................................................................-8
Section 3.10 Compliance with Laws................................................................-8
Section 3.11 Statements True and Correct.........................................................-8
Section 3.12 Incorporation of Certain Additional Representations and Warranties by Reference.....-9
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER......................................................-9
Section 4.1 Existence and Authority of Buyer....................................................-9
Section 4.2 Investment Intent...................................................................-9
Section 4.3 No Consents, Approvals, Violations or Breaches......................................-9
Section 4.4 Brokers.............................................................................10
ARTICLE 5 COVENANTS OF THE COMPANY.....................................................................10
Section 5.1 Operations in Ordinary Course.......................................................10
Section 5.2 Conditions to Closing...............................................................10
Section 5.3 Shareholder Approval................................................................10
Section 5.4 Investigations......................................................................10
ARTICLE 6 COVENANTS OF BUYER...........................................................................11
Section 6.1 Conditions to Closing...............................................................11
Section 6.2 Bank Holding Company Restrictions...................................................11
ARTICLE 7 REGISTRATION RIGHTS..........................................................................12
Section 7.1 Definitions.........................................................................12
Section 7.2 Demand Registration ................................................................13
Section 7.3 Piggyback Registration..............................................................14
Section 7.4 Registration Procedures.............................................................15
Section 7.5 Holder's Obligations................................................................17
Section 7.6 Expenses of Registration............................................................17
Section 7.7 Indemnification; Contribution.......................................................17
Section 7.8 Transfer of Registration Rights.....................................................20
Section 7.9 Covenants of the Company............................................................20
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ARTICLE 8 FURTHER AGREEMENTS...........................................................................21
Section 8.1 Further Assurances..................................................................21
Section 8.2 Restrictions on Certain Amendments to Amended and Restated
Declaration of Trust; Restrictions on Certain Equity Issuances....................21
Section 8.3 Costs and Expenses..................................................................21
Section 8.4 Buyer's Access to Records...........................................................21
Section 8.5 Home Office Payment.................................................................22
Section 8.6 Confidentiality.....................................................................22
Section 8.7 SECTION Filings and Press Releases..................................................22
Section 8.8 Limitation Upon Incurrence of Indebtedness..........................................22
ARTICLE 9 MISCELLANEOUS................................................................................22
Section 9.1 Survival of Representations, Warranties and Covenants...............................22
Section 9.2 Assignment; Transfer of Interests...................................................23
Section 9.3 Notices.............................................................................23
Section 9.4 Entire Agreement....................................................................24
Section 9.5 No Waiver...........................................................................24
Section 9.6 Governing Law.......................................................................25
Section 9.7 Counterparts........................................................................25
Section 9.8 Public Announcements................................................................25
Section 9.9 Availability of Equitable Remedies..................................................25
Section 9.10 Construction........................................................................25
Section 9.11 Arbitration.........................................................................25
EXHIBITS
Exhibit A Certificate of Designation for the Class A Preferred Shares and Class B Preferred
Shares
Exhibit B Form of Amended and Restated Declaration of Trust
Exhibit C Form of Opinion of Greenberg Glusker Fields Claman Machtinger LLP
Exhibit D Form of Opinion of Battle Fowler LLP
Exhibit E List of Holders
Exhibit F Form of Transfer Agreement
DISCLOSURE SCHEDULES
Schedule 3.2 Capital Stock
Schedule 3.7 Litigation
</TABLE>
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PREFERRED SHARE PURCHASE AGREEMENT, dated as of June 16, 1997, by and
between CALIFORNIA REAL ESTATE INVESTMENT TRUST, a trust organized under the
laws of the State of California, whose name is intended to be changed to CAPITAL
TRUST, and VEQTOR FINANCE COMPANY, LLC, a Delaware limited liability company.
Preliminary Statement
Capitalized terms used in this agreement are defined in Article 1
hereof. The Company desires to sell, and Buyer desires to purchase at the
Closing, pursuant to the terms and conditions set forth in this agreement, an
aggregate of up to 12,639,405 shares, and no less than 11,895,911 shares, of the
Company's Class A 9.5% Cumulative Convertible Preferred Shares of Beneficial
Interests, $1.00 par value.
Accordingly, the Company agrees with Buyer as follows:
ARTICLE 1
DEFINITIONS
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person.
"Amended and Restated Declaration of Trust" means the Amended and
Restated Declaration of Trust of the Company as set forth in Exhibit B hereto.
"Bank Holding Company" has the meaning set forth in Section 6.2(a).
"Business Day" means a day other than a Saturday, a Sunday or a day on
which banking institutions in the City of New York, New York are authorized or
obligated by law or executive order to close.
"Buyer" means Veqtor Finance Company, LLC, a Delaware limited
liability company.
"Capital Shares" means any and all shares, rights, warrants or options
to purchase shares, securities convertible into or exchangeable or exercisable
for shares and participations in or other equivalents of or interests (other
than security interests) in shares of beneficial interest in the Company,
however designated and whether voting or non-voting.
"Certificate of Designation" means the Certificate of Designation,
Preferences and Rights of the Class A 9.5% Cumulative Convertible Preferred
Shares and the Class B 9.5% Cumulative Convertible Non-Voting Preferred Shares
as set forth in Exhibit A hereto.
"Class A Common Shares" means the Company's Class A Common Shares of
Beneficial Interests, $1.00 par value, having the designations and rights,
qualifications, limitations and restrictions set forth in the Amended and
Restated Declaration of Trust.
"Class A Preferred Shares" means the Company's Class A 9.5% Cumulative
Convertible Preferred Shares of Beneficial Interest, having the designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations and restrictions set forth in the Certificate of
Designation.
"Class B Common Shares" means the Company's Class B Non-Voting Common
Shares of Beneficial Interests, $1.00 par value, having the designations and
rights, qualifications, limitations and restrictions set forth in the Amended
and Restated Declaration of Trust.
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"Class B Preferred Shares" means the Company's Class B 9.5% Cumulative
Convertible Non-Voting Preferred Shares of Beneficial Interest, having the
designations, preferences and relative, participating, optional or other special
rights and qualifications, limitations and restrictions set forth in the
Certificate of Designation.
"Closing" has the meaning set forth in Section 2.3.
"Closing Date" has the meaning set forth in Section 2.3.
"Commission" means the Securities and Exchange Commission.
"Common Shares" means, collectively, the Class A Common Shares and
Class B Common Shares.
"Company" means California Real Estate Investment Trust, a trust
organized under the laws of the State of California, whose name is intended to
be changed to Capital Trust..
"Consolidated Subsidiaries" means, as of any date, all Persons
included as of such date in the consolidated financial statements of the
Company.
"control" including, with correlative meanings, the terms "controlled
by" and "under common control with," means, as to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Persons, whether through the ownership of voting
securities, by contract or otherwise.
"D/E Ratio" means, as of the date of determination, the ratio of (i)
the sum of (x) the total Indebtedness of the Company and its consolidated
Subsidiaries as reflected on the Company's last regularly prepared balance
sheet, plus (y) all Indebtedness issued by the Company since that date less all
Indebtedness retired or repurchased by the Company since that date, plus (z) the
Company's pro rata share, based upon its percentage equity ownership interest
therein, of aggregate total Indebtedness of Equity Affiliates, to (ii) the
excess of total assets (including the Company's equity in its Equity Affiliates)
over total liabilities of the Company, as reflected on the Company's last
regularly prepared balance sheet, in each case determined in accordance with
GAAP and after giving effect to the incurrence of any proposed Indebtedness and
the application of proceeds of such Indebtedness.
"Disclosure Schedules" means the disclosure schedules referred to in
Article 3 hereof and delivered in connection with the execution of this
agreement.
"Equity Affiliate" means any Person in which the Company or any of its
consolidated Subsidiaries has an equity interest which is or, in accordance with
GAAP, should be accounted for on the equity method in the Company's consolidated
financial statements.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through its Accounting Principles Board or by the
Financial Accounting Standards Board or through other appropriate boards or
committees thereof and which are consistently applied for all periods after the
date hereof so as to properly reflect the financial condition, results of
operations and changes in financial position of any Person, except that any
accounting principle or practice required to be changed by such Accounting
Principles Board or Financial Accounting Standards Board (or other appropriate
board or committee of such Boards) in order to continue as a generally accepted
accounting principle or practice may be so changed. In the event of a change in
GAAP, the Company and Buyer will thereafter negotiate in good faith to revise
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any covenants of this agreement affected thereby in order to make such covenants
consistent with GAAP then in effect.
"Incur" means to issue, assume, guarantee, incur or otherwise become
liable for.
"Indebtedness" means, with respect to any Person, without duplication,
any liability of such Person (i) for borrowed money, (ii) evidenced by bonds,
debentures, notes or other similar instruments, (iii) constituting capitalized
lease obligations, (iv) incurred or assumed as the deferred purchase price of
property, or pursuant to conditional sale obligations and title retention
Agreements (but excluding trade accounts payable arising in the ordinary course
of business) and (v) which are secured by any Lien on any property or asset of
such first referred to Person.
"Indemnified Party" has the meaning set forth in Section 9.1(c).
"Indemnifying Party" has the meaning set forth in Section 9.1(c).
"Junior Shares" means Common Shares and any other class or series of
Capital Shares of the Company now or hereafter authorized, issued or outstanding
which is subject, under the terms of the Company's Amended and Restated
Declaration of Trust (including any certificate of designation adopted
thereunder relating to any class or series of preferred shares), to the
following restrictions and limitations:
(a) no dividend or distribution can be declared or paid on the
shares of such class or series unless all accrued dividends
and other amounts then due with respect to the Preferred
Shares shall have been paid in full;
(b) in the event of any liquidation, dissolution or
winding up of the Company, either voluntary or
involuntary, the holders of Preferred Shares shall be
entitled to receive out of assets of the Company
available for distribution to shareholders, the
amount specified in section 4 of the Certificate of
Designation, before any payment shall be made or any
assets distributed to the holders of such other class
or series of Capital Shares of the Company, and
(c) shares of such class or series are not required to be
redeemed under any circumstances, either at the option of
the Company or of any holder thereof, unless all of the
outstanding Preferred Shares have theretofore been redeemed
or converted.
"Lien" means any lien, mortgage, deed of trust, pledge, charge or
other encumbrance of any kind, including, without limitation, any conditional
sale or other title retention agreement and any lease in the nature thereof.
"Person" means an individual, a corporation, a partnership, a limited
liability company, a joint venture, an association, a joint-stock company, a
trust, a business trust, a government or any agency or any political
subdivision, any unincorporated organization or any other entity.
"Preferred Shares" means, collectively, the Class A Preferred Shares
and the Class B Preferred Shares.
"Proxy Statement" has the meaning set forth in Section 3.11.
"Purchase Price" has the meaning set forth in Section 2.2.
"Securities Act" means the Securities Act of 1933, as amended.
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"Shareholders' Meeting" has the meaning set forth in Section 3.11.
"Taxes" has the meaning set forth in Section 3.5.
"Transactions" means the transactions contemplated by this agreement
including, but not by way of limitation, (i) the sale of the Class A Preferred
Shares to Buyer, (ii) the adoption by the Company's shareholders of the Amended
and Restated Declaration of Trust and (iii) the adoption of the Certificate of
Designation.
ARTICLE 2
SALE AND PURCHASE
Section 2.1 Sale of Class A Preferred Shares. On the terms and subject
to the conditions of this agreement, and in reliance upon the representations
and warranties contained herein, at the Closing the Company shall sell or cause
to be sold to Buyer, and Buyer shall purchase from the Company for the
consideration specified in Section 2.2, up to Twelve Million Six Hundred Thirty
Nine Thousand Four Hundred Five (12,639,405) and no less than Eleven Million
Eight Hundred Ninety Five Thousand Nine Hundred Eleven (11,895,911) Class A
Preferred Shares.
Section 2.2 Purchase Price. The aggregate purchase price for the Class
A Preferred Shares (the "Purchase Price") shall be no more than Thirty Four
Million Dollars ($34,000,000) and no less than Thirty Two Million Dollars
($32,000,000), based upon a per share purchase price of $2.69.
Section 2.3 Closing and Closing Date. The closing of the sale and
purchase of the Class A Preferred Shares (the "Closing") will take place in a
mutually acceptable manner and on a mutually acceptable day and place (the
"Closing Date"), which shall be as soon as reasonably practicable and no later
than two Business Days after the Shareholders' Meeting. Prior to the Closing
Date, Buyer shall advise the Company in writing of the number of Class A
Preferred Shares to be purchased pursuant to Section 2.1 and shall confirm the
Purchase Price therefor, calculated as provided in Section 2.2. At the Closing,
the Company shall deliver to Buyer, free and clear of any lien, charge,
encumbrance or expense (including, without limitation, any tax or other fee
payable in connection with such issuance), a certificate or certificates
representing the Class A Preferred Shares, with appropriate legends, against
payment of the Purchase Price therefor. Buyer shall pay the Purchase Price to
the Company by wire transfer of immediately available funds.
Section 2.4 Conditions to Closing. (a) The obligation of Buyer to
close the transactions contemplated hereunder is subject to the satisfaction on
or prior to the Closing Date of the following conditions:
(i) No order, injunction or decree issued by any court or agency
of competent jurisdiction or other legal restraint or prohibition (A)
preventing the consummation of the closing of the transactions
contemplated by this agreement or (B) which is reasonably likely to
materially adversely affect the business, properties or assets of the
Company or the transactions contemplated by this agreement, shall be in
effect, and no claim, suit or action shall have been asserted
challenging the consummation of the Transactions which remains
outstanding.
(ii) Each of the terms, covenants and conditions of this
agreement to be complied with and performed by the Company on or prior
to the Closing Date shall have been duly complied with and performed in
all material respects, or the Buyer shall have waived such compliance
or performance, and all documents to be delivered or actions to be
taken by the Company pursuant to Section 2.5 shall have been delivered
or performed.
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(iii) Each of the representations and warranties made by the
Company herein shall be true and correct as of the date hereof and as
of the Closing Date (unless such representation and warranty is made as
of a specific date and then shall be true and correct as of such date)
with the same force and effect as though such representations and
warranties had been made as of the Closing Date.
(iv) Buyer shall have obtained financing on terms and in an
amount reasonably acceptable to Buyer and determined by Buyer to be
reasonably adequate to permit the consummation by Buyer of the
Transactions contemplated hereby.
(v) The shareholders of the Company shall have approved the
adoption of the Amended and Restated Declaration of Trust and the
issuance of the Class A Preferred Shares as contemplated hereby, in
each case as required by applicable law, at a duly called Shareholders'
Meeting.
(vi) The form and substance of all instruments and documents
required to be delivered pursuant to this agreement by the Company
shall be reasonably satisfactory in all respects to Buyer.
(b) The obligation of the Company to close the transactions
contemplated hereunder is subject to the satisfaction on or prior to the Closing
Date of the following conditions:
(i) No order, injunction or decree issued by any court or agency
of competent jurisdiction or other legal restraint or prohibition (A)
preventing the consummation of the closing of the transactions
contemplated by this agreement or (B) which is reasonably likely to
materially adversely affect the business, properties or assets of the
Company or the transactions contemplated by this agreement, shall be in
effect, and no claim, suit or action shall have been asserted
challenging the consummation of the Transactions which remains
outstanding.
(ii) Each of the terms, covenants and conditions of this
agreement to be complied with and performed by Buyer on or prior to the
Closing Date shall have been duly complied with and performed in all
material respects, or the Company shall have waived such compliance or
performance, and all documents to be delivered or actions to be taken
by Buyer pursuant to Section 2.5 shall have been delivered or
performed.
(iii) Each of the representations and warranties made by the
Buyer herein shall be true and correct as of the date hereof and as of
the Closing Date (unless such representation and warranty is made as of
a specific date and then shall be true and correct as of such date)
with the same force and effect as though such representations and
warranties had been made as of the Closing Date.
(iv) The shareholders of the Company shall have approved the
adoption of the Amended and Restated Declaration of Trust and the
issuance of the Class A Preferred Shares as contemplated hereby, in
each case as required by applicable law, at a duly called Shareholders'
Meeting.
(v) The form and substance of all instruments and documents
required to be delivered pursuant to this agreement by Buyer shall be
reasonably satisfactory in all respects to the Company.
Section 2.5 Additional Closing Deliveries. (a) On or prior to the
Closing Date, the Company shall deliver or cause to be delivered to Buyer the
documents listed below, in form and substance satisfactory to Buyer:
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(i) the Amended and Restated Declaration of Trust of the Company
and the Certificate of Designation, each certified as of the Closing
Date by the Company's secretary or assistant secretary;
(ii) resolutions of the Board of Trustees of the Company
approving and authorizing this agreement and the transactions
contemplated hereby, including the approval of the Certificate of
Designation, each certified as of the Closing Date by the Company's
secretary or assistant secretary as being in full force and effect
without modification or amendment;
(iii) resolutions of the shareholders of the Company approving
and authorizing the adoption of the Amended and Restated Declaration
of Trust and the issuance of the Class A Preferred Shares as
contemplated hereby, certified as of the Closing Date by the Company's
secretary or assistant secretary as being in full force and effect
without modification or amendment;
(iv) signature and incumbency certificates of the officers of
the Company executing this agreement and any other documents executed
and delivered in connection herewith;
(v) opinions of Greenberg Glusker Fields Claman Machtinger LLP,
counsel to the Company, in the form of Exhibit C; and
(vi) wire transfer instructions with respect to the payment of
the Purchase Price.
(b) On or prior to the Closing Date, Buyer shall deliver or cause to
be delivered to the Company the documents listed below, in form and substance
satisfactory to the Company:
(i) copies of the certificate of formation of Buyer together
with a good standing certificate from the state of its formation,
dated as of a recent date prior to the Closing Date and certified by
the Secretary of State or other authorized governmental entity;
(ii) signature and incumbency certificates of the officers
executing this agreement on behalf of Buyer and any other documents
executed and delivered in connection herewith; and
(iii) opinions of Battle Fowler LLP, counsel to Buyer, in the
form of Exhibit D.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Buyer as follows:
Section 3.1 Existence and Authority. (a) The Company is a trust duly
formed, validly existing and in good standing under the laws of the State of
California. The Company has full trust power and authority to enter into this
agreement and, subject to the approval of the shareholders contemplated by
Section 2.4(a)(v), to perform its obligations hereunder. The execution, delivery
and performance of this agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by all
necessary proceedings on the part of the Company (other than the approval of the
shareholders contemplated by Section 2.4(a)(v)), and this agreement constitutes
the valid and legally binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equity principles.
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(b) The Company has full trust power to carry on the business in which
it is currently engaged, and to own and use the properties owned and used by it.
The Company is duly qualified or licensed to do business as a foreign trust and
is in good standing in the jurisdictions in which the failure to so qualify is
reasonably likely to materially adversely affect the business, properties or
assets of the Company and the Consolidated Subsidiaries, taken as a whole.
Section 3.2 Capitalization; Consolidated Subsidiaries. (a) The
authorized Capital Shares of the Company is unlimited and may consist of common
shares of beneficial interest and preferred shares of beneficial interest. As of
December 31, 1996, 9,137,335 shares of beneficial interest designated as common
shares of beneficial interests of the Company, $1.00 par value, and no shares of
beneficial interest designated as preferred shares were issued and outstanding
and no shares were held in treasury. Since December 31, 1996, except as
contemplated by the Amended and Restated Declaration of Trust and the
Certificate of Designation, there has been no change in the authorized, issued
or outstanding Capital Shares of the Company and no shares have been redeemed or
converted into treasury shares. All of the issued and outstanding common shares
of beneficial interests of the Company, $1.00 par value, have been, and upon its
issuance as provided herein the Class A Preferred Shares shall be, duly
authorized, validly issued, fully paid and nonassessable. There are no
preemptive rights that have not been waived or terminated with respect to the
issuance of the Class A Preferred Shares and any Class B Preferred Shares or
Common Shares issuable upon the conversion or exercise of the Class A Preferred
Shares. Except as set forth on Schedule 3.2 of the Disclosure Schedules, there
were no outstanding or authorized options, warrants, rights, contracts, rights
to subscribe, conversion rights or other Agreements or commitments to which the
Company was a party or which were binding upon the Company as of December 31,
1996 providing for the issuance or acquisition of any of the Company's Capital
Shares and, except as contemplated by the Certificate of Designation, no
options, warrants, rights, contracts, rights to subscribe, conversion rights or
other such Agreements or commitments have been issued since December 31, 1996.
Except as set forth on Schedule 3.2 of the Disclosure Schedules, there are no
outstanding or authorized share appreciation, phantom share or similar rights
with respect to the Company.
(b) Schedule 3.2 of the Disclosure Schedules lists each of the
Consolidated Subsidiaries. Except as set forth on Schedule 3.2 of the Disclosure
Schedules, the Company does not, directly or indirectly, own or control or have
any capital, equity, partnership, participation or other interest in any Person.
Section 3.3 Securities Act and Exchange Act Filings. Since December
31, 1995, the Trust has filed all documents required to be filed by it pursuant
to the Securities Act and the Exchange Act and each such document when filed
complied as to form in all material respects with the requirements of the
Securities Act and the Exchange Act. Such documents taken together with all
information in this agreement and the Disclosure Schedules and all press
releases issued since December 31, 1996, do not contain an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained therein not misleading.
Section 3.4 No Consents, Approvals, Violations or Breaches. Neither
the execution and delivery by the Company of this agreement, nor the
consummation by the Company of the transactions contemplated hereby, will (i)
require any consent, approval, authorization or permit of, or filing,
registration or qualification with or notification to, any governmental or
regulatory authority under any law of the United States, any state or any
political subdivision thereof, applicable to the Company or any Consolidated
Subsidiary other than the Proxy Statement, a listing application with the New
York Stock Exchange with respect to the Class A Common Shares issuable upon the
conversion of the Class B Common Shares and the Preferred Shares, and any action
required to be taken by Buyer, (ii) violate any provision of the declaration of
trust of the Company or any constituent document of any Consolidated Subsidiary,
subject to the approval of the shareholders contemplated by Section 2.4(a)(v),
(iii) assuming no violation on the part of Buyer, violate any statute, law,
ordinance, rule or regulation of the United States, any state or any political
subdivision thereof, or any judgment, order, writ, decree or injunction
applicable to the Company or any Consolidated Subsidiary or any of their
properties or assets or (iv) assuming no violation on the part of Buyer,
violate, conflict with, or result in a material breach of any provisions of, or
constitute a material default (or any event which, with or without due notice or
lapse of time, or both, would constitute a material default) under, or result in
the
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termination of, or accelerate the performance required by, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which either the
Company or any Consolidated Subsidiary is a party or by which any thereof or any
of their respective properties or assets may be bound. Neither the Company nor
any Consolidated Subsidiary is (x) in violation of, or default under, any terms
or provisions of its constituent documents or (y) in violation of, or default
under, any Lien, mortgage, lease, indenture, agreement, instrument, order,
judgment, decree or law to which it is a party or by which it or any of its
properties or assets is bound or subject.
Section 3.5 Taxes. (a) The Company has timely filed all federal,
state, local and foreign tax returns and reports required to be filed by or with
respect to the Company in respect of all taxes, assessments or other
governmental charges, including, without limitation, income, estimated income,
business, occupation, franchise, gross income, gross receipts, alternative
minimum, property, sales, transfer, gains, value-added, use, ad valorem,
intangibles, document, employment, commercial rent or withholding taxes,
including interest, penalties and additions in connection therewith ("Taxes").
The returns and information filed with respect to any Taxes are accurate in all
material respects.
(b) All Taxes for which the Company is or may be liable (whether
disputed, incurred or which may be incurred) in respect of periods or portions
thereof ending on or before the Closing Date shall have been paid to the proper
taxing authority or an adequate reserve (in conformity with GAAP) established
therefor, and the Company does not have any material liability for Taxes in
excess of the amounts so paid or reserved. All Taxes that the Company has been
required to collect or withhold have been duly collected or withheld and, to the
extent required when due, have been or will be duly paid by the Company to the
proper taxing authority.
Section 3.6 Financial Statements. The Company has delivered to Buyer
copies of the audited consolidated balance sheet of the Company as of December
31, 1996, and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for the fiscal year ended on such date,
certified by Coopers & Lybrand L.L.P., independent certified public accountants
and, promptly after they become available, will deliver the consolidated balance
sheet of the Company as of March 31, 1997, and the related consolidated
statements of operations, changes in shareholders' equity and cash flows for the
fiscal quarter ended on such date. Such financial statements fairly represent
the financial condition of the Company and its Consolidated Subsidiaries as of
such date and for the period ending on such date, and have been prepared in
accordance with GAAP applied on a basis consistent with that of prior periods.
Section 3.7 Litigation; Legal and Governmental Proceedings and
Judgments; Licenses and Permits. (a) Except as set forth in Schedule 3.7 of the
Disclosure Schedules, (i) there is no claim, suit, action or legal,
administrative, arbitration or other proceeding or governmental investigation
pending, or to the knowledge of the Company threatened, against the Company or
any Consolidated Subsidiary, (ii) to the knowledge of the Company, neither the
Company nor any employee of the Company or any of the Consolidated Subsidiaries
is a target or subject of any pending or threatened criminal investigation or
proceeding and (iii) neither the Company nor any of the Consolidated
Subsidiaries is the subject of any order, judgment, stipulation or decree, which
has not been subsequently reversed, suspended or vacated.
(b) The Company and each of the Consolidated Subsidiaries have all
material licenses, permits and similar authorizations from all federal, state
and local and all foreign authorities which are required in connection with
their businesses.
Section 3.8 Brokers. None of the Company, any Consolidated Subsidiary
or any of their Affiliates has engaged any broker in connection with the
transactions contemplated by this agreement and no Person acting on behalf of
the Company or any Consolidated Subsidiary or any of their Affiliates is or will
be entitled to any brokerage fee, commission, finder's fee or financial advisory
fee, directly or indirectly, from the Company or any Consolidated Subsidiary or
any of their Affiliates in connection with the transactions contemplated by this
agreement.
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Section 3.9 No Material Change. Since December 31, 1996, and except as
otherwise disclosed in a filing under the Securities Act, the Exchange Act, a
press release or in this agreement, there has not been any material adverse
change in the financial position, operations, assets, liabilities, prospects or
the business of the Company and the Consolidated Subsidiaries taken as a whole.
Section 3.10 Compliance with Laws. The Company and each Consolidated
Subsidiary is in substantial compliance with, and has conducted its business in
all material respects so as to comply with, all applicable laws and regulations.
Section 3.11 Statements True and Correct. The proxy statement (the
"Proxy Statement") to be used by the Company to solicit any required approval of
its shareholders as contemplated by this agreement does not contain any
statement which, at the time of the meetings of the shareholders of the Company
to be held pursuant to Section 5.3, including any adjournments thereof (the
"Shareholders' Meeting") and in the light of the circumstances under which it is
made, is false or misleading with respect to any material fact or which omits to
state any material fact necessary in order to make the statements therein not
false or misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of a proxy for the same meeting
or subject matter which as become false or misleading.
Section 3.12 Incorporation of Certain Additional Representations and
Warranties by Reference. Subsequent to the date hereof, it is anticipated that
Buyer may be required to make certain customary representations and warranties
with respect to the Company to investors in Buyer. All such representations and
warranties relating to the Company, its business, assets, liabilities or
prospects shall be deemed to be incorporated herein by reference as if set forth
in full herein as additional representations and warranties made by the Company
to Buyer hereunder. Buyer will promptly provide the Company with a copy of such
representations and warranties and, if requested by Buyer, the Company will
execute and deliver such further instruments as may be necessary or appropriate
to reflect the Company's making such additional representations and warranties
to Buyer.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company as follows:
Section 4.1 Existence and Authority of Buyer. Buyer is a limited
liability company duly formed, validly existing and in good standing under the
laws of the State of Delaware and has full limited liability company power and
authority to enter into this agreement and to perform its obligations hereunder.
The execution, delivery and performance of this agreement by Buyer and the
consummation by Buyer of the transactions contemplated hereby have been duly
authorized by all necessary proceedings on the part of Buyer, and this agreement
constitutes the valid and legally binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equity principles.
Section 4.2 Investment Intent. The Class A Preferred Shares, and the
Class B Preferred Shares and Common Shares underlying the Class A Preferred
Shares, will be held by Buyer for its own account for investment and not with a
view to, or for sale in connection with, any distribution thereof within the
meaning of the Securities Act, nor with any present intention of distributing or
selling the same. Buyer acknowledges that the certificates evidencing the Class
A Preferred Shares, and the Class B Preferred Shares and Common Shares to be
issued upon conversion or exercise of the Class A Preferred Shares, contain or
will contain customary legends the Company may apply, and that neither the Class
A Preferred Shares, nor the Class B Preferred and the Common Shares underlying
the Class A Preferred Shares, has been registered under the Securities Act or
any
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applicable state securities laws, and that the Class A Preferred Shares, Class B
Preferred Shares and Common Shares may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without registration under
the Securities Act or any applicable state securities laws, except pursuant to
an applicable exemption.
Section 4.3 No Consents, Approvals, Violations or Breaches. Neither
the execution and delivery of this agreement by Buyer, nor the consummation by
Buyer of the transactions contemplated hereby, will (i) require any consent,
approval, authorization or permit of, or filing, registration or qualification
with or notification to, any governmental or regulatory authority under any law
of the United States, any state or any political subdivision thereof applicable
to Buyer other than any action required to be taken by the Company, (ii) violate
any provision of the certificate of formation or operating agreement of Buyer,
(iii) assuming no violations on the part of the Company, violate any statute,
law, ordinance, rule or regulation of the United States, any state or any
political subdivision thereof, or any judgment, order, writ, decree or
injunction applicable to Buyer or any of its properties or assets, the violation
of which would have a material adverse effect upon Buyer or (iv) assuming no
violation on the part of the Company, violate, conflict with, or result in a
breach of any provisions of, or constitute a default (or any event which, with
or without due notice or lapse of time, or both, would constitute a default)
under, or result in the termination of, or accelerate the performance required
by, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Buyer is a party or by which Buyer or any of its properties
or assets may be bound which would have a material adverse effect upon Buyer.
Section 4.4 Brokers. Neither Buyer nor any of its Affiliates
has engaged any broker in connection with the transactions contemplated by this
agreement and no Person acting on behalf of Buyer is or will be entitled to any
brokerage fee, commission, finder's fee or financial advisory fee, directly or
indirectly, from Buyer or any of its Affiliates in connection with the
transactions contemplated by this agreement.
ARTICLE 5
COVENANTS OF THE COMPANY
During the period from the date hereof to the Closing Date, the
Company covenants and agrees that:
Section 5.1 Operations in Ordinary Course. Without the consent of the
Buyer, the Company shall not
(i) conduct its business and operations in such a manner as to impair
its ability to consummate the Transactions,
(ii) incur any Indebtedness or engage in any transaction, take any
action or omit to take any action, which could reasonably be expected to impair
its ability to consummate the Transactions,
(iii) declare or pay any dividend or make any distribution on any
shares of beneficial interests in the Company, or
(iv) subdivide or reclassify any shares of beneficial interests in the
Company, or combine any shares of beneficial interests in the Company.
Section 5.2 Conditions to Closing. The Company shall use its
reasonable best efforts to satisfy, as expeditiously as reasonably possible, all
of the conditions to the obligations of the Company hereunder within the
Company's control, including obtaining all consents, approvals and Agreements
which are required in order to consummate the transactions contemplated hereby.
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Section 5.3 Shareholder Approval. The Company has filed the Proxy
Statement in preliminary form with the appropriate federal and state
governmental authorities prior to the date of this agreement and shall use its
reasonable best efforts to have such Proxy Statement approved by such federal
and state governmental authorities and mailed to the Company shareholders as
soon practicable. The Company shall call a meeting of its shareholders to be
held as soon as practicable for the purpose of voting upon the adoption of the
Amended and Restated Declaration of Trust and the issuance of the Class A
Preferred Shares as contemplated hereby at a duly called Shareholders' Meeting.
The Board of Trustees of the Company shall submit for approval of its
shareholders the matters to be voted upon at the Shareholders' Meeting, and
shall, subject to the exercise of its fiduciary obligations, recommend approval
of such matters and use its reasonable best efforts (including, without
limitation, soliciting proxies for such approvals) to obtain such shareholder
approvals.
Section 5.4 Investigations. The Company shall permit Buyer and its
agents to inspect the properties, assets, operations, books and records of the
Company at reasonable times and upon reasonable notice; provided, however, that
any such inspection shall be conducted in such manner at such times and upon
such notice as is reasonably acceptable to the Company. In addition, the Company
shall furnish Buyer and its agents with copies of such documents and records
with respect to the Company, its properties, assets, operations, books and
records as Buyer shall from time to time reasonably request.
ARTICLE 6
COVENANTS OF BUYER
Section 6.1 Conditions to Closing. Buyer shall use its reasonable best
efforts to satisfy, as expeditiously as reasonably possible, all of the
conditions to the obligations of Buyer hereunder within Buyer's control,
including obtaining all consents, approvals and Agreements which are required in
order to consummate the transactions contemplated hereby.
Section 6.2 Bank Holding Company Restrictions. (a) Buyer represents
that it is not a bank holding company (as defined in Section 1841(a) of the Bank
Holding Company Act of 1956, as amended) nor an affiliate (as defined in Section
1841(k) of the Bank Holding Company Act of 1956, as amended) of any bank holding
company (as defined in Section 1841(a) of the Bank Holding Company Act of 1956,
as amended) (collectively, a "Bank Holding Company").
(b) Buyer shall not transfer Class A Preferred Shares or Class
A Common Shares to any Bank Holding Company, unless, after giving effect to such
transfer, such Bank Holding Company would own no more than 4.9% of any class of
voting securities of the Company.
(c) Buyer understands and agrees that the Class B Preferred
Shares and the Class B Common Shares may be transferred by a Bank Holding
Company only (i) in accordance with applicable federal and state securities laws
and (ii) either (A) in a widely dispersed offering in which no more than 2% of
the outstanding Class B Common Shares and Capital Shares convertible into Class
B Common Shares are transferred to any one holder, in which circumstance the
transferee will be permitted to convert such Class B Common Shares into Class A
Common Shares, and Class B Preferred Shares into Class A Preferred Shares or (B)
to a transferee who agrees, in a written agreement satisfactory in form and
substance to the Company, to be bound by the provisions of this Section 6.2.
(d) Buyer agrees that substantially the following legend shall be
placed on the certificates representing any Class B Preferred Shares and Class B
Common Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THE LIMITATIONS UPON TRANSFER AND CONVERSION
CONTAINED IN THE CERTIFICATE OF DESIGNATION,
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PREFERENCES AND RIGHTS OF THE CLASS B 9.5% CUMULATIVE CONVERTIBLE
NON-VOTING PREFERRED SHARES OF BENEFICIAL INTERESTS AND THE BY-LAWS
OF THE COMPANY (COPIES OF WHICH ARE ON FILE AT THE OFFICE OF THE
COMPANY)."
ARTICLE 7
REGISTRATION RIGHTS
Section 7.1 Definitions. As used in this Article 7 the following terms
have the meanings indicated:
"Agent" means the principal placement agent on an agented placement of
Registrable Securities.
"Continuously Effective" means, with respect to a specified
registration statement, that it shall not cease to be effective and available
for Transfers of Registrable Securities thereunder for longer than either (i)
any ten (10) consecutive Business Days, or (ii) an aggregate of fifteen (15)
Business Days during the period specified in the relevant provision of this
agreement.
"Demand Registration" has the meaning set forth in Section 7.2(a).
"Demanding Holders" has the meaning set forth in Section 7.2(a).
"Holder" means the Buyer, the Persons named on Exhibit E hereto and
Transferees of Buyer's and such Persons' Registrable Securities with respect to
the rights that such Transferees shall have acquired in accordance with Section
7.8, at such times as such Persons shall own Registrable Securities.
"Majority Selling Holders" means those Selling Holders whose
Registrable Securities included in such registration represent a majority of the
Registrable Securities of all Selling Holders included therein.
"Piggyback Registration" has the meaning set forth in Section 7.3.
"Register", "Registered" and "Registration" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering by the
Commission of effectiveness of such registration statement or document.
"Registrable Securities" means, subject to Section 7.8 and Section
7.9(c): (i) the Common or Preferred Shares owned by Holders on the date hereof,
and owned by a Holder on the date of determination; (ii) any Common Shares or
Preferred Shares or other securities issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange by the Company
generally for, or in replacement by the Company generally of, such shares; and
(iii) any securities issued in exchange for Common or Preferred Shares in any
merger or reorganization of the Company; provided, however, that Registrable
Securities shall not include any securities which have theretofore been
registered and sold pursuant to the Securities Act or which have been sold to
the public pursuant to Rule 144 or any similar rule promulgated by the
Commission pursuant to the Securities Act, and, provided further, the Company
shall have no obligation under Sections 7.2 and 7.3 to register any Registrable
Securities of a Holder if the Company shall deliver to the Holders requesting
such registration an opinion of counsel reasonably satisfactory to such Holders
and their counsel to the effect that the proposed sale or disposition of all of
the Registrable Securities for which registration was requested does not require
registration under the Securities Act for a sale or disposition in a single
public sale, and offers to remove any and
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all legends restricting transfer from the certificates evidencing such
Registrable Securities. For purposes of this agreement, a Person will be deemed
to be a Holder of Registrable Securities whenever such Person has the
then-existing right to acquire such Registrable Securities (by conversion,
purchase or otherwise), whether or not such acquisition has actually been
effected.
"Registrable Securities then outstanding" means, with respect to a
specified determination date, the Registrable Securities owned by all Holders on
such date.
"Registration Expenses" has the meaning set forth in Section 7.6.
"Selling Holders" means, with respect to a specified registration
pursuant to this Article 7, Holders whose Registrable Securities are included in
such registration.
"Transfer" means and includes the act of selling, giving,
transferring, creating a trust (voting or otherwise), assigning or otherwise
disposing of (other than pledging, hypothecating or otherwise transferring as
security) (and correlative words shall have correlative meanings); provided
however, that any transfer or other disposition upon foreclosure or other
exercise of remedies of a secured creditor after an event of default under or
with respect to a pledge, hypothecation or other transfer as security shall
constitute a Transfer.
"Underwriters' Representative" means the managing underwriter, or, in
the case of a co-managed underwriting, the managing underwriter designated as
the Underwriters' Representative by the co-managers.
"Violation" has the meaning set forth in Section 7.7(a).
Section 7.2 Demand Registration.
(a)
(i) If one or more Holders shall make a written request to the
Company (the "Demanding Holders"), the Company shall cause there to be filed
with the Commission a registration statement meeting the requirements of the
Securities Act (a "Demand Registration"), and each Demanding Holder shall be
entitled to have included therein (subject to Section 7.8) all or such number of
such Demanding Holder's Registrable Securities as the Demanding Holder shall
report in writing. Any request made pursuant to this Section 7.2(a) shall be
addressed to the attention of the secretary of the Company, and shall specify
the number of Registrable Securities to be registered, the intended methods of
disposition thereof and that the request is for a Demand Registration pursuant
to this Section 7.2(a)(i).
(ii) Whenever the Company shall have received a demand pursuant
to Section 7.2(a)(i) to effect the registration of any Registrable Securities,
the Company shall promptly give written notice of such proposed registration to
all Holders. Any such Holder may, within twenty (20) days after receipt of such
notice, request in writing that all of such Holder's Registrable Shares, or any
portion thereof designated by such Holder, be included in the registration.
(b) Following receipt of a request for a Demand Registration, the
Company shall:
(i) File the registration statement with the Commission as
promptly as practicable, and shall use the Company's best efforts to have the
registration declared effective under the Securities Act as soon as reasonably
practicable, in each instance giving due regard to the need to prepare current
financial statements, conduct due diligence and complete other actions that are
reasonably necessary to effect a registered public offering.
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(ii) Use the Company's best efforts to keep the relevant
registration statement Continuously Effective for up to 270 days or until such
earlier date as of which all the Registrable Securities under the Demand
Registration statement shall have been disposed of in the manner described in
the Registration Statement. Notwithstanding the foregoing, if for any reason the
effectiveness of a registration pursuant to this Section 7.2 is suspended, the
foregoing period shall be extended by the aggregate number of days of such
suspension or postponement.
(c) The Company shall be obligated to effect no more than three Demand
Registrations. For purposes of the preceding sentence, registration shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, (ii) if after such registration statement has
become effective, such registration or the related offer, sale or distribution
of Registrable Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason not attributable to the Selling Holders and such
interference is not thereafter eliminated, or (iii) if the conditions to closing
specified in the underwriting agreement, if any, entered into in connection with
such registration are not satisfied or waived, other than by reason of a failure
on the part of the Selling Holders. If the Company shall have complied with its
obligations under this Article 7, a right to demand a registration pursuant to
this Section 7.2 shall be deemed to have been satisfied upon the earlier of (x)
the date as of which all of the Registrable Securities included therein shall
have been disposed of pursuant to the Registration Statement, and (y) the date
as of which such Demand Registration shall have been Continuously Effective for
a period of 270 days, provided no stop order or similar order, or proceedings
for such an order, is thereafter entered or initiated.
(d) A registration pursuant to this Section 7.2 shall be on such
appropriate registration form of the Commission as shall (i) be selected by the
Company and be reasonably acceptable to the Majority Selling Holders, and (ii)
permit the disposition of the Registrable Securities in accordance with the
intended method or methods of disposition specified in the request pursuant to
Section 7.2(a)(i).
(e) If any registration pursuant to Section 7.2 involves an
underwritten offering (whether on a "firm", "best efforts" or "all reasonable
efforts" basis or otherwise), or an agented offering, the Majority Selling
Holders shall have the right to select the underwriter or underwriters and
manager or managers to administer such underwritten offering or the placement
agent or agents for such agented offering; provided, however, that each Person
so selected shall be reasonably acceptable to the Company.
(f) Whenever the Company shall effect a registration pursuant to this
Section 7.2 in connection with an underwritten offering by one or more Selling
Holders of Registrable Securities: (i) if such Selling Holders have requested
the inclusion therein of more than one class of Registrable Securities, and the
Underwriters' Representative or Agent advises each such Selling Holder in
writing that, in its opinion, the inclusion of more than one class of
Registrable Securities would adversely affect such offering, the Demanding
Holders holding at least a majority of the Registrable Securities proposed to be
sold therein by them shall decide which class of Registrable Securities shall be
included therein in such offering and the related registration, and the other
class shall be excluded; and (ii) if the Underwriters' Representative or Agent
advises each such Selling Holder in writing that, in its opinion, the amount of
securities requested to be included in such offering (whether by Selling Holders
or others) exceeds the amount which can be sold in such offering within a price
range acceptable to the Majority Selling Holders, securities shall be included
in such offering and the related registration, to the extent of the amount which
can be sold within such price range, and on a pro rata basis among all Selling
Holders.
Section 7.3 Piggyback Registration.
(a) If at any time the Company proposes to register (including for
this purpose a registration effected by the Company for shareholders of the
Company other than the Holders) securities under the Securities Act in
connection with the public offering solely for cash on Form S-1, S-2 or S-3 (or
any replacement or successor forms), the Company shall promptly give each Holder
of Registrable Securities written
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notice of such registration (a "Piggyback Registration"). Upon the written
request of each Holder given within 20 days following the date of such notice,
the Company shall cause to be included in such registration statement and use
its best efforts to be registered under the Securities Act all the Registrable
Securities that each such Holder shall have requested to be registered. The
Company shall have the absolute right to withdraw or cease to prepare or file
any registration statement for any offering referred to in this Section 7.3
without any obligation or liability to any Holder.
(b) If the Underwriters' Representative or Agent shall advise the
Company in writing (with a copy to each Selling Holder) that, in its opinion,
the amount of Registrable Securities requested to be included in such
registration would materially adversely affect such offering, or the timing
thereof, then the Company will include in such registration, to the extent of
the amount and class which the Company is so advised can be sold without such
material adverse effect in such offering: securities proposed to be sold by the
Company for its own account; the Registrable Securities requested to be included
in such registration by Holders pursuant to this Section 7.3; and all other
securities being registered pursuant to the exercise of contractual rights
comparable to the rights granted in this Section 7.3, pro rata based on the
estimated gross proceeds from the sale thereof.
(c) Each Holder shall be entitled to have its Registrable Securities
included in an unlimited number of Piggyback Registrations pursuant to this
Section 7.3.
(d) If the Company has previously filed a registration statement with
respect to Registrable Securities pursuant to Section 7.2 or pursuant to this
Section 7.3, and if such previous registration has not been withdrawn or
abandoned, the Company will not file or cause to be effected any other
registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-8 or any successor form), whether on its own behalf or at
the request of any holder or holders of such securities, until a period of 180
days has elapsed from the effective date of such a previous registration.
Section 7.4 Registration Procedures. Whenever required under Section
7.2 or Section 7.3 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as practicable:
(a) Prepare and file with the Commission a registration statement with
respect to such Registrable Securities and use the Company's best efforts to
cause such registration statement to become effective; provided, however, that
before filing a registration statement or prospectus or any amendments or
supplements thereto, including documents incorporated by reference after the
initial filing of the registration statement and prior to effectiveness thereof,
the Company shall furnish to one firm of counsel for the Selling Holders
(selected by Majority Selling Holders) copies of all such documents in the form
substantially as proposed to be filed with the Commission at least four (4)
Business Days prior to filing for review and comment by such counsel, which
opportunity to comment shall include an absolute right to control or contest
disclosure if the applicable Selling Holder reasonably believes that it may be
subject to controlling person liability under applicable securities laws with
respect thereto.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act and rules thereunder with respect to the
disposition of all securities covered by such registration statement. If the
registration is for an underwritten offering, the Company shall amend the
registration statement or supplement the prospectus whenever required by the
terms of the underwriting agreement entered into pursuant to Section 7.5(b). In
the event that any Registrable Securities included in a registration statement
subject to, or required by, this Article 7 remain unsold at the end of the
period during which the Company is obligated to use its best efforts to maintain
the effectiveness of such registration statement, the Company may file a
post-effective amendment to the registration statement for the purpose of
removing such securities from registered status.
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(c) Furnish to each Selling Holder of Registrable Securities, without
charge, such numbers of copies of the registration statement, any pre-effective
or post-effective amendment thereto, the prospectus, including each preliminary
prospectus and any amendments or supplements thereto, in each case in conformity
with the requirements of the Securities Act and the rules thereunder, and such
other related documents as any such Selling Holder may reasonably request in
order to facilitate the disposition of Registrable Securities owned by such
Selling Holder.
(d) Use the Company's best efforts (i) to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such states or jurisdictions as shall be reasonably requested
by the Underwriters' Representative or Agent (as applicable, or if inapplicable,
the Majority Selling Holders), and (ii) to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of the offer
and transfer of any of the Registrable Securities in any jurisdiction, at the
earliest possible moment; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(e) In the event of any underwritten or agented offering, enter into
and perform the Company's obligations under an underwriting or agency agreement
(including indemnification and contribution obligations of underwriters or
agents), in usual and customary form, with the managing underwriter or
underwriters of or agents for such offering. The Company shall also cooperate
with the Majority Selling Holders and the Underwriters' Representative or Agent
for such offering in the marketing of the Registrable Shares, including making
available the Company's officers, accountants, counsel, premises, books and
records for such purpose, but the Company shall not be required to incur any
material out-of-pocket expense pursuant to this sentence.
(f) Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the Commission in connection therewith (and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered.
(g) Make generally available to the Company's security holders copies
of an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act no later than 90 days following the end of the 12-month period
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of each registration statement filed pursuant to this
agreement.
(h) Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of such
Selling Holder and Underwriter (but not more than one firm of counsel to such
Selling Holders), all financial and other information as shall be reasonably
requested by them, and provide the Selling Holder, any underwriter participating
in such offering and the representatives of such Selling Holder and Underwriter
the opportunity to discuss the business affairs of the Company with its
principal executives and independent public accountants who have certified the
audited financial statements included in such registration statement, in each
case all as necessary to enable them to exercise their due diligence
responsibility under the Securities Act; provided, however, that information
that the Company determines, in good faith, to be confidential and which the
Company advises such Person in writing is confidential shall not be disclosed
unless such Person signs a confidentiality agreement reasonably satisfactory to
the Company or the related Selling Holder of Registrable Securities agrees to be
responsible for such Person's breach of confidentiality on terms reasonably
satisfactory to the Company.
(i) Use the Company's best efforts to obtain a so-called "comfort
letter" from its independent public accountants, and legal opinions of counsel
to the Company addressed to the Selling Holders, in customary form and covering
such matters of the type customarily covered by such letters, and in a form that
shall be reasonably satisfactory to Majority Selling Holders. The Company shall
furnish to each Selling Holder a signed counterpart of any such comfort letter
or legal opinion. Delivery of any such opinion or comfort letter
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shall be subject to the recipient furnishing such written representations or
acknowledgments as are customarily provided by selling shareholders who receive
such comfort letters or opinions.
(j) Provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by such registration statement from and
after a date not later than the effective date of such registration statement.
(k) Use all reasonable efforts to cause the Registrable Securities
covered by such registration statement (i) if such Securities are then listed on
a securities exchange or included for quotation in a recognized trading market,
to continue to be so listed or included for a reasonable period of time after
the offering, and (ii) to be registered with or approved by such other United
States or state governmental agencies or authorities as may be necessary by
virtue of the business and operations of the Company to enable the Selling
Holders of Registrable Securities to consummate the disposition of such
Registrable Securities.
(l) Use the Company's reasonable efforts to provide a CUSIP number for
the Registrable Securities prior to the effective date of the first registration
statement including Registrable Securities.
(m) Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities included in
each such registration.
Section 7.5 Holders' Obligations. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Article 7
with respect to the Registrable Securities of any Selling Holder of Registrable
Securities that such Selling Holder shall:
(a) Furnish to the Company such information regarding such Selling
Holder, the number of the Registrable Securities owned by it, and the intended
method of disposition of such securities as shall be required to effect the
registration of such Selling Holder's Registrable Securities, and to cooperate
with the Company in preparing such registration;
(b) Agree to sell their Registrable Securities to the underwriters at
the same price and on substantially the same terms and conditions as the Company
or the other Persons on whose behalf the registration statement was being filed
have agreed to sell their securities, and to execute the underwriting agreement
agreed to by the Majority Selling Holders (in the case of a registration under
Section 7.2) or the Company and the Majority Selling Holders (in the case of a
registration under Section 7.3).
Section 7.6 Expenses of Registration. Expenses in connection with
registrations pursuant to this agreement shall be allocated and paid as follows:
(a) With respect to each Demand Registration, the Company shall bear
and pay all expenses incurred in connection with any registration, filing, or
qualification of Registrable Securities with respect to such Demand
Registrations for each Selling Holder (which right may be assigned to any Person
to whom Registrable Securities are Transferred as permitted by Section 7.8),
including all registration, filing and National Association of Securities
Dealers, Inc. fees, all fees and expenses of complying with securities or blue
sky laws, all word processing, duplicating and printing expenses, messenger and
delivery expenses, the reasonable fees and disbursements of counsel for the
Company, and of the Company's independent public accountants, including the
expenses of "cold comfort" letters required by or incident to such performance
and compliance, and the reasonable fees and disbursements of one firm of counsel
for the Selling Holders of Registrable Securities (selected by Demanding Holders
owning a majority of the Registrable Securities owned by Demanding Holders to be
included in a Demand Registration) (the "Registration Expenses"), but excluding
underwriting discounts and commissions relating to Registrable Securities (which
shall be paid on a pro rata basis by the Selling Holders), provided, however,
that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 7.2 if the registration is
subsequently withdrawn at the request of the Majority Selling Holders (in which
case all Selling Holders shall bear such
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expense), unless Holders whose Registrable Securities constitute a majority of
the Registrable Securities then outstanding agree that such withdrawn
registration shall constitute one of the demand registrations under Section 7.2
hereof.
(b) The Company shall bear and pay all Registration Expenses incurred
in connection with any Piggyback Registrations pursuant to Section 7.3 for each
Selling Holder (which right may be Transferred to any Person to whom Registrable
Securities are Transferred as permitted by Section 7.8), but excluding
underwriting discounts and commissions relating to Registrable Securities (which
shall be paid on a pro rata basis by the Selling Holders of Registrable
Securities).
(c) Any failure of the Company to pay any Registration Expenses as
required by this Section 7.6 shall not relieve the Company of its obligations
under this agreement.
Section 7.7 Indemnification; Contribution. If any Registrable
Securities are included in a registration statement under this agreement:
(a) To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder, each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act, and each
officer, director, partner, and employee of such Selling Holder and such
controlling Person, against any and all losses, claims, damages, liabilities and
expenses (joint or several), including attorneys' fees and disbursements and
expenses of investigation, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any of the
foregoing Persons may become subject under the Securities Act, the Exchange Act
or other federal or state laws, insofar as such losses, claims, damages,
liabilities and expenses arise out of or are based upon any of the following
statements, omissions or violations (collectively, a "Violation"):
(i) Any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein, or any amendments
or supplements thereto;
(ii) The omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements therein
not misleading; or
(iii) Any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any applicable state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
applicable state securities law;
provided, however, that the indemnification required by this Section 7.7(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or expense to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished to the Company by the indemnified party expressly for use in
connection with such registration; provided, further, that the indemnity
agreement contained in this Section 7.7 shall not apply to any underwriter to
the extent that any such loss is based on or arises out of an untrue statement
or alleged untrue statement of a material fact, or an omission or alleged
omission to state a material fact, contained in or omitted from any preliminary
prospectus if the final prospectus shall correct such untrue statement or
alleged untrue statement, or such omission or alleged omission, and a copy of
the final prospectus has not been sent or given to such Person at or prior to
the confirmation of sale to such Person if such underwriter was under an
obligation to deliver such final prospectus and failed to do so. The Company
shall also indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, their
officers, directors, agents and employees 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 Selling Holders.
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(b) To the extent permitted by applicable law, each Selling Holder
shall indemnify and hold harmless the Company, each of its directors, each of
its officers who shall have signed the registration statement, each Person, if
any, who controls the Company within the meaning of the Securities Act, any
other Selling Holder, any controlling Person of any such other Selling Holder
and each officer, director, partner, and employee of such other Selling Holder
and such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint and several), including attorneys' fees and
disbursements and expenses of investigation, incurred by such party pursuant to
any actual or threatened action, suit, proceeding or investigation, or to which
any of the foregoing Persons may otherwise become subject under the Securities
Act, the Exchange Act or other federal or state laws, insofar as such losses,
claims, damages, liabilities and expenses arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Selling Holder expressly for use in connection with such
registration; provided, however, that (x) the indemnification required by this
Section 7.7(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or expense if settlement is effected without the
consent of the relevant Selling Holder of Registrable Securities, which consent
shall not be unreasonably withheld, and (y) in no event shall the amount of any
indemnity under this Section 7.7(b) exceed the gross proceeds from the
applicable offering received by such Selling Holder.
(c) Promptly after receipt by an indemnified party under this Section
7.7 of notice of the commencement of any action, suit, proceeding, investigation
or threat thereof made in writing for which such indemnified party may make a
claim under this Section 7.7, such indemnified party shall deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties. The failure to deliver written notice to the
indemnifying party within a reasonable time following the commencement of any
such action, if prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under this
Section 7.7 but shall not relieve the indemnifying party of any liability that
it may have to any indemnified party otherwise than pursuant to this Section
7.7. Any fees and expenses incurred by the indemnified party (including any fees
and expenses incurred in connection with investigating or preparing to defend
such action or proceeding) shall be paid to the indemnified party, as incurred,
within thirty (30) days of written notice thereof to the indemnifying party
(regardless of whether it is ultimately determined that an indemnified party is
not entitled to indemnification hereunder). Any such indemnified party shall
have the right to employ separate counsel in any such action, claim or
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be the expenses of such indemnified party unless (i) the
indemnifying party has agreed to pay such fees and expenses or (ii) the
indemnifying party shall have failed to promptly assume the defense of such
action, claim or proceeding or (iii) the named parties to any such action, claim
or proceeding (including any impleaded parties) include both such indemnified
party and the indemnifying party, and such indemnified party shall have been
advised by counsel that there may be one or more legal defenses available to it
which are different from or in addition to those available to the indemnifying
party and that the assertion of such defenses would create a conflict of
interest such that counsel employed by the indemnifying party could not
faithfully represent the indemnified party (in which case, if such indemnified
party notifies the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action, claim or
proceeding on behalf of such indemnified party, it being understood, however,
that the indemnifying party shall not, in connection with any one such action,
claim or proceeding or separate but substantially similar or related actions,
claims 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 (together with appropriate local
counsel) at any time for all such indemnified parties, unless in the reasonable
judgment of such indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
action, claim or proceeding, in which event the indemnifying party shall be
obligated to pay the fees and expenses of such additional counsel or counsels).
No indemnifying party shall be liable to an indemnified party for any settlement
of any action, proceeding or claim without the written consent of the
indemnifying party, which consent shall not be unreasonably withheld.
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(d) If the indemnification required by this Section 7.7 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to in this
Section 7.7:
(i) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any Violation has been committed by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such Violation. 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
Section 7.7(a) and Section 7.7(b), any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.7(d) were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in Section 7.7(d)(i). 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.
(e) If indemnification is available under this Section 7.7, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Section 7.7 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 7.7(d)(i).
(f) The obligations of the Company and the Selling Holders of
Registrable Securities under this Section 7.7 shall survive the completion of
any offering of Registrable Securities pursuant to a registration statement
under this agreement, and otherwise.
Section 7.8 Transfer of Registration Rights. Rights with respect to
Registrable Securities may be Transferred as follows: all rights of a Holder
with respect to Registrable Securities pursuant to this agreement may be
Transferred by such Holder to any Person in connection with the Transfer of
Registrable Securities to such Person, in all cases, if (x) any such Transferee
shall have executed and delivered to the secretary of the Company a properly
completed agreement substantially in the form of Exhibit F, and (y) the
Transferor shall have delivered to the secretary of the Company, no later than
15 days following the date of the Transfer, written notification of such
Transfer setting forth the name of the Transferor, name and address of the
Transferee, and the number of Registrable Securities which shall have been so
Transferred.
Section 7.9 Covenants of the Company. The Company hereby agrees and
covenants as follows:
(a) The Company shall file as and when applicable, on a timely basis,
all reports required to be filed by it under the Exchange Act. If the Company is
not required to file reports pursuant to the Exchange Act, upon the request of
any Holder of Registrable Securities, the Company shall make publicly available
the information specified in subparagraph (c)(2) of Rule 144 of the Securities
Act, and take such further action as may be reasonably required from time to
time and as may be within the reasonable control of the Company, to enable the
Holders to Transfer Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
under the Securities Act or any similar rule or regulation hereafter adopted by
the Commission.
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(b) The Company shall not, and shall not permit its majority owned
subsidiaries to, effect any public sale or distribution of any shares of Common
Shares or any securities convertible into or exchangeable or exercisable for
shares of Common Shares, during the five (5) Business Days prior to, and during
the 90-day period beginning on, the commencement of a public distribution of the
Registrable Securities pursuant to any registration statement prepared pursuant
to this agreement. The Company shall not effect any registration of its
securities (other than on Form S-4, Form S-8, or any successor forms to such
forms or pursuant to such other registration rights Agreements as may be
approved in writing by the Majority Selling Holders) or effect any public or
private sale or distribution of any of its securities, including a sale pursuant
to Regulation D under the Securities Act, whether on its own behalf or at the
request of any holder or holders of such securities from the date of a request
for a Demand Registration pursuant to Section 7.2 until the earlier of (x) 90
days following the date as of which all securities covered by such Demand
Registration statement shall have been Transferred, and (y) 270 days following
the effective date of such Demand Registration Statement, unless the Company
shall have previously notified in writing all Selling Holders of the Company's
desire to do so, and Selling Holders owning a majority of the Registrable
Securities or the Underwriters' Representative, if any, shall have consented
thereto in writing.
(c) Any agreement entered into after the date of this agreement
pursuant to which the Company or any of its majority owned subsidiaries issues
or agrees to issue any privately placed securities similar to any issue of the
Registrable Securities (other than (x) shares of Common Shares pursuant to a
stock incentive, stock option, stock bonus, stock purchase or other employee
benefit plan of the Company approved by its Board and (y) securities issued to
Persons in exchange for ownership interests in any Person in connection with a
business combination in which the Company or any of its majority owned
subsidiaries is a party) shall contain a provision whereby holders of such
securities agree not to effect any public sale or distribution of any such
securities during the periods described in the first sentence of Section 7.9(b),
in each case including a sale pursuant to Rule 144 under the Securities Act
(unless such Person is prevented by applicable statute or regulation from
entering into such an agreement).
(d) The Company shall not, directly or indirectly, (x) enter into any
merger, consolidation or reorganization in which the Company shall not be the
surviving corporation or (y) Transfer or agree to Transfer all or substantially
all the Company's assets, unless prior to such merger, consolidation,
reorganization or asset Transfer, the surviving corporation or the Transferee,
respectively, shall have agreed in writing to assume the obligations of the
Company under this Article 7, and for that purpose references hereunder to
"Registrable Securities" shall be deemed to include the securities which the
Holders of Registrable Securities would be entitled to receive in exchange for
Registrable Securities pursuant to any such merger, consolidation or
reorganization.
(e) The Company shall not grant to any Person (other than a Holder of
Registrable Securities) any registration rights with respect to securities of
the Company, or enter into any agreement, that would entitle the holder thereof
to have securities owned by it included in a Demand Registration.
ARTICLE 8
FURTHER AGREEMENTS
Section 8.1 Further Assurances. Each party to this agreement shall, at
the request of another party to this agreement, at any time and from time to
time following the Closing hereunder, execute and deliver or cause to be
executed and delivered all such further instruments and take or cause to be
taken all such further action as may be reasonably necessary or appropriate in
order more effectively to sell, assign, transfer and con vey to Buyer the Class
A Preferred Shares and the underlying Class B Preferred Shares and Common
Shares, or otherwise to confirm or carry out the provisions of this agreement.
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Section 8.2 Restrictions on Certain Amendments to Amended and Restated
Declaration of Trust; Restrictions on Certain Equity Issuances. The Company
shall not amend its Amended and Restated Declaration of Trust at any time unless
(i) the Company has notified Buyer of such change no less than fifteen (15) days
prior to its adoption and (ii) in the reasonable judgment of the Company's Board
of Trustees, such amendment does not contravene or violate the provisions of
this agreement or the Certificate of Designation. So long as any Preferred
Shares remain outstanding, the Company shall not issue any Capital Shares that
are not Junior Shares, and shall not issue any Class B Preferred Shares (except
upon the conversion of any Class A Preferred Shares) without the affirmative
vote of the holders of a majority of the outstanding Preferred Shares, voting
together as a separate class from the Common Shares.
Section 8.3 Costs and Expenses. The Company shall bear the costs and
expenses (including, but not limited to, all compensation and expenses of
counsel, financial advisors, consultants and independent accountants) incurred
by the Company, Buyer, Equity Group Investments, Inc. and Victor Capital Group,
L.P. in connection with the negotiation, preparation, execution, delivery and
enforcement of this agreement and the consummation of the Transactions.
Section 8.4 Buyer's Access to Records.
(a) The Company shall afford, and shall cause each of the Consolidated
Subsidiaries to afford, Buyer and its authorized representatives, access during
normal business hours to their respective properties, books and records, in
order that they may have the opportunity to make such investigations as they
shall desire to make of the affairs of the Company and each Consolidated
Subsidiary. The Company shall cause its trustees, officers, employees,
investment bankers, counsel, accountants and other authorized representatives to
furnish such additional financial and operating data and other information as
Buyer and such other Persons shall from time to time reasonably request.
(b) Nothing in this Section 8.4 shall be construed as a limitation
upon Buyer's right to receive information from the Company as a shareholder and
beneficiary of the Company under California law.
Section 8.5 Home Office Payment. The Company agrees that the Company
will make any payments to Buyer on the Common Shares, the Class A Preferred
Shares and the Class B Preferred Shares by wire transfer in immediately
available funds by 12:00 noon, local time at the location of Buyer's account, on
the date of payment to such account as specified by Buyer in writing to the
Company.
Section 8.6 Confidentiality. Except to the extent disclosure is
required by law, or in response to any governmental authority, or in connection
with any litigation relating to an alleged breach of this agreement, each party
shall maintain the confidentiality of all information obtained from the other
party hereto other than information that is otherwise publicly available and
shall use such information only for purposes reasonably related to this
agreement and the transactions contemplated hereby.
Section 8.7 SEC Filings and Press Releases. Promptly upon their
becoming available, the Company will deliver to Buyer copies of (i) all
financial statements, reports, notices and proxy statements sent or made
available by the Company or any of its Consolidated Subsidiaries to their
security holders, (ii) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by the Company or its Consolidated
Subsidiaries with any securities exchange or with the Commission or any
governmental or private regulatory authority and (iii) all press releases and
other statements made available by the Company or any of its Consolidated
Subsidiaries to the public concerning developments in the business of any such
Person.
Section 8.8 Limitation Upon Incurrence of Indebtedness. So long as any
Preferred Shares remain outstanding, without the prior written consent of the
holders of a majority of the outstanding Preferred Shares, voting together as a
single class, but voting together as a separate class from the Common Shares,
the Company shall not Incur any Indebtedness if the Company's D/E Ratio would
exceed 5:1.
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ARTICLE 9
MISCELLANEOUS
Section 9.1 Survival of Representations, Warranties and Covenants. (a)
Notwithstanding any investigation made by or on behalf of Buyer, the
representations and warranties of the Company contained in this agreement shall
be continuing representations and warranties and shall survive the Closing for a
period of one year thereafter. The covenants and other Agreements of the Company
and Buyer contained in this agreement shall be continuing covenants and
Agreements and shall survive the Closing indefinitely.
(b) From and after the Closing Date, the Company will indemnify and
hold Buyer harmless from and against, and reimburse Buyer for any damages
resulting from, any and all loss, liability, damage or expense (including,
without limitation, interest, penalties and reasonable attorneys' fees and
disbursements) resulting to the Company or Buyer and based upon, arising out of
or otherwise in respect of any breach of any representation, warranty, covenant
or agreement of the Company contained in this agreement.
(c) Each party entitled to indemnification under this Section 9.1(c)
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnified Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnified Party of its
obligations under this Section 9.1(c), except to the extent that such failure to
give notice prejudices the Indemnifying Party. The Indemnified Party may
participate in such defense at such party's expense; provided, however, that the
Indemnifying Party shall pay the expense of one law firm for all Indemnified
Parties if representation of such Indemnified Parties by the counsel retained by
the Indemnifying Party would be inappropriate due to actual or potential
differing interests between an Indemnified Party and any other party represented
by such counsel in such proceeding. No Indemnifying Party, in the defense of any
such claim or litigation shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
of such claim or litigation, and no Indemnified Party shall consent to entry of
any judgment or settle such claim or litigation without the prior written
consent of the Indemnifying Party.
(d) Subsequent to the date hereof, it is anticipated that Buyer may be
required to make certain customary representations and warranties with respect
to the Company to investors in Buyer and, with respect to such representations
and warranties, indemnify and hold such investors harmless from any breach of
such representations and warranties. The terms and conditions of any
indemnification with respect to such representations and warranties relating to
the Company, its business, assets, liabilities or prospects shall be deemed to
be incorporated herein by reference as if set forth in full herein as an
additional indemnification obligation of the Company as the Indemnifying Party
in favor of Buyer. Buyer will promptly provide the Company with a copy of such
indemnification provisions and, if requested by Buyer, the Company will execute
and deliver such further instruments as may be necessary or appropriate to
reflect the Company's obligation to indemnify Buyer for any breach of such
additional representations and warranties.
Section 9.2 Assignment; Transfer of Interests. This agreement may be
assigned by Buyer, upon written notice to the Company, to any transferee of
Common Shares, Class A Preferred Shares or Class B Preferred Shares from Buyer
provided that such transferee agrees to be bound by all the provisions of this
agreement. This agreement may be assigned by the Company provided that such
transferee agrees to be bound by the provisions of this agreement and provided
further that such assignment shall not relieve the Company of
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any of its obligations or liabilities to Buyer under this agreement. This
agreement shall be binding upon and inure to the benefit of the parties hereto,
their successors in interest and permitted assigns.
Section 9.3 Notices. Any notices or other communications required or
permitted hereunder shall be sufficient if in writing and delivered by hand or
sent by telecopy, or sent, postage prepaid, by registered, certified or
express-mail, or by recognized overnight air courier service and shall be deemed
given when so delivered by hand or telecopied, or if mailed or sent by overnight
courier service, on the fifth (5) Business Day after mailing (one Business Day
in the case of express mail or overnight courier service) to the parties at the
following addresses:
(a) If to Buyer to:
Veqtor Finance Company, LLC
c/o Victor Capital Group, L.P.
885 Third Avenue
New York, New York 10022
Attention: John R. Klopp
Telecopy: (212) 593-0316
with a copy to:
Equity Group Investments, Inc.
Two North Riverside Plaza, 7th Floor
Chicago, Illinois 60606
Attention: Gary Garrabrant
Telecopy: (312) 454-0157
and:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Thomas E. Kruger
Telecopy: (212) 856-7815
(b) If to the Company, to:
California Real Estate Investment Trust
131 Steuart Street, #200
San Francisco, California 94105
Attention: Frank A. Morrow
Telecopy: (415) 543-6269
with a copy to:
Greenberg Glusker Fields Claman Machtinger LLP
1900 Avenue of the Stars, #2100
Los Angeles, California 90067
Attention: Paula Peters
Telecopy: (310) 553-0687
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein.
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Section 9.4 Entire Agreement. This agreement, including the Disclosure
Schedules and Exhibits hereto, constitutes the entire understanding of the
parties relating to the subject matter hereof and supersede all prior agreements
and understandings, whether oral or written. No amendment or modification of the
terms of this agreement shall be binding or effective unless expressed in
writing and signed by each party.
Section 9.5 No Waiver. The waiver by any party of the breach of any of
the terms and conditions of, or any right under, this agreement shall not be
deemed to constitute the waiver of any other breach of the same or any other
term or condition or of any similar right. No such waiver shall be binding or
effective unless expressed in writing and signed by the party giving such
waiver.
Section 9.6 Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the state of California applicable to
agreements executed and to be fully performed in such State.
Section 9.7 Counterparts. This agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
Section 9.8 Public Announcements. The Company and Buyer agree to
consult with each other prior to issuing any press release or otherwise making
any public statement (including without limitation any filing with the
Securities and Exchange Commission) with respect to the transactions
contemplated hereby. The Company will consult with Buyer prior to issuing any
press release or otherwise making any public statement with respect to Buyer or
its members.
Section 9.9 Availability of Equitable Remedies. Since a breach of the
provisions of this agreement could not adequately be compensated by money
damages, any party to this agreement shall be entitled, in addition to any other
right or remedy available to it, to an injunction restraining such breach or a
threatened breach and to specific performance of any such provision of this
agreement, and in either case no bond or other security shall be required in
connection therewith, and the parties hereby consent to the issuance of such an
injunction and to the ordering of specific performance.
Section 9.10 Construction. The article and section headings contained
in this agreement are inserted for reference purposes only and shall not affect
the meaning or interpretation of this agreement.
Section 9.11 Arbitration. Any dispute or controversy between the
Company and Buyer arising under, out of, in connection with, or in relation to
this agreement, the Amended and Restated Declaration of Trust, the Certificate
of Designation (including without limitation any dispute concerning any
determination made by the board of trustees of the Company) shall be determined
and settled by arbitration in New York City by a panel of three members in
accordance with the Commercial Rules of the American Arbitration Association as
in effect for New York City. In the event of any dispute with respect to any
calculation, such calculation shall be determined by an accountant from a "Big
Six" accounting firm selected by agreement of the parties (which accounting firm
shall have no material relationship with any party hereto or any of their
Affiliates) or, in the event the parties are unable to agree upon such
accountant, an accountant selected in accordance with the procedures established
by the Commercial Rules of the American Arbitration Association as in effect for
New York City. Any determination rendered therein shall be final and binding
upon the parties and their legal representatives.
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IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the day and year first above written.
CALIFORNIA REAL ESTATE INVESTMENT TRUST
By: /s/ Frank A. Morrow
Name: Frank A. Morrow
Title: Chairman of the Board
VEQTOR FINANCE COMPANY, LLC
By: CALREIT INVESTORS LIMITED PARTNERSHIP,
its Managing Member
By: SZ Investments, LLC, its
General Partner
By: ZELL GENERAL PARTNERSHIP, INC.
its Managing Member
By: /s/ Donald J. Libentritt
------------------------
Name: Donald J. Liebentritt
Title: Vice President
By: V2 Holdings LLC, its Managing Member
By: /s/ John R. Klopp
-----------------
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SCHEDULE 3.2
CAPITAL STOCK
(1) The Company owns a 59% interest in Totem Square, L.P. ("Totem"), a
Washington limited partnership.
(2) The Company owns 100% of CalREIT Totem Square, Inc. ("Cal-CORP"), which
acts as general partner of Totem. Cal-CORP has a 1% interest in Totem.
(3) The Company owns 100% of B.B. Real Estate Investment Corp.
27
<PAGE>
SCHEDULE 3.7
LITIGATION
None.
28
<PAGE>
Exhibit 10.2
NON-NEGOTIABLE NOTE
$2,162,500 New York, New York
July 15, 1997
FOR VALUE RECEIVED, CAPITAL TRUST (the "Debtor"), hereby
unconditionally promises to pay to JOHN R. KLOPP (the "Holder"), at the
principal offices of Debtor, or at such other place in the continental United
States of America as Holder may from time to time designate in writing, the
principal sum of TWO MILLION ONE HUNDRED SIXTY-TWO THOUSAND FIVE HUNDRED DOLLARS
($2,162,500) (the "Principal Amount"), to be paid in lawful money of the United
States of America in immediately available funds as set forth below.
1. Repayment. The Principal Amount shall be due and payable in
ten (10) semi-annual installments commencing on January 1, 1998 and on each June
1 and January 1 thereafter (each a "Payment Date"), until paid in full. Each
installment shall be in an amount equal to one-tenth of the Principal Amount. No
interest shall be accrued on or be payable under this Note prior to the due date
of this Note, whether at stated maturity or upon acceleration pursuant to
section 4 hereof.
2. Prepayment. Debtor shall prepay all of the unpaid portion
of the Principal Amount and all accrued interest, if any, on or prior to the
effective date of any Change in Control Event. "Change in Control Event" shall
mean
a. a merger or acquisition involving Debtor in which either:
(i) 50% or more of Debtor's voting stock
outstanding after the merger is held by
holders different from those who held
Debtor's voting stock immediately prior to
such merger or acquisition; or
(ii) the composition of the board of trustees (or
other governing board of Debtor) changes as
a result of which the individuals elected to
the board at the last meeting of the
shareholders at which there was not a
contested election cease to comprise a
majority of the board;
b. the sale, transfer or other disposition of all or
substantially all of the assets of Debtor in liquidation
or dissolution of Debtor;
611696.1
<PAGE>
c. a transfer of all or substantially all of Debtor's
assets pursuant to a partnership or joint venture
agreement or similar arrangement where Debtor's
resulting interest is or becomes less than 50%;
d. on or after the date hereof, a change in ownership of
Debtor through an action or series of transactions, such
that any person is or becomes the beneficial owner,
directly or indirectly, of 50% or more of Debtor's
voting stock; or
e. a change in the composition of the board of trustees
(or other governing board of Debtor) as a result of
which the individuals elected to the board at the
last meeting of the shareholders at which there is
not a contested election cease to comprise a majority
of the board.
3. Set-off. Debtor shall be entitled to set off against the
principal amount owing hereunder the amount of any Liquidated Claim, provided
that the amount of any Liquidated Claim shall be set off against payments due
hereunder in reverse order of due date. "Liquidated Claim" shall mean any claim
by Debtor against the holder of this Note under article 9 of the Interest
Purchase Agreement referred to in section 6 hereof to the extent that such claim
has been reduced to a judgment of a court or is subsumed in a settlement
agreement to which the holder hereof is a signatory.
4. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
a. Payments. The Debtor shall fail to make any principal
payment when due;
b. Bankruptcy. The Debtor shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto
(the "Bankruptcy Code"); or an involuntary case is commenced against the
Debtor and the petition is not controverted within 30 days, or is not
dismissed within 90 days, after commencement of the case; or a custodian
(as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of the Debtor; or the
Debtor commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now
or hereafter in effect relating to the Debtor; or there is commenced
against the Debtor any such proceeding which remains undismissed for a
period of 90 days; or the Debtor is adjudicated insolvent or bankrupt;
or any order of relief or other order approving any such case or
proceeding is entered; or the Debtor
611696.1
-2-
<PAGE>
suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed
for a period of 90 days; or the Debtor makes a general assignment for
the benefit of creditors;
c. Other Defaults. Debtor or any subsidiary of Debtor defaults
(whether as primary obligor or as guarantor or other surety) in any
payment of principal or interest on any obligation in respect of its
indebtedness beyond any period of grace provided with respect thereto,
or Debtor or any subsidiary of Debtor fails to perform or observe any
other agreement, term or condition contained in any agreement under
which any such indebtedness is created (or if any other event
thereunder or under any such agreement shall occur and be continuing),
and, on the basis of such default, failure or other event, the holder
or holders of such obligation cause such obligation to become due (or
to be repurchased by Debtor or any such subsidiary) prior to the stated
maturity of such obligation;
then the Holder, at Holder's option, may declare all unpaid amounts under this
Note to be immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Debtor.
Thereafter, the outstanding Principal Amount shall bear interest at an annual
rate equal to fifteen percent (15%) per annum from the date of notice to Debtor
of such Event of Default until the date all outstanding principal and any
accrued interest have been paid in full.
5. Waivers. The Debtor and all endorsers hereby severally
waive diligence, demand, presentment, protest and notice of any kind, and assent
to extensions of the time of payment, release, surrender or substitution of
security, or forbearance or other indulgence, without notice. No failure or
delay on the part of Holder in exercising any right or remedy accruing upon the
occurrence of an Event of Default shall impair the right or remedy or constitute
a waiver thereof or acquiescence of the Event of Default. All remedies are
cumulative to the extent permitted by law.
6. Interest Purchase Agreement. This Note is one of the
Notes referred to in, and the form of which is attached to, that certain
Interest Purchase Agreement, dated as of June 16, 1997, by and between John R.
Klopp, Craig M. Hatkoff and Valentine Wildove & Company, Inc., as sellers, and
Debtor, as buyer.
7. Assignment. This Note may not be assigned, assumed,
changed, modified or terminated orally or otherwise, except by a writing
executed by Holder hereof.
8. Binding Effect. This Note and the rights and obligations
hereunder shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and assigns.
611696.1
-3-
<PAGE>
9. Notices. All notices, consents and other communications
under this Note shall be in writing and shall be deemed to have been duly given
(a) when delivered by hand, (b) when sent by telecopier (with receipt
confirmed), provided that a copy is promptly thereafter mailed by first class
prepaid registered or certified mail, return receipt requested, (c) when
received by the addressee, if sent by Express Mail, Federal Express or other
express delivery service (receipt requested), or by such other means as the
parties may agree from time to time or (d) five (5) Business Days after being
mailed, by first class postage prepaid registered or certified mail, return
receipt requested; in each case to the appropriate addresses, and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate as to itself by notice to the other parties):
(a) If to Holder:
Valentine Wildove & Company, Inc.
885 Third Avenue, 12th Floor
New York, New York 10022
Attention: John R. Klopp and Craig M. Hatkoff
Telecopy: (212) 593-0316
(b) If to Debtor:
California Real Estate Investment Trust or Capital Trust
131 Steuart Street, #200
San Francisco, California 94105
Attention: Chief Executive Officer
Telecopy: (415) 543-6269
with a copy to:
Equity Group Investments, Inc.
2 North Riverside Plaza, 6th Floor
Chicago, Illinois 60606
Attention: Gary R. Garrabrant
Telecopy: (312) 454-0157
611696.1
-4-
<PAGE>
and to:
Victor Capital Group, L.P.
885 Third Avenue, 12th Floor
New York, New York 10022
Attention: John R. Klopp
Telecopy: (212) 593-0316
10. Governing Law. This Note shall be governed by and
construed and interpreted in accordance with the internal laws of the State of
New York, without giving effect to the principles of conflicts of laws thereof.
CAPITAL TRUST
By: _________________________
Name:
Title:
611696.1
-5-
<PAGE>
NON-NEGOTIABLE NOTE
$2,162,500 New York, New York
July 15, 1997
FOR VALUE RECEIVED, CAPITAL TRUST (the "Debtor"), hereby
unconditionally promises to pay to CRAIG M. HATKOFF (the "Holder"), at the
principal offices of Debtor, or at such other place in the continental United
States of America as Holder may from time to time designate in writing, the
principal sum of TWO MILLION ONE HUNDRED SIXTY-TWO THOUSAND FIVE HUNDRED DOLLARS
($2,162,500) (the "Principal Amount"), to be paid in lawful money of the United
States of America in immediately available funds as set forth below.
1. Repayment. The Principal Amount shall be due and payable in
ten (10) semi-annual installments commencing on January 1, 1998 and on each June
1 and January 1 thereafter (each a "Payment Date"), until paid in full. Each
installment shall be in an amount equal to one-tenth of the Principal Amount. No
interest shall be accrued on or be payable under this Note prior to the due date
of this Note, whether at stated maturity or upon acceleration pursuant to
section 4 hereof.
2. Prepayment. Debtor shall prepay all of the unpaid portion
of the Principal Amount and all accrued interest, if any, on or prior to the
effective date of any Change in Control Event. "Change in Control Event" shall
mean
a. a merger or acquisition involving Debtor in which either:
(i) 50% or more of Debtor's voting stock
outstanding after the merger is held by
holders different from those who held
Debtor's voting stock immediately prior to
such merger or acquisition; or
(ii) the composition of the board of trustees (or
other governing board of Debtor) changes as
a result of which the individuals elected to
the board at the last meeting of the
shareholders at which there was not a
contested election cease to comprise a
majority of the board;
b. the sale, transfer or other disposition of all or
substantially all of the assets of Debtor in liquidation
or dissolution of Debtor;
611697.1
<PAGE>
c. a transfer of all or substantially all of Debtor's assets
pursuant to a partnership or joint venture agreement or
similar arrangement where Debtor's resulting interest is
or becomes less than 50%;
d. on or after the date hereof, a change in ownership of
Debtor through an action or series of transactions, such
that any person is or becomes the beneficial owner,
directly or indirectly, of 50% or more of Debtor's voting
stock; or
e. a change in the composition of the board of trustees
(or other governing board of Debtor) as a result of which
the individuals elected to the board at the last meeting
of the shareholders at which there is not a contested
election cease to comprise a majority of the board.
3. Set-off. Debtor shall be entitled to set off against the
principal amount owing hereunder the amount of any Liquidated Claim, provided
that the amount of any Liquidated Claim shall be set off against payments due
hereunder in reverse order of due date. "Liquidated Claim" shall mean any claim
by Debtor against the holder of this Note under article 9 of the Interest
Purchase Agreement referred to in section 6 hereof to the extent that such claim
has been reduced to a judgment of a court or is subsumed in a settlement
agreement to which the holder hereof is a signatory.
4. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
a. Payments. The Debtor shall fail to make any principal
payment when due;
b. Bankruptcy. The Debtor shall commence a voluntary
case concerning itself under Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against the Debtor and the petition is not controverted within 30 days,
or is not dismissed within 90 days, after commencement of the case; or
a custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or substantially all of the property of the
Debtor; or the Debtor commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Debtor;
or there is commenced against the Debtor any such proceeding which
remains undismissed for a period of 90 days; or the Debtor is
adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Debtor
611697.1
-2-
<PAGE>
suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed
for a period of 90 days; or the Debtor makes a general assignment for
the benefit of creditors;
c. Other Defaults. Debtor or any subsidiary of Debtor
defaults (whether as primary obligor or as guarantor or other surety)
in any payment of principal or interest on any obligation in respect of
its indebtedness beyond any period of grace provided with respect
thereto, or Debtor or any subsidiary of Debtor fails to perform or
observe any other agreement, term or condition contained in any
agreement under which any such indebtedness is created (or if any other
event thereunder or under any such agreement shall occur and be
continuing), and, on the basis of such default, failure or other event,
the holder or holders of such obligation cause such obligation to
become due (or to be repurchased by Debtor or any such subsidiary)
prior to the stated maturity of such obligation;
then the Holder, at Holder's option, may declare all unpaid amounts under this
Note to be immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Debtor.
Thereafter, the outstanding Principal Amount shall bear interest at an annual
rate equal to fifteen percent (15%) per annum from the date of notice to Debtor
of such Event of Default until the date all outstanding principal and any
accrued interest have been paid in full.
5. Waivers. The Debtor and all endorsers hereby severally
waive diligence, demand, presentment, protest and notice of any kind, and assent
to extensions of the time of payment, release, surrender or substitution of
security, or forbearance or other indulgence, without notice. No failure or
delay on the part of Holder in exercising any right or remedy accruing upon the
occurrence of an Event of Default shall impair the right or remedy or constitute
a waiver thereof or acquiescence of the Event of Default. All remedies are
cumulative to the extent permitted by law.
6. Interest Purchase Agreement. This Note is one of the
Notes referred to in, and the form of which is attached to, that certain
Interest Purchase Agreement, dated as of June 16, 1997, by and between John R.
Klopp, Craig M. Hatkoff and Valentine Wildove & Company, Inc., as sellers, and
Debtor, as buyer.
7. Assignment. This Note may not be assigned, assumed,
changed, modified or terminated orally or otherwise, except by a writing
executed by Holder hereof.
8. Binding Effect. This Note and the rights and obligations
hereunder shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and assigns.
611697.1
-3-
<PAGE>
9. Notices. All notices, consents and other communications
under this Note shall be in writing and shall be deemed to have been duly given
(a) when delivered by hand, (b) when sent by telecopier (with receipt
confirmed), provided that a copy is promptly thereafter mailed by first class
prepaid registered or certified mail, return receipt requested, (c) when
received by the addressee, if sent by Express Mail, Federal Express or other
express delivery service (receipt requested), or by such other means as the
parties may agree from time to time or (d) five (5) Business Days after being
mailed, by first class postage prepaid registered or certified mail, return
receipt requested; in each case to the appropriate addresses, and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate as to itself by notice to the other parties):
(a) If to Holder:
Valentine Wildove & Company, Inc.
885 Third Avenue, 12th Floor
New York, New York 10022
Attention: John R. Klopp and Craig M. Hatkoff
Telecopy: (212) 593-0316
(b) If to Debtor:
California Real Estate Investment Trust or Capital Trust
131 Steuart Street, #200
San Francisco, California 94105
Attention: Chief Executive Officer
Telecopy: (415) 543-6269
with a copy to:
Equity Group Investments, Inc.
2 North Riverside Plaza, 6th Floor
Chicago, Illinois 60606
Attention: Gary R. Garrabrant
Telecopy: (312) 454-0157
611697.1
-4-
<PAGE>
and to:
Victor Capital Group, L.P.
885 Third Avenue, 12th Floor
New York, New York 10022
Attention: John R. Klopp
Telecopy: (212) 593-0316
10. Governing Law. This Note shall be governed by and
construed and interpreted in accordance with the internal laws of the State of
New York, without giving effect to the principles of conflicts of laws thereof.
CAPITAL TRUST
By: _________________________
Name:
Title:
611697.1
-5-
<PAGE>
NON-NEGOTIABLE NOTE
$675,000 New York, New York
July 15, 1997
FOR VALUE RECEIVED, CAPITAL TRUST (the "Debtor"), hereby
unconditionally promises to pay to VALENTINE WILDOVE & COMPANY, INC. (the
"Holder"), at the principal offices of Debtor, or at such other place in the
continental United States of America as Holder may from time to time designate
in writing, the principal sum of SIX HUNDRED SEVENTY-FIVE THOUSAND DOLLARS
($675,000) (the "Principal Amount"), to be paid in lawful money of the United
States of America in immediately available funds as set forth below.
1. Repayment. The Principal Amount shall be due and payable in
ten (10) semi-annual installments commencing on January 1, 1998 and on each June
1 and January 1 thereafter (each a "Payment Date"), until paid in full. Each
installment shall be in an amount equal to one-tenth of the Principal Amount. No
interest shall be accrued on or be payable under this Note prior to the due date
of this Note, whether at stated maturity or upon acceleration pursuant to
section 4 hereof.
2. Prepayment. Debtor shall prepay all of the unpaid portion
of the Principal Amount and all accrued interest, if any, on or prior to the
effective date of any Change in Control Event. "Change in Control Event" shall
mean
a. a merger or acquisition involving Debtor in which either:
(i) 50% or more of Debtor's voting stock
outstanding after the merger is held by
holders different from those who held
Debtor's voting stock immediately prior to
such merger or acquisition; or
(ii) the composition of the board of trustees (or
other governing board of Debtor) changes as
a result of which the individuals elected to
the board at the last meeting of the
shareholders at which there was not a
contested election cease to comprise a
majority of the board;
b. the sale, transfer or other disposition of all or
substantially all of the assets of Debtor in liquidation
or dissolution of Debtor;
611699.1
<PAGE>
c. a transfer of all or substantially all of Debtor's assets
pursuant to a partnership or joint venture agreement or
similar arrangement where Debtor's resulting interest is
or becomes less than 50%;
d. on or after the date hereof, a change in ownership of
Debtor through an action or series of transactions, such
that any person is or becomes the beneficial owner,
directly or indirectly, of 50% or more of Debtor's voting
stock; or
e. a change in the composition of the board of trustees
(or other governing board of Debtor) as a result of
which the individuals elected to the board at the
last meeting of the shareholders at which there is
not a contested election cease to comprise a majority
of the board.
3. Set-off. Debtor shall be entitled to set off against the
principal amount owing hereunder the amount of any Liquidated Claim, provided
that the amount of any Liquidated Claim shall be set off against payments due
hereunder in reverse order of due date. "Liquidated Claim" shall mean any claim
by Debtor against the holder of this Note under article 9 of the Interest
Purchase Agreement referred to in section 6 hereof to the extent that such claim
has been reduced to a judgment of a court or is subsumed in a settlement
agreement to which the holder hereof is a signatory.
4. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
a. Payments. The Debtor shall fail to make any principal
payment when due;
b. Bankruptcy. The Debtor shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto
(the "Bankruptcy Code"); or an involuntary case is commenced against
the Debtor and the petition is not controverted within 30 days, or is
not dismissed within 90 days, after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or substantially all of the property of the
Debtor; or the Debtor commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Debtor;
or there is commenced against the Debtor any such proceeding which
remains undismissed for a period of 90 days; or the Debtor is
adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Debtor
611699.1
-2-
<PAGE>
suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed
for a period of 90 days; or the Debtor makes a general assignment for
the benefit of creditors;
c. Other Defaults. Debtor or any subsidiary of Debtor defaults
(whether as primary obligor or as guarantor or other surety) in any
payment of principal or interest on any obligation in respect of its
indebtedness beyond any period of grace provided with respect thereto,
or Debtor or any subsidiary of Debtor fails to perform or observe any
other agreement, term or condition contained in any agreement under
which any such indebtedness is created (or if any other event
thereunder or under any such agreement shall occur and be continuing),
and, on the basis of such default, failure or other event, the holder
or holders of such obligation cause such obligation to become due (or
to be repurchased by Debtor or any such subsidiary) prior to the stated
maturity of such obligation;
then the Holder, at Holder's option, may declare all unpaid amounts under this
Note to be immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Debtor.
Thereafter, the outstanding Principal Amount shall bear interest at an annual
rate equal to fifteen percent (15%) per annum from the date of notice to Debtor
of such Event of Default until the date all outstanding principal and any
accrued interest have been paid in full.
5. Waivers. The Debtor and all endorsers hereby severally
waive diligence, demand, presentment, protest and notice of any kind, and assent
to extensions of the time of payment, release, surrender or substitution of
security, or forbearance or other indulgence, without notice. No failure or
delay on the part of Holder in exercising any right or remedy accruing upon the
occurrence of an Event of Default shall impair the right or remedy or constitute
a waiver thereof or acquiescence of the Event of Default. All remedies are
cumulative to the extent permitted by law.
6. Interest Purchase Agreement. This Note is one of the Notes
referred to in, and the form of which is attached to, that certain Interest
Purchase Agreement, dated as of June 16, 1997, by and between John R. Klopp,
Craig M. Hatkoff and Valentine Wildove & Company, Inc., as sellers, and Debtor,
as buyer.
7. Assignment. This Note may not be assigned, assumed,
changed, modified or terminated orally or otherwise, except by a writing
executed by Holder hereof.
8. Binding Effect. This Note and the rights and obligations
hereunder shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and assigns.
611699.1
-3-
<PAGE>
9. Notices. All notices, consents and other communications
under this Note shall be in writing and shall be deemed to have been duly given
(a) when delivered by hand, (b) when sent by telecopier (with receipt
confirmed), provided that a copy is promptly thereafter mailed by first class
prepaid registered or certified mail, return receipt requested, (c) when
received by the addressee, if sent by Express Mail, Federal Express or other
express delivery service (receipt requested), or by such other means as the
parties may agree from time to time or (d) five (5) Business Days after being
mailed, by first class postage prepaid registered or certified mail, return
receipt requested; in each case to the appropriate addresses, and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate as to itself by notice to the other parties):
(a) If to Holder:
Valentine Wildove & Company, Inc.
885 Third Avenue, 12th Floor
New York, New York 10022
Attention: John R. Klopp and Craig M. Hatkoff
Telecopy: (212) 593-0316
(b) If to Debtor:
California Real Estate Investment Trust or Capital Trust
131 Steuart Street, #200
San Francisco, California 94105
Attention: Chief Executive Officer
Telecopy: (415) 543-6269
with a copy to:
Equity Group Investments, Inc.
2 North Riverside Plaza, 6th Floor
Chicago, Illinois 60606
Attention: Gary R. Garrabrant
Telecopy: (312) 454-0157
611699.1
-4-
<PAGE>
and to:
Victor Capital Group, L.P.
885 Third Avenue, 12th Floor
New York, New York 10022
Attention: John R. Klopp
Telecopy: (212) 593-0316
10. Governing Law. This Note shall be governed by and
construed and interpreted in accordance with the internal laws of the State of
New York, without giving effect to the principles of conflicts of laws thereof.
CAPITAL TRUST
By: _________________________
Name:
Title:
611699.1
-5-
