<PAGE> 1
UNITED STATES
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): October 7, 1994
THE PEREGRINE REAL ESTATE TRUST
(Exact Name of Registrant as Specified in its Charter)
California
(State or Other Jurisdiction of Incorporation)
0-9097 94-2255677
(Commission File Number) (I.R.S. Employer
Identification Number)
1300 Ethan Way, Suite 200, Sacramento, California 95825
(Address of Principal Executive Offices) (Zip Code)
(916) 929-8244
(Registrant's Telephone Number, Including Area Code)
COMMONWEALTH EQUITY TRUST,
705 University Avenue, Sacramento, California
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) The Peregrine Real Estate Trust, formerly known as
Commonwealth Equity Trust (the "Company"), filed a Form 8-K dated
August 8, 1994, which included as an exhibit that certain Third
Amended Plan of Reorganization, as Modified, of Commonwealth
Equity Trust (the "Plan"). The Plan is incorporated herein by
this reference.
Capitalized terms used herein but not defined shall have the
meaning given for such terms in the Plan.
Prior to October 7, 1994 (the "Effective Date"), 25,000,000
shares of Old CET Common Stock were outstanding, which shares
were held by approximately 29,000 shareholders. The Plan
effectuated an approximately 10 for 1 reverse stock split; that
is, for approximately every 10 shares of Old CET Common Stock, a
shareholder received 1 share of New CET Common Stock.
All Old CET Common Stock and old CET securities were cancelled
and terminated as of the Effective Date.
Pursuant to the terms of the Plan, the Company issued
approximately 5,000,000 shares of New CET Common Stock as of the
Effective Date. Approximately 2,550,000 shares, constituting 51%
of the New CET Common Stock, were distributed to the parties
defined in the Plan as the Pacific Mutual Lenders, and
individually as follows:
<TABLE>
<CAPTION>
Pacific Mutual Lender Number of Common Shares
Shareholder Issued as of the
- -------------------- Effective Date
-----------------------
<S> <C>
The Prudential Insurance Company of America 424,434
PRUCO Life Insurance Company 254,660
Pacific Mutual Life Insurance Company 679,095
Orix USA Corp. 101,864
Weyerhaeuser Company Master Retirement Trust 98,095
TCW Special Credits Fund IV 316,884
TCW Special Credits Plus Fund 337,884
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
TCW Special Credits Trust IV 272,487
TCW Special Credits Trust IVA 65,397
</TABLE>
The remaining 2,450,000 shares of New CET Common Stock,
representing 49% of the New CET Common Stock, were issued to the
holders of Old CET Common Stock and those persons who formerly
owned Old CET Common Stock and have an Allowed Claim for Damages
from the purchase and sale of the stock.
In addition, 11,250,000 shares of preferred stock, representing
100% of the Company's preferred stock, were issued to the parties
defined in the Plan as the Pacific Mutual Lenders, as of the
Effective Date. The preferred shares were issued individually as
follows:
<TABLE>
<CAPTION>
Pacific Mutual Lender Number of Preferred
Shareholder Shares Issued as of
- --------------------- the Effective Date
-------------------
<S> <C>
The Prudential Insurance Company of America 913,782
The Prudential Insurance Company of America 958,721
PRUCO Life Insurance Company 1,123,502
Pacific Mutual Life Insurance Company 2,996,005
Orix USA Corp. 449,401
Weyerhaeuser Company Master Retirement Trust 432,773
TCW Special Credits Fund IV 1,394,490
TCW Special Credits Plus Fund 1,490,663
TCW Special Credits Trust IV 1,202,147
TCW Special Credits Trust IVA 288,516
</TABLE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C> <C>
(c) 3.1 Restated Declaration of
Trust of The Peregrine
Real Estate Trust
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
3.2 Byaws of The Peregrine
Real Estate Trust
4.1 Second Amended and Restated
Note Agreement dated
September 27, 1994, by and
among Commonwealth Equity
Trust, the Noteholders named
therein and The Prudential
Insurance Company of America
as Agent for the Noteholders
4.2 Loan and Security Agreement
dated October 6, 1994, between
Commonwealth Equity Trust and
Foothill Capital Corporation
4.3 Preferred Stock Purchase
Agreement dated as of October 1,
1994, by and among The Peregrine
Real Estate Trust, Pacific
Mutual Life Insurance Company,
The Prudential Insurance Company
of America, PRUCO Life Insurance
Company, Orix USA Corporation,
Weyerhaeuser Company Master
Retirement Trust, TCW Special
Credits Fund IV, TCW Special
Credits Plus Fund, TCW Special
Credits Trust IV and TCW Special
Credits Trust IVA
4.4 Registration Rights
Agreement dated as of October 1,
1994, by and among The Peregrine
Real Estate Trust, Pacific
Mutual Life Insurance Company,
The Prudential Insurance Company
of America, PRUCO Life Insurance
Company, Orix USA Corporation,
Weyerhaeuser Company Master
Retirement Trust, TCW Special
Credits Fund IV, TCW Special
Credits Plus Fund, TCW Special
Credits Trust IV and TCW Special
Credits Trust IVA
10 Services and Confidentiality
Agreement dated October 1, 1994,
between Commonwealth Equity Trust
and Fama Management, Inc.
</TABLE>
4
<PAGE> 5
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.
THE PEREGRINE REAL ESTATE TRUST
By:________________________________________
Name: Arnold E. Brown
Title: Chief Financial Officer
Date: October 7, 1994
5
<PAGE> 6
COMMISSION FILE NO. 1-9097 8-K PAGE 5 OF 5 PAGES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential Page
Exhibit Name No.
- ------- ---- ---------------
<S> <C> <C>
3.1 Restated Declaration of Page 8 of 309
Trust of The Peregrine
Real Estate Trust
3.2 Bylaws of The Peregrine Page 53 of 309
Real Estate Trust
4.1 Second Amended and Restated Page 83 of 309
Note Agreement dated
September 27, 1994, by and
among Commonwealth Equity
Trust, the Noteholders named
therein and The Prudential
Insurance Company of America
as Agent for the Noteholders
4.2 Loan and Security Agreement Page 187 of 309
dated October 6, 1994,
between Commonwealth Equity
Trust and Foothill Capital
Corporation
4.3 Preferred Stock Purchase Page 245 of 309
Agreement dated as of
October 1, 1994, by and
among The Peregrine
Real Estate Trust, Pacific
Mutual Life Insurance Company,
The Prudential Insurance
Company of America, PRUCO Life
Insurance Company, Orix USA
Corporation, Weyerhaeuser
Company Master Retirement
Trust, TCW Special Credits
Fund IV, TCW Special
Credits Plus Fund, TCW Special
Credits Trust IV and TCW
Special Credits Trust IVA
4.4 Registration Rights Page 279 of 309
Agreement dated as of
October 1, 1994, by and among
The Peregrine Real Estate
Trust, Pacific Mutual Life
Insurance Company, The
Prudential Insurance Company
</TABLE>
6
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<TABLE>
<S> <C> <C>
of America, PRUCO Life
Insurance Company, Orix USA
Corporation, Weyerhaeuser
Company Master Retirement
Trust, TCW Special
Credits Fund IV, TCW
Special Credits Plus Fund,
TCW Special Credits Trust IV
and TCW Special Credits
Trust IVA
10 Services and Page 299 of 309
Confidentiality Agreement
dated October 1, 1994,
between Commonwealth Equity
Trust and Fama Management, Inc.
</TABLE>
7
<PAGE> 1
EXHIBIT 3.1
RESTATED DECLARATION OF TRUST
OF
THE PEREGRINE REAL ESTATE TRUST
8
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 "Board" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 "CalREIT" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 "Change-in-Control Transaction" . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5 "Common Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.6 "Conversion Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.7 "Declaration" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.8 "Note Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.9 "Old Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.10 "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.11 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.12 "Preferred Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.13 "Shareholders" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.14 "Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.15 "Stated Value" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.16 "Trust" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.17 "Trustee" or "Trustees" . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.18 "1934 Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II. THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.2 Principal Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.4 Investment Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.5 Qualification as "Real Estate Investment Trust" . . . . . . . . . . . . . 4
Section 2.6 No Partnership Relationship . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.7 Third-Party Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.8 Nonliability and Indemnification of Shareholders . . . . . . . . . . . . . 5
Section 2.9 Responsibility of Trust Agents . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.10 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.11 Notice to Trust Agents . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.12 Notice by Trust Agents . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.13 Representations and Guarantees . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.14 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III. THE TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.1 Trustees' General Authority . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.2 Action as Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.3 Independence and Term of Trustees . . . . . . . . . . . . . . . . . . . . 9
Section 3.4 Removal of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.5 Resignation of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.6 Action by Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.7 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.8 Delegation of Authority . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.9 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.10 Use and Effect of Trust Seal . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
9
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<TABLE>
<S> <C>
Section 3.11 Powers of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV. INVESTMENT AND MANAGEMENT OF TRUST ASSETS . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.1 Investment and Management Policy . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.2 Permissible Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.3 Maintenance of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.4 Disposition or Encumbrance of Assets . . . . . . . . . . . . . . . . . . . . 15
Section 4.5 Use of Brokers and Appraisers . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.6 Transactions with Related Parties . . . . . . . . . . . . . . . . . . . . . 16
Section 4.7 Approval of Major Transactions . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V. SHARES AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.1 Classes of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.2 Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2.1 Rank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2.2 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2.3 Liquidation Preference . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.2.4 Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
.1 Right to Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
.2 Significant Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
.3 Election of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2.5 Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
.1 Optional Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
.2 Mandatory Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
.3 Conversion Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
.4 Stock Fully Paid; Reservation of Shares . . . . . . . . . . . . . . . . . . 22
.5 Adjustment of Conversion Price . . . . . . . . . . . . . . . . . . . . . . 23
.1 Reclassification, Consolidation or Merger . . . . . . . . . . . . . 23
.2 Subdivision or Combination of Shares . . . . . . . . . . . . . . . 24
.3 Certain Dividends and Distributions . . . . . . . . . . . . . . . . 24
.4 Issuance of Common Shares at Less Than Conversion Price . . . . . . 25
.5 Notice of Adjustments . . . . . . . . . . . . . . . . . . . . . . . 26
.6 No Reissuance of Preferred Stock . . . . . . . . . . . . . . . . . . . . . 26
5.2.6 Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.2.7 Optional Redemption . . . . .. . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.3 Shareholder's Interest in Trust . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.4 Agreement of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.5 Nonassessability of Shares . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.6 Issuance of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.7 Authentication of Certificates . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.8 Replacement Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.9 Only Registered Holder Recognized . . . . . . . . . . . . . . . . . . . . . 28
Section 5.10 Shareholder's Transfer of Shares. . . . . . . . . . . . . . . . . . . . . . 29
Section 5.11 Transfers by Operation of Law . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.12 Trust Agents as Shareholders . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.13 Right to Refuse to Transfer Shares; Acquisition Restriction;
Redemption Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
10
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<TABLE>
<S> <C>
Section 5.14 Cancellation of Old Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VI. DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.1 Declaration and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VII. ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.1 Standard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.2 Inspection of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.3 Annual Audit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.4 Interim Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VIII. MEETINGS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.1 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.2 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.3 Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.5 Effect of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.6 Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.7 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.8 Voting of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.9 Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IX. DURATION OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.1 Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.2 Early Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.3 Procedure Upon Termination . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE X. INTERPRETATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.1 California Laws Govern . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.2 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.3 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.4 Amendment Without Shareholder Approval . . . . . . . . . . . . . . . . . . . 37
Section 10.5 Recording Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
11
<PAGE> 5
RECORDING REQUESTED BY
WHEN RECORDED MAIL TO:
Greenberg, Glusker, Fields,
Claman & Machtinger
1900 Avenue of the Stars, #2000
Los Angeles, CA 90067
Attention: Gary L. Kaplan, Esq. (SPACE ABOVE THIS LINE FOR RECORDER'S USE)
RESTATED DECLARATION OF TRUST
OF
THE PEREGRINE REAL ESTATE TRUST
12
<PAGE> 6
RESTATED DECLARATION OF TRUST
OF
THE PEREGRINE REAL ESTATE TRUST
THIS RESTATED DECLARATION OF TRUST OF THE PEREGRINE REAL ESTATE TRUST,
dated and effective as of the date and time of recording in the Office of the
County Recorder of Sacramento County, California, by and between DORIS V.
ALEXIS, ALBERT S. RODDA, STEVEN H. GOLD, HOWARD E. COHN, and RICHARD RATHFON,
hereinafter referred to as the Trustees, and the holders from time to time of
shares to be issued hereunder, who become parties hereto and beneficiaries of
this Trust by becoming the holders of one or more shares;
WITNESSETH:
WHEREAS, by Declaration of Trust dated July 31, 1973 (the "Original
Declaration") WILHELM BERGER, ANDREW R. LOLLI, JEAN P. NIELSEN, LYNES DOWNING
and G. ROBERT HENRY formed the Commonwealth Equity Trust ("CET");
WHEREAS, the Original Declaration was amended on February 23, 1981,
March 31, 1984, March 30, 1985, and March 28, 1987;
WHEREAS, the Original Declaration together with the amendments dated
February 23, 1981, March 31, 1984 and March 30, 1985 was recorded on January
14, 1987 at Book 87 0114, Page 1908, in the Official Records of Sacramento
County, California, and the amendment dated March 28, 1987 was recorded on July
15, 1992 at Book 92 0715, Page 0963 in the Official Records of Sacramento
County, California;
WHEREAS, CET was the debtor in a reorganization proceeding under
Chapter 11 of the United States Bankruptcy Code, In re Commonwealth Equity
Trust, Case No. 93-26727-11, in the United States Bankruptcy Court for the
Eastern District of California (the Court");
WHEREAS, as part of the plan of reorganization approved by the Court,
the Court has ordered that the Original Declaration be amended, restated and
superseded in its entirety, as hereinafter set forth, pursuant to that certain
Order Approving Third Amended Plan of Reorganization dated August 8, 1994;
WHEREAS, the Trustees have determined that it is in the best interests
of CET to change its name to The Peregrine Real Estate Trust (the "Trust");
WHEREAS, the Trust is a California real estate investment trust
governed by Part 4, Title 3 of the California Corporations Code which provides,
at Section 23005, that the provisions of
13
<PAGE> 7
Corporations Code Sections 1400 and 1402 governing bankruptcy
reorganizations also apply to real estate investment trusts;
WHEREAS, Corporations Code Section 1400, as applied to real estate
investment trusts, provides that such a trust has the full power and authority
to put into effect and carry out any plan of reorganization and the order of
any United States bankruptcy court without further action by its board of
trustees or shareholders;
WHEREAS, DORIS V. ALEXIS, ALBERT S. RODDA, STEVEN H. GOLD, HOWARD E.
COHN, and RICHARD RATHFON are the duly elected and acting trustees of the Trust
(the "Trustees").
NOW, THEREFORE, the Trustees hereby declare that they will hold all
property of every type and description which they now hold or may acquire
hereafter as such Trustees, in trust, to receive the income, interests, rents,
and profits thereof and to reinvest them from time to time for the benefit of
or distribute them to the holders of the certificates of shares in this Trust
in the manner and subject to the terms and conditions contained herein; and
that the Original Declaration and the amendments thereto are hereby superseded
and of no further force or effect.
ARTICLE I.
DEFINITIONS
Section 1.1 "Board" shall mean the Trustees of the Trust acting as a
Board of Trustees as provided in Article III hereof.
Section 1.2 "CalREIT" shall mean California Real Estate Investment
Trust, an unincorporated California real estate investment trust formed
pursuant to that certain Declaration of Trust recorded on June 8, 1981 in Book
D 215, Page 250, Instrument D 94227, Official Records of San Francisco County,
California, as amended and restated.
Section 1.3 "Change-in-Control Transaction" shall have the meaning
described in 5.2.4.2.
Section 1.4 "Code" shall mean the United States Internal Revenue Code
of 1986 as amended, and any successor statute. Any reference to a provision of
the Code or any regulation promulgated thereunder shall include the
corresponding provision of any such successor statute or regulation.
Section 1.5 "Common Shares" shall mean the shares of beneficial
interest of the Trust of the class described as Common Shares in Section 5.1.
Section 1.6 "Conversion Price" shall have the meaning described in
Section 5.2.5.3.
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Section 1.7 "Declaration" and "Declaration of Trust" shall mean this
Restated Declaration of Trust of Commonwealth Equity Trust as it now stands and
as it may from time to time be supplemented, amended or modified pursuant to
the provisions hereof.
Section 1.8 "Note Agreement" shall mean that certain Second Amended
And Restated Note Agreement dated as of October 1, 1994 by and among the Trust,
the Noteholders named therein and The Prudential Insurance Company of America
as agent for Noteholders.
Section 1.9 "Old Shares" shall have the meaning described in Section
5.14.
Section 1.10 "Person" shall include an individual, partnership,
firm, group, association, trust, corporation, or other entity.
Section 1.11 "Plan" shall mean the Third Amended Plan of
Reorganization of the Trust filed with the United States Bankruptcy Court for
the Eastern District of California on June 9, 1994, and confirmed by such Court
by Order dated August 8, 1994.
Section 1.12 "Preferred Shares" shall mean the shares of beneficial
interest of the Trust of the class described as Preferred Shares in Sections
5.1 and 5.2.
Section 1.13 "Shareholders", unless expressly stated otherwise, shall
mean the holders of record of the Trust's outstanding Common Shares or
Preferred Shares.
Section 1.14 "Shares" shall mean the Common Shares and the Preferred
Shares.
Section 1.15 "Stated Value" shall have the meaning described in
Section 5.2.3.1.
Section 1.16 "Trust" shall mean The Peregrine Real Estate Trust,
formerly named Commonwealth Equity Trust, an unincorporated California real
estate investment trust created pursuant to this Declaration and Part 4, Title
3 of the California Corporations Code.
Section 1.17 "Trustee" or "Trustees" shall mean the individuals named
in this Declaration as Trustees and any successor Trustees as provided herein.
The word "Trustee" wherever it appears throughout this Declaration shall refer
to the Trustees of the Trust in their capacity as such Trustees and not
personally and shall not refer to the officers, agents, or shareholders of the
Trust.
Section 1.18 "1934 Act" shall mean the Securities Exchange Act of
1934, as amended, and any successor statute. Any reference to a provision of
the 1934 Act, or any rule promulgated thereunder,
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shall include the corresponding provision of any successor statute or rule.
ARTICLE II.
THE TRUST
Section 2.1 Name
The Trust shall be designated as THE PEREGRINE REAL ESTATE TRUST in
which name the Trustees may conduct business; make and execute deeds,
mortgages, leases, contracts, and other instruments; acquire, mortgage, lease,
convey, and transfer real estate and other property; and sue and be sued.
Insofar as may be practicable, the business of the Trust shall be conducted and
transacted in the name of the Trust.
Section 2.2 Principal Office
The principal office of the Trust shall be located at 1300 Ethan Way,
Sacramento, California 95825, or at such other places as the Trustees may
designate. The Trustees may also establish branch offices in such other places
as they may determine.
Section 2.3 Purpose
The purpose of the Trust shall be to conduct its business in such a
manner so that the Trust qualifies as a "real estate investment trust" as
defined in Section 856 of the Code. Notwithstanding the foregoing, however, if
circumstances arise in which the Trustees shall deem it advisable to take any
action inconsistent with such purpose, they shall have the power to do so.
Failure of the Trust to qualify under the foregoing statute shall not in any
manner whatsoever invalidate the Trust nor cause the termination of its term.
Section 2.4 Investment Objective
The Trustees may invest assets of the Trust pursuant to the powers
granted them in Article 3 hereof. The primary investment objective of the
Trust shall be to invest in income-producing real estate and related interests,
principally, but not limited to, office buildings, shopping centers, industrial
and commercial buildings, hotels, apartment houses, and motels.
Section 2.5 Qualification as "Real Estate Investment Trust"
So long as the Trustees deem it advisable to establish and maintain
the qualification of the Trust as a "real estate investment trust" for federal
income tax purposes, the Trustees shall use their best efforts to preserve such
qualification. In so doing, the Trustees will be protected in relying on the
written advice and opinions of their duly selected lawyers and accountants
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and upon facts as represented to them in writing by any Shareholder, Trustee, or
independent contractor of the Trust. Should the Trust fail or cease to qualify
at any such time, the Trustees shall incur no liability to the Shareholders by
reason of this event to the extent that their actions were based upon such
advice or opinions or such representations. To the extent that their actions
were not so based, they shall incur liability to the Shareholders only to the
extent that their acts or omissions constitute bad faith, wilful misfeasance,
gross negligence, or reckless disregard of duties.
Section 2.6 No Partnership Relationship
Nothing contained herein or in any share certificate, and no act done
or any writing or agreement made during the continuance of the Trust, shall be
construed as, or have the effect of constituting the Trustees, the
Shareholders, or any of them or any other person, copartners or otherwise
members of any association.
Section 2.7 Third-Party Reliance
Any act done by the Trustees or under their authority shall, as to
third parties dealing in good faith with the Trust, be conclusively deemed to
be within the purposes of the Trust and within the powers and authority of the
person or person acting.
Section 2.8 Nonliability and Indemnification of Shareholders
All persons dealing with or having any claim against the Trustees or
any officer, agent or employee of the Trust shall look only to the Trust for
the payment of any debt, claim, obligation or damages, or of any money or
other thing that might become due or payable in any way, whether founded upon
contract, tort, or otherwise, and no Shareholder shall be personally or
individually liable therefor. Every written contract to which the Trust is a
party shall include a provision that the Shareholders not be personally liable
thereon. The Trustees shall maintain adequate liability insurance for the
protection of the Trust and those connected therewith. Each Shareholder shall
be entitled to pro rata indemnity from the Trust's assets if, contrary to the
provisions hereof, such shareholder is held personally liable for any
obligation of the Trust.
Section 2.9 Responsibility of Trust Agents
No Trustee, officer, employee or agent of the Trust shall be liable to
the Trust or to any other person for any act or omission except for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of duty
or his failure to act in good faith in the reasonable belief that his actions
are in the best interests of the Trust. The Trustees, officers, employees and
agents of the Trust in incurring any debts, liabilities or obligations, or in
taking or omitting any other action for or in connection with the
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Trust are, and shall be deemed to be, acting as Trustees, officers, employees
or agents of the Trust and not in their own individual capacities.
Notwithstanding any provision to the contrary, no Trustee, officer, employee or
agent of the Trust shall be liable for any debt, claim, demand, judgment,
decree, liability or obligation of any kind in tort, contract or otherwise of,
against or with respect to the Trust arising out of any action taken or omitted
for or on behalf of the Trust, and the Trust shall be solely liable therefor
and resort shall be had solely to the assets of the Trust for the payment or
performance thereof. The Trustees shall obtain at the expense of the Trust and
shall file with the Trust and maintain thereafter a good and sufficient
fidelity bond, by a corporate surety qualified to do business in California.
Section 2.10 Indemnification
Any person made a party to any action, suit or proceeding or against
whom a claim or liability is asserted by reason of the fact that he, his
testator or intestate was or is a Trustee, officer, employee or agent of the
Trust or active in such capacity on behalf of the Trust shall be indemnified
and held harmless by the Trust against judgments, fines, amounts paid on
account thereof (whether in settlement or otherwise) and reasonable expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection with the defense of such action, suit or proceeding or in connection
with any appeal therein, whether or not the same proceeds to judgment or is
settled or otherwise brought to a conclusion. Notwithstanding the above, no
person shall be so indemnified or reimbursed for any claim, obligation or
liability which shall have been adjudicated, or, in case of settlement, which
in the opinion of counsel for the Trust would, if adjudicated, have likely been
adjudicated to have arisen out of or been based upon such person's willful
misfeasance, bad faith, gross negligence or reckless disregard of duty or for
his failure to act in good faith in the reasonable belief that his action was
in the best interests of the Trust. Any person seeking indemnification under
this provision must demonstrate to the satisfaction of the Trustees that such
person (1) gave prompt notice to the Trust of the claim, alleged liability,
action, suit or proceeding, and (2) has executed such documents, and taken such
action as to permit the Trust to conduct the defense or settlement of any such
claim, alleged liability, action, suit or proceeding. Such rights of
indemnification and reimbursement shall be satisfied only out of the assets of
the Trust.
The rights accruing to any person under these provisions shall not
exclude any other right to which he may be lawfully entitled, nor shall
anything contained herein restrict the right of the Trust to indemnify or
reimburse such person in any proper case even though not specifically provided
for herein, nor shall anything contained herein restrict such rights of a
Trustee to contribution as may be available under applicable law. The Trustees
may make advance payments in connection with indemnification under this section
provided that the indemnified person shall have given a
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written undertaking to reimburse the Trust in the event it is subsequently
determined that he is not entitled to such indemnification. For purposes of
this section, any investment advisor, investment manager or independent
property manager of the Trust shall be considered an agent of the Trust.
In order to carry out the intent and purposes of this section, the
Trust shall have the power to enter into individual indemnification agreements
with any person or entity entitled to be indemnified under this section,
without specific approval thereof by the Shareholders of the Trust, provided
that the substantive provisions of any such agreement shall be consistent in
all material respects with the provisions of this section at the time such
agreement is entered into. The terms of any such agreement need not be
identical to the terms of any other such agreement and any such agreement which
has been entered into may subsequently be amended or changed by mutual
agreement of the parties thereto, without specific approval thereof by the
Shareholders of the Trust, so long as at the time such agreement is entered
into or amended or changed, as the case may be, its substantive provisions are
consistent in all material respects with the provisions of this section.
The Trust shall have the power to use the assets of the Trust to
establish arrangements for funding its indemnification obligations under this
section, including but not limited to depositing assets in trust funds,
obtaining bank letters of credit in favor of indemnified persons or entities,
purchasing policies of insurance or establishing specific reserve accounts and
otherwise funding special self-insurance arrangements for these purposes.
Section 2.11 Notice to Trust Agents
No notice to the Trustees or any officer of the Trust shall be
effective for any purpose unless given in writing, and until the same is
received.
Section 2.12 Notice by Trust Agents
Any notice required or permitted by this Declaration or by law to be
given by the Trustees or by any officer or authorized agent of the Trust, shall
be conclusively deemed to have been given when such notice is enclosed in an
envelope addressed to the proper person at the last address shown in the
records of the Trust, and such envelope is deposited in the United States mail,
postage prepaid; and the date of mailing shall be deemed the date such notice
is given. All distributions from Trust assets may be made by mailing the same
in like manner.
Section 2.13 Representations and Guarantees
No officer, agent, representative or employee of the Trust or of the
Trustees, nor anybody other than the Trustees, has authority to make any
representations or guarantees concerning the Trust; nor
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shall any Trustee or officer of the Trust be responsible for or with respect to
the validity or sufficiency of the Trust or of the share certificates issued
hereunder; nor has any such officer, agent, representative, employee or other
person any authority to change the terms and conditions of the Trust or any
certificates issued hereunder, or to bind the Trust or its agents by any
representation, statement, agreement or interpretation, written or oral, not
contained herein or in such certificate.
Section 2.14 Merger
As provided in California Corporations Code Section 23006, the Trust
is hereby specifically authorized to merge with one or more real estate
investment trusts, with any participating trust as the surviving trust,
pursuant to the provisions of this Section 2.14. The trustees of each trust
which desires to merge shall approve an agreement of merger. The constituent
trusts shall be parties to the agreement of merger and other persons may be
parties to the agreement of merger. The agreement shall state all of the
following:
2.14.1 The terms and conditions of the merger.
2.14.2 The amendments to the declaration of trust of the
surviving trust to be effected by the merger, if any; if any amendment changes
the name of the surviving trust the new name may be the same as or similar to
the name of a disappearing trust subject to Corporations Code Section 201(b).
2.14.3 The name and place of organization of each
constituent trust and which of the constituent trusts is the surviving trust.
2.14.4 The manner of converting the shares of each of the
constituent trusts into shares or other securities of the surviving trust and,
if any shares of any of the constituent trusts are not to be converted solely
into shares or other securities of the surviving trust, the cash, property,
rights, or securities of any entity which the holders of those shares are to
receive in exchange for the shares, which cash, property, rights or securities
of any entity may be in addition to or in lieu of shares or other securities
of the surviving trust, or that the shares are canceled without consideration.
2.14.5 Such other details or provisions as are desired, if
any, including, without limitation, a provision for the payment of cash in lieu
of fractional shares or for any other arrangements with respect thereto
consistent with the provisions of Corporations Code Section 407 relating to
fractional shares.
Each share of the same class or series of any constituent
trust (other than the cancellation of shares held by a constituent trust in
another constituent trust) shall, unless all shareholders of the class or
series consent and except as provided in
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corporations Code Section 407, be treated equally with respect to any
distribution of cash, property, rights or securities.
ARTICLE III.
THE TRUSTEES
Section 3.1 Trustees' General Authority
Except as in this Declaration expressly otherwise provided, the
business, affairs and assets of the Trust shall be entrusted to the exclusive
management and control of the Trustees. The Trustees shall exercise their
powers hereunder in good faith and for the exclusive benefit of the
shareholders.
Section 3.2 Action as Board
In managing the business, affairs and assets of the Trust, the
Trustees shall act as a Board of Trustees. One member of the Board shall be
designated to serve as Chairman of the Board for such term as the Board fixes.
The full Board shall not be less than five nor more than thirteen, the number
to be established by resolution of the Board from time to time, subject to
Section 3.3.3. Ownership of all Trust assets, legal, equitable or both, shall
be vested jointly in those Trustees in office at any time. A successor Trustee
shall succeed immediately upon accepting office to the interest of his
predecessor, without the necessity of any transfer or conveyance.
Section 3.3 Independence and Term of Trustees
3.3.1 A majority of the Trustees shall not be an affiliate
or associate of the investment manager or advisor of the Trust or with any
person who is an affiliate or associate of such investment manager or advisor.
The terms "affiliate" and "associate" shall have the meaning assigned to them
in Rule 12b-2 under the 1934 Act; provided, that a person shall not be deemed
to be an affiliate or associate of any other person solely by reason of being a
Trustee or officer of the Trust.
3.3.2 Subject to the terms of Sections 3.3.3 and 5.2.4.3,
relating to voting rights of the Preferred Shares, and Section 8.8.4, relating
to cumulative voting for Trustees, Trustees shall be elected by a vote of a
majority of the Common Shares represented in person or by proxy at the annual
meeting of Shareholders. Subject to the terms of Sections 3.4 and 3.5, each
Trustee so elected shall serve until his term of office expires and until the
election and qualification of his successor. Each Trustee shall qualify
following his election, whether by the Shareholders or by the remaining
Trustees, by filing a notice of acceptance with the Trustees. The secretary of
the Trust and the Chairman of the Trustees shall, from time to time when
necessary to reflect any changes, execute and file for record an instrument
which sets forth the then existing membership of the Trustees.
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3.3.3 So long as any Preferred Shares shall be outstanding,
the authorized number of Trustees shall be five, none of whom need be
Shareholders and each of whom is to be elected for a term ending upon the next
succeeding annual meeting of Shareholders and his successor being elected and
qualified, subject to earlier termination as provided below. The holders of at
least a majority of the then outstanding Preferred Shares shall be entitled to
elect one Trustee (the "Preferred Designee"); provided that if no Trustee is
elected by the holders of a majority of the then outstanding Preferred Shares,
the unfilled position shall be left vacant. The other Trustees (the "Other
Trustees") shall be elected by the holders of all of the then outstanding
Common Shares. The person so elected as the Preferred Designee, together with
such persons elected as the Other Trustees, shall constitute the duly elected
Trustees of the Trust.
3.3.4 Notwithstanding anything to the contrary in this
Declaration, Frank A. Morrow, John McMahan, E. Lawrence Hill, Jr., John F.
Salmon and Kenneth T. Seeger are hereby designated as Trustees to serve from
the date hereof until their successors are elected at the next annual meeting
of Shareholders and qualified. During the period commencing on the date of
this Declaration until the date of the first annual meeting of Shareholders,
any of these designated Trustees may only be removed for cause pursuant to
Section 3.4.2 below.
Section 3.4 Removal of Trustees
A Trustee may be removed from office at any time either:
3.4.1
.1 if such Trustee is an Other Trustee, with or
without Cause (as hereinafter defined) by the vote or written consent of
either (A) seventy-five percent (75%) of the Trustees then in office and a
majority of the outstanding Common Shares of the Trust entitled to vote, or (B)
sixty-six and two-thirds percent (66-2/3%) of the outstanding Common Shares of
the Trust entitled to vote; provided, however, that the Trustee shall not be
removed if the number of votes cast against removal (or not consenting in
writing to such removal) would be sufficient to elect the Trustee if voted
cumulatively at an election at which the same total number of votes were cast
(or, if the action is taken by written consent, all Common Shares entitled to
vote were voted) and the entire number of Trustees to be elected by holders of
the Common Shares at the time of the Trustee's most recent election were then
being elected; and
.2 if such Trustee is a Preferred Designee, with
or without Cause by the vote or written consent of a majority of the
outstanding Preferred Shares, or
3.4.2 with Cause by the vote or written consent of all
remaining Trustees.
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For purposes of this Section 3.4, Cause shall mean having been declared of
unsound mind by an order of court or convicted of a felony.
Section 3.5 Resignation of Trustees
Any Trustee may resign his office by an instrument in writing signed
by him and delivered to the Board of Trustees, which resignation shall take
effect after such delivery and on the date indicated in such instrument;
provided, that such resignation shall not become effective until a copy of such
instrument shall have been duly filed for record by such resigning Trustee.
Section 3.6 Action by Trustees
A majority of the Trustees in office at any one time, but not less
than three Trustees, shall constitute a quorum at any meeting of the Board of
Trustees. Meetings of the Trustees shall be held from time to time upon the
call of the Chairman of the Board or any two Trustees; provided, however, that
prior to the annual meeting of Shareholders to be held during calendar year
1996, the Board shall meet no less frequently then once during each quarter of
each fiscal year of the Trust. Notice of any meeting shall be given at least 3
days before the meeting. The Trustees shall act pursuant to the vote or
written consent, with or without a meeting, of more than half their number in
office at any one time. No action of the Board shall be effective without a
meeting unless all Trustees then in office shall sign, before or after such
action is taken, a written consent to such action and waiver of meeting;
provided, however, that the lack of such consent and waiver shall not be raised
to defeat the rights of any third party who has in good faith relied upon such
action. In case of the death or resignation of one or more Trustees, or
vacancies occurring in the Board of Trustees for any reason, the vacancies so
created may be filled (i) with respect to an Other Trustee by the Other Trustee
or Other Trustees remaining in office at the time, and (ii) with respect to the
Preferred Designee, by the holders of a majority of the Preferred Shares, and
each new Trustee shall serve for the unexpired term of his predecessor and
until the election and qualification of his successor. No vacancy on the Board
of Trustees shall operate to diminish the powers of the Trustee or Trustees
remaining in office. The provisions of this Section 3.6 relating to call and
notice of meetings of the Trustees may be varied by By-Laws adopted by the
Trustees.
Section 3.7 By-Laws
The Trustees may adopt and from time to time amend or repeal By-Laws
for the conduct of their business, and in such By-Laws may define the duties of
their officers, agents, employees and representatives.
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Section 3.8 Delegation of Authority
The Trustees may appoint one or more committees from their number and
delegate to such committees any of the powers and authority of the Board of
Trustees in the management of the business, affairs and assets of the Trust,
except the power to declare dividends and initiate amendments to this
Declaration. The Trustees shall appoint, and from time to time fix the
compensation and duties of a Chairman of the Board of Trustees, who shall be a
Trustee, each of whom shall hold his office at the pleasure of the Board of
Trustees. The Trustees may appoint such other officers and employ or otherwise
contract with such other persons as the Trustees in the exercise of their
discretion may deem necessary or desirable to achieve the purposes of the
Trust. The Trustees may delegate to any Trustee(s), officer(s), employee(s) or
agent(s), the authority to act in behalf of the Trust, including without
limitation the authority to execute any contract, agreement, document,
conveyance, deed, deed of trust, mortgage, release, or other written
instruments.
Section 3.9 Compensation
The Trustees, the secretary, and every other person appointed,
employed or otherwise engaged to assist in the execution of the Trust, shall
receive such compensation from the assets of the Trust for their respective
services to the Trust as shall be fixed from time to time by the Board of
Trustees.
Section 3.10 Use and Effect of Trust Seal
The secretary or other officer designated by the Trustees shall have
custody of the seal of the Trust. As to any person relying thereon in good
faith, the impression of the seal of the Trust upon a document or writing
bearing the handwritten signature of the secretary, or of any assistant
secretary, shall conclusively evidence that such document or writing was duly
executed pursuant to authority granted by the Board of Trustees and this
Declaration.
Section 3.11 Powers of Trustees
The Trustees shall have full and absolute power, control and authority
over all Trust assets held by or for them hereunder, and over the business and
affairs of the Trust, to the same extent as if they were the sole owners of
such assets and such business in their own right, subject only to the
limitations herein expressly stated. Without limitation of the generality of
the foregoing, the Trustees shall have power:
3.11.1 To design and adopt a seal of the Trust, and to
change the same from time to time; to locate and relocate the principal office
of the Trust; and from time to time to change the name of the Trust, and under
such name to make and execute contracts and all kinds of instruments, conduct
business, acquire and convey real or personal property, and sue or be sued;
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3.11.2 To solicit proxies of the Shareholders; to declare
and effect Share dividends and splits; and when good reason appears therefor,
to require that outstanding certificates be handed in to the Trust in exchange
for new certificates;
3.11.3 To issue from time to time, without the necessity of
a prior offering thereof to existing Shareholders, Shares of the Trust in
addition to any then outstanding, issuing the same to such party or parties,
for such property or consideration, at such time or times, and on such terms as
the Trustees deem best, and in so doing, to allow or eliminate fractional
shares, in their discretion;
3.11.4 To acquire and dispose of assets, and otherwise
conduct the business of the Trust, in any part of the United States of America
and any of the territories or possessions thereof and in Canada; and to cause
to be organized or assist in organizing, under the laws of any jurisdiction,
such corporations, trusts, associations, or organizations having such rights,
powers and discretion as they deem desirable for Trust purposes;
3.11.5 To take out policies of insurance at the expense of
the Trust, including without limitation of the foregoing, liability, life,
errors and omissions, fire and casualty insurance including workers'
compensation insurance, covering such persons, property and contingencies and
in such amounts as they deem proper;
3.11.6 To lease property to or from others for a term
extending beyond the possible termination of the Trust; to acquire and deal
absolutely with property of any description, real or personal; and to lend and
borrow money and incur indebtedness for the purposes of the Trust, and cause to
be executed and delivered therefor promissory notes, bonds, debentures, deeds
of trust, mortgages, pledges, hypothecation or other evidences of debt and
securities therefor;
3.11.7 To exercise all rights, powers and privileges
relating to the ownership of any stock, bonds or other securities forming part
of Trust assets;
3.11.8 To employ such assistance, at such compensation, as
they deem expedient in the transaction of the business of the Trust;
3.11.9 To determine conclusively whether any monies,
obligations, securities or other properties of the Trust are to be considered
as principal or income, and in what manner any expenses or disbursements are to
be charged as between principal and income, or as between earnings, surplus and
capital, as the case may be;
3.11.10 To determine the fiscal year and the accounting
procedures of the Trust, and to change the same from time to time;
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3.11.11 To compromise or settle claims of or against the
Trust; and to take such action, legal or otherwise, as appears to them
necessary or desirable in the interests of the Trust and the shareholders, and
in so doing to pay the expenses thereby incurred in good faith, including
counsel fees, from the funds of the Trust;
3.11.12 To determine the proper interpretation of any
provision of this Declaration or By-Laws of the Trust; and
3.11.13 To do all acts and undertake all things which in
their judgment are necessary, convenient or appropriate to promote the purposes
of the Trust, although such acts or things are not specifically mentioned in
this Declaration.
ARTICLE IV.
INVESTMENT AND MANAGEMENT OF TRUST ASSETS
Section 4.1 Investment and Management Policy
It is intended that the Trust shall be a "real estate investment
trust," as that term now is, or as it or substitute designations later may be,
defined by the Code. The Trustees shall endeavor to manage the Trust and to
invest its assets, and to make distributions to shareholders therefrom, in such
manner as to comply with all valid state and federal laws, rules, regulations
and orders pertaining to the Trust, and to take advantage of tax benefits,
whether federal, state or local, from time to time afforded to "real estate
investment trusts" or shareholders thereof provided, however, that
notwithstanding the preceding provisions, the Trustees shall at all times take
such action under the Trust as in their judgment will best serve the interests
of the Trust and of the Shareholders.
Section 4.2 Permissible Investments
Trust assets shall consist principally of ownership interests in
income-producing real property. Such real property may be located in any
state, territory or possession of the United States (including the District of
Columbia) and shall be comprised for the most part of office buildings,
apartment buildings, shopping centers, or other multiple-residential,
commercial or industrial properties. Secondary investments of Trust assets may
be of such nature and of such extent as the Trustees may determine, having in
mind the best interests of the Trust and of the shareholders. Other things
being equal, Trust investments shall be chosen for their best overall return on
investment, including both income production and appreciation potential, among
other factors; but this principle shall be understood to be intended only as a
general guide to assist the Trustees in the exercise of their discretion.
Funds may be accumulated or invested temporarily until such times as more
suitable investments are available. The Trust may also participate in joint
ventures and may purchase or merge with other
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real estate investment trusts and companies, provided the assets and
investments of said joint ventures, trusts and companies are permissible
hereunder. Undivided interests in property may be acquired for the Trust, and
encumbered property may be acquired subject to, or with assumption of, the
underlying indebtedness.
Section 4.3 Maintenance of Assets
The Trustees, on behalf of the Trust, shall themselves or through
agents or independent contractors, incur all expenses and make all expenditures
necessary or desirable for the protection, improvement, maintenance, repair,
alteration, efficient operation, or ready marketability of any asset of the
Trust.
Section 4.4 Disposition or Encumbrance of Assets
The Trustees shall have full discretion in retaining, selling,
exchanging or encumbering any asset of the Trust, or any interest in any such
asset.
Section 4.5 Use of Brokers and Appraisers
Subject to the provisions of Section 4.7 hereof, the Trustees may
employ at the expense of the Trust the services of any person, including any
real estate or securities broker, for the purpose of appraising, acquiring,
encumbering or disposing of assets of the Trust.
Section 4.6 Transactions with Related Parties
4.6.1 The Trust shall not engage in any Material
Transaction with a Related Party unless the Material Transaction has, after
disclosure of the interest of the Related Party, been approved or ratified by a
majority of the Trustees who are neither affiliates nor associates of the
Related Party. All such transactions shall be fair and reasonable to the Trust
and its Shareholders as a whole at the time of authorization, and be on terms
at least as favorable to the Trust as terms that would have been obtainable
from a person other than a Related Party. This section shall not apply to any
purchase or sale of securities issued by the Trust and registered with the
Securities and Exchange Commission except to the extent that a person who is a
Large Shareholder immediately before or after the transaction has a direct or
indirect interest in such purchase or sale of securities.
4.6.2 No Related Party shall directly or indirectly receive
any material remuneration in connection with any Material Transaction involving
the Trust unless the terms for the payment of such remuneration have been
approved or ratified by a majority of the Trustees who are neither affiliates
nor associates of any person receiving such remuneration. Payment of any such
remuneration shall be on terms which are fair and reasonable to the Trust and
its shareholders as a whole at the time of authorization; such
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terms may include, without limitation, deduction of such payments from the
remuneration otherwise payable to a Related Party.
4.6.3 The Trustees entitled to approve a transaction or
terms for the payment of remuneration under subsections 4.6.1 or 4.6.2 above
shall be entitled in their discretion to retain, at the Trust's expense,
independent appraisers, investment bankers, legal counsel, accountants and
other professional consultants or advisors to assist them in their
determination.
4.6.4 For purposes of this Section 4.6:
.1 The term "Related Party" shall mean any
present or former Trustee, officer, Large Shareholder, investment manager or
advisor of the Trust, or any affiliate or associate of such person.
.2 The term "Material Transaction" shall
include, without limitation, any purchase, sale, loan, lease, pledge, exchange
or other transfer of Trust assets or securities, and any merger, consolidation,
reorganization, joint venture, partnership or other entity involving the Trust.
.3 The term "Large Shareholder" means any person
who is the beneficial owner (within the meaning of Rule 13d-3 under the 1934
Act) of five percent (5%) or more of the outstanding Common Shares or Preferred
Shares of the Trust entitled to vote in the election of Trustees after
including among his shares those owned by an affiliate or associate.
.4 The terms "affiliate" and "associate" shall
have the meanings assigned to them in Rule 12b-2 under the 1934 Act; provided,
that a person shall not be deemed to be an affiliate or an associate of any
other person solely by reason of being a Trustee or officer of the Trust.
Section 4.7 Approval of Major Transactions
Subject to additional requirements and restrictions of this
Declaration and the voting rights of holders of Preferred Shares pursuant to
Section 5.2.4.2,
4.7.1 at any time when the Trust is qualified as a real
estate investment trust under the Code, no action shall be taken by the Trust
which would foreseeably cause the Trust to fail so to qualify as a real estate
investment trust under the Code, notwithstanding Section 4.1, and
4.7.2 the Trust shall not be incorporated, merged into
another entity, consolidated with one or more entities into a new entity,
reorganized as a new entity, liquidated or dissolved, notwithstanding Section
4.2; provided, however, that the Trust may merge or consolidate with CalREIT
without obtaining the approval otherwise required pursuant to this Section 4.7,
and
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4.7.3 all or substantially all of the assets, properties,
or businesses of the Trust shall not be sold, leased, transferred, conveyed,
exchanged or otherwise disposed of, notwithstanding Section 3.11,
except upon the affirmative vote or written consent of seventy-five percent
(75%) of the outstanding Common Shares of the Trust entitled to vote.
ARTICLE V.
SHARES AND SHAREHOLDERS
Section 5.1 Classes of Shares
The Trustees are authorized to issue two classes of Shares to be
designated "Common Shares" and "Preferred Shares" respectively. The total
number of Shares which the Trust is authorized to issue is Seventy-Five Million
(75,000,000), of which Fifty Million (50,000,000) Shares shall be Common Shares
and Twenty-Five Million (25,000,000) Shares shall be Preferred Shares. The
Trustees shall not be authorized to issue any Shares which do not have the
right to vote for election of Trustees.
Section 5.2 Preferred Shares
The designations, voting powers, preferences and relative,
participating, optional and other special rights of the shares of the Preferred
Shares and the qualifications, limitations or restrictions thereof are as
follows:
5.2.1 Rank. The Preferred Shares shall, with respect to
dividend rights and rights on redemption and on liquidation, winding up and
dissolution, rank prior to any other equity securities of the Trust, including
Common Shares (all of such equity securities of the Trust to which the
Preferred Shares rank prior are collectively referred to in this Section 5.2 as
the "Junior Shares").
5.2.2 Dividends. The holders of Preferred Shares shall be
entitled to receive, when and as declared by the Trustees out of funds legally
available therefor, cumulative dividends payable in cash at a rate of 10% per
annum of the Stated Value (as hereinafter defined), provided that until and
including September 30, 1998, dividends may, at the option of the Trustees, be
paid in Preferred Shares issued by the Trustees, Preferred Shares issued as
payments of dividends shall be valued at the Stated Value. Such dividends
shall be payable quarterly on the last day of each March, June, September and
December commencing on the first of such dates to occur after the first
Preferred Shares are initially issued. Dividends shall accrue on each
Preferred Share from the date of issuance thereof and shall accrue from day to
day, whether or not earned or declared. Accrued but unpaid dividends shall
increase at a compounding rate equal to 10% per annum compounded quarterly.
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Dividends paid on the Preferred Shares in an amount less than the total amount
of such dividends at the time accrued and payable on such Preferred Shares
shall be allocated pro rata on a share-by-share basis among all such Preferred
Shares at the time outstanding. The Trustees may fix a record date for the
holders of Preferred Shares entitled to receive payment of a dividend or
distribution declared thereon, which record date shall not be more than 30 days
prior to the date fixed for payment thereof. During such time as any Preferred
Shares are outstanding, the Trustees shall not declare, pay or set apart for
payment any dividend on any Junior Shares or make any payment on account of, or
set apart money for a sinking or other similar fund or make any payment for,
the purchase, redemption or other retirement of, any Junior Shares or any
warrants, rights, calls or options exercisable for or convertible into any
Junior Shares, or make any distribution in respect thereof, either directly or
indirectly, and whether in cash, obligations or Shares of the Trust or other
property (other than distributions or dividends in Junior Shares to the holders
of Junior Shares), and shall not permit any corporation or other entity
directly or indirectly controlled by the Trustees to purchase or redeem any
Junior Shares or any warrants, rights, calls or options exercisable for or
convertible into any Junior Shares, unless prior to or concurrently with such
declaration, payment, setting apart for payment, purchase, redemption or
distribution, as the case may be, the full cumulative dividends on all
outstanding Preferred Shares shall have been paid in full or contemporaneously
are declared and paid through the most recent dividend payment date.
5.2.3 Liquidation Preference.
.1 In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Trust, the holders
of the Preferred Shares then outstanding shall be entitled to be first paid out
of the assets of the Trust available for distribution to its Shareholders an
amount in cash equal to Two Dollars ($2.00) per Preferred Share (the "Stated
Value"), plus an amount equal to all dividends (whether or not earned or
declared) on such Shares accrued and unpaid thereon to the date of final
distribution, before any payment shall be made or any assets distributed to the
holders of any Junior Shares. Except as provided in the preceding sentence,
holders of the Preferred Shares shall not be entitled to any distribution in
the event of liquidation, dissolution or winding up of the affairs of the
Trust. If, upon any such liquidation, dissolution or winding up of the affairs
of the Trust, the remaining assets of the Trust available for distribution to
its Shareholders shall be insufficient to pay the holders of the Preferred
Shares the full amount to which they shall be entitled, the holders of the
Preferred Shares shall share ratably in any distribution of the remaining
assets and funds of the Trust in proportion to the respective amounts which
would otherwise be payable in respect of the Shares held by them upon such
distribution if all amounts payable on or with respect to such Preferred Shares
were paid in full.
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.2 For the purposes of this Section 5.2.3,
neither the voluntary sale, conveyance, exchange or transfer (for cash, shares
of stock, securities or other consideration) of all or substantially all the
property or assets of the Trust nor the consolidation or merger of the Trust
with one or more other entities shall be deemed a liquidation, dissolution or
winding up, voluntary or involuntary.
5.2.4 Voting Rights.
.1 Right to Vote. Except as otherwise expressly
provided herein, or by law, the holders of Preferred Shares shall have no
voting rights. In the event that the holders of Preferred Shares shall have
the right to vote, each person in whose name Preferred Shares shall be
registered on the record date for determining the holders of the Preferred
Shares entitled to vote at any meeting of Shareholders (or adjournment thereof)
or to consent to Shareholder action in writing without a meeting shall be
entitled to, at such meeting or with respect to such action, one vote for each
Common Share of the Trust into which each Preferred Share registered in the
name of such person on such record date could be converted (with any fractional
Share determined on an aggregate conversion basis being rounded to the nearest
whole Share).
.2 Significant Events. During such time as any
Preferred Shares are outstanding, the Trustees shall not, without the
affirmative vote or consent of the holders of at least a majority of the issued
and outstanding Preferred Shares voting together as a separate class, (A)
create, authorize or issue (including on conversion or exchange of any
convertible or exchangeable securities or by reclassification) any class or
series of Shares ranking on a parity with or prior to the Preferred Shares,
either as to dividends or redemption or upon voluntary or involuntary
liquidation, dissolution or winding up; (B) increase the authorized Shares of,
or issue (including on conversion or exchange of any convertible or
exchangeable securities or by reclassification) any Preferred Shares, except to
pay dividends on the issued and outstanding Preferred Shares as provided in
Section 5.2.2 above; (C) amend, alter, waive the application of, or repeal
(whether by merger, consolidation or otherwise) any provision of the
Declaration, enter into any agreement or take any other action which in any
manner would alter, change or otherwise adversely affect the powers, rights or
preferences of the Preferred Shares; (D) effect the reorganization,
liquidation, dissolution or winding up of the Trust, or the sale, lease,
conveyance or exchange of all or substantially all of the assets, property or
business of the Trust, or the merger or consolidation of the Trust with or into
any other entity other than CalREIT; (E) take any action which would cause a
dividend or other distribution to be deemed to be received by the holders of
the Preferred Shares for federal income tax purposes unless such dividend or
other distribution is actually received by such holders; (F) cause the
occurrence of a Change-in-Control Transaction (as hereinafter defined),
including through
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issuance of additional Securities; or (G) at any time after October 1, 1998,
when the Trust has not paid, when due, cash dividends specified in Section
5.2.2 for a period of three consecutive quarters, incur any indebtedness,
whether recourse or non-recourse, other than indebtedness described in Section
6.5 of the Note Agreement. As used in this Section 5.2.4.2, "Change-in-Control
Transaction" means any transaction or series of related transactions, involving
the Trust, holders of any class of Shares or both, resulting in any person or
group of persons acting in concert who were not theretofore the holder or
holders of voting securities enabling the holder or holders thereof to cast
more than a majority of the votes which may be cast for the election of Other
Trustees (as defined in Section 3.3.3) becoming the holder or holders of at
least such amount of voting securities (for such purpose, treating instruments
or securities issued in such transaction which are convertible into or
exchangeable or exercisable for voting securities as being so converted,
exchanged or exercised upon issuance, regardless of the terms thereof);
provided, however, that any transfer of voting securities of the Trust by
persons (including, without limitation, any affiliate, agent, or control person
of such persons) who are, or at any time have been, holders of Preferred
Shares, shall not constitute all or any part of a Change-In-Control
Transaction. A person shall not be considered as acting in concert with any
other person for this purpose unless such persons bear a relationship described
in either Section 267(b) or 707(b) of the Code.
.3 Election of Trustees. The right of holders
of Preferred Shares to elect the Preferred Designee as a Trustee is set forth
in Section 3.3.3.
5.2.5 Conversion.
.1 Optional Conversion. As long as Mandatory
Conversion has not occurred, the Trustees shall have the right, at their
option, to cause the conversion of all of the outstanding Preferred Shares into
Conversion Shares (as defined below) upon the issuance in a single offering or
transaction (the "New Issuance") by the Trust of Common Shares and/or any
equity securities convertible into or exchangeable or exercisable for Common
Shares for an aggregate purchase price equal to or greater than an amount equal
to 150% of the sum of (A) the aggregate Stated Value of all Preferred Shares
then outstanding as of the date that the optional conversion occurs (the
"Conversion Date") and (B) the amount of unpaid dividends accrued on all
Preferred Shares then outstanding to the Conversion Date. The conversion right
granted by this Section 5.2.5.2 may be exercised by the Trust by giving written
notice of its election to exercise such conversion right by United States
certified or registered mail, postage prepaid, mailed not more than 30 days
thereafter to all holders of record of the then outstanding Preferred Shares at
such holders' addresses shown on the books of the Trust. Each such notice
shall state the proposed Conversion Date (which date shall not be fewer than 10
days more than 30 days after the date notice thereof is received), the number
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of Common Shares to be delivered per Preferred Share converted and the place or
places where certificates of Preferred Shares are to be surrendered for
conversion. From and after the Conversion, each certificate of Preferred
Shares shall be deemed to represent only the Common Shares into which such
Preferred Shares have been converted. The holder of such certificates shall
surrender such certificates for conversion upon and pursuant to the request of
the Trust. The number of whole Common Shares to be delivered to each holder of
Preferred Shares upon an Optional Conversion shall be computed by dividing (1)
the aggregate Stated Value of those Preferred Shares held by each such holder
by (2) an amount equal to 80% of the purchase price per Common Share included
in the New Issuance securities. (For such purpose, to the extent that the New
Issuance securities are equity securities convertible into or exchangeable or
exercisable for Common Shares, such New Issuance securities shall be treated as
having been converted, exchanged or exercised as of the date of the New
Issuance even if not by their terms then convertible, exchangeable or
exercisable.) At the time of an Optional Conversion of Preferred Shares, the
Trust shall pay in cash to the holder thereof an amount equal to all unpaid
dividends accrued thereon to the date of conversion. Each Preferred Share
certificate surrendered for conversion shall be endorsed by its holder.
.2 Mandatory Conversion. All of the outstanding
Preferred Shares shall, without any further action by the holders thereof,
convert into Conversion Shares (a "Mandatory Conversion") upon the occurrence
of any event specified in Section 5.2.6 and the failure by the Trust to redeem
all issued and outstanding Preferred Shares (and to pay in cash an amount equal
to all unpaid dividends accrued thereon to the date of redemption) within 10
days after the occurrence of any such event. The number of Common Shares to be
delivered to each holder of Preferred Shares upon a Mandatory Conversion
pursuant to this Section 5.2.5.2 shall be computed by dividing (1) the
aggregate Stated Value of such holder's Preferred Shares, plus an amount equal
to all accrued but unpaid dividends on such person's Preferred Shares by (2)
the then applicable Conversion Price (as defined in Section 5.2.5.3) for such
holder's Preferred Shares. In the event of a Mandatory Conversion pursuant to
this Section 5.2.5.3, the Trust shall forthwith transmit to each holder of
Preferred Shares notice thereof in reasonable detail, together with
certificates for the shares of Common Shares issued as a result thereof, dated
the date of such Mandatory Conversion against delivery of the certificates
representing the Preferred Shares to be converted, and such holders shall be
deemed for all purposes to be the holders of such Common Shares as of the date
and time of such Mandatory Conversion.
.3 Conversion Price. For the purposes of
conversion under Section 5.2.5.2, the Preferred Shares shall be converted into
Common Shares (the "Conversion Shares") at the price per Share of $2.00 per
Conversion Share ("Conversion Price"), subject to adjustment pursuant to the
provisions of Section 5.2.5.5.
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.4 Stock Fully Paid; Reservation of Shares. All
Common Shares which may be issued upon the conversion of Preferred Shares will,
upon issuance, be duly issued, fully paid and nonassessable and free from all
liens and charges with respect to the issue thereof. At all times that any
Preferred Share is outstanding, the Trust shall have authorized, and shall have
reserved for the purpose of issuance upon such conversion, a sufficient number
of Common Shares to provide for the conversion into Common Shares of all
Preferred Shares then outstanding at the then effective conversion price.
Without limiting the generality of the foregoing, if at any time the
conversion price is decreased, the number of Common Shares authorized and
reserved for issuance upon the conversion of the Preferred Shares shall be
appropriately increased.
.5 Adjustment of Conversion Price. The
Conversion Price shall be subject to adjustment from time to time upon the
happening of certain events, as set forth in the following paragraphs;
provided, however that the issuance of Common Shares pursuant to any conversion
of Preferred Shares under this Declaration shall not result in any adjustment
of the Conversion Price pursuant to this Section 5.2.5.5; and provided further,
that the issuance of any Shares which results in an adjustment of the
Conversion Price pursuant to any subsection of this Section 5.2.5.5 shall not
result in any further adjustment of the Conversion Price under this Section
5.2.5.5:
.1 Reclassification, Consolidation or
Merger. In case of any reclassification or change of
outstanding Common Shares issuable upon conversion of
Preferred Shares (other than as a result of a
subdivision or combination), or in case of any
consolidation, merger or combination of the Trust
with or into another entity (other than a merger or
combination with another entity in which the Trust is
the surviving Trust and which does not result in any
reclassification or change -- other than as a result
of a subdivision or combination --of outstanding
Common Shares issuable upon such conversion, and
other than a consolidation or merger with CalREIT),
the rights of the holders of the outstanding
Preferred Shares shall be adjusted in the manner
described below:
.1 In the event that the Trust is
the surviving entity, the Preferred Shares
shall, without payment of additional
consideration therefor, be deemed modified so
as to provide that upon conversion thereof
the holder of the Preferred Shares being
converted shall procure, in lieu of each
Common Share theretofore issuable upon such
conversion, the kind and amount of shares,
other securities, money and property
receivable upon such
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reclassification, change, consolidation,
combination or merger by the holder of each
Common Share issuable upon such conversion
had conversion occurred immediately prior to
such reclassification, change, consolidation,
combination or merger. Such Preferred Shares
shall be deemed to provide for adjustments
which shall be as nearly equivalent as may be
practicable to the adjustments provided for
in this Section 5.2.5. The provisions of
this clause (1) shall similarly apply to
successive reclassifications, changes,
consolidations, combinations and
mergers.
.2 In the event that the Trust is
not the surviving entity, the surviving
entity shall, without payment of any
additional consideration therefor, issue new
Preferred Shares, providing that upon
conversion thereof, the holders thereof shall
procure in lieu of each Common Share
theretofore issuable upon conversion of the
Preferred Shares the kind and amount of
Shares, other securities, money and property
receivable upon such reclassification,
change, consolidation or merger by the holder
of each Common Share issuable upon conversion
of the Preferred Shares had such conversion
occurred immediately prior to such
reclassification, change, consolidation or
merger. Such new Preferred Shares shall
provide for adjustments which shall be as
nearly equivalent as may be practicable to
the adjustments provided for in this Section
5.2.5. The provisions of this clause (2)
shall similarly apply to successive
reclassification, changes, consolidations,
combinations and mergers.
.2 Subdivision or Combination of
Shares. If the Trust, at any time while any of the
Preferred Shares is outstanding, shall subdivide or
combine its Common Shares, the Conversion Price shall
be proportionately reduced, in case of subdivision of
Shares, as of the effective date of such subdivision,
or if the Trust shall take a record of holders of its
Common Shares for the purpose of a subdividing, as of
such record date, whichever is earlier; or shall be
proportionately increased, in the case of combination
of Shares, as of the effective date of such
combination or, if the Trust shall take a record of
holders of its Common Shares for the purpose of so
combining, as of such record date, whichever is
earlier.
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.3 Certain Dividends and Distributions.
If the Trust, at any time while any of the Preferred
Shares is outstanding, shall:
.1 Stock Dividends. Pay a
dividend payable in, effect a split-up of, or
make any other distribution of Common Shares,
the Conversion Price shall be adjusted, as
of the date the Trust shall take a record of
the holders of its Common Shares for the
purpose of receiving such dividend, stock
split or other distribution (or if no such
record is taken, as of the date of such
payment or other distribution), to that price
determined by multiplying the Conversion
Price by a fraction (1) the numerator of
which shall be the total number of Common
Shares outstanding immediately prior to such
dividend, split-up or distribution and (2)
the denominator of which shall be the total
number of Common Shares outstanding
immediately after such dividend, split-up or
distribution (plus in the event that the
Trust paid cash for fractional Shares, the
number of additional Shares which would have
been outstanding had the Trust issued
fractional shares in connection with said
dividend, split-up or distribution); or
.2 Liquidating Dividends, etc.
Make a distribution of its property to the
holders of its Common Shares as a dividend in
liquidation or partial liquidation or by way
of return of capital or other than as a
dividend payable out of funds legally
available for dividends under the laws of the
State of California if the Trust were a
general business corporation, the holders of
the Preferred Shares shall, upon conversion
thereof, be entitled to receive, in addition
to the number of Common Shares receivable
thereupon, and without payment of any
consideration therefor, a sum equal to the
amount of such property as would have been
payable to them as owners of that number of
Common Shares of the Trust receivable upon
such conversion, had they been the holders of
record of such Common Shares on the record
date for such distribution; and an
appropriate provision therefor shall be made
a part of any such distribution.
.4 Issuance of Common Shares at Less
Than Conversion Price. In the event that after the
date of issuance of the Preferred Shares the Trust
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issues Common Shares or Common Share Equivalents (as
hereinafter defined) at an issue price less than the
Conversion Price, the Conversion Price shall be
reduced to an amount equal to the weighted average of
the issue prices of all Common Shares and Common
Share Equivalents then outstanding. For this
purpose, the issue price of all Common Shares issued
on or before the effective date of this Declaration
shall be deemed to be equal to the Two Dollars
($2.00) per Share. A Common Share Equivalent shall
mean any security that is treated as a Common Share
for purposes of computing fully diluted earnings per
share under generally accepted accounting principles,
but shall not include the Preferred Shares.
.5 Notice of Adjustments. Whenever the
Conversion Price shall be adjusted pursuant to
Section 5.2.5.5 hereof, the Trust shall make a
certificate signed by the Chairman of the Board and
by its chief financial officer, treasurer, assistant
treasurer, secretary or assistant secretary, setting
forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method
by which such adjustment was calculated (including a
description of the basis on which the Trust made any
determination hereunder), and the Conversion Price
after giving effect to such adjustment, and shall
cause copies of such certificate to be mailed (by
first-class mail, postage prepaid) to each holder of
Preferred Shares at its address shown on the books of
the Trust. The Trust shall make such certificate and
mail it to each holder promptly after each
adjustment.
.6 No Reissuance of Preferred Stock. No
Preferred Shares which have been converted into Common Shares shall be reissued
by the Trust.
5.2.6 Redemption. Upon the earlier to occur of (A) any
event specified in clauses (A) through (G) of Section 5.2.4.2 for which the
affirmative vote or consent of holders or Preferred Shares required under
Section 5.2.4.2. has not been obtained, (B) any failure by the Trust on or
after October 1, 1998, to declare and pay any cash dividend on the Preferred
Shares on the payment due dates and in the amounts described in Section 5.2.2
hereof, if such failure shall continue in whole or in part for a period of 90
days from the payment due date, or (C) the sixth anniversary of the date that
any Preferred Shares are first issued, the Trust shall redeem all issued and
outstanding Preferred Shares not more than 10 days following the date of such
event for cash at a redemption price per share equal to the Stated Value plus
an amount equal to all unpaid dividends accrued thereon to the date of
redemption; provided, however, that the right of redemption under
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clause (A) of this Section 5.2.6 may be waived by affirmative vote or consent
of the holders of at least a majority of the issued and outstanding Preferred
Shares. If the Trust fails to redeem all issued and outstanding Preferred
Shares within 10 days after the occurrence of any of the events specified in
this Section 5.2.6, all Shares which have not been redeemed (at the option of
the Trust) shall be converted to Common Shares as provided in Section 5.2.5.3.
5.2.7 Optional Redemption. The Trust may, in its sole
discretion, elect to redeem all or any portion of the outstanding Preferred
Shares, at a price per share equal to the Stated Value, plus any accrued but
unpaid dividends on the Preferred Share, so long as:
.1 The Trust has paid in cash the
entire principal amount of all Interest Deferral
Notes (as defined in the Note Agreement) as delivered
to Noteholders (as defined in the Note Agreement) and
all accrued interest thereon, and the period on which
the Trust may issue Interest Deferral Notes in lieu
of cash payments of interest has expired; and
.2 All amounts owing under the New
Credit Line (as defined in the Note Agreement) and
the Redding Hotel Improvement Loan (as defined in the
Note Agreement) have been paid in full.
Section 5.3 Shareholder's Interest in Trust
The interest in the Trust of each Shareholder consists of his right to
enforce the performance of the Trust, including the right to participate in all
distributions of Trust income or principal according to the proportion which
the number of Common Shares or Preferred Shares held by him bears to the total
number of Common Shares or Preferred Shares , respectively, then outstanding.
Such interest is personal property. During the continuance of the Trust, no
Shareholder or his legal representative or successor shall be entitled to a
partition of Trust property or, except as herein provided, to an accounting,
nor shall the Trust be in any manner affected by the death, incapacity,
dissolution, termination or bankruptcy of any Shareholder, or by the transfer
of any Share or Shares of the Trust.
Section 5.4 Agreement of Shareholders
Each of the Shareholders, severally but not jointly, by becoming a
Shareholder hereunder, hereby agrees with the Trustees and their successors in
office that he accepts and agrees to, and shall be bound and governed by, the
provisions, terms, and conditions of this Declaration in the same manner as if
he had personally executed the same.
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Section 5.5 Nonassessability of Shares
No assessment shall ever be made upon the Shares of the Trust.
Section 5.6 Issuance of Certificates
Every Shareholder shall be entitled to receive a share certificate in
such form as the Trustees shall from time to time approve. There shall be
stated on each share certificate the certificate number, the date of its
issuance, the number of Shares represented thereby, and the name of the
Shareholder. All certificates shall be for full Shares. No certificates for
fractional shares shall be issued.
Section 5.7 Authentication of Certificates
Each certificate shall bear the signatures of the chairman or a
vice-chairman of the Board of Trustees and the secretary or an assistant
secretary of the Trust, and if there shall be an independent transfer agent or
registrar, the countersignature of an officer thereof duly authorized for the
purpose. The signatures of the chairman or a vice-chairman of the Board, the
secretary or an assistant secretary of the Trust, and the designated officer of
any independent transfer agent or registrar, may be facsimile reproductions.
The validity of a share or certificate therefor shall not be affected by the
fact that at the time of issuance of the certificate one or more persons whose
signatures where duly authorized when placed thereon are no longer authorized
to sign the same.
Section 5.8 Replacement Certificates
Lost, stolen, mutilated or destroyed certificates shall be replaced
subject to such conditions of proof and indemnity as the Trustees may determine
to impose.
Section 5.9 Only Registered Holder Recognized
A register shall be kept under the direction of the Trustees, which
shall contain the names and addresses of the Shareholders, the number of Shares
of each class of Shares held by them respectively, the numbers of the
certificates representing the same, and a record of all transfers thereof.
Only the Shareholder designated in such register as the holder of a share
certificate shall be recognized for purposes of the Trust as having any
interest in such certificate or the Shares represented thereby, and neither the
Trust nor any person connected therewith shall be bound by any notice to the
contrary, but in cases of dispute the Trustees may require that the certificate
in question be submitted for inspection and that the registered Shareholder's
title thereto be satisfactorily established. A holder may be registered as a
fiduciary, and customary words may be employed to identify the fiduciary
relationship.
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Section 5.10 Shareholder's Transfer of Shares
Excepting transfers by operation of law, Shares shall be transferable
on the records of the Trust only by the record holder thereof or by his agent
duly authorized in writing, upon delivery to the Trustees or a transfer agent
of the Trust, if any, of the certificate or certificates therefor, properly
endorsed or accompanied by duly executed instrument or instruments of transfer,
together with such evidence of the genuineness of each such endorsement,
execution and authorization and of other matters as may reasonably be required.
Upon such delivery and proof, the transfer shall be recorded upon the register
of the Trust, and one or more new certificates shall be issued to those
entitled thereto by reason of such transfer. Until the transfer is so
recorded, the Shareholder designated by the register as the holder of such
Shares shall be deemed to be the holder thereof for all purposes of the Trust,
and neither the Trustees nor any transfer agent or registrar, nor any officer
or agent of the Trust, shall be affected by any notice of any proposed
transfer. The Trustees may establish particular procedures to govern the
assignment of Shares for security purposes. No Shareholder may demand that the
Trust or the Trustees redeem his Shares. No certificates for fractional Shares
shall be issued.
Section 5.11 Transfers by Operation of Law
Any person becoming entitled to any Share in consequence of the death,
dissolution or bankruptcy of any shareholder, or in any other way than in
Section 5.10 provided, may be entered upon the register as the holder thereof
and receive a new certificate therefor, upon delivery of the existing
certificate and such proofs as may be required to the Trustees or any transfer
agent of the Trust. The transfer shall have no effect until entered upon the
register, and notice given to any person prior to such entry shall likewise be
ineffective for any purpose. No certificates for fractional shares shall be
issued.
Section 5.12 Trust Agents as Shareholders
Any Trustee, officer, agent or employee of the Trust may, in his
individual capacity, acquire or dispose of Shares of the Trust.
Section 5.13 Right to Refuse to Transfer Shares; Acquisition
Restriction; Redemption Rights
5.13.1 Whenever it is deemed by them to be reasonably
necessary to protect the status of the Trust as a "real estate investment
trust" for federal income tax purposes, the Trustees may require a statement or
affidavit from each proposed transferee of Trust shares setting forth the
number of Shares already owned by him and any related person specified in the
form prescribed by the Trustees for that purpose. If, in the opinion of the
Trustees, the proposed transfer may jeopardize the qualification of the Trust
as a "real estate investment trust" under the Code, or result in a
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Change-in-Control Transaction, the Trustees shall have the right, but not a
duty, to refuse to transfer the Shares to the proposed transferee. All
contracts for the sale or other transfer of Shares of the Trust shall be
subject to this provision.
5.13.2 Notwithstanding any other provision of this
Declaration of Trust to the contrary, any purported acquisition of Shares of
the Trust which would result in the disqualification of the Trust as a real
estate investment trust under the Code shall be null and void.
5.13.3 All persons who own 5% or more of any class of the
Trust's outstanding Shares shall file with the Trust an affidavit setting forth
the number of Shares (i) owned directly (held of record by such person or by a
nominee or nominees of such person), (ii) owned indirectly (by reason of
Sections 542, 544 and 856 of the Code or for purposes of Rule 13(d) under the
1934 Act) by the person filing the affidavit, and (iii) owned by an person who
would be considered as acting in concert with such person as determined under
Section 5.2.4.2. The affidavit to be filed with the Trust shall set forth all
the information required to be reported (i) in returns of Shareholders under
Treasury Regulations Section 1.857-9 and (ii) in reports to be filed under
Section 13(d) of the 1934 Act. The affidavit or an amendment to a previously
filed affidavit shall be filed with the Trust annually within 60 days after the
close of the Trust's taxable year, and prior to any transfer or attempted
transfer of Shares by or to such person, so long as immediately prior to or
subsequent to the transfer or attempted transfer such person owns 5% or more of
the Trust's outstanding Shares.
5.13.4 The Trustees may redeem such Shares as they deem
necessary when, in good faith, the Trustees determine that failure to redeem
such Shares will result in the Trust's failure to qualify as a real estate
investment trust under the Code. All such Shares may be redeemed by the Trust,
in the discretion of the Trustees, by mailing a written notice of redemption to
the holder of such Shares not less than one week prior to the redemption date
as set by the Trustees and included in the notice. The redemption price to be
paid for such Shares shall be equal to (i) the average of the high and low
sales prices of the shares of such class or series on the last business day
prior to the redemption date on the principal national securities exchange on
which such shares are listed or admitted to trading, or (ii) if such shares are
not so listed or admitted to trading, the average of the highest bid and lowest
asked prices on such last business day as reported by the National Quotation
Bureau Incorporated or a similar organization selected from time to time by the
Trust for the purpose, or (iii) if not determinable as aforesaid, as determined
in good faith by the Trustees. From and after the date fixed for redemption by
the Trustees, the holder of any Shares of so called for redemption shall cease
to be entitled to any distributions and other benefits with respect to such
Shares, except only the right to payment of the redemption price fixed as
aforesaid.
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5.13.5 The provisions of this Section 5.13 relating to
transactions which could affect the Trust's qualification as a "real estate
investment trust" under the Code shall be applicable only during fiscal years
of the Trust for which the Trustees determine that the Trust can reasonably
expect to meet the requirements for election to be taxed as a "real estate
investment trust" under the Code and that it is in the best interests of the
Trust and the Shareholders that the Trust make such election.
Section 5.14 Cancellation of Old Shares
Prior to the effective date of this Declaration, the Trust had
outstanding a single class of beneficial interests designated as "shares" (the
"Old Shares"). Effective as of the date hereof, all issued and outstanding
certificates representing Old Shares are hereby canceled and terminated, and
all issued and outstanding Old Shares are hereby converted into Common Shares
and cash, without necessity for further action either by the Trust or the
holders of the Old Shares. The number of Common Shares issued to holders of
Old Shares is the number determined pursuant to Article IV.B.22 and .23 of the
Plan. The Trustees shall record on the books of the Trust the names of former
holders of the Old Shares and the number of Common Shares issued to such
holders pursuant to the conversion provided for in this Section 5.14 and the
Plan. Upon receipt of a request of a former holder of Old Shares, or when and
to the extent they deem practicable, the Trustees shall issue to the persons
entitled thereto certificates for Common Shares issued pursuant to the
conversion provided for in this Section 5.14 and the Plan.
ARTICLE VI.
DIVIDENDS
Section 6.1 Declaration and Payment
Subject to Section 5.2, relating to Preferred Shares, the Trustees
shall declare dividends, payable from the assets of the Trust, in money or
otherwise, at such times, in such amounts and from such sources, whether
income, surplus, capital, or any combination thereof, as they in their
discretion may determine, and cause the same to be distributed to the
shareholders in amounts proportionate to the number of shares held by each
Shareholder. The Trustees may fix a record date for the determination of
holders of Preferred Shares entitled to receive payment of a dividend or a
distribution declared thereon, which record date shall be not more than 30 days
prior to the date fixed for the payment thereof.
Section 6.2 Statement of Source
Any distributions to Shareholders shall be accompanied by a statement
in writing identifying the source or sources to which the distribution is
charged. In case of doubt as to source, the writing shall so state, and the
required statement as to source shall be forwarded to Shareholders not later
than 60 days after the
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close of the fiscal year in which the distribution of doubtful source is made.
ARTICLE VII.
ACCOUNTING
Section 7.1 Standard
The books and records of the Trust shall be kept in conformity with
generally accepted principles of accounting, consistently applied.
Section 7.2 Inspection of Records
The share register or a duplicate thereof, the books of account, and
minutes of proceedings of the Shareholders and the Board of Trustees and of
committees of the Trustees, shall be open to inspection at any reasonable time
upon the written demand of any Shareholder, made upon the secretary or any
assistant secretary of the Trust, for a purpose reasonably related to his
interests as a Shareholder, and shall be exhibited at any time when required by
the demand at any Shareholders' meeting of ten percent of the Shares
represented at the meeting. Inspection by a Shareholder may be made in person
or by agent or attorney. The right of such inspection shall include the right
to make extracts. Each Trustee shall have the right at all reasonable times
during his term of office to inspect the records and property of the Trust.
Section 7.3 Annual Audit
The Trustees shall cause to be prepared at least annually, at the
expense of the Trust, a report of Trust operations, containing a balance sheet
and a statement of income and surplus and an opinion of an independent
certified public accountant on the financial statement. Such opinion shall be
based on an examination of the books and records of the Trust which is not
materially limited in scope and is made in accordance with generally accepted
auditing procedures. Within one hundred fifty (150) days after the close of
the period covered by the report, a signed copy of such report and opinion
shall be filed with the Trustees, and a copy thereof shall be sent to each
Shareholder.
Section 7.4 Interim Reports
Interim reports, containing a current balance sheet which may be
unaudited, shall be prepared at least quarterly and shall be furnished within a
reasonable time after the close of the quarter to each Shareholder.
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ARTICLE VIII.
MEETINGS OF SHAREHOLDERS
Section 8.1 Annual Meeting
The annual meeting of the Shareholders shall be held on a business day
during the fifth or sixth calendar month of the Trust's fiscal year, between
9:00 a.m. and 10:00 p.m., at Sacramento, California, or at such other location
in the State of California as the Trustees shall elect, provided, however, that
no annual meeting shall be held during calendar year 1995. Notice of the date,
hour and place of the meeting as determined by resolution of the Trustees, and
the annual report of Trust operations required by Section 7.3, shall be mailed
to shareholders at least 14 days before the day of the meeting.
Section 8.2 Special Meetings
8.2.1 Special meetings of Shareholders may be called at any
time and place by a majority of the Trustees. The Trustees shall cause a
special meeting to be called upon receipt of the written request of the
holders of more than twenty-five percent (25%) of the outstanding Shares of
each class of Shares entitled to vote on any matter to be considered at such
meeting, which request shall specify the purpose or purposes for which such
meeting is to be called. Such special meeting shall be held not less than 35
nor more than 90 days following receipt by the Trustees of such written request
of Shareholders. If for any reason an annual meeting of Shareholders as herein
provided for shall be omitted, a special meeting of Shareholders may
subsequently be held in lieu thereof and the business of the annual meeting may
be transacted thereat.
8.2.2 Notwithstanding Section 8.2.1, upon the written
request of the holders of that number of then outstanding Preferred Shares
which equal at least 10% of the aggregate number of Preferred Shares then
outstanding addressed to the Trustees at the principal office, the Trust shall
give notice of a special meeting of the holders of Preferred Shares for the
election of a Preferred Designee to fill any vacancy caused by the failure of
the holders of Preferred Shares to elect a Preferred Designee or by the death,
resignation or other inability to serve of the Preferred Designee, to be held
not less than 35 nor more than 60 days following receipt by the Trustees of
such written request. The record date for any such special meeting shall be
the date of receipt by the Trustees of such written request. If a notice of a
special meeting requested as aforesaid shall not be transmitted by the Trustees
within 20 days after receipt of the request, then the holders of at least 10%
of the Preferred Shares may designate in writing one of their number to call
such meeting, and the person so designated may call such meeting at the place
designated in the Declaration or the By-Laws of the Trust for meetings of the
Shareholders and upon not less than 10 nor more than 60 days' notice and for
that purpose shall have access to the Share register of the Trust.
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Section 8.3 Action Without Meeting
Whenever holders of the Preferred Shares or Common Shares are required
or permitted to take any action by vote, such action may be taken without a
meeting by written consent, setting forth the action so taken and signed by the
holders of the outstanding Preferred Shares or Common Shares, as the case may
be, having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all such shares entitled to
vote thereon were present and voted.
Section 8.4 Notice
Notice of all meetings of Shareholders shall be given at the direction
of the Trustees by the secretary or any other officer authorized by the
Trustees, and shall be mailed not less than 14 days nor more than 60 days
before the day of the meeting to each Shareholder at his address as given in
the register, or lacking such address, to such Shareholder addressed to the
principal office of the Trust. No business shall be transacted at any special
meeting of Shareholders unless notice of such business has been given in the
call for the meeting. Any adjourned meeting may be held as adjourned, without
further notice.
Section 8.5 Effect of Action
Except as otherwise expressly provided by law or this Declaration, no
action taken by the Shareholders at any meeting shall in any way bind the
Trustees in their management of the Trust.
Section 8.6 Record Date
Except as provided in Section 6.1, relating to dividends on Preferred
Shares, the Trustees may, without closing the transfer books, fix a date not
more than 45 days prior to the date of any meeting of Shareholders or dividend
payment as a record date for the determination of Shareholders entitled to vote
at such meeting or any adjournment thereof, or to receive such dividend. Any
person who is a registered Shareholder at the time so fixed shall be entitled
to vote or receive such dividend even though he has since that date disposed of
his Shares, and no Shareholder becoming such after that date shall be so
entitled to vote at such meeting or any adjournment thereof or to receive such
dividend.
Section 8.7 Quorum
A majority of the outstanding Shares of each class entitled to vote on
any matter to be voted on at a meeting of Shareholders represented in person or
by proxy shall constitute a quorum at any such meeting. The Shareholders
present at a duly called or held meeting at which a quorum is present may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough Shareholders to leave less than a quorum. In the absence of
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a quorum, any meeting of Shareholders may be adjourned from time to time, up to
and including the 45th day following the originally noticed meeting date by an
affirmative vote of a majority of the Common Shares entitled to vote and
represented in person or by proxy at the meeting. At any meeting of
Shareholders called for the purpose of election of Trustees, holders of at
least a majority of the outstanding Preferred Shares, present in person or by
proxy, shall be sufficient to constitute a quorum for the election of a
Preferred Designee.
Section 8.8 Voting of Shares
8.8.1 Subject to the terms of Preferred Shares, which may
at the time be outstanding, each Common Share shall be entitled to one vote;
provided, that only holders of record as of the record date for the meeting
shall be entitled to vote at any meeting of Shareholders. Whenever any action
is to be taken by the Shareholders, it shall, except as otherwise required by
this Declaration or the provisions of any series of Preferred Shares which may
at the time be outstanding or by law, be authorized either by the affirmative
vote of a majority of the votes cast at a meeting of Shareholders by holders of
Common Shares entitled to vote thereon, or by written consents setting forth
the action so taken and signed by the holders of a majority of all outstanding
Common Shares entitled to vote thereon.
8.8.2 Whenever the vote or written consent of Shareholders
is required or permitted under this Declaration, such vote or consent may be
given either in person or by proxy. The trustees may solicit such proxies from
the Shareholders or any of them in any matter requiring or permitting the
Shareholders' vote or written consent. No proxy for any meeting of
Shareholders shall be effective unless such proxy shall have been received in
the office of the Trust, or such other location designated by the Trustees and
indicated in the material soliciting the proxies, for verification prior to the
meeting.
8.8.3 When a Share entitled to vote is held jointly by
several persons, any one of them may vote at any meeting in person or by proxy
with respect to such Share, but if more than one of them shall be present at
such meeting in person or by proxy and such joint owners or their proxies so
present disagree as to any vote to be cast, no vote shall be received with
respect to such Share.
8.8.4 Every Shareholder entitled to vote at any election of
trustees may cumulate such Shareholder's votes and give one candidate a number
of votes equal to the number of Trustees to be elected multiplied by the number
of votes to which the Shareholder's Share are normally entitled, or distribute
the Shareholder's votes on the same principle among as many candidates as the
Shareholder thinks fit, provided however, that no Shareholder shall be entitled
to cumulate votes (i.e., cast for any candidate a number of votes greater than
the number of votes which
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such Shareholder normally is entitled to cast) unless such candidate or
candidates' names have been placed in nomination prior to the voting and the
Shareholder has given notice at the meeting prior to the voting of the
Shareholder's intention to cumulate the Shareholder's votes. If any one
Shareholder has given such notice, all Shareholders may cumulate their votes
for candidates in nomination.
Section 8.9 Annual Report
At each annual meeting of Shareholders, the Trustees shall present a
report upon the affairs of the Trust and upon its business and operations.
ARTICLE IX.
DURATION OF TRUST
Section 9.1 Duration
Unless terminated at an earlier date, the Trust shall terminate
twenty-one (21) years after the death of the last survivor of the following
named persons: WILHELM BERGER, ANDREW R. LOLLI, JEAN P. NIELSEN, G. ROBERT
HENRY, LYNES DOWNING, JACK KRYSTAL, BRUCE E. BEDIG, CLAYTON W. BRUNSELL, JAMES
H. THOMAS, and ROSE J. SUNDQUIST.
Section 9.2 Early Termination
The Trust shall be irrevocable. Subject to the provisions of the
Preferred Shares, the Trust may be terminated or dissolved only upon the
affirmative vote or written consent of sixty-six and two-thirds percent
(66-2/3%) of the outstanding Common Shares of the Trust entitled to vote.
Section 9.3 Procedure Upon Termination
Upon termination of the Trust, subject to the provisions of the
Preferred Shares, the Trustees shall cause such liquidation of Trust assets as
they deem desirable, shall pay or make adequate provision for all liabilities
of the Trust, whether present or contingent, and shall distribute the remaining
Trust assets, either in kind or in money or both, to the Shareholders in
proportion to their Shareholdings.
ARTICLE X.
INTERPRETATION AND AMENDMENT
Section 10.1 California Laws Govern
This Declaration of Trust is executed and delivered in the State of
California, and its provisions and all rights, powers, privileges, trusts,
duties and obligations hereunder and under all
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share certificates shall be governed by the laws of the State of California and
of the United States of America.
Section 10.2 Headings
The use of headings in this Declaration of Trust is solely for
convenience, and all such headings shall be disregarded in the construction of
its provisions.
Section 10.3 Amendments
Except as provided in Section 10.4, any amendment to this Declaration
of Trust shall be in writing and, subject to the terms of Section 10.4 and the
provisions of the Preferred Shares, shall require and shall be effective upon
the affirmative vote or written consent of seventy-five percent (75%) the
outstanding Common Shares of the Trust entitled to vote.
Section 10.4 Amendment Without Shareholder Approval.
Notwithstanding Section 10.3, seventy-five percent (75%) of the
Trustees then in office may amend this Declaration without the vote or consent
of Shareholders to the extent (i) such action is within the powers granted to
the Trustees pursuant to Section 3.11 of this Declaration, and (ii) the
Trustees deem it necessary for the Trust to qualify as a real estate investment
trust under the Code, or to conform this Declaration to any other applicable
laws, rulings or regulations; provided that the Trustees shall in no event be
liable for failing to so amend the Declaration. The Trustees shall cause
notice of any such amendment to be mailed to Shareholders within 30 days
following such amendment.
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Section 10.5 Recording Amendments
Following the adoption of any amendment hereto, the secretary of the
Trust and the chairman of the Board of Trustees shall execute and file for
record an instrument which sets forth such amendment.
IN WITNESS WHEREOF, the individuals above named, comprising the
Trustees of the Trust, have hereunto set their hands on the date first above
written.
_______________________________
Doris V. Alexis
_______________________________
Albert S. Rodda
_______________________________
Steven H. Gold
_______________________________
Howard E. Cohn
_______________________________
Richard Rathfon
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<PAGE> 43
STATE OF CALIFORNIA )
) SS:
COUNTY OF LOS ANGELES )
On __________________________, 1994, before me,
____________________________, a Notary Public, personally appeared DORIS V.
ALEXIS known to me (or proved to me on the basis of satisfactory evidence) to
be the person whose name is subscribed to the within instrument and
acknowledged to me that she executed the same in her authorized capacity, and
that by her signature on the instrument the person, or the entity upon behalf
of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________
(Seal)
STATE OF CALIFORNIA )
) SS:
COUNTY OF LOS ANGELES )
On __________________________, 1994, before me,
____________________________, a Notary Public, personally appeared ALBERT S.
RODDA, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his authorized capacity,
and that by his signature on the instrument the person, or the entity upon
behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________
(Seal)
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<PAGE> 44
STATE OF CALIFORNIA )
) SS:
COUNTY OF LOS ANGELES )
On __________________________, 1994, before me,
____________________________, a Notary Public, personally appeared STEPHEN H.
GOLD known to me (or proved to me on the basis of satisfactory evidence) to be
the person whose name is subscribed to the within instrument and acknowledged
to me that he executed the same in his authorized capacity, and that by his
signature on the instrument the person, or the entity upon behalf of which the
person acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________
(Seal)
STATE OF CALIFORNIA )
) SS:
COUNTY OF LOS ANGELES )
On __________________________, 1994, before me,
____________________________, a Notary Public, personally appeared HOWARD E.
COHN, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his authorized capacity,
and that by his signature on the instrument the person, or the entity upon
behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________
(Seal)
51
<PAGE> 45
STATE OF CALIFORNIA )
) SS:
COUNTY OF LOS ANGELES )
On __________________________, 1994, before me,
____________________________, a Notary Public, personally appeared RICHARD
RATHFON, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his authorized capacity,
and that by his signature on the instrument the person, or the entity upon
behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________
(Seal)
52
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
THE PEREGRINE REAL ESTATE TRUST
A CALIFORNIA REAL ESTATE INVESTMENT TRUST
ARTICLE I. OFFICES
SECTION 1. Principal Executive Office. The principal executive office
of the Trust is hereby fixed and located at 1300 Ethan Way, Sacramento,
California 95825. The Board of Trustees of this Trust (referred to herein
individually as a "Trustee" and collectively as the "Trustees") are hereby
granted full power and authority to change said principal executive office from
one location to another. Any such change shall be noted on the Bylaws opposite
this Section, or this Section may be amended to state the new location.
SECTION 2. Other Offices. Branch or subordinate offices may at any
time be established by the Trustees at any place or places.
ARTICLE II. SHAREHOLDERS
SECTION 1. Annual Meetings. Annual meetings of the shareholders shall
be held on a business day during the fifth or sixth calendar month of the
Trust's fiscal year on a date and at a time and place within the State of
California designated by the
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<PAGE> 2
Trustees. No annual meeting of shareholders shall be held during calendar
year 1995.
SECTION 2. Special Meetings. Special meetings of the shareholders may
be called at any time and place when ordered by a majority of the Trustees or
upon the written request of the holders of more than 25% percent of the
outstanding shares of each class of shares entitled to vote, specifying the
purpose or purposes for which the meeting is called. If for any reason the
annual meeting of the shareholders shall be omitted, a special meeting of the
shareholders may subsequently be held in lieu thereof, and the business of the
annual meeting may be transacted thereat. No business shall be transacted at
any special meeting of shareholders unless notice of such business has been
given in the call for the meeting. Special meetings of holders of Preferred
Shares, as defined in the Restated Declaration of Trust of The Peregrine Real
Estate Trust (the "Declaration") are provided for in Section 8.2.2 of the
Declaration.
SECTION 3. Notice. Notice of a shareholders' meeting shall be given
not less than fourteen (14) nor more than sixty (60) days before the meeting by
a Trustee or officer either personally or by mail or by other means of written
communication, addressed to the shareholder at the address of such shareholder
appearing on the books of the Trust or given by the shareholder to the Trust
for the purpose of such notice; or, if no such address appears or is given,
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<PAGE> 3
at the place where the principal executive office of the Trust is
located or by publication at least once in a newspaper of general circulation
in the county in which the principal executive office is located. Notice by
mail shall be deemed to have been given at the time a written notice is
deposited in the United States mail, postage prepaid. Any other written notice
shall be deemed to have been given at the time it is personally delivered to
the recipient, or is delivered to a common carrier for transmission, or is
actually transmitted by the person giving the notice by electronic means.
SECTION 4. Record Date. For purposes of determining the shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution payment, the
Trustees may from time to time close the transfer books, for such periods not
exceeding forty-five (45) days as the Trustees may determine; or without
closing the transfer books, the Trustees may fix a date not more than
forty-five (45) days prior to the date of any meeting of shareholders, or
dividends or distribution payment, as a record date for the determination of
shareholders entitled to vote at such meeting or any adjournment thereof, or to
receive such dividend or distribution payment; and any shareholder who was a
shareholder at the time so fixed shall be entitled to vote at such meeting or
any adjournment thereof or to receive such dividend or distribution even though
the shares of such shareholder have since that date
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<PAGE> 4
been disposed; and no shareholder becoming such after said date shall be so
entitled to vote at said meeting or any adjournment thereof or to receive such
dividend or distribution; provided, however, that the record date for payment
of dividends on Preferred Shares shall be not more than thirty (30) days prior
to the date fixed for payment thereof.
SECTION 5. Voting.
(a) Only shareholders of record shall be entitled to vote.
(b) In the election of Trustees, each shareholder shall
be entitled to one (1) vote per share, on a cumulative basis, for each
trusteeship to be filled; provided, however, that no shareholder shall be
entitled to cumulate votes unless the candidate(s) name(s) have been placed in
nomination prior to the voting and at least one shareholder has given notice at
the meeting prior to the voting of the shareholder's intention to cumulate
votes. The candidate(s) receiving the highest number of votes, up to the
number of trusteeships to be filled in the election, shall be elected.
(c) If any share is held jointly by several persons, any
one of them may vote at any meeting in person or by proxy in respect of such
share, but if more than one of them shall be present at such meeting in person
or by proxy, and such joint owners or their proxies so present disagree as to
any vote to be cast, such vote shall not be received in respect of such share.
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<PAGE> 5
(d) Shares held by an administrator, executor, guardian,
conservator or custodian may be voted by such holder either in person or by
proxy, without a transfer of such shares into the holder's name; and shares
standing in the name of a trustee may be voted by the trustee, either in person
or by proxy, but no trustee shall be entitled to vote shares held by such
trustee without a transfer of such shares into the trustee's name.
(e) Shares standing in the name of a receiver may be
voted by such receiver; and shares held by or under the control of a receiver
may be voted by such receiver without the transfer thereof into the receiver's
name if authority to do so is contained in the order of the court by which such
receiver was appointed.
(f) Shares standing in the name of a minor may be voted
and the Trust may treat all rights incident thereto as exercisable by the
minor, in person or by proxy, whether or not the Trust has notice, actual or
constructive, of the nonage, unless a guardian of the minor's property has been
appointed and written notice of such appointment given to the Trust.
(g) Except where otherwise agreed in writing between the
parties, a shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
(h) Shares standing in the name of a corporation,
domestic or foreign, may be voted by such officer, agent or power as the bylaws
of such corporation may prescribe, or in the absence of such provision, as the
board of directors of such corporation may determine or, in the absence
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of such determination, by the chairman of the board, president or any vice
president of such corporation, or by any other person authorized to do so by
the board, president or any vice president of such other corporation. Shares
which are purported to be voted or any proxy purported to be executed in the
name of a corporation (whether or not any title of the person signing is
indicated) shall be presumed to be voted or the proxy executed in accordance
with the provisions of this subdivision, unless the contrary is shown.
(i) Any shares held by the Trust in a fiduciary capacity shall
not be entitled to vote on any matter, except to the extent that the settlor or
beneficial owner possesses and exercises a right to vote or gives the Trust
binding instructions as to how to vote such shares.
SECTION 6. Quorum. A majority of the outstanding shares of each class
of shares entitled to vote, represented in person or by proxy, shall constitute
a quorum at any meeting of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
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SECTION 7. Adjourned Meeting and Notice Thereof. Any shareholders'
meeting, whether or not a quorum is present, may be adjourned from time to time
by the vote of a majority of the shares, the holders of which are either
present in person or represented by proxy thereat, but in the absence of a
quorum (except as provided in Section 6 of this Article II) no other business
may be transacted at such meeting. It shall not be necessary to give any
notice of the time and place of the adjourned meeting or of the business to be
transacted thereat, other than by announcement at the meeting at which such
adjournment is taken; provided, however, when any shareholders' meeting is
adjourned for more than 45 days or, if after adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall be given
as in the case of an original meeting.
SECTION 8. Consent of Absentees. The transactions of any meeting of
shareholders, however called and noticed, and wherever held, are as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
Proxy, signs a written waiver of notice, or a consent to the holding of the
meeting or an approval of the minutes of the meeting.
SECTION 9. Action Without Meeting. Any action which may be taken at
any annual or special meeting of shareholders may be taken
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without a meeting and without prior notice if a consent in writing, setting
forth the action so taken, shall be signed by the holders of outstanding shares
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. Unless a record date for voting purpose be
fixed as provided in Section 4 of this Article II, the record date for
determining shareholders entitled to give consent pursuant to this Section 9,
when no prior action by the Trustees has been taken, shall be the day on which
the first written consent is given.
SECTION 10. Proxies. Every person entitled to vote shares has the
right to do so either in person or by one or more persons authorized by a
written proxy executed by such shareholder and filed with a Trustee or officer
of the Trust. Any proxy duly executed is not revoked and continues in full
force and effect until revoked by the person executing it prior to the vote
pursuant thereto by a writing delivered to the Trust stating that the proxy is
revoked or by a subsequent proxy executed by, or by attendance at the meeting
and voting in person by, the person executing the proxy; provided, however,
that no proxy shall be valid after the expiration of eleven (11) months from
the date of its execution unless otherwise provided in the proxy.
SECTION 11. Inspectors of Election. In advance of any meeting of
shareholders, the Trustees may appoint any persons other
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than nominees for office as inspectors of election to act at such
meeting and any adjournment thereof. If inspectors of election be not so
appointed, or if any persons so appointed fail to appear or refuse to act, the
chairman of any such meeting may, and on the request of any shareholder or
shareholder's proxy shall, make such appointment at the meeting. The number of
inspectors shall be either one or three. If appointed at a meeting on the
request of one or more shareholders or proxies, the majority of shares present
shall determine whether one or three inspectors are to be appointed. The
duties of such inspector(s) shall include, but not necessarily be limited to,
determining the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, and the
authenticity, validity, and effect of proxies; receiving votes, ballots, or
consents; hearing and determining all challenges and questions in any way
arising in connection with the right to vote; counting and tabulating all votes
or consents; determining when the polls shall close; determining the result of
the election or vote; and doing such acts as may be proper to conduct the
election or vote with fairness to all shareholders. If there are three
inspectors of election, the decision, act, or certificate of a majority is
effective in all respects as the decision, act, or certificate of all.
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ARTICLE III. TRUSTEES
SECTION 1. Number and Qualifications. Subject to Section 3.3.3 of the
Declaration, there shall be not less than five (5) nor more than thirteen (13)
Trustees, the exact number to be fixed by the Trustees from time to time. No
reduction of the authorized number of Trustees shall have the effect of
removing any Trustee prior to the expiration of the Trustee's term of office.
No person shall qualify as a Trustee unless that person is at least twenty-one
(21) years of age, and until that person shall have either signed the
Declaration or agreed in writing to be bound by the Declaration.
SECTION 2. Election. The election of Trustees is provided for in
Section 3.3 of the Declaration.
SECTION 3. Vacancies. The filling of vacancies on the Board is
provided for in Section 3.6 of the Declaration. The election to fill such a
vacancy shall be evidenced by an instrument in writing signed by a majority of
the Trustees; but no such election shall become effective unless and until such
instrument bearing the acceptance of the person so appointed has been
acknowledged by one or more of the existing Trustees. Thereupon, the Trust
property shall vest in the new Trustee jointly with the continuing Trustee or
Trustees without any further act or conveyance. The Trustees named in the
Declaration and/or their successors as Trustees shall
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hold office during the existence of this Trust; provided, however, that
any one or more Trustees may be removed and one or more new Trustees elected to
take the place of each such Trustee so removed. Whenever a vacancy in the
number of Trustees shall occur, until such vacancy is filled, the continuing or
surviving Trustee or Trustees shall have all the powers granted to the Trustees
and shall discharge all duties imposed upon the Trustees by the Declaration.
The term "majority of the Trustees", except where otherwise defined herein,
shall mean more than one-half ( 1/2) of the total number of Trustees then in
office.
SECTION 4. Removal. Removal of a Trustee is provided for in Section
3.4 of the Declaration.
SECTION 5. Resignation. Any Trustee may resign as Trustee by a signed
instrument in writing which is delivered or mailed to the Trustees, and such
resignation shall take effect immediately or at a later date, according to the
terms of the notice; provided, however, that such resignation shall not become
effective until a copy of such resignation is recorded with the County Recorder
for the county in which the principal office of business of the Trust is
located.
SECTION 6. Cessation of Right, Title or Interest. Upon the
resignation, removal, or death of a Trustee, that Trustee shall automatically
cease to have any right, title, or interest in any
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properties or interest in properties of the Trust, and the right, title
and interest of such Trustee shall automatically vest, upon that Trustee's
resignation, removal, or death, in the remaining Trustees, if any.
SECTION 7. Survival of Trust. The death, resignation, or removal of
any one or more of the Trustees shall not operate to annul the Trust or to
revoke any existing agency created pursuant to the terms of the Declaration,
except as to the Trustee or Trustees whose term has been so terminated.
SECTION 8. Meetings. Meetings of the Trustees shall be held from time
to time upon the call of the Chairman of the Board or any two of the Trustees;
provided, that prior to the annual meeting of shareholders of the Trust to be
held during calendar year 1996, the Board shall meet no less frequently than
once during each quarter of each fiscal year of the Trust. Regular or special
meetings of the Trustees shall be held at any place within or without the State
of California which has been designated from time to time by the Trustees. In
the absence of such designation regular meetings shall be held at the principal
executive office of the Trust.
SECTION 9. Notice. Notice of any meetings shall be given not less
than seventy-two (72) hours prior to the meeting, but may be waived by any
Trustee either before or after such meeting. Notice may be given personally or
by telephone, telegraph, telex,
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facsimile or other similar means of communication. Any such notice
shall be addressed or delivered to each Trustee at such Trustee's address as it
is shown upon the records of the Trust or as may have been given to the Trust
by the Trustee for purposes of notice or, if such address is not shown on such
records or is not readily ascertainable, at the place in which the meetings of
the Trustees are regularly held. Notice by mail shall be deemed to have been
given at the time a written notice is deposited in the United States mail,
postage prepaid. Any other written notice shall be deemed to have been given at
the time it is personally delivered to the recipient or is delivered to a
common carrier for transmission, or is actually transmitted by the person
giving the notice by electronic means.
SECTION 10. Voting. The concurrence of all the Trustees shall not be
necessary for the validity of any action taken by them, but a decision
expressed in a vote passed at a meeting by a majority of the Trustees present
or expressed in writing signed by a majority of the Trustees without a meeting
shall constitute the action of the Trustees and have the same effect as if
assented to by all. At any meeting a majority of the Trustees shall constitute
a quorum. Any deed, mortgage, lease, or other instrument or writing executed
by one or more of the Trustees shall be valid and binding upon the Trustees and
upon the Trust when authorized by a vote or writing passed or signed as above
provided.
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SECTION 11. Telephone Conference. Trustees may participate in a
meeting through use of conference telephone or similar communications
equipment, so long as all Trustees participating in such meeting can hear one
another.
SECTION 12. Consent of Absentees. The transactions of any meeting of
the Trustees, however called and noticed or wherever held, are as valid as
though had at a meeting duly held after regular call and notice if a quorum be
present and if, either before or after the meeting, each of the Trustees not
present signs a written waiver of notice, a consent to holding such meeting or
an approval of the minutes thereof. All such waivers, consents, or approvals
shall be filed with the Trust records or made a part of the minutes of the
meeting.
SECTION 13. Adjourned Meeting and Notice Thereof. A majority of the
Trustees present, whether or not a quorum is present, may adjourn any Trustees'
meeting to another time and place. Notice of the time and place of holding an
adjourned meeting need not be given to absent Trustees if the time and place be
fixed at the meeting adjourned. If the meeting is adjourned for more than 24
hours, notice of any adjournment to another time or place shall be given prior
to the time of the adjourned meeting to the Trustees who were not present at
the time of the adjournment.
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SECTION 14. Action Without Meeting. Any action required or permitted
to be taken by the Trustees may be taken without a meeting if all Trustees
shall individually or collectively consent in writing to such action. Such
consent or consents shall have the same effect as a unanimous vote of the
Trustees and shall be filed with the minutes of the proceedings of the
Trustees.
SECTION 15. Inspection Rights. Every Trustee shall have the right at
any reasonable time to inspect and copy all books, records, and documents of
every kind and to inspect the physical properties of the Trust. Such
inspection by a Trustee may be made in person or by agent or attorney and
includes the right to copy and obtain extracts.
SECTION 16. Compensation. Each Trustee shall receive such
remuneration from the Trust for Trustee's services as a Trustee as shall be
fixed from time to time by the Trustees. There shall be no requirement that
each Trustee receive compensation in the same amount.
SECTION 17. Executive Committee. The Trustees shall have power to
appoint and remove from among their own number an Executive Committee of three
(3) or more persons to whom they may delegate such of the powers herein given
to the Trustees as they may deem expedient, except as otherwise provided
herein.
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SECTION 18. Advisory Board. The Trustees may appoint an Advisory
Board. Members of this Board shall not be Trustees or officers of the Trust
but may be shareholders or retired Trustees. They shall be entitled to such
remuneration for their services as the Trustees from time to time deem
appropriate. The Trustees may at any time remove any member of the Advisory
Board and may appoint new or additional members. Any member may resign by
giving notice in writing to the Trustees. The Advisory Board shall consult
with and advise the Trustees as to the investment of the Trust property and
other matters relating to the business and affairs of the Trust. The Advisory
Board shall have no power or authority to make any contract or incur any
liability whatever or to take any action binding upon the Trust, the Trustees,
or the shareholders. The provisions of the Declaration and these Bylaws
relative to the exemption from personal liability of the Trustees, officers,
and agents of the Trust shall apply in all respects to members of the Advisory
Board.
SECTION 19. Reliance on Documents. The Trustees may rely on and
shall be protected in acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, or other paper or
document which they believe to be genuine and to have been signed or presented
by the proper party or parties.
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SECTION 20. No Security Required. Except as required by law or by
any rule or order issued by the Commissioner of Corporations of California
applicable to real estate investment trusts, no Trustee shall be required to
provide a bond, surety, or security to secure the performance of such Trustee's
duties or obligations hereunder.
SECTION 21. Execution of Instruments. All instruments, whether or
not under seal (including, but not limited to, deeds, mortgages, leases,
contracts, bonds, notes, and agreements), may be executed on behalf of the
Trust by any Trustee or agent as shall be authorized by the Trustees herein
provided. Except as otherwise provided for in the Declaration or these Bylaws,
all agreements, obligations, instruments, papers, and actions by, or in the
name of, or on behalf of the Trust shall be made, incurred, executed, signed,
or taken by, or in the name of the Trust, and shall in such cases and in such
manner as the Trustees deem advisable, expressly exempt the Trustees and the
shareholders from personal liability and expressly provide that the Trust
property shall be liable thereunder by reason thereof; provided, however, in
any contract made by the Trustees, or their duly authorized agents, a provision
shall be included eliminating any personal liability of the Trustees or
shareholders by reason of such contract, which provision shall be in
substantially the following form:
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"This contract is made by the undersigned, [name of
Trustee(s)], not individually, but as Trustee(s) under that
certain Restated Declaration of Trust of The Peregrine Real
Estate Trust, and hereby made a part hereof, and is
enforceable only against, and is payable out of, the Trust
property held thereunder, and any and all personal liability
of the Trustee(s), their duly authorized agents, and the
shareholders of said Trust is expressly waived."
SECTION 22. Interested Trustees. No contract or other transaction
between the Trust and any other person, firm, association, or corporation shall
be void or voidable because of the fact that one or more Trustees of the Trust
is a director, partner, or member of, or otherwise interested in or affiliated
with such other person, firm, association, or corporation, provided that such
contract or transaction shall be approved or ratified by the affirmative vote
of a majority of the Trustees who are not so interested at a meeting of the
Trustees, and that the fact of the interest of such interested Trustees shall
be disclosed or known to such approving majority of the Trustees. Any Trustee
so interested present at any meeting of the Trustees may be counted in
determining the existence of a quorum at such meeting, provided, however, that
it is the intent of the Trustees that any
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relationship of any of the Trustees with any independent contractor
dealing with the Trust shall meet the requirements of the Internal Revenue Code
of 1986, as amended, and the regulations promulgated thereunder, and the
requirements set forth in any rule or order issued by the California
Corporations Commissioner relative to real estate investment trusts, in order
that the Trust be treated as a qualified real estate investment trust.
SECTION 23. Powers. Subject to any limitations of the Declaration
and these Bylaws, the business and affairs of the Trust shall be managed by the
Trustees. All Trust powers, including, but not limited to, those powers set
forth in the Declaration and these Bylaws, shall be exercised by or under the
direction of the Trustees. The Trustees may delegate the management of the
day-to- day operation of the business of the Trust to a management company, or,
as provided in Section 18 of this Article III, an Executive Committee, or as
provided in Section 19 of this Article III, an Advisory Board, or other person
or entity provided that the business and affairs of the Trust shall be managed
and all Trust powers shall be exercised under the ultimate direction of the
Trustees.
ARTICLE IV. OFFICERS
SECTION 1. Officers. The officers of the Trust shall be a Chairman
of the Board, a President and Chief Executive Officer, one
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or more Vice Presidents, a Secretary, a Treasurer/Chief Financial
Officer and/or such additional officers or agents as the Trustees may from time
to time determine. The term of office of all officers shall be for such period
of time as the Trustees may determine or until their respective successors are
elected and qualify, but any officer may be removed at any time by the
Trustees. In the absence of designation from time to time of powers and duties
by the Trustees, the officers shall have powers and duties as generally pertain
to their respective offices. Any number of offices may be held by the same
person.
SECTION 2. Election. The officers of this Trust shall be chosen by
the Board of Trustees, and each shall serve at the pleasure of the Board of
Trustees, subject to the rights, if any, of an officer under any contract of
employment. The Chairman of the Board, President and Chief Executive Officer,
Secretary and Treasurer/Chief Financial Officer shall be chosen by the Board of
Trustees annually at its first meeting after the election of Trustees.
SECTION 3. Subordinate Officers. The Trustees may elect, and may
empower the President and Chief Executive Officer to appoint, such other
officers as the business of the Trust may require, each of whom shall hold
office for such period, have such authority, and perform such duties as are
provided in these Bylaws or as the Trustees may from time to time determine.
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SECTION 4. Removal. Subject to the rights, if any, of an officer
under any contract of employment, any officer may be removed, either with or
without cause, by the Board of Trustees. Any officer may resign at any time
upon written notice to the Trustees without prejudice to the rights, if any, of
this Trust under any contract to which the officer is a party.
SECTION 5. Resignation. Any officer may resign at any time by giving
written notice to the Trust, but without prejudice to the rights, if any, of
the Trust under any contract to which the officer is a party. Any such
resignation shall take effect at the date of the receipt of such notice or at
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 6. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in these Bylaws for regular election or appointment to
such office.
SECTION 7. Chairman of the Board. The Chairman of the Board shall be
a member of the Board of Trustees. The Chairman of the Board shall preside at
meetings of the Board of Trustees and the shareholders and shall exercise and
perform such other powers and duties as from time to time may be prescribed by
the Board of Trustees. If there is no President, the Chairman of the Board
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shall, in addition, be the chief executive officer of this Trust and shall have
the powers and duties of the President.
SECTION 8. President and Chief Executive Officer. Subject to such
supervisory powers, if any, as may be given by the Board of Trustees to the
Chairman of the Board, the President and Chief Executive Officer shall be the
chief executive officer of this Trust and shall, subject to the control of the
Board of Trustees, have general supervision, direction and control of the
business and the affairs of this Trust. In the absence of the Chairman of the
Board, the President and Chief Executive Officer shall preside at all meetings
of the shareholders and at meetings of the Board of Trustees. The President
and Chief Executive Officer shall have the general powers and duties of
management usually vested in the chief executive officer of a business entity
and shall have such other powers and duties as from time to time may be
prescribed by the Board of Trustees.
SECTION 9. Vice Presidents. In the absence or disability of the
President and Chief Executive Officer and the Chairman of the Board, the Vice
President or Vice Presidents, if there be such an officer, or officers, in
order of their rank as prescribed by the Board of Trustees, shall perform all
the duties of the President and Chief Executive Officer, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President and Chief Executive Officer. The Vice President(s) shall
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have such other powers and perform such other duties as from time to
time may be prescribed for them, respectively, by the Board of Trustees.
SECTION 10. Secretary. The Secretary shall keep or cause to be kept,
at the principal executive office or such other place as the Board of Trustees
may direct, a book of minutes of all meetings and actions of Trustees,
committees of Trustees, and shareholders, with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice given,
the names of those present at Trustees' meetings or committee meetings, the
number of shares present in person or by proxy at meetings of shareholders, and
the proceedings thereof. The Secretary shall keep, or cause to be kept, at the
principal executive office or at the office of the transfer agent or registrar,
a record of its shareholders, or a duplicate share register, showing the names
of all shareholders and their addresses, the number and classes of shares held
by each, the number and date of share certificates issued, and the number and
date of cancellation of every share certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of the
shareholders and of the Board of Trustees required by the Restated Declaration
of Trust to be given, shall be the custodian of the Trust records of this
Trust, shall keep the seal of this Trust in safe custody, and shall have such
other powers and perform such
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other duties as are usually vested in the office of secretary of a business
entity and as may be prescribed by the Board of Trustees.
SECTION 11. Treasurer/Chief Financial Officer. The Treasurer/Chief
Financial Officer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of the properties and business
transactions of the Trust, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained earnings and shares.
The Trea- surer/Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Trust with such depositaries as
may be designated by the Board of Trustees. The Treasurer/Chief Financial
Officer shall disburse the funds of this Trust as may be ordered by the Board
of Trustees, shall render to the Chairman of the Board, President and Chief
Executive Officer and the Trustees, whenever they request it, an account of all
transactions as Treasurer/Chief Financial Officer and of the financial
condition of this Trust, and shall have other powers and perform such other
duties as are usually vested in the office of chief financial officer of a
business entity and as from time to time may be prescribed by the Trustees.
SECTION 12. Compensation. Subject to the rights, if any, of any
officer under any contract of employment, the compensation of the officers of
this Trust shall be fixed from time to time by the
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Board of Trustees, or by one or more officers of this Trust to the
extent so authorized from time to time by the Board of Trustees.
ARTICLE V. LIMITATION OF LIABILITY
OF SHAREHOLDERS, TRUSTEES AND OTHERS
SECTION 1. Shareholders. All shares shall be non-assessable. The
shareholders shall not be personally liable upon any debt, claim, demand, suit,
judgment, note, or other obligation of the Trust or of the Trustees, in tort,
contract, or otherwise, in connection with Trust property or the affairs of the
Trust, and the Trustees shall have no power to bind the shareholders personally
in any manner whatsoever. The liability of the shareholders shall be limited
to their share of the capital of the Trust and shall not be increased in any
manner. Any amendment to the Declaration or these Bylaws increasing the
liability of the shareholders shall be void. All written contracts to which
the Trust is a party shall include a provision substantially in the form set
forth in Section 21 of Article III of these Bylaws.
SECTION 2. Trustees; Officers; Agents. No Trustee, officer, or agent
of the Trust shall be liable on account of any act or omission of any other
Trustee or agent or representative of the Trust or for their own act, neglects,
and defaults (including without limitation the failure to compel in any way
former or acting Trustee to redress any breach of Trust) to the Trust or to
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any shareholder, Trustee, officer, or agent thereof, except for such of
his own acts as shall constitute bad faith, willful misfeasance, gross
negligence, or reckless disregard of his duties.
SECTION 3. Indemnification. The Trust shall indemnify and hold
harmless each Trustee, officer, and agent from and against all claims and
liabilities to which such trustee, officer, or agent may become subject by
reason of his having been or being a Trustee, officer, or agent, or by reason
of any action alleged to have been taken or omitted by him as Trustee, officer,
or agent and shall reimburse such Trustee for all legal and other expenses
which such Trustee reasonably incurs in connection with any such claim or
liability; provided, however, that no Trustee shall be indemnified or
reimbursed under the foregoing provisions in relation to that Trustee's own act
as shall constitute bad faith, willful misfeasance, gross negligence, or
reckless disregard of that Trustee's duties. The rights accruing to a Trustee,
officer, or agent under these provisions shall not exclude any other right to
which such Trustee may lawfully be entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse such
Trustee, officer, or agent in any proper cause even though not specifically
provided for herein; provided, that no Trustee, officer or agent may satisfy
any right of indemnity or reimbursement granted herein or to which that Trustee
may be otherwise entitled except out of the property of the Trust, and no
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shareholder shall be personally liable with respect to any claim of a Trustee,
officer, or agent for indemnity or reimbursement.
SECTION 4. Insurance. The Trust shall have power to purchase and
maintain insurance on behalf of any agent, Trustee, shareholder, or independent
contractor of the Trust (the "Insured") against any obligation or liability
asserted against or incurred by the Insured in such capacity or arising out of
the Insured's status as such whether or not the Trust would have the power to
indemnify the Insured against such liability under the provisions of this
Article V.
ARTICLE VI. AMENDMENTS
SECTION 1. Amendment by Shareholders. Subject to the Declaration, the
provisions of these Bylaws may be amended or repealed with the vote or written
consent of the shareholders holding a majority of the outstanding shares of
each class of shares entitled to vote.
SECTION 2. Amendment by Trustees. Subject to the Declaration and the
rights of the shareholders as provided in Section 1 of this Article VI, the
provisions of these Bylaws may be amended or repealed by the Trustees.
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ARTICLE VII. MISCELLANEOUS
SECTION 1. Choice of Law. This instrument is by the Trustees and
delivered in the State of California with reference to the laws thereof, and
the rights of all parties, and the construction and effect of every provision
hereof shall be subject to and construed according to the laws of said State.
SECTION 2. Headnotes and Titles. The headnotes and titles of articles
are inserted herein only as a matter of convenience and for reference and in no
way define, limit, or describe the scope or intent of these Bylaws in any
manner whatsoever.
* * * * *
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CERTIFICATE OF SECRETARY OF
THE PEREGRINE REAL ESTATE TRUST
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting secretary of said
Trust; and
(2) That the foregoing Bylaws, comprising twenty-eight (28)
pages, constitute the Bylaws of said Trust as duly adopted by Action by
Unanimous Consent in Writing of the Trustees dated as of September 27, 1994.
IN WITNESS WHEREOF, I have hereunder subscribed my name and
affixed the seal of said Trust.
Dated as of: ___________________________ ____________________________
Arnold E. Brown
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CONFIRMATION BY TRUSTEES OF
THE PEREGRINE REAL ESTATE TRUST
The undersigned, being the Trustees of said Trust hereby assents to
and adopts the foregoing Bylaws of said Trust.
Executed by the undersigned on the date set forth opposite their names.
Dated as of: ____________________________
Dated as of: ____________________________
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EXHIBIT 4.1
ITEM NO. 7.1
SECOND AMENDED AND RESTATED NOTE AGREEMENT
by and among
The Peregrine Real Estate Trust,
formerly known as Commonwealth Equity Trust
and
Noteholders Named Herein
and
The Prudential Insurance Company of America
as Agent for Noteholders
September 27, 1994
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II DEBT RESTRUCTURING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 Debt Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Closing of Debt Restructuring. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 The Notes; Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.5 Note Payments; Prohibition Against Non-Proportional Payments . . . . . . . . . . . . . 15
2.6 Payments Due on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.7 Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.8 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.9 Release or Subordination of Noteholders' Liens Upon Sales or Other Dispositions
of Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.10 Subordination in Connection With New Credit Line . . . . . . . . . . . . . . . . . . . 18
2.11 Notation on Notes; Notification to Accountant and Agent; Accountant's
Calculation of Amounts Owed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.12 Agent's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE III CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.1 Conditions Precedent to Noteholders' Obligations . . . . . . . . . . . . . . . . . . . 18
3.2 Conditions Precedent to Company's Obligations . . . . . . . . . . . . . . . . . . . . 19
3.3 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV WARRANTIES AND REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.1 Legal Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2 Correctness of Collateral Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 Correctness of Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.4 Authorization and Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.6 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.8 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.9 No Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.10 Court Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.11 Permits, Franchise.s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.12 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.13 Compliance With Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.14 Executive Offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.15 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE V AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 Punctual Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 Compliance with Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.3 Reporting Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.4 Communication with Accountants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.5 Right of Access and Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.6 Maintenance of Existence and Conduct of Business. . . . . . . . . . . . . . . . . . . 29
5.7 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.8 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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5.9 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.10 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.11 Payment of Tax Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.12 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.13 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VI NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1 Mergers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.2 Loans, Advances, Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.3 Name Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.4 Dividends, Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.5 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.6 Sales of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.7 Purchase Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.8 Real Property Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.9 Notes Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.10 Prohibited Payments on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.11 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.12 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.13 Cancellation of Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.14 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.15 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII EVENTS OF DEFAULT; RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . 35
7.1 Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.2 Cross-Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.3 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.4 Waivers by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.5 Right of Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VIII MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.1 Complete Agreement; Transferability. . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.2 Professional Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.3 Noteholders' Action; Modification Under and of Documents . . . . . . . . . . . . . . . 42
8.4 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.5 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.6 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.7 Form, Registration, Transfer and Exchange of Notes; Lost Notes . . . . . . . . . . . . 45
8.8 Persons Deemed Owners; Participations . . . . . . . . . . . . . . . . . . . . . . . . 46
8.9 Parties; No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . . 46
8.10 Disgorgement; Revival of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . 47
8.11 Conflict of Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.12 Governing Law; Consent to Jurisdiction and Venue. . . . . . . . . . . . . . . . . . . 47
8.13 MUTUAL WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.14 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.15 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.16 Section Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.17 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.18 Further Assurances; Execution of Notes for Assignees. . . . . . . . . . . . . . . . . 49
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8.19 No Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.20 No Personal Liability of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.21 Understanding of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
TABLE OF SCHEDULES AND EXHIBITS TO SECOND AMENDED AND RESTATED NOTE AGREEMENT . . . . . . . . . . . 53
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SECOND AMENDED AND RESTATED NOTE AGREEMENT
This Second Amended and Restated Note Agreement (this
"Agreement") is made as of September 27, 1994, by and among The Peregrine Real
Estate Trust, formerly known as Commonwealth Equity Trust ("Company"), those of
the following note purchasers who execute and deliver this Agreement and the
Intercreditor Agreement of even date herewith: Pacific Mutual Life Insurance
Company, The Prudential Insurance Company of America, Pruco Life Insurance
Company, ORIX USA Corporation, TCW Special Credits Fund IV, TCW Special Credits
Plus Fund, TCW Special Credits Trust IV, TCW Special Credits Trust IVA, and
Weyerhaeuser Company Master Retirement Trust (each individually, a "Noteholder"
and collectively, "Noteholders") and The Prudential Insurance Company of
America, as Agent for Noteholders (in such capacity, "Agent").
RECITALS
A. Noteholders, or their respective predecessors in interest, are
parties to an Amended and Restated Note Agreement dated July 17, 1992 (as
amended, supplemented, or otherwise modified from time to time prior to the
date hereof, the "Existing Note Agreement"), pursuant to which Company issued
certain notes and Noteholders purchased such notes (the "Existing Notes")
secured by perfected liens upon substantially all of the assets of Company;
B. On August 2, 1993, Company filed a petition under Chapter 11
of Title 11 of the United States Code and such chapter 11 case is pending in
the United States Bankruptcy Court for the Eastern District of California as
Chapter 11 Case No. 93-26727-C11 (the "Chapter 11 Case").
C. Company, Noteholders, the Official Committee of Unsecured
Creditors, and the Official Committee of Equity Security Holders have filed a
joint Plan of Reorganization in the Chapter 11 Case (the "Plan"); and
D. In connection with and as provided under the Plan, Company,
Noteholders and Agent have agreed (i) that certain of the respective claims of
Noteholders in the Chapter 11 Case will be satisfied and discharged by
converting such claims into amounts outstanding under this Agreement pursuant
to the terms and conditions set forth herein and (ii) that Company shall
reaffirm the grant of liens and security interests in the Collateral made in
connection with the Existing Note Agreement and grant additional liens and
security interests in the Collateral in connection with this Agreement such
that Company shall have granted liens and security interests in substantially
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all of its assets to Collateral Agent (as hereinafter defined) for the benefit
of Noteholders.
ARTICLE I
DEFINED TERMS
Terms Defined in this Agreement. As used in this Agreement,
the following terms shall have the meanings set forth below.
1.1 "Accountant" means Ernst & Young, or any other accountant or
financial advisor retained by Agent or Noteholders and designated as Accountant
hereunder.
1.2 "Affiliate" means (i) CalREIT; (ii) any person or entity
(other than Company or Noteholders) that directly or indirectly owns or
controls five percent (5%) or more of the voting shares of Company or CalREIT;
(iii) any person or entity, five percent (5%) or more of whose voting shares or
partnership equity interests is directly or indirectly owned or controlled by
Company or CalREIT; (iv) any general partnership or limited partnership in
which Company or CalREIT is a general partner; (v) any present or former
advisor, officer, or former property manager of Company or CalREIT; (vi) any
person or entity five percent (5%) or more of whose shares or partnership
equity interests is directly or indirectly owned or controlled by Company,
CalREIT or any of the persons or entities described in clause (v), above; and
(vii) any person or entity that directly or indirectly owns or controls five
percent (5%) of any entity described in clause (v), above.
1.3 "After Acquired Property" means real property or fixtures
acquired by Company on or after entry of the Confirmation Order, to the extent
that the purchase money for such property consists solely of the proceeds of
any equity offering, unsecured financing (other than the New Line of Credit),
or Purchase Money Lien on such property.
1.4 "Agent" has the meaning set forth in the preamble and any
successor Agent as provided in the Intercreditor Agreement.
1.5 "Agent's Fee" has the meaning assigned to it in SECTION 2.12.
1.6 "Agreement" means this Second Amended and Restated Note
Agreement, including all amendments, modifications and supplements hereto.
1.7 "Allowed Secured Real Property Tax Claim" shall have the
meaning assigned it in the Plan.
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1.8 "Available Cash Flow" means, with respect to Company for any
fiscal period, EBITDA minus (i) taxes; and (ii) Capital Expenditures in each
case actually due or paid during such fiscal period.
1.9 "Bankruptcy Code" means the United States Bankruptcy Code, 11
U.S.C. Section 101 et seq.
1.10 "Bankruptcy Court" means the United States Bankruptcy Court
for the Eastern District of California.
1.11 "Bankruptcy Law" has the meaning assigned to it in SECTION
7.1(h).
1.12 "Business Day" means any day other than a Saturday, Sunday, or
any day appointed as a holiday by the President or the Congress of the United
States, or by the State of California.
1.13 "CalREIT" means California Real Estate Investment Trust, a
California real estate investment trust.
1.14 "Capital Expenditures" means, as to Company, any expenditure
for the acquisition or construction of fixed assets which would be capitalized
on a balance sheet of Company prepared in accordance with generally accepted
accounting principles, including deferred maintenance charges and tenant
improvements or leasing commissions (whether in connection with a new lease or
with an existing lease).
1.15 "Capitalized Lease" means any lease of property by Company as
lessee which would be capitalized on a balance sheet of Company prepared in
accordance with generally accepted accounting principles.
1.16 "Cash Equivalents" means (a) securities issued, guaranteed or
insured by the United States of America or any of its agencies with maturities
of not more than one year from the date acquired, (b) certificates of deposit
with maturities of not more than one year from the date acquired that have been
issued by a federal or state chartered commercial bank of recognized standing,
which bank has capital and unimpaired surplus in excess of $500,000,000, based
on its most recent publicly available financial statements, and (c) commercial
paper or finance company paper issued by any entity incorporated under the laws
of the United States of America or any state thereof and having a rating of at
least A-1 or the equivalent by Standard & Poor's Corp. or at least P-1 or the
equivalent by Moody's Investors Service, Inc., in each case with maturities of
not more than 60 days from the date acquired.
1.17 "Chapter 11 Case" has the meaning assigned to it in Recital B.
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1.18 "Closing" has the meaning assigned to it in SECTION 2.2.
1.19 "Closing Date" means the first date on which (i) Company and
each Noteholder have executed and delivered this Agreement and (ii) all
conditions precedent under Article III hereof have been fully satisfied, waived
or deferred.
1.20 "Collateral" means all of Company's now existing or hereafter
arising interest, however such interest may arise (including but not limited to
interests acquired by Company as a result of any merger, acquisition, tender
offer, or other business combination with CalREIT, regardless of whether
Company or CalREIT is the surviving entity) in any and all real or personal
property, including, without limitation, (a) all real property and fixtures
encumbered by the Deeds of Trust, and (b) all personal property described in
the Pledge and Security Agreement, including all personal property described in
the Description of Collateral attached as EXHIBIT ___ to the Pledge and
Security Agreement, provided that Collateral shall not include any After
Acquired Property.
1.21 "Collateral Agent" means Collateral Agent under and as defined
in the Collateral Agent Agreement, or any person or entity that becomes a
successor Collateral Agent pursuant to the terms thereof.
1.22 "Collateral Agent Agreement" means the Amended and Restated
Collateral Agent Agreement dated as of September 27, 1994, by and among
Collateral Agent, Agent and Noteholders.
1.23 "Company" means Commonwealth Equity Trust, a California Real
Estate Investment Trust, as reorganized pursuant to the Plan.
1.24 "Confirmation Order" means the order of the Bankruptcy Court
confirming the Plan pursuant to section 1129 of the Bankruptcy Code entered by
the Bankruptcy Court on August 8, 1994.
1.25 "Consultant" means Ernst & Young, or any other consultant or
real estate advisor retained by Agent or Noteholders, or by any agent of Agent
or Noteholders.
1.26 "Contingent Obligations" shall mean, as to any person or
entity, collectively, all indebtedness, obligations or other liabilities of
such person or entity guarantying or in effect guarantying the payment or
performance of any indebtedness, obligation or other liability, whether or not
contingent (collectively, the "primary obligations"), of any other person or
entity (the "primary obligor") in any manner, whether directly or indirectly,
including without limitation any indebtedness,
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obligation or other liability of such person or entity (a) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds, (c) to purchase property, securities
or services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation, or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss with respect thereto.
1.27 "Deeds of Trust" means the deeds of trust and modifications
thereto described in Item No. 7.4 of the Schedule of Documents, including all
amendments, modifications and supplements thereto and any appendices, exhibits
or schedules to any of the foregoing.
1.28 "Default" means an event or condition the occurrence of which
would, with the giving of notice or the lapse of time or both, become an Event
of Default.
1.29 "Default Rate" means a rate of interest equal to the greater
of: (a) a rate equal to the Prime Rate plus two percent (2%) per annum, and
(b) ten and one-half percent (10.5%) per annum; provided that to the extent the
Default Rate exceeds the Maximum Lawful Rate, the Default Rate shall be a rate
equal to the Maximum Lawful Rate.
1.30 "Documents" means the Agreement, the Notes, Pledge and
Security Agreement, Deeds of Trust, financing statements, schedules, and all
other agreements, notices, endorsements, title policies, and other documents
executed and delivered pursuant to the Schedule of Documents relating to this
Agreement, including without limitation those documents listed in Sections 2.1,
2.2, 2.5, 2.6, 3, 5, 6, 7 and 10 of the Schedule of Documents, or this
Agreement, the other documents, instruments and agreements referred to therein
or executed in connection therewith, including all amendments, modifications
and supplements hereto and any appendices, exhibits or schedules to any of the
foregoing.
1.31 "EBITDA" means, with respect to Company, for any fiscal period
(i) income before interest and taxes, plus (ii) to the extent deducted in
determining such income, depreciation, amortization and other similar non-cash
charges, minus (iii) to the extent recognized in determining such income,
extraordinary gains, in each case for such fiscal period.
1.32 "Effective Date of Plan" means the Effective Date as defined
in the Plan.
1.33 "Environmental Laws" means all federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in
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effect, and in each case as amended or supplemented from time to time, and any
applicable judicial or administrative interpretation thereof relating to the
regulation and protection of human health, safety, the environment and natural
resources (including ambient air, surface water, groundwater, wetlands, land
surface or subsurface strata, wildlife, aquatic species and vegetation).
Environmental Laws include, but are not limited to, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Section Section 9601 et seq.) ("CERCLA"); the Hazardous Material
Transportation Act, as amended (49 U.S.C. Section Section 1801 et seq.); the
federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C.
Section Section 136 et seq.); the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Section Section 6901 et seq.) ("RCRA"); the Toxic Substance
Control Act, as amended (15 U.S.C. Section Section 2601 et seq.); the Clean
Air Act, as amended (42 U.S.C. Section Section 740 et seq.); the federal Water
Pollution Control Act, as amended (33 U.S.C. Section Section 1251 et seq.);
the Occupational Safety and Health Act, as amended (29 U.S.C. Section Section
651 et seq.) ("OSHA"); the Safe Drinking Water Act, as amended (42 U.S.C.
Section Section 300(f) et seq.); the Safe Drinking Water and Toxic Enforcement
Act of 1986 (Cal. Health & Saf. Code Section Section 25249.5 et seq.); and
the Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section
Section 11001 et seq.), each as amended or supplemented from time to time, and
any and all regulations promulgated thereunder, and all analogous state and
local counterparts or equivalents and any transfer of ownership notification or
approval statutes.
1.34 "ERISA" means the Employee Retirement Income Security Act of
1974 (or any successor legislation thereto), as amended from time to time, and
regulations promulgated thereunder.
1.35 "ERISA Affiliate" means any person or entity who (i) for
purposes of Title IV of ERISA is a member of Company's controlled group, or
(ii) may be treated as a single employer together with Company within the
meaning of section 414(b)(c)(m) or (o) of the Internal Revenue Code and the
regulations promulgated and rulings issued thereunder.
1.36 "Event of Default" means any of the events specified in
SECTION 7.1.
1.37 "Excess Cash Flow" means, with respect to Company for any
fiscal period, EBITDA minus (i) Interest Expense, (ii) taxes, and (iii) Capital
Expenditures, in each case actually due or paid during such fiscal period.
1.38 "Existing Indebtedness" means the obligations of Company to
Noteholders under the Existing Note Agreement and the other documents executed
in connection therewith.
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1.39 "Existing Note Agreement" has the meaning assigned to it in
Recital A.
1.40 "Existing Notes" has the meaning assigned to it in Recital A.
1.41 "Florin-Perkins Bond Claims" means all such claims listed in
the Plan.
1.42 "Florin-Perkins Properties" has the meaning assigned to it in
the Plan.
1.43 "Hazardous Material" means any substance, material or waste,
the generation, handling, storage, treatment or disposal of which (i) is
regulated by any governmental authority in any jurisdiction in which Company
has owned, leased, or operated real property, or by any federal governmental
authority, or (ii) forms the basis of liability under any Environmental Law,
including any material or substance which is (a) defined as a "solid waste,"
"hazardous waste," "hazardous material," "hazardous substance," "extremely
hazardous waste" or "restricted hazardous waste" or other similar term or
phrase under any Environmental Laws, or (b) petroleum or any fraction or
by-product thereof, asbestos, polychlorinated biphenyls, or radioactive
substances.
1.44 "Indebtedness" of any person or entity means: (a)
indebtedness for borrowed money or for the deferred purchase price of property
or services (including reimbursement and all other indebtedness with respect to
surety bonds, letters of credit and bankers' acceptances), whether or not
matured; (b) all indebtedness evidenced by notes, bonds, debentures or similar
instruments; (c) all indebtedness referred to in clauses (a) or (b) above that
are secured by (or for which the holder of such indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
owned by such person or entity, even though such person or entity has not
assumed or become liable for the payment of such Indebtedness; (d) Contingent
Obligations; and (e) obligations under Capitalized Leases.
1.45 "Intercreditor Agreement" means the Intercreditor Agreement, of
even date herewith, by and among Agent and Noteholders, including all
amendments, modifications and supplements thereto and any appendices, exhibits
or schedules to any of the foregoing.
1.46 "Interest Deferral Notes" means the promissory notes to be
delivered by Company to each Noteholder pursuant to SECTION 2.3.
1.47 "Interest Expense" means, for each fiscal period, Company's
interest expense on Indebtedness due during such period
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which should be reported on Company's financial statements prepared in
accordance with generally accepted accounting principles.
1.48 "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time.
1.49 "Lien" means any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any agreement to give any of the foregoing, any conditional sale or
other title retention agreement or financing lease having substantially the
same economic effect as any of the foregoing, and the filing of, or agreement
to give, any financing statement perfecting a security interest under the
Uniform Commercial Code or comparable law of any jurisdiction) or any other
type of similar preferential arrangement for the purpose, or having the effect,
of protecting a creditor against loss or securing the payment or performance of
an obligation.
1.50 "Majority Noteholders" means Noteholders holding at least
fifty-one percent (51%) of the Pro Rata Share.
1.51 "Material Adverse Effect" means (a) a material adverse effect
on (i) the business, assets, operations, prospects or financial or other
condition of Company, individually or of Company and CalREIT, on a consolidated
basis; (ii) the ability of Company to pay or perform the Obligations under the
Documents; (iii) the Collateral or Noteholders' Liens on the Collateral or the
priority of any such Lien; or (iv) Noteholders' rights and remedies under this
Agreement and the other Documents, or (b) the incurrence by Company or CalREIT
of any liability, contingent or liquidated, that has an actual or estimated
incurrence of liability, or dollar exposure or loss, greater than $1,000,000 to
Company or to Company and CalREIT, on a consolidated basis, which loss or
liability would not be reflected on Company's or CalREIT's respective income
statement.
1.52 "Maturity Date" means October 1, 2000.
1.53 "Maximum Lawful Rate" means the highest rate of interest
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable under this Agreement.
1.54 "Minimum Noteholders" shall mean Noteholders holding at least
twenty-five percent (25%) of the Pro Rata Share.
1.55 "Mortgaged Property" means all of the land, improvements,
fixtures and personal property described in any of
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the Deeds of Trust. "Mortgaged Properties," means all of the land,
improvements, fixtures and personal property described in all of the Deeds of
Trust.
1.56 "Net Cash Proceeds" means, (a) with respect to the sale or
refinancing of any asset, all cash payable to Company as a result of such sale
or refinancing after payment of (i) all reasonable and customary closing costs
not payable to Company or any Affiliate or insider of Company, including,
brokerage commissions, appraisal fees, recording fees, attorneys' fees, title
insurance premiums, inspection report charges, prepayment penalties payable to
senior lienholders, escrow credits in favor of the purchaser or financier,
customary prorations, transfer taxes, escrow fees, points and other loan fees,
(ii) Senior Permitted Liens on such asset, (iii) Allowed Secured Real Property
Tax Claims on such asset, (iv) permitted deposits into the Tax Reserve Account
and (v) any and all fees incurred by Agent, Collateral Agent and Noteholders in
connection with such sale or refinancing, and (b) with respect to the grant by
Company of an option to purchase real property at the time such funds are not
refundable by CET, all cash payable to Company as a result of such grant after
payment of all reasonable and customary closing costs not payable to Company or
any Affiliate or insider of Company.
1.57 "Net Worth" means, as to any person or entity, the gross book
value of the assets of such person or entity (exclusive of goodwill, patents,
trademarks, trade names, organization expense, treasury shares, debt discount
and expense, deferred charges and other like intangibles), minus (i) reserves
applicable thereto, and (ii) all of such person's or entity's liabilities
(including accrued and deferred income taxes).
1.58 "New CET Common Stock" means the New CET Common Stock defined
in and issued pursuant to the Plan.
1.59 "New CET Unsecured Notes" means the New CET Unsecured Notes
defined in and issued pursuant to the Plan.
1.60 "New Credit Line" means the line of credit to be provided to
Company in accordance with the Plan on or after the Effective Date of the Plan,
which shall be in an amount of no more than $10 Million.
1.61 "New Kroeger Note" means the New Kroeger Note as defined in
and issued pursuant to the Plan.
1.62 "Noteholder" has the meaning set forth in the preamble and all
assignees or transferees of any such Noteholder.
1.63 "Noteholders' Action" shall mean any action, consent,
instruction, notice, declaration which may be taken under the
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Documents by the appropriate percentage of Noteholders as provided in SECTION 8
of the Intercreditor Agreement and SECTION 8.3 of this Agreement to instruct
Agent or Collateral Agent, to amend any Document, to consent or refuse to
consent to any Company request, or to take any other action with respect to the
Documents, the Collateral, or the Obligations.
1.64 "Notes" means the Principal Notes and the Interest Deferral
Notes.
1.65 "Notes Receivable" shall have the meaning set forth in
SECTION 2.8(c).
1.66 "Notice of Acceleration" means a written notice sent to
Company pursuant to SECTION 7.1, accelerating the Obligations.
1.67 "Notice of Default" means a written notice sent to Company
notifying Company that an Event of Default has occurred.
1.68 "Obligations" means all loans, advances, debts, liabilities,
and obligations, for monetary amounts (whether or not such amounts are
liquidated or determinable) owing by Company to Agent, Collateral Agent, or any
Noteholder, and all covenants and duties regarding such amounts, of any kind or
nature, present or future, whether or not evidenced by any note, agreement or
other instrument, arising under the Notes, this Agreement or any of the other
Documents. This term includes, without limitation, all principal, interest,
fees, charges, reimbursable expenses, attorneys' fees and costs, accounting
fees and costs, consultants' and advisors' fees and expenses, and any other sum
chargeable to Company under any of the Documents.
1.69 "Pacific Palisades Property" means the property located at 881
Alma Real Drive in Pacific Palisades, California.
1.70 "Permitted Liens" means: (a) Liens for taxes or assessments
or other governmental charges or levies, either not yet due and payable, or
payment of which is provided by the Plan; (b) inchoate and unperfected
workers', mechanics', suppliers' or similar Liens arising in the ordinary
course of business; (c) zoning restrictions, easements, licenses, or other
restrictions on the use of real property, leases, or leasehold estates, or
other minor irregularities in title (including leasehold title) thereto, so
long as the same do not materially impair the use, value, or marketability of
such real property, leases or leasehold estates; (d) Senior Mortgage Liens
against the real property of Company; (e) Permitted Liens under and as defined
in the Deeds of Trust; and (f) Liens securing Indebtedness permitted under
SECTIONS 6.5(a), (d), (e), (f), (g) AND (i) AND SECTION 6.8, to the extent, in
each case, Noteholders consent to the pledge of the property securing such
Indebtedness.
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1.71 "Plan" has the meaning assigned to it in Recital C.
1.72 "Pledge and Security Agreement" means the Amended and Restated
Pledge and Security Agreement to be executed by Company in favor of Collateral
Agent, for the benefit of Noteholders, including all amendments, modifications
and supplements thereto and any appendices, exhibits or schedules to any of the
foregoing.
1.73 "Pledged Property" means the Pledged Property under and as
defined in the Pledge and Security Agreement.
1.74 "Prime Rate" means the prime rate (for corporate loans at
large United States money center commercial banks) published in the Western
Edition of The Wall Street Journal. In the event the Western Edition of The
Wall Street Journal is no longer published or no longer publishes such prime
rate, Noteholders shall select a comparable reference.
1.75 "Principal Notes" means the promissory notes to be delivered
by Company to each Noteholder pursuant to SECTION 2.2 and which may be
delivered in exchange for Interest Deferral Notes and Principal Notes pursuant
to SECTION 2.3(c).
1.76 "Pro Rata Share" means as of any date of determination the
ratio (expressed as a percentage) of (a) the principal balance of the Principal
Notes and Interest Deferral Notes, if any, held by any Noteholder or
Noteholders, as the case may be, to (b) the aggregate outstanding principal
balance of all Principal Notes, plus the aggregate outstanding principal
balance of all Interest Deferral Notes, if any.
1.77 "Purchase Money Lien" means any Lien on property, to the
extent that such Lien is (a) taken or retained by the seller of such property
to secure all or part of its purchase price, or (b) taken by any person or
entity who by making advances or incurring obligations gives value to Company
to enable Company to acquire rights in such property if such value is in fact
so used.
1.78 "Redding Hotel Improvement Loan" means the Redding Hotel
Improvement Loan under and as defined in the Plan.
1.79 "Refinancing Indebtedness" has the meaning set forth in
SECTION 6.8.
1.80 "Responsible Officer" means the chief executive officer, chief
operating officer, chief accounting officer, chief financial officer or any
other officer of Company principally involved in the financial administration
of Company.
1.81 "Schedule of Documents" means the list of all documents, to be
executed or delivered on or before the Closing
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Date in connection with this Agreement, a copy of which is attached hereto as
EXHIBIT A.
1.82 "Schedules" means all of the schedules listed in Part 6 of the
Schedule of Documents, together with all amendments thereto and all updates or
supplementary schedules delivered to Agent, Collateral Agent or Noteholders
after the Closing Date.
1.83 "Senior Mortgage Liens" means the Liens securing the Senior
Mortgages under and as defined in the Plan, and any Lien securing permitted
Refinancing Indebtedness.
1.84 "Senior Permitted Liens" means any Permitted Lien that is
senior to the Lien of Collateral Agent on any Collateral.
1.85 "Subsidiary" shall mean any entity, including CalREIT, of
which an aggregate of more than 50% of the outstanding stock having ordinary
voting power to elect a majority of the board of directors of such entity is at
the time, directly or indirectly, through one or more intermediaries or both,
owned legally or beneficially by Company.
1.86 "Systems Integrators Buildings" means the property located at
3755 N. Freeway Boulevard and 3900 Lanane Drive, each in Sacramento,
California.
ARTICLE II
DEBT RESTRUCTURING
2.1 Debt Restructuring. Effective on the Closing Date, the
Existing Indebtedness shall be restructured on the terms set forth in this
Agreement and the other Documents. Company and Noteholders acknowledge and
agree that, as of the Closing Date, Company is indebted to each Noteholder in
the principal amount set forth opposite the name of each Noteholder in SECTION
2.2, and in the aggregate principal amount of $40,000,000.
2.2 Closing of Debt Restructuring. The closing of the
restructuring of the Existing Indebtedness (the "Closing") shall take place
within three (3) Business Days after the Effective Date of Plan or such date as
each Noteholder shall agree in writing. At the Closing, in exchange for the
Existing Notes, Company shall execute and deliver to each Noteholder one or
more promissory notes, in the form of the secured promissory note attached
hereto as EXHIBIT B in the principal amounts set forth opposite each
Noteholder's name listed below (each of which shall be a "Principal Note").
<TABLE>
<S> <C>
Pacific Mutual Life Insurance Company: $10,652,463
The Prudential Insurance Company of America: $ 3,249,001
</TABLE>
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<PAGE> 17
<TABLE>
<S> <C>
The Prudential Insurance Company of America: $ 3,408,788
Pruco Life Insurance Company: $ 3,994,674
ORIX USA Corporation: $ 1,597,870
TCW Special Credits Fund IV: $ 4,958,189
TCW Special Credits Plus Fund: $ 5,300,134
TCW Special Credits Trust IV: $ 4,274,301
TCW Special Credits Trust IVA: $ 1,025,832
Weyerhaeuser Company Master Retirement Trust: $ 1,538,748
</TABLE>
2.3 The Notes; Interest.
(a) The Principal Notes. The Principal Notes delivered at
the Closing shall be dated the Closing Date, shall mature on the Maturity Date
and shall bear interest on the unpaid balance thereof from the date thereof
until the principal thereof shall have become due and payable at a rate of 8.5%
per annum and, on overdue payments, at the Default Rate, all as specified
below.
(b) Payment of Interest; Interest Deferral Notes.
Interest on the Notes is payable quarterly commencing October 1, 1994.
Interest shall be computed on the basis of a 360 day year/actual days elapsed.
From October 1, 1994 to and including September 30, 1996, unless an Event of
Default has occurred and is continuing, Company may, in lieu of paying interest
on the Notes in cash, execute and deliver to each Noteholder on or before any
interest payment date, one or more promissory notes in the form of the secured
promissory note attached hereto as EXHIBIT C (each of which shall be an
"Interest Deferral Note") in a principal amount equal to the sum of interest
due to such Noteholder on such interest payment date and maturing on the
Maturity Date. Each Interest Deferral Note shall bear interest at a rate of
8.5% per annum and, on overdue payments, at the Default Rate as provided in
SECTION 2.3(D). If on any interest payment date Company elects to deliver
Interest Deferral Notes to any Noteholder, Company shall deliver Interest
Deferral Notes to all Noteholders and shall not pay cash interest to any
Noteholder. From and after October 1, 1996, interest on the Notes shall be
payable only in cash.
(c) Permitted Issuance of New Notes. From and after
October 1, 1996, at each Noteholder's election, each Noteholder may request
that Company, in exchange for the Principal Notes and
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<PAGE> 18
Interest Deferral Notes held by such Noteholder, execute new Notes, the
principal amount of which shall be the aggregate principal amounts due under
the Principal Notes and Interest Deferral Notes in the form attached hereto as
EXHIBIT D (each of which shall be a "Principal Note"). Each Noteholder shall
notify Agent in writing of such election and its receipt of such Principal
Note. Such Notes shall have the same payment terms provided in SECTION 2.3(b),
provided that interest on such Notes shall be payable only in cash.
(d) Default Interest. From and after the occurrence of
any Event of Default (including but not limited to any Event of Default
resulting from the filing of a bankruptcy case) and continuing until such Event
of Default is cured or has been waived in writing by Agent, at Noteholders'
option pursuant to SECTION 8.3, interest shall accrue on the Obligations at the
Default Rate. Any interest, reasonable professional fees and expenses of Agent
and Collateral Agent, or other reasonable professional fees, expenses and
charges of Noteholders due under SECTION 8.2, which are not paid as and when
due, shall be added to principal, shall be secured by the Collateral and shall,
at Noteholders' option, bear interest at the Default Rate. The foregoing
interest rate increase shall take effect immediately upon Noteholders' election
made at any time following the occurrence of an Event of Default, without prior
notice to Company.
2.4 Prepayments. The Notes shall be subject to prepayment as set
forth below.
(a) Optional Prepayments. The Notes may be prepaid (i)
without discount, penalty or premium and (ii) (A) in whole at any time or (B)
from time to time in part in multiples of $1,000,000, at the option of Company,
plus interest accrued thereon to the prepayment date.
(b) Mandatory Payments. Company shall immediately pay to
Agent for the benefit of Noteholders (i) eighty percent (80%) of the Net Cash
Proceeds of (A) any sale of Collateral under and as permitted by SECTION 6.6,
(B) any grant of an option to purchase Collateral under and as permitted by
SECTION 6.7, (C) any Refinancing Indebtedness incurred under and as permitted
by SECTION 6.8, (D) any new financing or refinancing secured by a lien on the
Collateral, and (E) any principal payment or prepayment on account of any Note
Receivable; and (ii) eighty percent (80%) of any CalREIT dividends other than
dividends derived from CalREIT's net income plus depreciation minus Capital
Expenditures and principal payments on Indebtedness of CalREIT; provided, that
Company shall retain a portion of Net Cash Proceeds sufficient, in Company's
reasonable business judgment, to satisfy any federal, state, or local tax
liability of Company arising from any such asset disposition. Any excess of
such
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retained funds remaining after payment of all such tax liabilities shall be
deemed Net Cash Proceeds, eighty percent (80%) of which shall be paid to
Noteholders as provided herein.
(c) Notice of Prepayment. Company shall give Agent and
each Noteholder irrevocable written notice of any prepayment pursuant to
SECTION 2.4 not less than five (5) Business Days prior to the prepayment date,
specifying such prepayment date and the principal amount of the Notes to be
prepaid on such date and stating that such prepayment is to be made pursuant to
SECTION 2.4. Notice of prepayment having been given as aforesaid, the
principal amount of the Notes specified in such notice, together with interest
thereon to the prepayment date, shall become due and payable on such prepayment
date.
(d) Payment Obligations Not Excused. Company's use of
Net Cash Proceeds from the sale or refinancing of any Mortgaged Property, Note
Receivable or Pledged Property shall not excuse, defer or delay Company's
obligations to make any payments required under this Agreement, the Notes or
the other Documents.
2.5 Note Payments; Prohibition Against Non-Proportional Payments.
(a) Payments. Company agrees that, so long as any holder
shall hold any Note and any Obligations are outstanding under the Documents, it
will make payments of principal of, and interest on such Note or payments with
respect to any other Obligations, which comply with the terms of this
Agreement, by wire transfer of immediately available funds for credit (not
later than 12:00 noon, California time, on the date due) to such Noteholder's
account as specified in the Schedule of Notices, or such other account or
accounts in the United States as such Noteholder may designate in writing,
notwithstanding any contrary provision herein or in any Note with respect to
the place of payment.
(b) Prohibition Against Non-Proportional Payments.
Company shall not, and shall not permit any Subsidiary to, prepay or otherwise
retire in whole or in part prior to or at their stated final maturity or
purchase or otherwise acquire, directly or indirectly, Notes held by any holder
unless Company or any Subsidiary shall have offered to pay, prepay or otherwise
retire or purchase or otherwise acquire, as the case may be, the same
proportion of the aggregate principal amount of the Notes held by each other
holder of Notes at the time outstanding upon the same terms and conditions.
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2.6 Payments Due on Non-Business Days. Anything in this Agreement
or the Notes to the contrary notwithstanding, any payment on the Notes or any
of the other Obligations that is due on a date other than a Business Day shall
be made on the next succeeding Business Day. If the date for any payment is
extended to the next succeeding Business Day by reason of the preceding
sentence, the period of such extension shall be included in the computation of
the interest payable on such Business Day.
2.7 Application of Payments.
All payments, other than regularly scheduled interest
payments, (including, without limitation, prepayments) on the Notes or on any
of the other Obligations shall be made to Noteholders or Agent, as the case may
be, for application against Company's then due Obligations as follows
(regardless of how each Noteholder may treat such payments for purposes of its
own accounting): first to outstanding fees, expenses or other charges of
Agent, Noteholders or Collateral Agent under this Agreement or any other
Document to the extent payable by Company; second to interest on any Interest
Deferral Notes accrued and unpaid prior to the date such funds are received by
Noteholders; third to the principal balance on the Interest Deferral Note;
fourth to interest accrued and unpaid on the Principal Notes at the time such
funds are received by Noteholders; and fifth to the principal balance of the
Principal Notes.
2.8 Collateral.
(a) General. To secure the payment and performance of
the Obligations, Company shall grant to Collateral Agent for the benefit of
Noteholders a Lien on all of the Collateral, which shall be evidenced and
perfected by and subject to the terms of such Documents as each Noteholder
shall reasonably require.
(b) Deeds of Trust. Without limiting the generality of
SECTION 2.8(a), above, Company shall execute Deeds of Trust, in form and
substance reasonably satisfactory to Collateral Agent for the benefit of
Noteholders, encumbering all Company's now existing or hereafter arising
interest in land, improvements, fixtures and related property, other than After
Acquired Property. Notwithstanding the provisions of this SECTION 2.8(b),
Noteholders may, in their sole discretion, instruct Collateral Agent in writing
not to take a Lien against one or more properties owned by Company, or to
reconvey its Lien against one or more of such properties after the Closing
Date.
(c) Notes Receivable. Without limiting the generality of
SECTION 2.8(a), above, Company shall grant a security interest in, assign,
endorse, and pledge to Collateral Agent for the benefit of Noteholders all of
Company's interest in any notes, instruments, and documents, and all
receivables and rights to
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payment evidenced thereby, together with all leases, master leases, trust
deeds, mortgages, rent assignments, guaranties, and contingent obligations to
which Company may look for payment therefor, and other collateral or security
for any of the foregoing (collectively, "Notes Receivable") in which Company is
the original obligee or is the assignee or pledgee of such Note Receivable.
Company shall execute a Pledge and Security Agreement in form and substance
satisfactory to Noteholders to evidence the foregoing pledge and shall deliver
physical possession of all original Notes Receivable to Collateral Agent.
(d) Investments and Partnerships. Without limiting the
generality of SECTION 2.8(a), above, Company shall assign to Collateral Agent
for the benefit of Noteholders for security purposes all of Company's interest
in any partnership in which Company is a general partner or holds a substantial
limited partner interest (as determined by Noteholders), together with
Company's interest in CalREIT. Company shall execute such documents, Uniform
Commercial Code financing statements, instruments and agreements as Collateral
Agent, Agent and/or Noteholders may require in order to evidence and perfect
the foregoing assignments, all in form and substance satisfactory to
Noteholders.
(e) CalREIT Distributions. Company acknowledges and
agrees that all dividends (whether in stock, cash or other property),
distributions, and payments or rights to payment received or receivable from
CalREIT on account of Company's equity interest therein constitute a part of
the Collateral, subject to the security interest in favor of Collateral Agent.
2.9 Release or Subordination of Noteholders' Liens Upon Sales
or Other Dispositions of Collateral.
(a) Upon consummation of any sale of any Collateral and
the satisfaction of all conditions to such sale provided by SECTION 6.6,
Noteholders shall instruct Collateral Agent to release its Lien on such
Collateral.
(b) Upon the grant of any option to purchase Collateral
and the satisfaction of all conditions to such grant provided by SECTION 6.7,
Noteholders shall, pursuant to a subordination agreement in form and substance
reasonably satisfactory to Agent, Noteholders and Collateral Agent, instruct
Collateral Agent to subordinate its Lien on such Collateral to such option to
purchase.
(c) Upon consummation of a refinancing of any real
property Collateral and the satisfaction of all conditions to such refinancing
provided by SECTION 6.8, Noteholders shall, pursuant to a subordination
agreement in form and substance reasonably satisfactory to Agent, Noteholders
and Collateral
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Agent, instruct Collateral Agent to subordinate its Lien on such Collateral to
the Refinancing Indebtedness incurred thereby.
(d) Approved Escrows. All sales or refinancings of any
Mortgaged Property or sales of Notes Receivable shall be conducted through an
independent corporation or association selected by Company and reasonably
satisfactory to Noteholders that is licensed under the laws of any state as a
bank, trust company, title company, title insurance company or otherwise
licensed to conduct trust or escrow business.
2.10 Subordination in Connection With New Credit Line. Noteholders
shall, pursuant to a subordination agreement in form and substance reasonably
satisfactory to Noteholders, subordinate certain Liens to Liens granted in
connection with the New Credit Line; provided that the terms of such New Credit
Line are in form and substance reasonably satisfactory to Noteholders and
advances thereunder shall not be used to purchase real property or to make
tenant improvements on After Acquired Property.
2.11 Notation on Notes; Notification to Accountant and Agent;
Accountant's Calculation of Amounts Owed. Each Noteholder agrees that upon
receipt of any payment with respect to the Obligations hereunder, including
prepayments specified in SECTION 2.4, such Noteholder shall notify Accountant
and Agent of such payment and shall prior to disposing of such Note (i) notify
Agent, Accountant and each other Noteholder of such disposition and (ii) make a
notation on the Note (or on a schedule attached thereto) of all principal
payments previously made thereon and of the date to which interest thereon has
been paid. Company may from time to time request Accountant to instruct
Company in writing as to the amount of any Interest Deferral Note, interest
payment, or Net Cash Proceeds due any Noteholder, and Company may rely on such
written instructions.
2.12 Agent's Fee. Company shall pay to Agent on the Closing Date
and monthly thereafter on the first day of each month in advance, a
nonrefundable fee in an amount equal to $2500.00 per month (the "Agent's Fee").
The Agent's Fee is payable from the Closing Date until such time as the Company
has no Obligation to any Noteholder and the Obligation to pay the Agent's Fee
shall survive the payment in full of the Obligations.
ARTICLE III
CONDITIONS PRECEDENT
3.1 Conditions Precedent to Noteholders' Obligations.
Noteholders' obligations under this Agreement and under the Documents are
expressly conditioned upon the satisfaction of each of the following conditions
precedent:
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(a) The occurrence of the Effective Date of Plan by no
later than October 1, 1994.
(b) All legal matters, and corporate and other
proceedings incidental to the transactions contemplated by this Agreement and
by the Documents shall be satisfactory to Agent's and each Noteholder's legal
counsel.
(c) All of the Documents specified on the Schedule of
Documents all in form and substance satisfactory to Noteholders shall have been
executed and delivered to Agent, Noteholders and Collateral Agent, except those
items on the Schedule of Documents which Agent and Noteholders may agree to
have executed, delivered, or performed after the Closing Date, pursuant to the
Post-Closing Items Letter referred to in the Schedule of Documents.
(d) All of the warranties and representations contained
in this Agreement and the Documents shall be true and correct.
(e) Company shall have obtained all of the consents,
licenses, permits and approvals necessary or appropriate to permit Company to
enter into and perform its obligations under this Agreement.
(f) Company shall have paid the Agent's Fee for one month
as set forth in SECTION 2.12.
3.2 Conditions Precedent to Company's Obligations. Company's
obligations under this Agreement and under the Documents are expressly
conditioned upon the satisfaction of each of the following conditions
precedent:
(a) The occurrence of the Effective Date of Plan by no
later than October 1, 1994.
(b) All legal matters, and corporate and other
proceedings incidental to the transactions contemplated by this Agreement and
by the Documents shall be satisfactory to Company's legal counsel.
(c) Agent and each Noteholder shall have executed and
delivered all Documents to be executed and delivered by Noteholders, except
those items on the Schedule of Documents which Company may agree to have
executed, delivered, or performed after the Closing Date, pursuant to the
Post-Closing Items Letter referred to in the Schedule of Documents.
3.3 Closing Date. The Closing Date shall occur no later than
October 1, 1994.
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ARTICLE IV
WARRANTIES AND REPRESENTATIONS
Company represents and warrants as follows:
4.1 Legal Status.
(a) Other than as listed on Schedule 4.1(a), Company (i)
is duly organized and validly formed as a Real Estate Investment Trust under
California law and has not been dissolved, revoked or terminated, and no action
has been taken to dissolve, revoke or terminate Company, (ii) has all requisite
power and authority and all necessary licenses and permits to own and operate
its properties and to carry on its business as now conducted and as presently
proposed to be conducted, where failure to have such power, authority, licenses
and permits might have a Material Adverse Effect and (iii) has been duly
qualified and is authorized to do business in each jurisdiction, if any, where
failure to qualify might have a Material Adverse Effect.
(b) Other than as listed on Schedule 4.1(b), CalREIT (i)
is a Real Estate Investment Trust under California law, formed pursuant to a
Declaration of Trust made and entered into on September 15, 1966, as amended,
(ii) as of the Closing Date, is qualified as a Real Estate Investment Trust
pursuant to sections 856-860 of the Internal Revenue Code and has been so
qualified for all prior fiscal years as to which its federal income tax returns
remain subject to audit by the Internal Revenue Service, so that CalREIT is not
and has not been subject to federal income taxation on that portion of its
taxable income that was distributed to shareholders, (iii) to the best of
Company's knowledge, has been operated in such a manner so as to preserve its
status as a qualified Real Estate Investment Trust pursuant to sections 856-860
of the Internal Revenue Code, (iv) is duly organized and validly formed as a
Real Estate Investment Trust and has not been dissolved, revoked or terminated,
and no action has been taken to dissolve, revoke or terminate CalREIT, (v) has
all requisite power and authority and all necessary licenses and permits to own
and operate its properties and to carry on its business as now conducted and as
presently proposed to be conducted, where failure to have such power,
authority, licenses and permits might materially adversely affect the business,
prospects, assets or condition (financial or otherwise) of CalREIT, and (vi)
has been duly qualified and is authorized to do business in each jurisdiction,
if any, where failure to qualify might have a Material Adverse Effect.
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4.2 Correctness of Collateral Schedules.
The Schedules listed as Item Nos. 6.1 through 6.10 of the
Schedule of Documents and delivered to Agent and Noteholders in connection
herewith are complete and correct in all material respects as of the date of
this Agreement.
4.3 Correctness of Financial Statements. The financial statements
described on Item No. 3.1 of the Schedule of Documents and delivered to Agent
and Noteholders in connection herewith are true and correct and (a) present
fairly, in all material respects, the consolidated financial condition of
Company and CalREIT as of the date thereof, (b) disclose all material
liabilities of Company and CalREIT whether liquidated or unliquidated, fixed or
contingent that are required to be disclosed under generally accepted
accounting principles as of the date thereof, and (c) have been prepared in
accordance with generally accepted accounting principles, consistently applied.
The financial projections described on Item No. 3.4 of the Schedule of
Documents and delivered to Agent and Noteholders in connection herewith are
based upon reasonable estimates and assumptions, and reflect the reasonable
estimates of Company of the results of operations and other information
projected therein.
4.4 Authorization and Validity. This Agreement, the Notes and the
other Documents required by or delivered to Agent and Noteholders in connection
with this Agreement have been duly authorized, and upon their execution and
delivery in accordance with the provisions hereof will constitute legal, valid
and binding agreements and obligations of Company or the party which executes
the same, enforceable in accordance with their respective terms, except as the
enforceability of each such Document may be subject to or limited by
bankruptcy, insolvency, reorganization, arrangement, moratorium or other
similar laws relating to or affecting the rights of creditors and except as the
availability of equitable remedies are subject to the application of equitable
principles.
4.5 No Violation. The execution, delivery and performance by
Company of each of the Documents to which it is a party will not: (a) violate
any provision of any law or regulation; (b) contravene any provision of
Company's Declaration of Trust or By- Laws (if any); (c) result in a breach of
or constitute a default under any contract, obligation, indenture or other
instrument to which Company is a party or by which Company may be bound; or (d)
require the consent or approval of any governmental authority.
4.6 Assets. Company has good and marketable title to the
Collateral, including but not limited to the Mortgaged
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Properties. None of the properties or assets of Company are subject to any
Liens except Permitted Liens.
4.7 Litigation. Other than as listed on Schedule 4.7, there are
no pending, or to the best of Company's knowledge after due investigation,
threatened, actions, claims, investigations, suits or proceedings before any
governmental authority, court or administrative agency which may reasonably be
expected to have a Material Adverse Effect.
4.8 Taxes. Except as otherwise provided by the Plan:
(a) All federal, state, local and foreign tax returns,
reports and statements required to be filed by Company have been filed with the
appropriate governmental agencies and all charges and other impositions shown
thereon to be due and payable by Company have been paid, or accrued and
appropriately reserved for, prior to the date on which any fine, penalty,
interest or late charge may be added thereto for nonpayment thereof, or any
such fine, penalty, interest, late charge or loss has been paid.
(b) Company has paid when due and payable all requisite
taxes and other charges.
(c) Proper and accurate amounts have been withheld by
Company from its employees for all periods in full and complete compliance with
the tax, social security and unemployment withholding provisions of applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective governmental agencies.
(d) Company has neither executed nor filed with the
Internal Revenue Service or any other governmental authority any agreement or
other document extending, or having the effect of extending, the period for
assessment or collection of any taxes or assessments, and there are no tax
audits under way with respect to the Internal Revenue Service or any such
entities. Company has neither agreed nor been requested to make any adjustment
under Internal Revenue Code section 481(a) by reason of a change in accounting
method or otherwise. Company has no knowledge of any pending assessments or
adjustments of its income tax payable with respect to any year.
4.9 No Subordination. Except as may be provided in the Plan,
there is no agreement, indenture, contract or instrument to which Company is a
party or by which Company may be bound that requires the subordination in right
of payment of any of Company's Obligations to any other obligation of Company.
4.10 Court Orders. Neither Company nor (to the best of Company's
knowledge, after due investigation) CalREIT is subject
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to any order, writ, judgment, decree, injunction, or other restriction that
would have a Material Adverse Effect.
4.11 Permits, Franchises. Company possesses, and will hereafter
possess, all permits, memberships, franchises, contracts and licenses required
and all trademark rights, trade names, trade styles, logos, trade name rights,
patents, patent rights and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged without conflict with the
rights of others where failure to possess such permits, memberships,
franchises, contracts, licenses, trademark rights, trade names, trade styles,
logos, trade name rights, patents, patent rights and fictitious name rights
might reasonably be expected to have Material Adverse Effect.
4.12 ERISA. Company and all ERISA Affiliates are in compliance in
all material respects with all applicable provisions of ERISA and the Internal
Revenue Code and no "Reportable Event" as that term is defined in ERISA, has
occurred and is continuing with respect to any employee benefit plan (as that
term is defined in Section 3(3) of ERISA) maintained or contributed to by
Company or any ERISA Affiliate thereunder. All employee benefit plans
maintained by the Company or any of its ERISA Affiliates that are intended to
qualify under Section 401(a) of the Internal Revenue Code do so qualify.
Neither the Company nor any ERISA Affiliate has engaged in, or has incurred,
any liability with respect to, a non-exempt "prohibited transaction" described
in Section 406 of ERISA or Section 4975 of the Internal Revenue Code. Neither
the Company nor any ERISA Affiliate has incurred any liability, which was not
satisfied, under Title IV of ERISA, Section 302 of ERISA, Section 412 of the
Internal Revenue Code, or Section 4971 of the Internal Revenue Code. Neither
the Company nor any ERISA Affiliate has incurred or expects to incur any
withdrawal liability, which was not satisfied (either as a contributing
employer or as part of a controlled group which includes a contributing
employer) to any multiemployer plan, as defined in Section 3(37) or Section
4001(a)(3) of ERISA or Section 414(f) of the Code in connection with any
complete or partial withdrawal from such plan. Neither the Company nor any
ERISA Affiliate maintains, contributes to, or has any liability (fixed,
contingent or otherwise) for medical, health, life, or other welfare benefits
for present or future terminated employees (other than any welfare benefits
provided in compliance with the Consolidated Omnibus Budget Reconciliation Act
or similar law).
4.13 Compliance With Other Laws. Company is in compliance in all
material respects with all federal, state and local laws, ordinances and
regulations, including those relating to licensing, securities, labor,
environmental, health and safety, including, without limitation, all rules and
regulations of the Securities and Exchange Commission, the California
Department of
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Real Estate, the California Department of Corporations, and their federal,
state and local counterparts, to the extent applicable.
4.14 Executive Offices. The chief executive office and principal
place of business of Company is located at 705 A University Avenue, Sacramento,
California 95825 or at such other location as Company reports to Noteholders in
writing prior to the Closing Date.
4.15 Full Disclosure. Neither this Agreement nor the other
Documents contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statement contained herein or therein not
misleading in light of the circumstances under which such statement has been
made.
ARTICLE V
AFFIRMATIVE COVENANTS
Company covenants and agrees that from and after the Closing
Date and until all of the Obligations are paid and satisfied in full:
5.1 Punctual Payments. Company shall punctually pay the
Obligations at the times and place and in the manner specified in the
Documents.
5.2 Compliance with Documents. Company shall comply with each and
every term and condition of the Documents, in a complete and timely manner.
Within five (5) days before March 30, June 30, September 30, and December 31 of
each calendar year, in addition to the financial statements and other reports
which are required under this Article V, Company shall deliver to Agent and
each Noteholder a Certificate of Compliance and Financial Condition, properly
executed in the form attached hereto as EXHIBIT E. In addition to the
foregoing, Company shall promptly provide Agent and each Noteholder with copies
of any compliance certificates or statements of financial condition prepared by
Company for the purpose of incurring or in connection with any Indebtedness.
5.3 Reporting Requirements. Company shall deliver to Agent,
Accountant and each Noteholder all of the following:
(a) As soon as available and, in any event, within
fifteen (15) days after the beginning of each fiscal year, an operating budget
for Company, prepared on a monthly basis for such fiscal year, including
projected income statements, cash flow statements, and balance sheets, and, not
later than forty-five (45) days after the end of each fiscal quarter, if the
actual operating results for such quarter were materially
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different than projected, a revised operating budget for the remainder of the
fiscal year.
(b) Not later than the thirty-fifth (35th) day after each
calendar month, an unaudited unconsolidated income statement, balance sheet and
cash flow statement, in each case for such month, and setting forth a
comparison to the budget for such calendar month and the actual results for
such calendar month in the previous fiscal year, certified by a Responsible
Officer as complete and correct, subject to normal accounting adjustments and
without footnotes.
(c) As soon as practicable and in any event within 45
days after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, consolidated statements of income, stockholders'
equity and cash flows of Company and CalREIT for the period from the beginning
of the current fiscal year to the end of such quarterly period, and a
consolidated balance sheet of Company and CalREIT as at the end of such
quarterly period, setting forth in each case in comparative form figures for
the corresponding period in the preceding fiscal year, all in reasonable detail
and satisfactory in form to Noteholders and certified by a Responsible Officer,
subject to changes resulting from year-end adjustments together with a variance
report comparing Company's operating results for such quarter with Company's
budget for such quarter, and including an explanation of the reason for any
material variations certified by a Responsible Officer; provided, however, that
delivery pursuant to clause (f) below of copies of the Quarterly Report on Form
10-Q of Company for such quarterly period filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this clause
(c).
(d) As soon as practicable and in any event within 90
days after the end of each fiscal year, consolidating and consolidated
statements of income and cash flows and a consolidated statement of
stockholders' equity of Company and CalREIT for such year, and a consolidating
and consolidated balance sheet of Company and CalREIT as at the end of such
year, setting forth in each case in comparative form corresponding consolidated
figures from the preceding annual audit, all in reasonable detail and
satisfactory in form to Noteholders and, as to the consolidated statements,
reported on by independent public accountants of recognized national standing
selected by Company whose report shall be without limitation as to the scope of
the audit and satisfactory in substance to Noteholders and, as to the
consolidating statements, certified by a Responsible Officer; provided,
however, that delivery pursuant to clause (f) below of copies of the Annual
Report on Form 10-K of Company for such fiscal year filed with the Securities
and Exchange Commission shall be deemed to satisfy the requirements of this
clause (d).
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(e) As soon as available, and in any event within 90 days
after the end of each fiscal year, a copy of each other report submitted to
Company or CalREIT by its independent certified public accountants in
connection with any annual interim or special audit made by them on the books
of Company or CalREIT.
(f) Promptly upon transmission thereof, and in any event
not later than five (5) Business Days thereafter, copies of all such financial
statements, proxy statements, notices and reports as Company or CalREIT shall
send to its public stockholders and copies of all registration statements
(without exhibits) and all reports which Company or CalREIT files with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission).
(g) Promptly upon receipt thereof, and in any event not
later than five (5) Business Days thereafter, copies of all financial
statements Company receives from CalREIT unless such financial statements are
already required to be provided under another subsection of this SECTION 5.3.
(h) Promptly, and in any event not later than five (5)
Business Days after the occurrence of each of the following, written notice in
reasonable detail of: (i) the occurrence of (A) a Default, or (B) an Event of
Default, or (C) an event or condition that occurs or exists which could have or
results in a Material Adverse Effect, the nature and period of existence
thereof and the action Company proposes to take with respect thereto; (ii) any
change in the name or the organizational structure of Company; (iii) any
termination or cancellation of any insurance policy which Company is required
to maintain; or (iv) any uninsured or partially uninsured loss through
liability or property damage, or through fire, theft or any other cause
affecting Company's property in excess of an aggregate of $1,000,000; or (v)
any changes in the following senior management positions of Company: Trustee,
Chair, President, Secretary, or Chief Financial Officer.
(i) Promptly upon, and in any event no later than five
(5) Business Days after learning thereof, written notice in reasonable detail
of any litigation threatened or commenced against Company or CalREIT, and of
the threat or institution of any suit or administrative proceeding that may
have a Material Adverse Effect, or where the damages claimed exceeds
$1,000,000.
(j) Together with each delivery of financial statements
required by clauses (b) and (c) above, a certificate of a Responsible Officer
stating that there exists no (i) Event of Default, or (ii) Default, or (iii) an
event or condition which could have or results in a Material Adverse Effect,
or, if any (i) Event of Default, or (ii) Default, or (iii) an event or
condition that occurs or exists which could have or results in a Material
Adverse Effect, exists, specifying the nature and period of existence thereof
and what action Company proposes to take
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with respect thereto. Together with each delivery of financial statements
required by clause 5.3 (d) above, Company will deliver a certificate of such
accountants stating that, in making the audit necessary for their report on
such financial statements, they have obtained knowledge of no (i) Event of
Default, or (ii) Default, or (iii) an event or condition which could have or
results in a Material Adverse Effect, or if they have obtained knowledge of any
(i) Event of Default, or (ii) Default, or (iii) an event or condition which
could have or results in a Material Adverse Effect, specifying the nature and
period of existence thereof. Such accountants, however, shall not be liable to
anyone by reason of their failure to obtain knowledge of any (i) Event of
Default, or (ii) Default, or (iii) an event or condition which could have or
results in a Material Adverse Effect, which would not be disclosed in the
course of an audit conducted in accordance with generally accepted auditing
standards.
(k) Promptly upon, and in any event no later than three
(3) Business Days after learning thereof, written notice in reasonable detail
of each of the following: (i) any penalty assessed against Company by any
federal, state, or local government agency (including but not limited to tax
penalties), (ii) any notice received from any federal, state, or local
government agency of any violation by Company of any federal, state, or local
law or regulation which could result in the assessment of a penalty in excess
of $500,000 or the revocation of any license by any federal, state or local
government agency, (iii) any investigation of Company by any federal, state or
local government agency, and (iv) any violation by Company of any such law or
regulation of which Company becomes aware, which violation could result in the
assessment of a penalty or the revocation of a registration or license by any
federal, state, or local government agency, or in notification of a violation
of any federal, state, or local law or regulation from any federal, state, or
local government agency.
(l) As soon as practicable and in any event within 45
days after the end of each quarterly period, including the last quarterly
period, a report certified by a Responsible Officer setting forth the status of
the items listed on Schedules 4.1(a), 4.1(b) and 4.7, until such items have
been resolved such that they would not have been listed on such Schedules.
(m) From time to time and with reasonable promptness such
other information as Collateral Agent, Agent or any Noteholder may reasonably
request.
5.4 Communication with Accountants. Upon the request of
Collateral Agent, Agent or any Noteholder, Company hereby authorizes Agent,
Collateral Agent and each Noteholder, upon notice to Company, to communicate
directly with Company's independent certified public accountants and tax
advisors and authorizes those accountants to disclose to Agent, Collateral
Agent and Noteholders any and all financial statements and other supporting
financial documents and schedules including copies of any management
representation letter with respect to the
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business, financial condition and other affairs of Company. On or before the
Closing Date and on each anniversary of the Closing Date, Company shall deliver
a letter addressed to such accountants and tax advisors instructing them to
comply with the provisions of this SECTION 5.4 and authorizing Agent,
Collateral Agent and Noteholders to rely on the certified financial statements
prepared by such accountants.
5.5 Right of Access and Inspection. Company shall provide Agent,
Collateral Agent, any Noteholder, Accountant and/or Consultant (as the case may
be) with full and complete access to all books, records, financial statements
and documents requested by Agent, Collateral Agent, any Noteholder, Accountant
and/or Consultant to enable Accountant and Consultant to (i) continue to review
Company's business and financial condition, (ii) to monitor the Collateral,
(iii) to monitor Company's compliance with the reporting requirements set forth
herein, and (iv) to perform audits. Company hereby grants to Agent, Collateral
Agent, Noteholders, Accountant, Consultant, and any of their officers,
employees and/or agents the right, exercisable as frequently as Agent,
Collateral Agent, Noteholders, Accountant and Consultant reasonably determine
to be appropriate, during normal business hours (or at such other times as may
reasonably be requested by Agent, Collateral Agent, any Noteholder, Accountant
or Consultant), to inspect the properties and facilities of Company and to
inspect, audit and make extracts from all of Company's records, financial
statements, files and books of account as set forth above, discuss the affairs,
finances and accounts of Company with any of its advisors, officers or
trustees, and communicate directly with Company's independent certified public
accountants. Company shall deliver any document or instrument reasonably
necessary for Agent, Collateral Agent, any Noteholder, Accountant, or
Consultant as any of them may reasonably request, to obtain records from any
service bureau maintaining records for Company, and shall maintain duplicate
records or supporting documentation on media, including computer tapes and
discs owned by Company. Upon the written request by Agent, Collateral Agent or
any Noteholder to Company, Company shall instruct its banking and other
financial institutions to make available to Agent, Collateral Agent or
Noteholders such information and records as reasonably requested. In
exercising any inspection rights pursuant to this SECTION 5.5, Agent,
Collateral Agent, Noteholders, Accountant, and Consultant shall use their best
efforts to minimize any disruption to the orderly conduct of Company's
business.
5.6 Maintenance of Existence and Conduct of Business. Company
shall: (a) do or cause to be done all things necessary to maintain and keep in
full force and effect CalREIT's existence and rights as a real estate
investment trust; (b) at all times maintain, preserve and protect all of their
respective rights to enjoy and use trademarks, trade names, service marks,
patents, copyrights, licenses, and such real property rights necessary or
useful to the conduct of their respective businesses; (c) do or cause to be
done all things necessary to renew all registrations and licenses and avoid any
forfeiture of any registration or
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license necessary or useful to the conduct of their respective businesses; (d)
preserve all the remainder of their property, in use or useful in the conduct
of their respective businesses and keep the same in good repair, working order
and condition and from time to time make, or cause to be made, all needed and
proper repairs, renewals and replacements, betterments and improvements thereto
consistent with industry practices, so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
5.7 Books and Records. Company shall keep adequate records and
books of account with respect to its business activities, in which proper
entries, reflecting all financial transactions, are made in accordance with
generally accepted accounting principles, consistently applied.
5.8 Maintenance of Insurance. Company shall maintain and keep in
force insurance of the types and in amounts customarily carried in lines of
business similar to that of Company, including fire, extended coverage, public
liability (including bodily injury and property damage) and workers'
compensation, carried with companies and in amounts reasonably satisfactory to
Noteholders, and deliver to Agent and Noteholders from time to time, at
Noteholders' request, schedules setting forth all insurance then in effect.
All such liability insurance shall name Collateral Agent as an additional
insured and all such fire and extended coverage insurance with respect to
Collateral granted to Collateral Agent pursuant to the Documents shall name
Collateral Agent as co-loss payee and be the subject of a lender's loss payable
endorsement (Form 438 BFU or equivalent) reasonably acceptable to Noteholders
in favor of Collateral Agent to the extent of amounts outstanding hereunder or
to the extent of Collateral Agent's interest in such Collateral.
5.9 Compliance with Law. Company shall comply with all federal,
state and local laws and regulations applicable to it, including those relating
to ERISA, those regarding the collection, payment and deposit of sales,
employees' income, unemployment and Social Security taxes, and those relating
to environmental matters, where the failure to comply may have a Material
Adverse Effect.
5.10 Agreements. Company shall perform within all required time
periods (after giving effect to any applicable grace periods), all of its
obligations and enforce all of its rights under each agreement to which it is
a party, including any leases to which it is a party. Company shall not
terminate or modify in any manner any provision of any agreement to which
either is a party which termination or modification could have a Material
Adverse Effect.
5.11 Payment of Tax Obligations. Except as otherwise provided by
the Plan, Company shall pay and discharge before any notice of default or
delinquency is filed or recorded with any governmental authority having
jurisdiction over Company, any and all assessments or taxes that first come
due and payable by
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Company on or after the Effective Date of Plan, including (i) real property or
personal property taxes or ad valorem assessments, (ii) federal and state
income taxes, and (iii) any principal, interest, or other charges with respect
to bond issues which are or may become Liens upon any of Company's real or
personal property.
5.12 Leases. Company shall comply in all material respects with
all of its obligations under all leases existing on the Effective Date of Plan
or thereafter entered into by it with respect to Mortgaged Property. Company
shall provide Agent and Noteholders with a copy of each notice of default or
termination received by Company under any lease which represents more than 20%
of the net rentable square footage of any Mortgaged Property, immediately upon
receiving any such notice, and deliver to Agent and Noteholders a copy of each
notice of default or termination sent by Company under any lease simultaneously
with its delivery of such notice under such lease, and shall notify Agent, not
later than thirty (30) days prior to the date of the expiration of the term of
any lease, of Company's intention either to renew or not renew any such lease,
and, if Company shall intend to renew such lease, the terms and conditions of
renewal of any such lease. Upon Agent's or any Noteholder's request, Company
shall use its best efforts to obtain and deliver to Agent for the benefit of
Noteholders, an estoppel certificate, in form and substance satisfactory to
Noteholders, executed by such tenants as Noteholders may specify, certifying,
among other things, that Company is not in default under such lease, the
amount of rent payable under such lease, the term of such lease, and disclose
any extra-contractual rent adjustments or discounts, and any purchase,
extension or termination options.
5.13 Property. If, after the Closing Date, Company acquires any
interest in additional real property (other than After Acquired Property),
which Noteholders reasonably determine to be material to Company, then, such
real estate shall be deemed to be "Mortgaged Property" as defined herein and if
requested by Agent, Company shall (i) execute a mortgage or deed of trust in
favor of Collateral Agent covering such real property, in form and substance
satisfactory to Noteholders and subordinate or junior only to such mortgages
or deeds of trust as are existing of record on the date Company acquires such
real property, (ii) provide Collateral Agent with casualty insurance covering
such real property in an amount equal to the value of such real property (as
determined by Noteholders), (iii) provide Collateral Agent with an ALTA
Lender's Policy covering such real property, in an amount and with such
endorsements as Noteholders may, in their sole discretion, require, and (iv)
if requested by Noteholders, provide a current ALTA survey thereof, together
with a surveyor's certificate in form and substance reasonably satisfactory to
Noteholders.
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ARTICLE VI
NEGATIVE COVENANTS
Company covenants and agrees that until all of the Obligations
are paid and satisfied in full:
6.1 Mergers, Etc. Company shall not, and shall not vote to allow
CalREIT to, directly or indirectly, by operation of law or otherwise, merge
with, consolidate with, acquire all or substantially all of the assets or
capital stock of, or otherwise combine with, any person or entity, other than a
merger or consolidation of Company and CalREIT, provided that the Obligations
are assumed by the surviving entity. Company shall not, and shall not vote to
allow CalREIT to, form or acquire any subsidiary, or make any material change
in the nature of their respective businesses (other than changes occurring in
the ordinary course of its business), or sell all or substantially all of their
respective assets.
6.2 Loans, Advances, Investments. Except for (a) investments in
Cash Equivalents, (b) seller financing permitted by SECTION 6.6(B) of this
Agreement, and (c) the purchase, with After Acquired Property, of 100% of the
stock of a corporation whose primary assets are real property, Company shall
not make any loans, guarantees (including, without limitation guarantees of any
lease in connection with a sale/leaseback transaction), capital contributions
or advances to or for the benefit of, or investments in any person or entity.
6.3 Name Change. Company shall not change its name, chief
executive office or principal place of business, or conduct business (including
purchasing real property, notes, inventory or other assets) in any name other
than its present correct name, unless and until Company has (i) given Agent and
Collateral Agent at least thirty (30) days prior written notice of its intended
name change; and (ii) executed such documents, instruments or agreements as
Agent or Collateral Agent may require in order to preserve and protect
Noteholders' Liens and other rights under this Agreement and the other
Documents.
6.4 Dividends, Distributions. Company shall not declare or pay
any dividend or distribution either in cash, stock or any other property on
account of New CET Common Stock now or hereafter outstanding, nor redeem,
retire, repurchase or otherwise acquire any shares or warrants of New CET
Common Stock now or hereafter outstanding, unless and until:
(a) Company has paid in cash all dividends then due and
owing to holders of New CET Preferred Stock;
(b) Company has paid in cash the entire principal amount
of all Interest Deferral Notes delivered to Noteholders and all
accrued interest thereon, and the period in which Company may issue
Interest Deferral Notes in lieu of cash payments of interest has
expired; and
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(c) All amounts owing under the New Credit Line and the
Redding Hotel Improvement Loan have been paid in full;
provided, that if permitted under applicable law, Company may declare dividends
to the extent, in the opinion of counsel to Company satisfactory to
Noteholders, such payment is required to maintain Company's status as a real
estate investment trust. Notwithstanding anything to the contrary in this
SECTION 6.4, Company shall not repurchase New CET Common Stock, make payments
of dividends thereon or make distributions in connection therewith, unless such
payments are made from Excess Cash Flow.
6.5 Indebtedness. Company shall not, create, incur, assume or
permit to exist any Indebtedness except for (a) the Obligations, (b) trade and
other credit on account of goods and services incurred in the ordinary course
of business which are not more than 90 days past due, (c) lease payment
obligations under leases that Company is not prohibited from entering into
under the Documents, (d) Refinancing Indebtedness as permitted under the terms
of SECTION 6.8, (e) Purchase Money Indebtedness, (f) the New Credit Line
provided that such New Credit Line meets the requirements of SECTION 2.10, (g)
the New Kroeger Note, (h) the New CET Unsecured Notes, (i) the Redding Hotel
Improvement Loan, in an amount not to exceed $1,000,000, and (j) unsecured
Indebtedness due and payable after the Maturity Date; provided that at the time
such unsecured Indebtedness is created, incurred or assumed the ratio of
Available Cash Flow to Interest Expense for the immediately preceding period
meets or exceeds 2 to 1.
6.6 Sales of Collateral. So long as no Event of Default has
occurred and is continuing, Company may sell Collateral and other assets,
provided:
(a) Eighty percent (80%) of all Net Cash Proceeds from
any sale of Collateral are paid to Noteholders pursuant to SECTION 2.4(b); and
(b) Without limiting SECTION 6.6(a), with respect to
sales of any asset (whether or not Collateral) in which Company provides seller
financing, (i) the subject property is sold to a financially responsible
purchaser (as determined by Board of Directors of Company in accordance with
commercially reasonable standards), (ii) Company assigns and pledges to
Collateral Agent, for the benefit of Noteholders, the note, any and all
security for the note, and any other collateral given to Company in
consideration for the sale, and (iii) such note, security documents, other
collateral, and assignment are in form and substance satisfactory to
Noteholders and (iv) such sale is for a purchase price no less than the fair
market value of such asset as determined by an independent appraisal
satisfactory to Board of Directors of Company or such other method satisfactory
to Noteholders.
6.7 Purchase Options. So long as no Event of Default has occurred
and is continuing, Company may grant options to purchase Company's real
property, provided eighty percent (80%) of all Net
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Cash Proceeds from any grant of an option to purchase real property Collateral
are paid to Noteholders pursuant to SECTION 2.4.
6.8 Real Property Refinancing. So long as no Event of Default has
occurred and is continuing, Company may incur Indebtedness relating to the
refinancing of Indebtedness secured by real property ("Refinancing
Indebtedness"), provided that eighty percent (80%) of any Net Cash Proceeds of
such Refinancing Indebtedness is paid to Noteholders pursuant to SECTION
2.4(b).
6.9 Notes Receivable. Company shall not compromise, settle, waive,
extend, modify, alter, fractionalize, or hypothecate any Note Receivable;
provided nothing in this SECTION 6.9 shall be deemed to prohibit the sale of
any Note Receivable for par pursuant to the terms of SECTION 6.6 without
approval of the Board of Trustees of Company.
6.10 Prohibited Payments on Indebtedness. Company (i) shall make
no prepayments of principal, interest or other amounts on account of (A) the
New Kroeger Note, (B) the New CET Unsecured Notes or (C) the Florin-Perkins
Properties and the Florin-Perkins Bond Claims, or (D) unsecured Indebtedness
referred to in SECTION 6.5(j), and (ii) shall make no payments with respect to
the Florin-Perkins Properties and the Florin-Perkins Bond Claims in connection
with any taxes, bond payments or bond assessments.
6.11 Transactions with Affiliates. Company shall not, directly or
indirectly, enter into or be a party to any agreement or transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate except for
transactions in the ordinary course of and pursuant to the reasonable
requirements of business and upon fair and reasonable terms that are approved
by Company's board of trustees, fully disclosed to Agent and approved by
Noteholders, and no less favorable to Company than it would obtain in a
comparable arm's length transaction with a person not an Affiliate; provided
nothing in this SECTION 6.11 shall be deemed to prohibit CalREIT from declaring
and paying dividends which might otherwise be payable under this Agreement, or
permitting Company and CalREIT to merge as permitted under SECTION 6.1.
6.12 Liens. Except for Permitted Liens, Company shall not create
or permit any Lien on any of its properties or assets, including, without
limitation, the Collateral.
6.13 Cancellation of Indebtedness. Company shall not cancel any
claim or debt owing to it, except for reasonable consideration and in the
ordinary course of business.
6.14 ERISA. Neither Company nor any ERISA Affiliate shall acquire
any new ERISA Affiliate that (i) maintains or has an obligation to contribute
to a pension plan that has either an "accumulated funding deficiency", as
defined in section 302 of ERISA, or any "unfunded vested benefits," as defined
in
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section 4006(a)(3)(E)(iii) of ERISA in the case of any plan other than a
Multiemployer Plan and in section 4211 of ERISA in the case of a Multiemployer
Plan, or (ii) maintains or has an obligation to contribute to a pension plan
that has assets having a fair market value which is less than the present value
of the liabilities under the plan on a termination basis or (iii) which will
result in any liability to the Company or any ERISA Affiliate if a plan
maintained by a new ERISA Affiliate is to be terminated immediately after the
new ERISA Affiliate is acquired by the Company or any ERISA Affiliate.
Additionally, neither Company nor any ERISA Affiliate shall: (a) permit or
cause any representation set forth in section 4.12 to cease to be met and
satisfied at any time; establish any Pension Plan that is subject to Title IV
of ERISA; or terminate any Pension Plan that is subject to Title IV of ERISA
where such termination could reasonably be anticipated to result in liability
to Company; or any ERISA Affiliate; (b) permit any accumulated funding
deficiency, as defined in section 302(a)(2) of ERISA, to be incurred with
respect to any Pension Plan; (c) fail to make any contributions or fail to pay
any amounts due and owing as required by the terms of any Plan before such
contributions or amounts become delinquent; (d) make a complete or partial
withdrawal (within the meaning of section 4201 of ERISA) from any Multiemployer
Plan; or (e) at any time fail to provide any Noteholder with copies of any plan
documents or governmental reports or filings, if reasonably requested by such
Noteholder.
6.15 Hazardous Materials. Except in the ordinary course of
business and in compliance with all applicable Environmental Laws, Company
shall not and shall use its reasonable best efforts not to cause or permit any
other person or entity to, cause or permit the presence, use, generation,
manufacture, installation, release, discharge, storage or disposal of any
Hazardous Materials on, under, in or about any real property owned by Company
or any Subsidiary or any real property leased, subleased, occupied or used by
Company or any Subsidiary, or the transportation of any Hazardous Materials to
or from any such real property unless such use or transportation is on a
temporary basis incidental to the conduct of its business in the ordinary
course and is performed in a manner that does not cause a material violation of
any applicable Environmental Law. In the event of any breach or violation of
the foregoing, or in the event of any other release or threatened release of
Hazardous Materials on, under, in or about any real property owned by Company
or any real property leased, subleased, occupied or used by Company, Company
shall promptly commence and diligently complete a clean-up or other remediation
of any such environmental contamination using a duly qualified, licensed and
insured contractor. In the event of any release or threatened release of
Hazardous Material on, under, in or about any real property owned by any
Subsidiary or any real property leased, subleased, occupied or used by any
Subsidiary, Company shall cause such Subsidiary to promptly commence and
diligently complete a clean-up or other remediation of any such environmental
contamination using a duly qualified, licensed and insured contractor.
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ARTICLE VII
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
7.1 Default. The occurrence of any one or more of the following
events or conditions (regardless of the reason therefor) shall constitute an
Event of Default under this Agreement:
(a) Company fails to make any payment of principal,
interest, fees, expenses, or any other amount owing in respect of any of the
Notes or any of the other Obligations when due and payable pursuant to the
terms thereof or hereof; or
(b) Company (whether as primary obligor or as guarantor
or other surety) fails to make any payment of Indebtedness at maturity or
otherwise beyond any period of grace provided with respect thereto, or Company
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
the effect of such failure or other event is to cause, or to permit the holder
or holders of such Indebtedness (or a trustee on behalf of such holder or
holders) to cause, such Indebtedness to become due (or to be repurchased by
Company, prior to any stated maturity, provided that the aggregate amount of
all Indebtedness as to which such a payment default shall occur and be
continuing or such failure or other event causing or permitting acceleration
(or resale to Company) shall occur and be continuing exceeds $500,000; and
provided, further, that this SECTION 7.1(b) shall not apply to Indebtedness
secured by the Florin-Perkins Properties, the 425 University Avenue property,
the University Village property, the Pacific Palisades Property or the Systems
Integrators Buildings; or
(c) any representation or warranty made by Company herein
or by Company or any of its officers in any writing furnished in connection
with or pursuant to this Agreement shall be false in any material respect on
the date as of which made; or
(d) Company fails to perform or observe any agreement
contained in Article VI; or
(e) Company fails to perform or observe any other
agreement, term or condition contained in this Agreement or in any of the other
Documents and such failure shall not be remedied within 30 days after any
Responsible Officer obtains actual knowledge thereof; or
(f) Company conceals, removes or permits to be concealed
or removed, any part of its property, with intent to hinder, delay or defraud
its creditors or any of them, or makes or suffers a transfer of any of its
property or incurs any obligation which may be intentionally or constructively
fraudulent under any bankruptcy, fraudulent conveyance or other similar law; or
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(g) Company makes an assignment for the benefit of
creditors or is generally not paying its debts as such debts become due; or
(h) any decree or order for relief in respect of Company
is entered under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law,
whether now or hereafter in effect (collectively, "Bankruptcy Law"), of any
jurisdiction; or
(i) Company petitions or applies to any tribunal for, or
consents to, the appointment of, or taking possession by, a trustee, receiver,
custodian, liquidator or similar official of Company, or of any substantial
part of the assets of Company, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than proceedings
for the voluntary liquidation and dissolution of CalREIT) relating to Company
under the Bankruptcy Law of any other jurisdiction; or
(j) any such petition or application is filed, or any
such proceedings are commenced, against Company and Company by any act
indicates its approval thereof, consent thereto or acquiescence therein, or an
order, judgment or decree is entered appointing any such trustee, receiver,
custodian, liquidator or similar official, or approving the petition in any
such proceedings, and such order, judgment or decree remains unstayed and in
effect for more than 30 days; or
(k) any order, judgment or decree is entered in any
proceedings against Company decreeing the dissolution of Company and such
order, judgment or decree remains unstayed and in effect for more than 60 days;
or
(l) any order, judgment or decree is entered in any
proceedings against Company decreeing a split-up of Company which requires the
divestiture of assets representing a substantial part, or the divestiture of
the stock of CalREIT whose assets represent a substantial part, of the
consolidated assets of Company and CalREIT (determined in accordance with
generally accepted accounting principles) or which requires the divestiture of
assets, or stock of CalREIT, which shall have contributed a substantial part of
the consolidated net income of Company and CalREIT (determined in accordance
with generally accepted accounting principles) for any of the three fiscal
years then most recently ended, and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or
(m) a final judgment in an amount in excess of $500,000
is rendered against Company and, within 60 days after entry thereof, such
judgment is not discharge or execution thereof stayed pending appeal, or within
60 days after the expiration of any such stay, such judgment is not discharged;
or
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(n) Company or any ERISA Affiliate, in its capacity as an
employer under a Multiemployer Plan, makes a complete or partial withdrawal
from such Multiemployer Plan resulting in the incurrence by such withdrawing
employer of a withdrawal liability in an amount exceeding $100,000; or
(o) Any material provision of any Deed of Trust, the
Pledge and Security Agreement or any other Document shall for any reason cease
to be valid, any such Document shall be repudiated, terminated or avoided,
including by operation of law, or any security interest created under any such
Document shall cease to be a valid and perfected first priority security
interest or Lien in any material portion of the Collateral purported to be
covered thereby (subject only to Permitted Liens), provided that such
termination or avoidance is not caused by the actions of Noteholders or the
failure of Noteholders to act; or
(p) The holder of any Lien encumbering any of the
Mortgaged Properties (other than Agent, Collateral Agent or Noteholders and a
claimant under a mechanic's lien or a materialmen's lien) records a notice of
default against such property or commences an action to enforce such Lien,
regardless of the reason therefor; or
(q) The claimant under any mechanics' lien or
materialman's lien obtains a judgment against Company establishing the validity
of such lien or permitting such claimant to enforce such lien, or notices of
mechanics' and/or materialmen's liens are recorded against the Mortgaged
Properties, which judgments, liens or notices aggregate $500,000 or more.
(r) Any other event or condition occurs or exists which
could have or result in a Material Adverse Effect, provided that Agent provides
two Business Days written notice to Company of such event or condition.
then (a) if such event is an Event of Default specified in any clause of this
SECTION 7.1 other than clause (h), (i), or (j), Agent shall, at the direction
of any Noteholder or Noteholders, by notice in writing to Company ("Notice of
Acceleration"), declare such Noteholder's Notes and the Obligations to such
Noteholder or all of the Notes and the other Obligations, as the case may be,
to be and such Noteholder's Notes and the Obligations to such Noteholder or the
Notes and the other Obligations, as the case may be, shall thereupon be and
become, immediately due and payable together with interest accrued thereon,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by Company; and (b) if such event is an Event of Default
specified in clause (h), (i), or (j) of this SECTION 7.1 with respect to
Company, all of the Notes and the other Obligations at the time outstanding
shall automatically become immediately due and payable at par together with
interest accrued thereon, without presentment, demand,
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protest or notice of any kind, all of which are hereby waived by Company.
7.2 Cross-Defaults. The occurrence of any Event of Default under
this Agreement shall also constitute an Event of Default under each of the
other Documents. The occurrence of any Event of Default under any of the other
Documents shall constitute an Event of Default under this Agreement. Company's
failure to pay any installment of principal or interest when due under any
Note, or to execute and deliver any Interest Deferral Note as and when due,
shall constitute an Event of Default under all of the Notes.
7.3 Other Remedies. Upon the occurrence of any Event of Default
in addition to the remedies listed in SECTION 7.1 upon the earlier of a Notice
of Acceleration or acceleration of the Obligations: (a) Agent and/or
Noteholders may file an action against Company in any court having
jurisdiction, in their own names or in the name of Agent, Noteholders and/or
Collateral Agent; and/or (b) Agent, Collateral Agent and Noteholders shall have
all rights, powers and remedies available under each of the Documents and
applicable law, including, without limitation, (i) commencing judicial or
nonjudicial foreclosure proceedings against the Mortgaged Properties, (ii)
enforcing Collateral Agent's security interest in the Collateral by means of
one or more public or private sales thereof, (iii) taking possession of all or
any portion of the Mortgaged Properties or the Collateral, in person or by
means of a court appointed receiver (who shall be appointed without regard to
the value of Collateral Agent's or Noteholders' security), and (iv) exercising
any or all of the rights of a beneficiary or secured party pursuant to
applicable law. All rights, powers and remedies of Agent, Collateral Agent or
Noteholders in connection with each of the Documents may be exercised at any
time or from time to time, are cumulative and not exclusive, and shall be in
addition to any other rights, powers or remedies provided by law or equity.
7.4 Waivers by Company. Except as otherwise provided for in this
Agreement and applicable law, Company waives (i) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Agent, Collateral Agent or Noteholders on which Company may
in any way be liable and hereby ratifies and confirms whatever Agent,
Collateral Agent or Noteholders may do in this regard, (ii) all rights to
notice and a hearing prior to Collateral Agent's taking possession or control
of, or replevy, attachment or levy upon, the Collateral, or any bond or
security which might be required by any court prior to allowing Agent or
Collateral Agent to exercise any of its remedies, and (iii) the benefit of all
valuation, appraisal and exemption laws. Company acknowledges that it has been
advised by counsel of its choice with respect to the effect of the foregoing
waivers and this Agreement, the other Documents and
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the transactions evidenced by this Agreement and the other Documents,
generally.
7.5 Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default, Agent, Collateral Agent and each of
Noteholders are hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off, recoup, and apply any and all
funds in the possession of Agent, Collateral Agent or any Noteholder, all
deposits (general or special, time or demand, provisional or final) at any time
held and other Indebtedness at any time owing by Agent, Collateral Agent or any
Noteholder to or for the credit or the account of Company against any and all
of the Obligations of Company now or hereafter existing under the Documents
that are then due and payable, whether by maturity or acceleration,
irrespective of whether or not Noteholders shall have made any demand under
this Agreement or the other Documents. Agent shall notify Company promptly
after any such set-off and application made by Agent, Collateral Agent or any
Noteholder; provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of Agent,
Collateral Agent or Noteholders under this section are in addition to any other
rights and remedies (including, without limitation, other rights of set-off)
which Agent, Collateral Agent and Noteholders may have.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 Complete Agreement; Transferability.
(a) The Documents (i) supersede any prior written or oral
agreements or understandings between the parties or any predecessor in interest
with respect to the subject matter of the Documents, and (ii) constitute the
complete agreement between the parties with respect to the subject matter of
the Documents and (iii) may not be modified, altered or amended except by an
agreement in writing signed by Company and each party affected by such
modification.
(b) Company may not sell, assign or transfer, whether by
operation of law or otherwise, any of the Documents, or any portion thereof,
including Company's rights, title, interests, remedies, powers and duties
hereunder or thereunder.
8.2 Professional Fees and Expenses.
(a) If at any time or times after the Closing Date,
whether prior or subsequent to the commencement of a bankruptcy case (other
than the Chapter 11 Case), any Noteholder, Agent or Collateral Agent, or any of
them, employs legal counsel or other professionals (including, but not limited
to, attorneys, accountants, consultants, inspectors, engineers, environmental
experts, title insurers, appraisers, brokers or auctioneers) for advice or
other representation or incurs other costs and
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expenses, Company shall, under the circumstances described below, pay to and
reimburse Agent, each Noteholder, and Collateral Agent for the reasonable
professional fees, including reasonable attorneys' fees, arising from such
services and all expenses, costs, charges and other fees incurred by or on
behalf of such party in connection therewith, and the same shall constitute
Obligations of Company to Agent, Collateral Agent and Noteholders secured by
the Collateral; provided that The Prudential Insurance Company of America, in
its capacity as Noteholder, and Pruco Life Insurance Company of America shall
use the same professionals and TCW Special Credits Fund IV, TCW Special Credits
Plus Fund, TCW Special Credits Trust IV, TCW Special Credits Trust IVA, and
Weyerhaueser Company Master Retirement Trust shall use the same professionals.
The circumstances under which such fees, costs and expenses are payable are as
follows:
(i) whether or not an Event of Default has
occurred under this Agreement or the other Documents, the negotiation or
preparation of any proposed modification, extension, or renewal of, or proposed
consent or waiver under, this Agreement, the Notes or any other Document,
including additional documentation relating to the addition of any Collateral
securing the Obligations, whether or not such amendment, modification,
extension or renewal is consummated or such proposed consent granted; and
(ii) upon the occurrence and during the
continuation of an Event of Default: (A) any litigation, contest, dispute,
suit, case, proceeding or action (whether instituted by Agent, Noteholders,
Company or any other person), in any way relating to this Agreement, the
Documents, the Collateral or the affairs of Company or CalREIT; (B) any
litigation, contested matter, adversary proceeding, dispute, suit, case,
proceeding or action and any appeal or review thereof in connection with a case
commenced by or against Company or CalREIT under the federal bankruptcy or
reorganization laws or any other applicable federal or state bankruptcy,
insolvency, debtor relief, reorganization or similar law, including but not
limited to any contested matters, cases or proceeding relating to or arising
out of the Chapter 11 Case or the Plan; (C) the monitoring, appraisal,
inspection, collection, sale, liquidation or other disposition of the
Collateral, and (D) the taking of (or determining whether or how to take) any
action establishing, preserving, or enforcing any right or remedy permitted
hereunder.
Payment of the fees and expenses provided for in this SECTION 8.2(a) shall be
paid to Agent, Collateral Agent, or such Noteholder, as the case may be, by
wire transfer as provided on the Schedule of Notices, no later than thirty (30)
days after the date Company receives a written statement for such fees or
expenses. The Obligations of Company under this SECTION 8.2 shall survive (i)
the payment in full of any Note and (ii) the transfer of any Note or portion
thereof or interest therein by any Noteholder.
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(b) In addition to the amounts set forth in SECTION
8.2(a), Company shall pay to Collateral Agent, (i) within 10 days after
Collateral Agent invoices Company therefor, all fees of Collateral Agent and,
(ii) within 30 days after Collateral Agent invoices Company therefor, all costs
and expenses of Collateral Agent, and all fees and expenses of professionals
engaged by Collateral Agent in accordance with the fees and expenses agreed to
by Noteholders and by Collateral Agent in the Collateral Agent Agreement. In
the event Company fails to timely pay such amounts, Noteholders shall advance
their own funds to pay Collateral Agent and/or Collateral Agent's reasonable
professional fees and expenses, as provided by the Collateral Agent Agreement,
and demand reimbursement from Company, provided, that no action taken by any
Noteholder or Collateral Agent pursuant to this sentence shall be deemed to
waive or cure any Event of Default.
8.3 Noteholders' Action; Modification Under and of Documents. Any
Noteholders' Action shall be taken only by Minimum Noteholders, Majority
Noteholders or all Noteholders as required by this SECTION 8.3:
(a) Noteholders' Action to Modify Documents.
(i) The consent of each Noteholder is required to
alter or modify this SECTION 8.3, and the amount of principal outstanding, the
scheduled payments, the rate of interest, the maturity date, or the mandatory
prepayments of principal set forth in this Agreement (including SECTIONS 2.4,
6.6, 6.7 AND 6.8) or the Notes.
(ii) Except as set forth in SECTION 8.3(a)(i),
consent of Majority Noteholders is required to amend or modify any provision of
this Agreement or the other Documents.
(b) Noteholders' Action With Respect to Defaults and
Remedies. The following Noteholders' Actions with respect to defaults and
remedies will require the consent of the following:
(i) Upon the request of any Noteholder after the
occurrence of an Event of Default under SECTION 7.1(a), Agent shall send a
Notice of Default.
(ii) Upon the request of Minimum Noteholders after
the occurrence of any other Event of Default under SECTION 7.1, Agent shall
send a Notice of Default.
(iii) Upon the request of Majority Noteholders after
the occurrence of an Event of Default under SECTION 7.1, Agent and/or
Collateral Agent shall send a Notice of Acceleration.
(iv) Upon the request of Majority Noteholders
after the occurrence of an Event of Default, Agent shall send a notice to
Company of the commencement of accrual of interest at the Default Rate as set
forth in SECTION 2.3.
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(v) Upon the request of Majority Noteholders
after the occurrence of an Event of Default, Agent shall instruct Collateral
Agent to commence non-judicial action to collect rents on the Real Properties,
payments on Notes Receivable, and/or dividends from CalREIT, pursuant to
applicable provisions of the Collateral Agent Agreement and the other
Documents.
(vi) Upon the request of Majority Noteholders after
the occurrence of an Event of Default, Agent shall instruct Collateral Agent to
exercise other remedies under the Documents, including but not limited to
collection of funds in deposit accounts, foreclosure on Mortgaged Properties,
collection of Notes Receivable, seeking a receiver to take possession of any
Collateral and/or the Mortgaged Property, and commencement of or actions in
court proceedings.
(c) Other Noteholders' Actions.
(i) Any action, consent, waiver, instruction,
notice or declaration which is or may be taken or made by or on behalf of
Noteholders under the Documents and which is not specified in SECTIONS 8.3(a)
or (b) hereof shall be taken by Agent upon the vote of Majority Noteholders,
and said Noteholders' Action shall thereupon be binding on all Noteholders,
Agent, and Collateral Agent.
(ii) Any Noteholders' Action to rescind, annul,
waive, modify or extend any prior Noteholders' Action shall require the same
vote and consent of Noteholders as the prior Noteholders' Action; provided that
Noteholders' Action by Majority Noteholders shall be required to rescind,
annul, waive or modify any prior Noteholders' Action consented to by Minimum
Noteholders.
(d) Modification of Documents. Agent's, Collateral
Agent's or Noteholders' failure, at any time or times, to require strict
performance by Company or any other person or entity of any provision of this
Agreement or any of the other Documents shall not waive, affect or diminish any
right of Agent, Collateral Agent or Noteholders thereafter to demand strict
compliance and performance therewith. Any suspension or waiver by Agent,
Collateral Agent or Noteholders of a Default or Event of Default under this
Agreement or any of the other Documents, shall not suspend, waive or affect any
other Default or Event of Default under this Agreement or any of the other
Documents, whether the same is prior or subsequent thereto and whether of the
same or of a different type. No waiver of any provision of this Agreement or
any other Documents, nor consent to any departure by Company, or any other
person or entity therefrom, shall in any event be effective unless the same
shall be in writing and signed by Agent or the requisite Noteholders necessary
to effectuate such waiver or consent and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
8.4 Indemnity.
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(a) Company shall indemnify, defend and hold harmless
Agent, Collateral Agent and each Noteholder and their affiliates, and the
officers, directors, employees and agents of, and persons controlling any of
them within the meaning of either section 15 of the Securities Act of 1933 or
section 20 of the Securities Exchange Act of 1934, from and against any and all
suits, actions, proceedings, claims, damages, losses, liabilities (including
any liabilities owing by such indemnified person or entity to Agent or
Collateral Agent pursuant to the indemnification provisions of the
Intercreditor Agreement and the Collateral Agent Agreement), obligations,
penalties, and expenses (including attorneys' fees and disbursements and other
costs incurred by any indemnified person or entity in preparing for or
undertaking investigations or defense, including those incurred upon any
appeal) which may be instituted or asserted against or incurred by such
indemnified person or entity, or to which such person or entity may become
subject, whether direct, indirect, or consequential and whether based on any
common law or in equity, or on contract, tort or otherwise resulting from,
arising in any manner out of or in connection with or otherwise related to the
Documents or any of the transactions contemplated thereunder, or in connection
with the preparation, filing and dissemination of all documents and securities
filings in connection therewith (including, without limitation, all
environmental liabilities and costs arising from or connected with the past,
present or future operations of Company or CalREIT involving any Mortgaged
Property, Collateral or other real or personal property, or damage to real or
personal property or natural resources or harm or injury (including pain and
suffering) alleged to have resulted from any use or release of any Hazardous
Materials on, upon or into such property); provided, however, that Company
shall not be liable for such indemnification to such indemnified person or
entity to the extent that any such suit, action, proceeding, claim, damage,
loss, liability or expense either results from such indemnified person's gross
negligence or willful misconduct.
(b) Company, at the request of any indemnified party,
shall have the obligation to defend against any of the matters covered by the
indemnity set forth in SECTION 8.4(a). In the event that any indemnified
person or entity requests that Company defend against any such indemnified
matter, Company shall promptly do so with counsel of Company's choosing and
reasonably acceptable to the indemnified party, provided, that any such
indemnified person or entity shall retain the right to participate in, but not
control, the defense of any such indemnified matter using counsel of such
person's choice at such person's expense. No action taken by legal counsel
chosen by such indemnified party in defending against any indemnified matter
shall vitiate or in any way impair Company's duty and obligation to indemnify
and hold such person harmless hereunder.
(c) This indemnity provided for by this SECTION 8.4 shall
be an ongoing obligation of Company that shall survive the termination of this
Agreement.
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8.5 Remedies Cumulative. Agent's, Collateral Agent's and
Noteholders' rights and remedies under this Agreement shall be cumulative and
nonexclusive of any other rights and remedies which Agent, Collateral Agent or
Noteholders may have under any other agreement, including the other Documents,
by operation of law or otherwise. No failure to exercise nor any delay in
exercising on the part of Agent, Collateral Agent or Noteholders, any right,
power or privilege hereunder, shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or future exercise thereof or the exercise of any other right, power
or privilege.
8.6 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
8.7 Form, Registration, Transfer and Exchange of Notes; Lost
Notes. The Notes are issuable as registered notes without coupons in
denominations of at least $1,000,000, except as may be necessary to reflect any
principal amount not evenly divisible by $1,000,000; provided that the Interest
Deferral Notes are issuable as registered notes without coupons in any
denomination. Company shall keep at its principal office a register in which
Company shall provide for the registration of Notes and of transfers of Notes.
Upon surrender for registration of transfer of any Note at the principal office
of Company, Company shall, at its expense, execute and deliver one or more new
Notes of like tenor and of a like aggregate principal amount, registered in the
name of such transferee or transferees. At the option of the holder of any
Note, such Note may be exchanged for other Notes of like tenor and of any
authorized denominations, of a like aggregate principal amount, upon surrender
of the Note to be exchanged at the principal office of Company. Whenever any
Notes are so surrendered for exchange, Company shall, at its expense, execute
and deliver the Notes which the holder making the exchange is entitled to
receive. Every Note surrendered for registration of transfer or exchange shall
be duly endorsed, or be accompanied by a written instrument of transfer duly
executed, by the holder or such holder's attorney duly authorized in writing.
Any Note or Notes issued in exchange for any Note or upon transfer thereof
shall carry the rights to unpaid interest and interest to accrue which were
carried by the Note so exchanged or transferred, so that neither gain nor loss
of interest shall result from any such transfer or exchange. Upon receipt of
written notice from the holder of any Note of the loss, theft or destruction,
upon receipt of such holder's unsecured indemnity agreement, or in the case of
any such mutilation upon surrender and cancellation of such Note, Company will
make and deliver a new Note, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Note.
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<PAGE> 49
8.8 Persons Deemed Owners; Participations. Prior to due
presentment for registration of transfer, Company and Agent may treat the
person or entity in whose name any Note is registered as the owner and holder
of such Note for the purpose of receiving payment of principal of and interest
on such Note and for all other purposes whatsoever, whether or not such Note
shall be overdue, and Company and Agent shall not be affected by notice to the
contrary. Subject to the preceding sentence, the holder of any Note may from
time to time grant participations in such Note to any person or entity on such
terms and conditions as may be determined by such holder in its sole and
absolute discretion.
8.9 Parties; No Third Party Beneficiaries. This Agreement and the
other Documents shall be binding upon, and inure to the benefit of, the
successors of Agent, the permitted successors of Company, and the assigns,
transferees and endorsees of Noteholders. No other person or entity shall be
deemed to be a third-party beneficiary of any of the provisions of the
Documents or otherwise have any rights by reason of any provision of the
Documents.
8.10 Disgorgement; Revival of Obligations. In the event that any
payments, collections or proceeds of Collateral paid or distributed to or
realized by Noteholders, or any other payment made to any Noteholder pursuant
to the terms hereof, is required to be disgorged, returned, repaid, turned
over, or refunded to Company or to any other person or entity, including,
without limitation any debtor in possession or bankruptcy trustee, the
Obligations shall be reinstated, revived, or restored by the amount that is
required to be disgorged, returned, repaid, turned over, or refunded, the same
as if such payment, distribution, or realization had never been made. The
Obligations, as reinstated, revived, or restored, shall continue to be secured
by Collateral Agent's security interest in the Collateral.
8.11 Conflict of Terms. Except as otherwise provided in this
Agreement or any of the other Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is
in conflict with, or is inconsistent with, any provision in any of the other
Documents, the provision contained in this Agreement shall govern and control,
except that this Agreement shall be subject to the provisions of the
Intercreditor Agreement. If the provisions of one agreement give Noteholders
greater or broader rights than the provisions of any other agreement, those
provisions shall not be deemed to be inconsistent or in conflict, and
Noteholders shall have the full benefit of the greater or broader provisions.
8.12 Governing Law; Consent to Jurisdiction and Venue. Except as
otherwise expressly provided in any of the Documents, in all respects,
including all matters of construction, validity and performance, this
Agreement, the Notes and the other Documents, and the Obligations arising
hereunder and thereunder, shall be governed by, and construed and enforced in
accordance with, the laws of the State of California applicable to contracts
made and performed in such state, without regard to the
131
<PAGE> 50
principles thereof regarding conflict of laws, and any applicable laws of the
United States of America. COMPANY, AGENT AND EACH NOTEHOLDER CONSENTS TO
PERSONAL JURISDICTION, WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE, AND
AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN ANY
STATE AND FEDERAL COURT SITUATED IN CALIFORNIA. Service of process on Company,
Agent or any Noteholder in any action arising out of or relating to any of the
Documents shall be effective if mailed to such party at the address specified
in the Schedule of Notices. Nothing herein shall preclude Agent, any
Noteholder or Company from bringing suit or taking other legal action in any
other jurisdiction.
8.13 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE
PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. EACH OF THE PARTIES HERETO SPECIFICALLY WAIVES SUCH PARTY'S
RIGHT TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM,
COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, "CLAIMS")
ASSERTED BY COMPANY AGAINST AGENT AND/OR ANY ONE OR MORE NOTEHOLDERS, OR BY
AGENT AND/OR ANY ONE OR MORE NOTEHOLDERS AGAINST COMPANY. THIS WAIVER EXTENDS
TO ALL SUCH CLAIMS, INCLUDING, WITHOUT LIMITATION, CLAIMS WHICH INVOLVE PERSONS
OR ENTITIES OTHER THAN AGENT, NOTEHOLDERS AND COMPANY; CLAIMS WHICH ARISE OUT
OF OR ARE IN ANY WAY CONNECTED TO THE RELATIONSHIP BETWEEN COMPANY, AGENT AND
NOTEHOLDERS; AND ANY CLAIMS FOR DAMAGES, BREACH OF CONTRACT ARISING OUT OF THIS
AGREEMENT, SPECIFIC PERFORMANCE, OR ANY EQUITABLE OR LEGAL RELIEF OF ANY KIND.
8.14 Notices. Except as otherwise provided herein, any notice or
other communication required or permitted to be given hereunder shall be in
writing and shall be deemed to have been validly served, given or delivered (a)
when delivered, if hand- delivered, with receipt acknowledged; (b) upon
transmission, when set by facsimile transmission, with such transmission
electronically confirmed during normal business hours of recipient, provided
that no later than one (1) Business Day following such transmission, a copy of
such facsimile shall be mailed by first class mail, postage prepaid; (c) one
(1) Business Day after deposit with a reputable overnight delivery service with
all charges prepaid; or (d) upon the earlier of actual receipt or five (5) days
after deposit in the United States Mail, postage prepaid, in each case
addressed as set forth on the Schedule for Notices attached hereto, or at such
other address or facsimile transmission number as may be substituted by notice
given as herein provided, provided, further, that to the extent the address for
notices of one or more Noteholders is the same, only one notice need be sent to
such address. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Failure or delay in
delivering copies of any notice or other communication to the persons
designated herein or in the Schedule of Notices hereof to receive
132
<PAGE> 51
copies shall in no way adversely affect the effectiveness of such notice or
other communication.
8.15 Survival. The representations and warranties of Company in
this Agreement shall survive the execution, delivery and acceptance hereof by
the parties hereto and the closing of the transactions described herein or
related hereto.
8.16 Section Titles. The section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
8.17 Counterparts. This Agreement may be executed in counterparts
which, taken together, shall constitute the Agreement. Each party to this
Agreement agrees to be bound by its own facsimile signature and to accept the
facsimile signatures of the other parties to this Agreement.
8.18 Further Assurances; Execution of Notes for Assignees.
Company, Agent, and Noteholders mutually covenant and agree to execute any
additional documents and to do all other acts reasonably required to effect the
intent and purposes of this Agreement. Company agrees to execute and deliver
Notes to Agent for the benefit of and in the name of assignees of Noteholders
promptly upon notice from Agent of any assignment.
8.19 No Partnership. Nothing herein shall be deemed or construed
to create a partnership or joint venture between Company, Agent, and
Noteholders, between Company and Agent, Collateral Agent or any Noteholder, or
among Agent, any of Noteholders or Collateral Agent.
8.20 No Personal Liability of Trustees. As provided in the
Declaration of Trust of Company, this contract is made by the undersigned
trustee, not individually, but as Trustee under a certain Declaration of Trust
creating Commonwealth Equity Trust, and hereby made a part hereof, and is
enforceable only against, and is payable out of, the Trust property held
thereunder, and any and all personal liability of the Trustees, their duly
authorized agents, and the shareholders of said Trust is expressly waived.
8.21 Understanding of the Parties.
(a) Each of the parties hereto stipulates and agrees
that, in entering into this Agreement, such party has not relied upon any
representations, statements, covenants or warranties other than those actually
set forth in this Agreement or the other Documents, incorporated by reference
by this Agreement or the other Documents, (including, without limitation, all
of the information contained in the Schedules delivered in connection
herewith), or specifically referred to in this Agreement or the other
Documents.
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<PAGE> 52
(b) Each party represents that such party has received
independent advice from legal counsel with respect to the advisability of
entering into this Agreement and with respect to the advisability of making the
agreements and providing the releases, waivers and expressions of intent
contained in this Agreement.
(c) Each party represents that such party has read this
Agreement and understands the contents hereof.
134
<PAGE> 53
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth above.
COMPANY:
THE PEREGRINE REAL ESTATE TRUST,
fka Commonwealth Equity Trust
By
---------------------------------
Title
------------------------------
AGENT:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By
---------------------------------
Title
------------------------------
NOTEHOLDERS:
PACIFIC MUTUAL LIFE INSURANCE COMPANY
By
---------------------------------
Title
------------------------------
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By
---------------------------------
Title
------------------------------
PRUCO LIFE INSURANCE COMPANY
By
---------------------------------
Title
------------------------------
ORIX USA CORPORATION
By
---------------------------------
Title
------------------------------
WEYERHAEUSER COMPANY MASTER RETIREMENT TRUST
By: TCW Special Credits,
135
<PAGE> 54
Its Investment Manager
By: TCW Asset Management Co.
By:
---------------------------
Richard Masson
Managing Director
By:
---------------------------
Name:
Title:
TCW SPECIAL CREDITS FUND IV
By: TCW Special Credits,
Its General Partner
By: TCW Asset Management Co.
By:
---------------------------
Richard Masson
Managing Director
By:
---------------------------
Name:
Title:
TCW SPECIAL CREDITS PLUS FUND
By: TCW Special Credits,
Its General Partner
By: TCW Asset Management Co.
By:
---------------------------
Richard Masson
Managing Director
By:
---------------------------
Name:
Title:
TCW SPECIAL CREDITS TRUST IV
By: Trust Company of the West, Trustee
By:
---------------------------
136
<PAGE> 55
Richard Masson
Managing Director
By:
---------------------------
Name:
Title:
TCW SPECIAL CREDITS TRUST IVA
By: Trust Company of the West, Trustee
By:
---------------------------
Richard Masson
Managing Director
By:
---------------------------
Name:
Title:
137
<PAGE> 56
TABLE OF SCHEDULES AND EXHIBITS TO
SECOND AMENDED AND RESTATED NOTE AGREEMENT
----------------------------------------
SCHEDULES REFERRED TO IN SECOND
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT
-----------------------------------------
Schedule For Notices
Schedule 4.1(a): CET Legal Status
Schedule 4.1(b): CalREIT Legal Status
Schedule 4.7: CET Litigation
EXHIBITS TO SECOND
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT
------------------------------------------
<TABLE>
<S> <C> <C>
EXHIBIT A -- Schedule of Documents
EXHIBIT B -- Form of Principal Notes
EXHIBIT C -- Form of Interest Deferral Notes
EXHIBIT D -- Form of Cash Only Principal Note to be Issued After October 1, 1996
EXHIBIT E -- Form of Certificate of Compliance and Financial Condition
</TABLE>
138
<PAGE> 57
SCHEDULE FOR NOTICES
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(1) All payments on account of Notes held by such
noteholder shall be made by wire transfer of
immediately available funds for credit to:
Account No. 050-54-526
Morgan Guaranty Trust Company of New York
23 Wall Street
New York, New York 10015
(ABA No.: 021-000-238)
Each such wire transfer shall set forth the name
of the Company, a reference to 8.5% Senior Notes
due October 1, 2000, and the due date and application
(as among principal and interest) of the payment being made.
(2) Address for all notices relating to payments:
The Prudential Insurance Company of America
c/o The Prudential Investment Operations Group
Three Gateway Center, 12th Floor
100 Mulberry Street
Newark, New Jersey 07102-4077
Attention: Manager
(3) Address for all notices not relating to payments:
If to The Prudential Insurance Company of America, to:
The Prudential Insurance Company of America
c/o The Prudential Corporate Finance Group
Attn: John P. Mullman
Four Gateway Center, 9th Floor
100 Mulberry Street
Newark, NJ 07102-4069
FAX: (201) 802-2662
Peter J. Gurfein, Esq.
Sonnenschein Nath & Rosenthal
601 S. Figueroa Street, Suite 1500
Los Angeles, CA 94104-2675
FAX: (213) 623-9924
(4) Tax Identification No. 22-1211670
139
<PAGE> 58
PRUCO LIFE INSURANCE COMPANY:
(1) All payments on account of Notes held by such
noteholder shall be made by wire transfer of
immediately available funds for credit to:
Account No. 000-55-455
Morgan Guaranty Trust Company of New York
23 Wall Street
New York, New York 10015
(ABA No.: 021-000-238)
Each such wire transfer shall set forth the name
of the Company, a reference to 8.5% Senior Notes
due October 1, 2000, and the due date and application
(as among principal and interest) of the payment being made.
(2) Address for all notices relating to payments:
Pruco Life Insurance Company
c/o The Prudential Life Insurance Company of America
Three Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
Attn: Managing Director in Charge of the Investment Operations Group
(3) Address for all notices not relating to payments:
Pruco Life Insurance Company
c/o The Prudential Insurance Company of America
Four Gateway Center
100 Mulberry Street
Newark, NJ 07102
FAX: (201) 802-2662
Attn: Managing Director in Charge of the
Specialized Finance Group
Peter J. Gurfein, Esq.
Sonnenschein Nath & Rosenthal
601 S. Figueroa Street, Suite 1500
Los Angeles, CA 94104-2675
FAX: (213) 623-9924
(4) Tax Identification No. 22-1944557
140
<PAGE> 59
TCW SPECIAL CREDITS FUND IV
(1) All payments on account of Notes held by such
noteholder shall be made by wire transfer of
immediately available funds for credit to:
Account No. 400-1129
Sanwa Bank California
Trust Operation Center
Monterey Park, CA
ABA #122-003-516
A/C Name: TCW Special Credits Fund IV
Each such wire transfer shall set forth the name
of the Company, a reference to 8.5% Senior Notes
due October 1, 2000, and the due date and application
(as among principal and interest) of the payment being made.
(2) Address for all notices relating to payments:
TCW Special Credits Fund IV
c/o Trust Company of the West
865 So. Figueroa Street
Suite 1800
Los Angeles, CA 90017
Attention: Richard Masson
(3) Address for all notices not relating to payments:
Richard Masson
Managing Director
Trust Company of the West
865 S. Figueroa Street, Suite 1800
Los Angeles, CA 90017
FAX: (213) 244-0549
Brian Kilb, Esq.
Gibson, Dunn & Crutcher
333 S. Grand Avenue, 46th Floor
Los Angeles, CA 90071
FAX: (213) 229-7520
(4) Tax Identification No.: 95-4424460
141
<PAGE> 60
TCW SPECIAL CREDITS PLUS FUND
(1) All payments on account of Notes held by such
noteholder shall be made by wire transfer of
immediately available funds for credit to:
Account No. 400-1130
Sanwa Bank California
Trust Operation Center
Monterey Park, CA
ABA #122-003-516
A/C Name: TCW Special Credits Plus Fund
Each such wire transfer shall set forth the name
of the Company, a reference to 8.5% Senior Notes
due October 1, 2000, and the due date and application
(as among principal and interest) of the payment being made.
(2) Address for all notices relating to payments:
TCW Special Credits Plus Fund
c/o Trust Company of the West
865 So. Figueroa Street
Suite 1800
Los Angeles, CA 90017
Attention: Richard Masson
(3) Address for all notices not relating to payments:
Richard Masson
Managing Director
Trust Company of the West
865 S. Figueroa Street, Suite 1800
Los Angeles, CA 90017
FAX: (213) 244-0549
Brian Kilb, Esq.
Gibson, Dunn & Crutcher
333 S. Grand Avenue, 46th Floor
Los Angeles, CA 90071
FAX: (213) 229-7520
(4) Tax Identification No.: 95-4424461
142
<PAGE> 61
TCW SPECIAL CREDITS TRUST IV
(1) All payments on account of Notes held by such
noteholder shall be made by wire transfer of
immediately available funds for credit to:
Account No. 400-1131
Sanwa Bank California
Trust Operation Center
Monterey Park, CA
ABA #122-003-516
A/C Name: TCW Special Credits Trust IV
Each such wire transfer shall set forth the name
of the Company, a reference to 8.5% Senior Notes
due October 1, 2000, and the due date and application
(as among principal and interest) of the payment being made.
(2) Address for all notices relating to payments:
TCW Special Credits Trust IV
c/o Trust Company of the West
865 So. Figueroa Street
Suite 1800
Los Angeles, CA 90017
Attention: Richard Masson
(3) Address for all notices not relating to payments:
Richard Masson
Managing Director
Trust Company of the West
865 S. Figueroa Street, Suite 1800
Los Angeles, CA 90017
FAX: (213) 244-0549
Brian Kilb, Esq.
Gibson, Dunn & Crutcher
333 S. Grand Avenue, 46th Floor
Los Angeles, CA 90071
FAX: (213) 229-7520
(4) Tax Identification No.: 95-6955426
143
<PAGE> 62
TCW SPECIAL CREDITS TRUST IVA
(1) All payments on account of Notes held by such
noteholder shall be made by wire transfer of
immediately available funds for credit to:
Account No. 400-1180
Sanwa Bank California
Trust Operation Center
Monterey Park, CA
ABA #122-003-516
A/C Name: TCW Special Credits Trust IV-A
Each such wire transfer shall set forth the name
of the Company, a reference to 8.5% Senior Notes
due October 1, 2000, and the due date and application
(as among principal and interest) of the payment being made.
(2) Address for all notices relating to payments:
TCW Special Credits Trust IVA
c/o Trust Company of the West
865 So. Figueroa Street
Suite 1800
Los Angeles, CA 90017
Attention: Richard Masson
(3) Address for all notices not relating to payments:
Richard Masson
Managing Director
Trust Company of the West
865 S. Figueroa Street, Suite 1800
Los Angeles, CA 90017
FAX: (213) 244-0549
Brian Kilb, Esq.
Gibson, Dunn & Crutcher
333 S. Grand Avenue, 46th Floor
Los Angeles, CA 90071
FAX: (213) 229-7520
(4) Tax Identification No.: 95-6958283
144
<PAGE> 63
WEYERHAEUSER COMPANY MASTER RETIREMENT TRUST
(1) All payments on account of Notes held by such
noteholder shall be made by wire transfer of
immediately available funds for credit to:
Account No. 400-0733
Sanwa Bank California
Trust Operation Center
Monterey Park, CA
ABA #122-003-516
A/C Name: TCW Weyerhaeuser Co.
Each such wire transfer shall set forth the name
of the Company, a reference to 8.5% Senior Notes
due October 1, 2000, and the due date and application
(as among principal and interest) of the payment being made.
(2) Address for all notices relating to payments:
Weyerhaeuser Company Master Retirement Trust
c/o Trust Company of the West
865 So. Figueroa Street
Suite 1800
Los Angeles, CA 90017
Attention: Richard Masson
(3) Address for all notices not relating to payments:
Richard Masson
Managing Director
Trust Company of the West
865 S. Figueroa Street, Suite 1800
Los Angeles, CA 90017
FAX: (213) 244-0549
Brian Kilb, Esq.
Gibson, Dunn & Crutcher
333 S. Grand Avenue, 46th Floor
Los Angeles, CA 90071
FAX: (213) 229-7520
(4) Tax Identification No.: 13-6351459
145
<PAGE> 64
PACIFIC MUTUAL LIFE INSURANCE COMPANY
(1) All payments on account of Notes held by such
noteholder shall be made by wire transfer of
immediately available funds for credit to:
Account No. 473-633
U.S. TR NYC/Trust
ABA #021001318
A/C Name: Commonwealth Equity Trust
Each such wire transfer shall set forth the name
of the Company, a reference to 8.5% Senior Notes
due October 1, 2000, and the due date and application
(as among principal and interest) of the payment being made.
(2) Address for all notices relating to payments:
Pacific Mutual Life Insurance Company
Attention: Fixed Income Securities Dept.
700 Newport Center Drive
Newport Beach, California 92660
Attention: Ronn C. Cornelius
(3) Address for all notices not relating to payments:
Ronn C. Cornelius
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Newport Beach, CA 92660
FAX: (714) 640-3199
Sharon A. Cheever, Esq.
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Newport Beach, CA 92660
FAX: (714) 640-3706
Margaret Sheneman, Esq.
Murphy, Weir & Butler
101 California Street, 39th Floor
San Francisco, CA 94111
FAX: (415) 421-7879
(4) Tax Identification No.: 95-1079000
146
<PAGE> 65
ORIX USA CORPORATION
(1) All payments on account of Notes held by such
noteholder shall be made by wire transfer of
immediately available funds for credit to:
Account No. 0060890010
ORIX USA Corporation
Sanwa Bank, Ltd.
ABA# 026009823
Each such wire transfer shall set forth the name
of the Company, a reference to 8.5% Senior Notes
due October 1, 2000, and the due date and application
(as among principal and interest) of the payment being made.
(2) Address for all notices relating to payments:
Orix USA Corporation
600 Wilshire Blvd., Suite 1460
Los Angeles, CA 90017
Orix USA Corporation
780 Third Avenue, 48th Floor
New York, NY 10017-7088
(3) Address for all notices not relating to payments:
Peter A. Sforzo, Jr.
ORIX USA Corp.
780 Third Avenue, 48th Floor
New York, New York 10017
FAX: (212) 418-8308
Denise L. Getty
ORIX USA Corp.
600 Wilshire Blvd., Suite 1460
Los Angeles, CA 90017
FAX: (213) 955-6530
(4) Tax Identification No.: 13-3095268
147
<PAGE> 66
SCHEDULE 4.1(a): CET LEGAL STATUS
NONE.
148
<PAGE> 67
SCHEDULE 4.1(b): CALREIT LEGAL STATUS
NONE.
149
<PAGE> 68
SCHEDULE 4.7: CET LITIGATION
NONE.
150
<PAGE> 69
(FORM OF)
SECURED PROMISSORY NOTE
(Principal Note)
$ San Francisco, California
-------------- Dated as of
------------- ,1994
FOR VALUE RECEIVED, the undersigned, Commonwealth Equity
Trust, a California Real Estate Investment Trust ("Maker"), promises to pay to
the order of ______________________ or its successors and assigns ("Holder") at
its offices at ________________________________________, or at such other place
as the Holder hereof may designate, the principal sum of __________________
DOLLARS ($___________), in lawful money of the United States of America and in
immediately available funds, with interest thereon prior to default at the rate
of eight and one-half percent (8.5%) per annum (computed on the basis of a 360
day year, actual days elapsed).
For the period commencing on ________ and ending September 30,
1996 (the "PIK Period"), interest accruing hereunder shall be paid quarterly,
in arrears, on the last day of each calendar quarter (the "Payment Date").
Unless an Event of Default has occurred and is continuing during the PIK
Period, Maker may, in lieu of paying interest accrued hereunder in cash,
execute and deliver to Holder, on or before each Payment Date, an Interest
Deferral Note in the principal amount equal to the sum of the interest and
other monies then due and payable to Holder on such Payment Date.
Commencing on November 1, 1996 and at all times thereafter,
interest accruing hereunder from and after October 1, 1996, shall be paid
monthly, in arrears, in cash, on the first day of each successive month.
Notwithstanding any provision contained herein or any other
agreement between Maker and Holder to the contrary, the entire balance due
hereunder, including principal, accrued interest, and any other sums owing
hereunder, shall be due and payable, in full on October 1, 2000 (the "Maturity
Date"). Payments of principal made by Maker to Holder on account of this
Secured Promissory Note (the "Note") may not be reborrowed.
This Note may be prepaid, in whole or in part, without penalty
or premium as provided in the Note Agreement. Any prepayment shall be applied
against principal and interest installments hereunder in the manner set forth
in that certain Second Amended and Restated Note Agreement of even date
herewith (the "Note Agreement").
151
<PAGE> 70
Maker, for itself and its legal representatives, successors
and assigns, and all endorsers, guarantors, or any others who may at any time
become liable for payment hereunder, hereby waives presentment, demand,
protest, notice of dishonor, notice of non-payment, notice of maturity,
presentment for the purposes of accelerating maturity, and diligence in
collection.
Maker agrees to pay all fees and costs of expenses incurred by
or on behalf of the Holder hereof in the collection or enforcement of this Note
as provided in Section 8.2 of the Note Agreement.
This Note is made pursuant to and in connection with the Note
Agreement, and is subject to all of the terms thereof. All capitalized terms
that are not defined herein shall have the meanings as set forth in the Note
Agreement. Payment and performance of Maker's obligations under this Note is
secured by a security interest in certain Collateral, pursuant to and as
defined in that certain Amended and Restated Pledge and Security Agreement,
dated as of _______, 1994, among Maker, U.S. Trust Company, of California,
N.A., as Collateral Agent for Holder and certain other parties (the "Security
Agreement"), and by liens against certain real property and improvements
pursuant to certain Deeds of Trust. This Note amends and restates in its
entirety that certain Secured Promissory Note (One Year Note) dated July 17,
1992, in the original principal amount of _____________________
($ ), made by Maker in favor of Holder.
Maker's failure to make timely payment of any installment of
principal or other sums due hereunder, or the occurrence of any Event of
Default under the Note Agreement, shall constitute a default under this Note.
Upon the occurrence of a default hereunder, regardless of the cause therefor,
Holder may immediately declare the entire balance of this Note to be
immediately due and payable and exercise any and all of the rights and remedies
available under the Note Agreement, the Security Agreement, the Deeds of Trust,
and applicable law. From and after the occurrence of a Default hereunder or
an Event of Default under the Note Agreement, the unpaid principal balance
hereunder shall, at Holder's option as provided in the Note Agreement, bear
interest at the Default Rate specified in the Note Agreement. Any installment
or principal or interest that is not paid when due hereunder shall be added to
the principal balance hereof and shall thereafter bear interest, at Holder's
option, at the Default Rate until paid.
In no contingency or event whatsoever shall the aggregate of
all amounts deemed interest hereunder and charged or collected by Holder or any
holder hereof exceed the highest rate
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<PAGE> 71
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto. In the event that such a court
determines that Holder has charged or received interest hereunder in excess of
the highest applicable rate, the rate in effect hereunder shall automatically
be reduced to the maximum rate permitted by applicable law and Holder shall
apply all interest paid in excess of the maximum lawful rate to the principal
balance of this Note. It is the intent of the parties hereto that Maker not
pay or contract to pay, and that Holder not receive or contract to receive,
directly or indirectly in any manner whatsoever, interest in excess of that
which may be paid by Maker to Holder under applicable law.
This Note shall be governed by and construed in accordance
with the laws of the State of California, except to the extent Holder has
greater rights or remedies under federal law, in which case such choice of
California law shall not be deemed to deprive Holder of such rights and
remedies as may be available under federal law.
If any provision of this Note or the application hereof to any
person or circumstance shall, for any reason or to any extent, be invalid or
unenforceable, neither the remainder of this Note nor the application of such
provision to any other person or circumstance shall be affected thereby, but
rather the same shall be enforced to the greatest extent permitted by law,
except that if such provision relates to the payment of any monetary sum, then
Holder may, at its option, declare the entire indebtedness evidenced hereby
immediately due and payable.
IN WITNESS WHEREOF, the undersigned Maker has executed this
Note as of the day and year set forth on the first page hereof.
THE PEREGRINE REAL ESTATE TRUST,
formerly known as
COMMONWEALTH EQUITY TRUST,
A California Real Estate
Investment Trust
By:
------------------------
Its:
-----------------------
153
<PAGE> 72
(FORM OF)
SECURED PROMISSORY NOTE
(Cash Principal Note)
$ Sacramento, California
-------------- Dated as of
--------------, ----
FOR VALUE RECEIVED, the undersigned, Commonwealth Equity
Trust, a California Real Estate Investment Trust ("Maker"), promises to pay to
the order of ______________________ or its successors and assigns ("Holder") at
its offices at ________________________________________, or at such other place
as the Holder hereof may designate, the principal sum of __________________
DOLLARS ($___________), in lawful money of the United States of America and in
immediately available funds, with interest thereon prior to default at the rate
of eight and one-half percent (8.5%) per annum (computed on the basis of a 360
day year, actual days elapsed).
Interest accruing hereunder shall be paid monthly, in arrears,
on the first day of each calendar month, commencing _________________.
Notwithstanding any provision contained herein or any other
agreement between Maker and Holder to the contrary, the entire balance due
hereunder, including principal, accrued interest, and any other sums owing
hereunder, shall be due and payable, in full on October 1, 2000 (the "Maturity
Date"). Payments of principal made by Maker to Holder on account of this
Secured Promissory Note (the "Note") may not be reborrowed.
This Note may be prepaid, in whole or in part, without penalty
or premium, provided that (a) Maker provides Agent with ten business days
written notice of Maker's intent to prepay this Note in whole or in part, and
(b) any partial principal prepayment made by Maker is in multiples of
$5,000,000, plus interest accrued thereon on the prepayment date. Any
prepayment shall be applied against principal and interest installments
hereunder in the manner set forth in that certain Second Amended and Restated
Note Agreement of even date herewith (the "Note Agreement").
Maker, for itself and its legal representatives, successors
and assigns, and all endorsers, guarantors, or any others who may at any time
become liable for payment hereunder, hereby waives presentment, demand,
protest, notice of dishonor, notice of non-payment, notice of maturity,
presentment for the purposes of accelerating maturity, and diligence in
collection.
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<PAGE> 73
Maker agrees to pay all fees and costs of expenses incurred by
or on behalf of the Holder hereof in the collection or enforcement of this Note
as provided in Section 8.2 of the Note Agreement.
This Note is made pursuant to and in connection with the Note
Agreement, and is subject to all of the terms thereof. All capitalized terms
that are not defined herein shall have the meanings as set forth in the Note
Agreement. Payment and performance of Maker's obligations under this Note is
secured by a security interest in certain Collateral, pursuant to and as
defined in that certain Amended and Restated Pledge and Security Agreement,
dated as of _______, 1994, among Maker, U.S. Trust Company, of California,
N.A., as Collateral Agent for Holder, and certain other parties (the "Security
Agreement") and by liens against certain real property and improvements
pursuant to certain Deeds of Trust.
Maker's failure to make timely payment of any installment of
principal or other sums due hereunder, or the occurrence of any Event of
Default under the Note Agreement shall constitute a default under this Note.
Upon the occurrence of a default hereunder, regardless of the cause therefor,
Holder may immediately declare the entire balance of this Note to be
immediately due and payable and exercise nay and all of the rights and remedies
available under the Note Agreement, the Security Agreement, the Deeds of Trust,
and applicable law. From and after the occurrence of a default hereunder or an
Event of Default under the Note Agreement, the unpaid principal balance
hereunder shall, at Holder's option, bear interest at the Default Rate
specified in the Note Agreement. Any installment or principal or interest that
is not paid when due hereunder shall be added to the principal balance hereof
and shall thereafter bear interest, at Holder's option, at the Default Rate
until paid.
In no contingency or event whatsoever shall the aggregate of
all amounts deemed interest hereunder and charged or collected by Holder or any
holder hereof exceed the highest rate permissible under any law which a court
of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that such a court determines that Holder has charged or
received interest hereunder in excess of the highest applicable rate, the rate
in effect hereunder shall automatically be reduced to the maximum rate
permitted by applicable law and Holder shall apply all interest paid in excess
of the maximum lawful rate to the principal balance of this Note. It is the
intent of the parties hereto that Maker not pay or contract to pay, and that
Holder not receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be paid by Maker to Holder
under applicable law.
155
<PAGE> 74
This Note shall be governed by and construed in accordance
with the laws of the State of California, except to the extent Holder has
greater rights or remedies under federal law, in which case such choice of
California law shall not be deemed to deprive Holder of such rights and
remedies as may be available under federal law.
If any provision of this Note or the application hereof to any
person or circumstance shall, for any reason or to any extent, be invalid or
unenforceable, neither the remainder of this Note nor the application of such
provision to any other person or circumstance shall be affected thereby, but
rather the same shall be enforced to the greatest extent permitted by law,
except that if such provision relates to the payment of any monetary sum, then
Holder may, at its option, declare the entire indebtedness evidenced hereby
immediately due and payable.
IN WITNESS WHEREOF, the undersigned Maker has executed this
Note as of the day and year set forth on the first page hereof.
THE PEREGRINE REAL ESTATE TRUST,
formerly known as
COMMONWEALTH EQUITY TRUST,
A California Real Estate
Investment Trust
By:
-----------------------
Its:
----------------------
156
<PAGE> 75
(FORM OF)
INTEREST DEFERRAL NOTE
$ Sacramento, California
-------------- Dated as of
--------------, ----
FOR VALUE RECEIVED, the undersigned, Commonwealth Equity
Trust, a California Real Estate Investment Trust ("Maker"), promises to pay to
the order of ______________________ or its successors and assigns ("Holder") at
its offices at ________________________________________, or at such other place
as the Holder hereof may designate, the principal sum of __________________
DOLLARS ($___________), in lawful money of the United States of America and in
immediately available funds, with interest thereon prior to default at the rate
of eight and one-half percent (8.5%) per annum (computed on the basis of a 360
day year, actual days elapsed).
For the period commencing on ________ and ending September 30,
1996 (the "PIK Period"), interest accruing hereunder shall be paid quarterly,
in arrears, on the last day of each calendar quarter (the "Payment Date").
Unless an Event of Default has occurred and is continuing during the PIK
Period, Maker may, in lieu of paying interest accrued hereunder in cash,
execute and deliver to Holder, on or before each Payment Date, an Interest
Deferral Note in the principal amount equal to the sum of the interest and
other monies then due and payable to Holder on such Payment Date.
Commencing on November 1, 1996 and at all times thereafter,
interest accruing hereunder from and after October 1, 1996 shall be payable
monthly, in arrears, in cash, on the first day of each successive month.
Notwithstanding any provision contained herein or any other
agreement between Maker and Holder to the contrary, the entire balance due
hereunder, including principal, accrued interest, and any other sums owing
hereunder, shall be due and payable, in full on October 1, 2000 (the "Maturity
Date"). Payments of principal made by Maker to Holder on account of this
Interest Deferral Note (the "Note") may not be reborrowed.
This Note may be prepaid, in whole or in part, as provided in
the Note Agreement. Any prepayment shall be applied against principal and
interest installments hereunder in the manner set forth in that certain Second
Amended and Restated Note Agreement of even date herewith (the "Note
Agreement").
157
<PAGE> 76
Maker, for itself and its legal representatives, successors
and assigns, and all endorsers, guarantors, or any others who may at any time
become liable for payment hereunder, hereby waives presentment, demand,
protest, notice of dishonor, notice of non-payment, notice of maturity,
presentment for the purposes of accelerating maturity, and diligence in
collection.
Maker agrees to pay all fees and costs of expenses incurred by
or on behalf of the Holder hereof in the collection or enforcement of this Note
as provided in Section 8.2 of the Note Agreement.
This Note is made pursuant to and in connection with the Note
Agreement, and is subject to all of the terms thereof. All capitalized terms
that are not defined herein shall have the meanings as set forth in the Note
Agreement. Payment and performance of Maker's obligations under this Note is
secured by a security interest in certain Collateral, pursuant to and as
defined in that certain Amended and Restated Pledge and Security Agreement,
dated as of _______, 1994, among Maker, U.S. Trust Company, of California,
N.A., as Collateral Agent for Holder and certain other parties (the "Security
Agreement"), and by liens against certain real property and improvements
pursuant to certain Deeds of Trust.
Maker's failure to make timely payment of any installment of
principal or other sums due hereunder, or the occurrence of any Event of
Default under the Note Agreement shall constitute a default under this Note.
Upon the occurrence of a default hereunder, regardless of the cause therefor,
Holder may immediately declare the entire balance of this Note to be
immediately due and payable and exercise any and all of the rights and remedies
available under the Note Agreement, the Security Agreement, the Deeds of Trust,
and applicable law. From and after the occurrence of a Default hereunder or an
Event of Default under the Note Agreement, the unpaid principal balance
hereunder shall, at Holder's option, bear interest at the Default Rate
specified in the Note Agreement. Any installment or principal or interest that
is not paid when due hereunder shall be added to the principal balance hereof
and shall thereafter bear interest, at Holder's option, at the Default Rate
until paid.
In no contingency or event whatsoever shall the aggregate of
all amounts deemed interest hereunder and charged or collected by Holder or any
holder hereof exceed the highest rate permissible under any law which a court
of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that such a court determines that Holder has charged or
received interest hereunder in excess of the highest applicable rate, the rate
in effect hereunder shall automatically be reduced to the maximum rate
permitted by applicable law and Holder shall
158
<PAGE> 77
apply all interest paid in excess of the maximum lawful rate to the principal
balance of this Note. It is the intent of the parties hereto that Maker not
pay or contract to pay, and that Holder not receive or contract to receive,
directly or indirectly in any manner whatsoever, interest in excess of that
which may be paid by Maker to Holder under applicable law.
This Note shall be governed by and construed in accordance
with the laws of the State of California, except to the extent Holder has
greater rights or remedies under federal law, in which case such choice of
California law shall not be deemed to deprive Holder of such rights and
remedies as may be available under federal law.
If any provision of this Note or the application hereof to any
person or circumstance shall, for any reason or to any extent, be invalid or
unenforceable, neither the remainder of this Note nor the application of such
provision to any other person or circumstance shall be affected thereby, but
rather the same shall be enforced to the greatest extent permitted by law,
except that if such provision relates to the payment of any monetary sum, then
Holder may, at its option, declare the entire indebtedness evidenced hereby
immediately due and payable.
IN WITNESS WHEREOF, the undersigned Maker has executed this
Note as of the day and year set forth on the first page hereof.
THE PEREGRINE REAL ESTATE TRUST,
formerly known as
COMMONWEALTH EQUITY TRUST,
A California Real Estate
Investment Trust
By:
-----------------------
Its:
----------------------
159
<PAGE> 78
SCHEDULE OF DOCUMENTS
FOR PLAN OF REORGANIZATION FOR
COMMONWEALTH EQUITY TRUST
This Schedule of Documents lists the information to be
provided, the actions to be taken, and the documents to be executed and
delivered in connection with the restructuring of the indebtedness of
Commonwealth Equity Trust ("Company") to the following senior secured lenders
(collectively, "Noteholders" and individually "Lender"): The Prudential
Insurance Company of America ("Prudential"); Pruco Life Insurance Company
("Pruco"); Pacific Mutual Life Insurance Company ("Pac Mutual"), Orix USA
Corporation ("Orix"); Weyerhaeuser Company Master Retirement Company, TCW
Special Credits Fund IV, TCW Special Credits Plus Fund, TCW Special Credits
Company IV, and TCW Special Credits Company IVA (collectively "TCW"); and
Prudential, as Agent for the Noteholders.
The documents are delivered and the actions are taken pursuant
to the Third Amended Plan of Reorganization for Company confirmed by order the
United States Bankruptcy Court for the Eastern District of California on August
8, 1994 (the "Plan"). All capitalized terms shall have their respective
meanings set forth in the Plan and the New Noteholder Documents described
below. "Company" as used herein shall mean Commonwealth Equity Trust in its
capacity as a real estate investment trust as "Reorganized CET" under and as
defined in the Plan.
Some or all of the Documents described below may be executed
in counterparts and may be executed and delivered prior to the Effective Date
of Plan (as defined in the Note Agreement), but no Document shall become
effective until all Documents have been executed and delivered and all
Documents have become effective and the Effective Date of Plan shall have
occurred. Upon the Effective Date of Plan and upon satisfaction of all
conditions precedent set forth in the Documents, all Documents shall be
executed and delivered and become effective as of the Effective Date of Plan.
Unless otherwise specified herein, all information and
Documents required hereunder shall be in form and substance acceptable to
Agent, Noteholders, the Company, the Official Equity Security Holders'
Committee and their respective counsel, and (except as otherwise specified)
_________ originals of the Note Agreement, one (1) original of each Note, and
_________ originals of each other Document shall be executed and delivered.
160
<PAGE> 79
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
The following references to "GGFCM," "SNR", and "MWB" mean,
respectively, Greenburg, Glusker, Fields, Claman & Machtinger; Sonnenschein,
Nath & Rosenthal; and Murphy, Weir & Butler.
161
<PAGE> 80
<TABLE>
<CAPTION>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C>
1. PLEADINGS AND DOCUMENTS IN THE BANKRUPTCY CASE
1.1 Third Amended Plan of Reorganization dated Done
June 9, 1994, as modified.
1.2 Disclosure Statement for Third Amended Plan Done
of Reorganization dated June 9, 1994.
1.3 Order Approving Disclosure Statement and Done
Procedures For Balloting, Fixing Time For
Filing Objections to Confirmation, and Setting
Date For Hearing on Confirmation of Plan.
A. Ballot For Present or Former Shareholders
in Classes 17(a), 17(b), 18(a) and 18(b)
For Accepting or Rejecting the Third
Amended Plan of Reorganization.
B. Ballot For Creditors in All Classes Except
17(a), 17(b), 18(a) and 18(b) For Accepting
or Rejecting the Third Amended Plan of
Reorganization.
1.4 Settlement Agreement and Mutual Release among Done
CET, CalREIT, Berger and Related Entities and
consented to by Noteholders.
1.5 Stipulation and Settlement Agreement Re: Done
Luebkeman Lawsuit.
1.6 Amendment to Stipulation and Settlement Agreement Done
Re: Luebkeman Lawsuit.
1.7 Agreement Re: Return of B&B Art. GGFCM
1.8 Order Confirming Plan of Reorganization, Done
Approving Settlements, and Fixing Bar Date for
Administrative Expense Claims and for Claims
Arising from Rejection of Executory Contracts.
</TABLE>
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<PAGE> 81
<TABLE>
<CAPTION>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C>
2. CORPORATE DOCUMENTS.
2.1 Restated Declaration of Trust of Company Done
certified by a Responsible Officer of Company
as complete and correct as of the Effective
Date of Plan.
2.2 [Intentionally Omitted]
2.3 With respect to Company: Done
A. A Statement By Unincorporated
Association filed with the Secretary
of State of each state listed below,
identifying the address of the principal
office and designating the agent for the
service of process.
(i) California
B. A Statement By Unincorporated
Association filed with the county clerk/
recorder for each county listed below,
identifying the address of the principal
office and designating the agent for the
service of process.
(i) Sacramento County, California
C. [Intentionally Omitted]
2.4 With respect to CalREIT: GGFCM
A. A Statement By Unincorporated
Association filed with the Secretary of
State of each state listed below,
identifying the address of the
principal office and designating the
agent for the service of process.
(i) California
</TABLE>
163
<PAGE> 82
<TABLE>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C> <C>
B. A Statement By Unincorporated
Association filed with the county clerk/
recorder for each county listed below,
identifying the address of the principal
office and designating the agent for the
service of process.
(i) Sacramento County, California
(ii) Maricopa County, Arizona
C. A long form certificate from the
Secretary of State of each state listed
below, certifying that CalREIT is duly
organized and in good standing.
(i) Arizona
2.5 Certificate of a Responsible Officer of Company GGFCM
certifying and attaching:
A. Copy of a resolution of Company's Board
authorizing Company to enter into and
perform the transactions contemplated
by the Documents;
B. The minutes of Company's Board meeting
at which such Resolutions were adopted
and certifying that such meeting was
duly noticed and held; and
C. Specimen signatures certified to be
genuine of each officer of Company who
has executed or will execute any of
Documents, certifying that each such
officer was duly elected, qualified and
incumbent as of the date such officer
executed such Document and as of the
Effective Date of Plan, together with
evidence of the incumbency of such
officer.
</TABLE>
164
<PAGE> 83
<TABLE>
<CAPTION>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C>
3. FINANCIAL STATEMENTS.
3.1 Copies of the Form 10-K Annual Report for the Done
fiscal year ended September 30, 1993, and
December 31, 1993, respectively, for each
of the companies listed below.
A. Company
B. CalREIT
3.2 Copies of the Form 10-Q Quarterly Report, for Done
the quarters ending on December 31, 1993,
March 30, 1994, and June 30, 1994, for each
of the companies listed below.
A. Company
B. CalREIT
3.3 Unaudited consolidated statements of income, GGFCM
stockholders' equity, and cash flows and an
unaudited consolidated balance sheet of each
of the companies listed below, certified by a
Responsible Officer of each respective company
as complete and correct as of the Effective Date
of Plan.
A. Company
B. CalREIT
3.4 Financial projections covering a period of at GGFCM
least one year from the Effective Date of Plan,
showing Company's estimated cash flow, revenues,
expenses, results of operations, and balance
sheet certified by a Responsible Officer of the
Company as representing the best estimates of
Company's future financial performance, based
on reasonable and conservative assumptions.
</TABLE>
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<TABLE>
<CAPTION>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C>
3.5 Letter from Company to Company's independent GGFCM
certified public accountants and tax advisors
authorizing such entities to disclose to Agent,
Collateral Agent, and Noteholders any and all
financial statements and other supporting
financial documents and schedules, including
without limitation, any management representation
letter, with respect to the business, financial
condition and other affairs of the Company.
4. DOCUMENTS FOR SECURITIES TO BE ISSUED UNDER THE PLAN.
4.1 Preferred Stock Purchase Agreement by and among Done
Company and Noteholders named therein.
Exhibit A - Note Purchase Agreement
Exhibit B - Registration Rights
Agreement
Exhibit C - Certificate of Incorporation
Exhibit D - Bylaws
4.2 Registration Rights Agreement by and among Done
Company and the Noteholders named therein.
4.3 Documents for New Stock Options to be issued GGFCM
to Reorganized CET Initial Board of Trustees.
4.4 [Intentionally Omitted]
5. FINANCING STATEMENTS, LIEN SEARCHES, AND TITLE REPORT
DATEDOWNS TO BE DELIVERED BEFORE THE EFFECTIVE DATE
OF PLAN.
</TABLE>
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<TABLE>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C>
5.1 UCC-2 Financing Statements, to be executed by Done
Company in favor of Collateral Agent for the
benefit of Noteholders, to be filed in the
following governmental offices at least one
day prior to the Effective Date of Plan:
A. California Secretary of State
B. [Intentionally Omitted]
5.2 Datedowns of existing title reports for each MWB
property listed on Appendix A for which
Noteholders' modification to Deeds of Trust
are to be recorded.
6. SCHEDULES OF COLLATERAL AND OTHER INFORMATION TO BE
DELIVERED BEFORE THE EFFECTIVE DATE OF PLAN.
6.1 Schedule of Real Property Leases (Rent Roll) GGFCM
listing all real property leases under which
Company is lessor, and specifying (i) the
address of each such property, (ii) the name
and address of the lessee, (iii) the amount of
all monthly lease payments (including CAM and
other fees), (iv) the terms of the lease,
(v) any renewal or other options, and (vi) the
amount of any security deposit held by the
Company, and at the Effective Date of Plan, a
certificate signed by a Responsible Officer of
the Company certifying that the Schedule is
complete and correct as of the Effective Date
of Plan.
6.2 Schedule of Ground Leases, listing all real GGFCM
property ground leases under which Company is
the lessee, and specifying (i) the address
of each such property, (ii) the name and address
of the lessor, (iii) the amount of all monthly
lease payments (including CAM and other fees),
(iv) the terms of the lease, (v) any renewal or
other options, and attaching copies of any
amendments or modifications thereto, and at the
Effective Date of Plan, a certificate
</TABLE>
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<PAGE> 86
<TABLE>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C>
signed by a Responsible Officer of the Company
certifying that the Schedule is complete and
correct as of the Effective Date of Plan and
estoppel certificates executed by the ground
lessors of the Timberlake and Downtown Mini-
Storage properties.
6.3 Schedule of Real Property, listing all Real GGFCM
Property in which Company holds or will hold,
as of the Effective Date of Plan, any interest
other than a leasehold, including (i) the
address of each such Real Property, and (ii)
the nature of the Company's interest therein
(i.e., fee, option to purchase, etc.), and at
the Effective Date of Plan, a certificate
signed by a Responsible Officer of the Company
certifying that the Schedule is complete and
correct as of the Effective Date of Plan.
6.4 Schedule of Notes Receivable, identifying all GGFCM
promissory notes or other instruments owned by
or pledged to Company, and, with respect to each
note, specifying (i) the name and address of the
maker of such note, (ii) the original principal
amount of such note, (iii) the amount of each
monthly payment required under such note, (iv)
the outstanding balance under such note as of
the Effective Date of Plan, (v) the maturity
date of such note, (vi) a general description
of any collateral securing the note, and (vii)
summary of the payment history of the note,
and, at the Effective Date of Plan, a
certificate signed by a Responsible Officer of
the Company certifying that the Schedule is
complete and correct as of the Effective Date
of Plan.
</TABLE>
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<TABLE>
<CAPTION>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C>
6.5 Schedule of Deposit Accounts, listing all banks GGFCM
and other financial institutions at which Company
maintains or will maintain any checking,
operating, payroll, or other deposit accounts,
including (i) the name, branch, and address of
each bank and financial institution, (ii) the
type of each such account, (iii) the account
number for such account, and (iv) copies of the
signature cards for each account, and at the
Effective Date of Plan, a certificate signed by a
Responsible Officer of the Company certifying
that the Schedule is complete and correct as of
the Effective Date of Plan.
6.6 Schedule of Insurance Policies, listing all GGFCM
policies of property, fire, and casualty,
replacement cost, hazard, liability, umbrella,
and/or rent insurance and other types of
insurance in which Company is named insured,
beneficiary, loss payee or assignee for each of
the interests listed below, or in which Company
has any interest as of the Effective Date of
Plan, and at the Effective Date of Plan, a
certificate signed by a Responsible Officer of
Company certifying that the Schedule is complete
and correct, as of the Effective Date of Plan.
(a) Real Property as listed in section
6.3 herein;
(b) Properties securing Notes Receivable as
listed in section 6.4 herein; and
(c) Partnerships and Joint Ventures as listed
in section 6.9 herein.
</TABLE>
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<TABLE>
<CAPTION>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C>
6.7 Schedule of Tenant Insurance Policies with GGFCM
respect to all types of coverage listed in
Item 6.6. listing the name of the tenant,
property address, name of insurer, and policy
number with respect to the Real Property as
listed in Item 6.3 herein, and at the Effective
Date of Plan, a certificate signed by a
Responsible Officer of the Company certifying
that the Schedule is complete and correct as of
the Effective Date of Plan.
6.8 Schedules of Instruments and Securities, listing GGFCM
all chattel paper, letters or credit, warehouse
receipts, documents of title, stock certificates,
certificated securities or other instruments in
which Company has any interest, and at the
Effective Date of Plan, a certificate signed by
a Responsible Officer of the Company certifying
that the Schedule is complete and correct as of
the Effective Date of Plan.
6.9 Schedule of Investments, Partnerships, and Joint GGFCM
Ventures, listing all investments, general
partnership interests, limited partnership
interests, joint venture interests, and
uncertificated securities or other instruments
in which Company has any interest, and at the
Effective Date of Plan, a certificate signed by
a Responsible Officer of the Company certifying
that the Schedule is complete and correct as of
the Effective Date of Plan.
</TABLE>
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<TABLE>
<CAPTION>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C>
6.10 Schedule of Material Contracts, Agreements, and GGFCM
Guarantees listing all material contracts and
agreements between Company and any person or
entity, whether written or oral, express or
implied or having any other legally binding
basis upon the Company, whether direct,
indirect, absolute or contingent, and with
respect to each such contract (i) identifying
all parties thereto, (ii) describing the nature
of the goods or services to be provided or
received thereunder, and (iii) summarizing the
payment terms thereof, and at the Effective Date
of Plan, a certificate signed by a Responsible
Officer of the Company certifying that the
Schedule is complete and correct as of the
Effective Date of Plan.
7. DOCUMENTS FOR THE NEW SECURED DEBT TO BE EXECUTED AND
DELIVERED ON OR BEFORE THE EFFECTIVE DATE OF PLAN.
7.1 Second Amended and Restated Note Agreement, with Done
the following exhibits and schedules:
Exhibit A -- Schedule of Documents
Exhibit B -- Form of Secured Done
Promissory Note
(Promissory Note)
Exhibit C -- Form of Interest Done
Deferral Note
Exhibit D -- Form of Secured Done
Promissory Note (Cash
Principal Note) to be
Issued After October 1,
1996
Exhibit E -- Form of Certificate of
Compliance and Financial
Condition
Schedule for Notices
Schedule 4.1(a): CET Legal GGFCM
Status
Schedule 4.1(b): CalREIT GGFCM
Legal Status
Schedule 4.7: CET Litigation GGFCM
</TABLE>
171
<PAGE> 90
<TABLE>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C>
7.2 Secured Promissory Notes executed by Company in Done
favor of each of
the Noteholders, as follows:
A. Pruco for $3,994,674
B. Prudential for $3,249,001
C. Prudential for $3,408,788
D. Pac Mutual for $10,652,463
E. Orix USA for $1,597,870
F. Weyerhaeuser Company Master Retirement
Company for $1,538,748
G. TCW Special Credits Fund IV for
$4,958,189
H. TCW Special Credits Plus Fund for
$5,300,134
I. TCW Special Credits Company IV for
$4,274,301
J. TCW Special Credits Company IVA
$1,025,832
7.3 Prepetition Notes to be marked "Superseded by MWB
Secured Promissory Note dated as of September
27, 1994" and returned to Company at closing.
7.4 Modifications of Deeds of Trust and Assignments Done
of Rents, to be executed by Company, as trustor,
in favor of Collateral Agent, with respect to
the Deeds of Trust and Assignments of Rents
encumbering each of the Real Properties listed
in Appendix A hereto, to be recorded in the
official records of the county in which each
property is located.
7.5 Amended and Restated Pledge and Security Done
Agreement, to be executed by Company in favor
of Collateral Agent on behalf of Noteholders,
with the following exhibits:
Exhibit A -- Description of Collateral
Exhibit B -- Permitted Encumbrances
Exhibit C -- Pledged Interests
Exhibit D -- Pledged Shares
Exhibit E -- Form of Stock Power
Exhibit F -- Form of Pledge Amendment
</TABLE>
172
<PAGE> 91
<TABLE>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C>
to be delivered on the Effective Date of Plan
together with the following:
A. Evidence of re-delivery as of the
Effective Date of Plan to Collateral
Agent of all shares of the CalREIT
stock in which Company has an interest
B. Receipt executed by Collateral Agent
for delivery of Item 7.5A
C. Evidence of re-delivery as of the
Effective Date of Plan to Collateral
Agent of the Notes Receivable
D. Receipt executed by Collateral Agent
for delivery of Item 7.5C
E. Execution by Company, and evidence of
mailing by Noteholders' Agent to each
obligor and guarantor with respect to
Notes Receivable, of notice of
Noteholders' security interest in all
Notes Receivable
7.6 Intercreditor Agreement, to be executed by each Done
of the Noteholders, with the following exhibit:
Exhibit A -- Wire Transfer
Information for Each
Noteholder
7.7 With respect to Collateral Agent, MWB
A. Amended and Restated Collateral Agent Done
Agreement, to be executed by Collateral
Agent, Noteholders and Agent.
B. Receipt and confirmation from Collateral Done
Agent that it has received all Documents
required by the Second Amended and
Restated Note Agreement and the Amended
and Restated Collateral Agent Agreement
to be delivered by the Effective Date of
Plan.
</TABLE>
173
<PAGE> 92
<TABLE>
<CAPTION>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C>
C. Acknowledgement and Agreement between
Collateral Agent and Company.
7.8 Documents for perfection of Noteholders' MWB
security interest in all deposit accounts in
which Company has an interest or in which
proceeds of Collateral or cash Collateral may
be deposited.
A. (Short form) Notice of Security
Interest, to be given to each
institution at which a Deposit Account
is maintained (Item 6.5 herein).
B. Notice of Security Interest given with
respect to each Note Receivable.
7.9 [intentionally omitted]
7.10 Assignment of Contracts and other property MWB
service contracts and/or documents to be
executed by Company in favor of Collateral Agent.
7.11 Insurance. GGFCM
A. Certificates of Insurance with respect
to each insurance policy issued in
connection with the following:
(i) Real Properties as listed in
Item 6.3 herein;
(ii) Partnerships and joint ventures
as listed in Item 6.9 herein;
(iii) Properties securing Notes
Receivable as listed in
Item 6.4 herein.
B. Endorsements and Noteholder's loss
payable endorsements in favor of
</TABLE>
174
<PAGE> 93
<TABLE>
<CAPTION>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C> <C>
Collateral Agent for each insurance
policy issues in Item 6.6.
C. Notices to all of Company's and
Company's tenants' insurance carriers
under Section 9302(h) of the California
Commercial Code.
7.12 Confirmation Letters from Company stating that GGFCM
the entities listed below have duly
registered that certain pledge of Company's
partnership or joint venture interest to
Collateral Agent on the books and records
of such partnership or joint venture.
A. Placer Ranch Partners, L.P.
B. Placer Ranch Inc.
C. CR Properties, G.P.
D. Company/RJB Properties, G.P.
E. Richard J. Benvenuti
F. The Sacramento Renaissance, L.P.
G. Joseph Benvenuti
H. Nancy Benvenuti
7.13 Release Agreement to be executed by Company Done
in favor of each of the Noteholders and to be
executed by each of the Noteholders in favor
of Company
7.14 Subordination and Attornment Agreement to be MWB
executed by any future or prospective lessee
or operator of any of Company's hotels in
favor of Collateral Agent, subordinating its
leases and management/operating agreement to
the fee Deed of Trust in favor of Collateral
Agent and agreeing to attorn to the foreclosure
sale purchaser and acknowledging ownership of
certain personal property.
</TABLE>
175
<PAGE> 94
<TABLE>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C>
7.15 Opinion letter of Greenberg, Glusker, Fields, GGFCM
Claman & Machtinger addressed to Noteholders.
7.16 Post-Closing Items Letter, to be executed by MWB
Company or its counsel and Noteholders or their
counsel regarding items, if any, to be executed,
delivered or performed after the Effective Date
of Plan.
8. DOCUMENTS WITH RESPECT TO NEW CREDIT LINE FROM FOOTHILL
CAPITAL TO COMPANY.
8.1 Loan Agreement GGFCM
8.2 Note GGFCM
8.3 Security Agreement GGFCM
8.4 UCC-1 Financing Statement to be filed with GGFCM
California Secretary of State
8.5 Deed of Trust, Assignment of Rents, and Fixtures GGFCM
Filing Recorded in the appropriate county for
each of the following properties:
(CET to Provide List of Properties)
9. DOCUMENTS WITH RESPECT TO EACH SENIOR MORTGAGEE TO BE
DELIVERED ON THE EFFECTIVE DATE OF PLAN.
9.1 Redding Holiday Inn: Commercial Federal GGFCM
A. Amended and Restated First Trust Deed
Note
B. Amendment to Deed of Trust
C. [Intentionally Omitted]
9.2 Regency Plaza: SunLife of America
A. Reconveyance of Deed of Trust, Security
Agreement, Fixture Filing, and
Assignment of Leases and Rents
B. Promissory Note Done
</TABLE>
176
<PAGE> 95
<TABLE>
<CAPTION>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C> <C>
C. Deed of Trust, Security Agreement, Done
Fixture Filing, Financing Statement
and Assignment of Leases and Rents
D. [Intentionally Omitted]
E. [Intentionally Omitted]
F. UCC-1 financing statements to be filed Done
in California and Sacramento County,
California
G. Subordination Agreement Done
H. Certificate Concerning Leases Done
I. Receipt and Agreement Done
J. Substitution of Trustee Done
K. Full Reconveyance Done
9.3 Sierra Oaks: SunLife of America MWB
A. Reconveyance of Deed of Trust, Security
Agreement, Fixture Filing, Financing
Statement, and Assignment of Leases and
Rents
B. Promissory Note Done
C. Deed of Trust, Security Agreement, Done
Fixture Filing, Financing Statement and
Assignment of Leases and Rents
D. [Intentionally Omitted]
E. [Intentionally Omitted]
F. UCC-1 financing statements to be filed Done
in California and Placer County,
California
G. Subordination Agreement Done
H. Certificate Concerning Leases Done
I. Receipt and Agreement Done
</TABLE>
177
<PAGE> 96
<TABLE>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C> <C>
J. Substitution of Trustee Done
K. Full Reconveyance Done
9.4 Sunrise Hills: SunLife of America MWB
A. Reconveyance of Deed of Trust,
Security Agreement, Fixture Filing,
and Assignment of Leases and Rents
B. Promissory Note Done
C. Deed of Trust, Security Agreement, Done
Fixture Filing, Financing Statement
and Assignment of Leases and Rents
Done
D. [Intentionally Omitted]
E. [Intentionally Omitted]
F. UCC-1 financing statements to be filed Done
in California and Sacramento County,
California
G. Subordination Agreement Done
H. Certificate Concerning Leases Done
I. Receipt and Agreement Done
J. Substitution of Trustee Done
K. Full Reconveyance Done
9.5 University Village: SunLife of America MWB
A. Amended and Restated Secured Promissory Done
Note
B. Amendment to Deed of Trust, Security Done
Agreement, Fixture Filing, Financing
Statement and Assignment of Leases and
Rents
C. [Intentionally Omitted] Done
</TABLE>
178
<PAGE> 97
<TABLE>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C> <C>
D. UCC-2 financing statements to be Done
filed in California and Sacramento
County, California
E. Subordination Agreement Done
F. Certificate Concerning Leases Done
G. Receipt and Agreement
9.6 Hurley-Ethan I: State Farm GGFCM
A. Amended and Restated Promissory Note
B. Amendment to Deed of Trust
C. [Intentionally omitted]
9.7 Systems Integrators on Freeway Boulevard: GGFCM
HomeFed/RTC
A. Amended and Restated Secured Promissory
Note
B. Amendment to Deed of Trust
C. [Intentionally Omitted]
9.8 Systems Integrators on Lanane Way: HomeFed/RTC GGFCM
A. Amended and Restated Secured Promissory
Note
B. Amendment to Deed of Trust
C. [Intentionally Omitted]
9.9 Hurley-Ethan II: First Nationwide GGFCM
A. Amended and Restated Secured Promissory
Note
B. Amendment to Deed of Trust
C. [Intentionally Omitted]
</TABLE>
179
<PAGE> 98
<TABLE>
<CAPTION>
Responsible
Documents Party
- ------------------------------------------------------------------ -----------
<S> <C> <C> <C>
9.10 Timberlake: SunLife Assurance Company of Canada GGFCM
A. Amended and Restated California Note
Secured by Deed of Trust
B. Amendment to Deed of Trust
C. [Intentionally Omitted]
9.11 [Intentionally Omitted]
9.12 [Intentionally Omitted]
10. DOCUMENTS TO BE DELIVERED AFTER THE EFFECTIVE DATE OF PLAN.
10.1 File stamped copies of each Modification of MWB
Deed of Trust and Assignment of Deed of Trust
described in Item 7.4, 7.9 and Appendix A hereto
showing that each was duly recorded.
10.2 File stamped copies of each UCC Financing MWB
Statement and fixtures filings described in
Item 5.1 Appendix B showing that each such
Financing Statement was duly filed.
10.3 [Intentionally Omitted]
10.4 Updates of ALTA Noteholder's policies of title MWB
insurance, issued by Chicago Title Insurance
Company in favor of Collateral Agent, together
with ALTA endorsement no. 110.5 insuring the
validity and priority of each of the Deeds of
Trust described in Appendix C.
10.5 Copies of a Commercial Finance Lender's License GGFCM
issued by the California Department of
Corporations to:
A. Company
B. CalREIT
10.6 Documents for New Stock Options which may be GGFCM
issued to management upon the approval of
CET's Board of Trustees.
</TABLE>
180
<PAGE> 99
APPENDIX A
LIST OF REAL PROPERTIES OWNED BY COMPANY
(SEE ITEM 6.3)
<TABLE>
<S> <C>
CET No. 601 Chico, CA
One Sunrise Park
2893 Sunrise Blvd.
Rancho Cordova, CA
CET No. 603
Milpitas
500 E. Calavares
Milpitas, CA
CET No. 605
Regency Plaza
7143-7263 Greenback Lane
Citrus Heights, CA
CET No. 606
16th & K
1600 "K" St.
Sacramento, CA
CET No. 607
Burbank Mini Storage
1435 Sebastopol Rd.
Santa Rosa, CA
CET No. 608
Villa Del Sol
305 N. Harbor Blvd.
Fullerton, CA
CET No. 609
Holiday Inn
1900 Hilltop Dr.
Redding, CA
CET No. 611
Holiday Inn
2730 No. Main St.
Walnut Creek, CA
CET No. 614
Holiday Inn
5321 Date Ave.
Sacramento, CA
CET No. 615
Holiday Inn
685 Manzanita Court
</TABLE>
181
<PAGE> 100
<TABLE>
<S> <C>
CET No. 618 CET No. 636
University Village Sunrise Hills (w/o T.G.I. Friday)
400-448 Howe Ave. 6241-6301 Sunrise Blvd.
Sacramento, CA Citrus Heights, CA
CET No. 620 CET No. 637
T.G.I. Friday Sierra Oaks
6307 Sunrise Blvd. 4040-4130 Douglas Blvd.
Citrus Heights, CA Roseville, CA
CET No. 623 CET No. 640
Town Center Garden Office Park Florin Perkins
2501-2525 Cherry Ave. Sacramento, CA
Signal Hill, CA
CET No. 619
CET No. 624 Timberlake
Mallory Service Building 7501 Timberlake Way
1421 Lesnick Lane Sacramento, CA
Walnut Creek, CA
CET No. 628
CET No. 625 Downtown Mini Storage
Parkway Center 2318 16th St.
5200 Golden Foothill Parkway Sacramento, CA
El Dorado Hills, CA
CET No. 630
Hurley Ethan Office Park I
1300 Ethan Way
Sacramento, CA
CET No. 631
Trade Center "A"
11135 Trade Center Dr.
Rancho Cordova, CA
CET No. 632
Trade Center "C"
11167 Trade Center Dr.
Rancho Cordova, CA
CET No. 634
Systems Integrators Buildings
3755 N. Freeway/3900 Lenane
Sacramento, CA
CET No. 635
Hurley Ethan Office Park II
2025-35-45 Harley Way
Sacramento, CA
</TABLE>
182
<PAGE> 101
APPENDIX B
LIST OF UCC-2 FINANCING STATEMENT AND
FIXTURES FILING FILED BY COMPANY IN
FAVOR OF NOTEHOLDERS
(SEE ITEM 10.2)
183
<PAGE> 102
APPENDIX C
LIST OF EXISTING DEEDS OF TRUST, ASSIGNMENT
OF RENTS, SECURITY AGREEMENT AND FIXTURE
FILING EXECUTED BY COMPANY IN FAVOR OF
COLLATERAL AGENT
<TABLE>
<CAPTION>
PROPERTY RECORDING INFORMATION
- -------- ---------------------
<S> <C>
CET No. 601 Recorded on 7/21/92 in
One Sunrise Park Book 920721,
2893 Sunrise Blvd. Page 1157
Rancho Cordova, CA
CET N0. 603 Recorded on 7/22/92 as
Milpitas Instrument No. 11461924
500 E. Calavares
Milpitas, CA
CET No. 605 Recorded on 7/21/92 in
Regency Plaza Book 920721,
7143-7263 Greenback Lane Page 1144
Citrus Heights, CA
CET No. 606 Recorded on 7/21/92 in
16th & K Book 920721,
1600 "K" St. Page 1152
Sacramento, CA
CET No. 607 Recorded on 7/21/92 as
Burbank Mini Storage Instrument No. 1992-00889572
1435 Sebastopol Rd.
Santa Rosa, CA
CET No. 608 Recorded on 7/23/92 as
Villa Del Sol Instrument No. 92-493292
305 N. Harbor Blvd.
Fullerton, CA
CET No. 609 Recorded on 7/21/92 as
Holiday Inn Instrument No. 3319
1900 Hilltop Dr. Book 2885
Redding, CA Page 722
CET No. 611 Recorded on 7/21/92 as
Holiday Inn Instrument No.
2730 No. Main St. 92-183844
Walnut Creek, CA
CET No. 614 Recorded on 7/21/92 in
Holiday Inn Book 920721,
5321 Date Ave. Page 1156
Sacramento, CA
</TABLE>
184
<PAGE> 103
<TABLE>
<S> <C>
CET No. 615 Recorded on 7/21/92 as
Holiday Inn Serial No.
685 Manzanita Court 92-032767
Chico, CA
CET No. 618 Recorded on 7/21/92 in
University Village Book 920721,
400-448 Howe Ave. Page 1147
Sacramento, CA
CET No. 620 Recorded on 7/21/92 in
T.G.I. Friday Book 920721,
6307 Sunrise Blvd. Page 1158
Citrus Heights, CA
CET No. 623 Recorded on 7/21/92 as
Town Center Garden Office Park Instrument No. 92-1324800
2501-2525 Cherry Ave.
Signal Hill, CA
CET No. 624 Recorded on 7/21/92 as
Mallory Service Building Instrument No.
1421 Lesnick Lane 92-183874
Walnut Creek, CA
CET No. 625 Recorded on 7/21/92 as
Parkway Center Instrument No. 44878,
5200 Golden Foothill Parkway Book 3827,
El Dorado Hills, CA Page 215
CET No. 630 Recorded on 7/21/92 in
Hurley Ethan Office Park I Book 920721,
1300 Ethan Way Page 1150
Sacramento, CA
CET No. 631 Recorded on 7/21/92 in
Trade Center "A" Book 920721,
11135 Trade Center Dr. Page 1154
Rancho Cordova, CA
CET No. 632 Recorded on 7/21/92 in
Trade Center "C" Book 920721,
11167 Trade Center Dr. Page 1153
Rancho Cordova, CA
CET No. 634 Recorded on 7/21/92 in
Systems Integrators Buildings Book 920721
3755 N. Freeway/3900 Lenane Page 1146
Sacramento, CA
CET No. 635 Recorded on 7/21/92 in
Hurley Ethan Office Park II Book 920721,
</TABLE>
185
<PAGE> 104
<TABLE>
<S> <C>
2025-35-45 Harley Way Page 1159
Sacramento, CA
CET No. 636 Recorded on 7/21/92 in
Sunrise Hills (w/o T.G.I. Friday) Book 920721,
6241-6301 Sunrise Blvd. Page 1145
Citrus Heights, CA
CET No. 637 Recorded on 7/21/92 as
Sierra Oaks Instrument No.
4040-4130 Douglas Blvd. 92-056160
Roseville, CA
CET No. 640 Recorded on 7/21/92 in
Florin Perkins Book 920721,
Sacramento, CA Page 1155
CET No. 619 Recorded on 7/21/92 in
Timberlake Book 920721
7501 Timberlake Way Page 1149
Sacramento, CA
CET No. 628 Recorded on 7/21/92 in
Downtown Mini Storage Book 920721
2318 16th St. Page 1141
Sacramento, CA
</TABLE>
186
<PAGE> 1
EXHIBIT 4.2
[LOGO]
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
COMMONWEALTH EQUITY TRUST
AND
FOOTHILL CAPITAL CORPORATION
DATED AS OF OCTOBER 6, 1994
187
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.3 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.5 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1 Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.2 Interest: Rates, Payments, and Calculations . . . . . . . . . . . . . . . . . . . . . . . 17
2.3 Crediting Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.4 Statements of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.5 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3. CONDITIONS; TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.1 Conditions Precedent to Initial Advance . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.2 Conditions Precedent to All Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.3 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.4 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.5 Early Termination by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.6 Termination Upon Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.1 Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Negotiable Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 Collection of Rents, Issues, Profits, Accounts, General Intangibles, and Negotiable
Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.4 Release of Portions of the Real Property. . . . . . . . . . . . . . . . . . . . . . . . . 23
4.5 Delivery of Additional Documentation Required . . . . . . . . . . . . . . . . . . . . . . 24
4.6 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.7 Right to Inspect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.1 Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.2 No Prior Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.3 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.4 Authority To Assign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.5 Location of Chief Executive Office; FEIN . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
188
<PAGE> 3
<TABLE>
<S> <C> <C>
5.6 Due Authorization; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.8 No Material Adverse Change in Financial Condition . . . . . . . . . . . . . . . . . . . . 26
5.9 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.10 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.11 Environmental Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.12 Reliance by Foothill; Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.1 Accounting System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2 Financial Statements, Reports, Certificates . . . . . . . . . . . . . . . . . . . . . . . 28
6.3 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.4 Collateral Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.7 No Setoffs or Counterclaims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.9 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.10 Environmental Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.11 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.12 Financial Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.3 Restrictions on Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.4 Extraordinary Transactions and Disposal of Assets . . . . . . . . . . . . . . . . . . . . 36
7.5 Change Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.6 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.7 Restructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.8 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.9 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.10 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.11 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.12 Accounting Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.13 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.14 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.15 Suspension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.16 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.17 Change in Location of Chief Executive Office; Related Equipment with Bailees . . . . . . . 38
7.18 Amendment of Certain Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.1 Monetary Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.2 Non-monetary Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.3 Breach of Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.4 Material Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.5 Seizure of Borrower's Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.6 Voluntary Insolvency Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.7 Involuntary Insolvency Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.8 Court Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.9 Governmental Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.10 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.11 Material Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.12 Misrepresentations by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.13 Termination of Subordination Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.14 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.15 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9. FOOTHILL'S RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.1 Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.2 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.3 Foreclosure Not A Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10. TAXES AND EXPENSES REGARDING THE COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.1 Failure to Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.2 Right to Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11. WAIVERS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.1 Demand; Protest; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2 Foothill's Liability for Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.3 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14. DESTRUCTION OF BORROWER'S DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.1 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.3 Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.5 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
190
<PAGE> 5
<TABLE>
<S> <C> <C>
15.6 Amendments in Writing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.7 Counterparts; Telefacsimile Execution . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.8 Revival and Reinstatement of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.9 Lending Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.10 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
Schedule R-1 Real Property and Release Amounts
191
<PAGE> 6
SCHEDULE R-1
<TABLE>
<CAPTION>
PROPERTY NAME ADDRESS CITY COUNTY PARCEL NUMBER RELEASE AMOUNT
<S> <C> <C> <C> <C> <C>
16th & K Streets 1600 K Street Sacramento Sacramento 006-0124-001 $1,600,000
11135 Trade 11135 Trade Rancho Cordova Sacramento 072-0222-021 $1,160,000
Center Center Dr.
11167 Trade 11167 Trade Rancho Cordova Sacramento 072-0222-033 $ 540,000
Center Center Dr.
Burbank Mini- 1435 Sabastopol Santa Rosa Sonoma 125-091-028-000 $ 965,000
Warehouse Rd
Downtown Mini- 2318 16th St. Sacramento Sacramento 009-0217-001 $ 670,000
Storage
Holiday Inn Chico 685 Manzanita Chico Butte 006-240-022 $3,350,000
Ct.
Holiday Inn 5321 Date Avenue Sacramento Sacramento 228-0143-023 $5,050,000
Sacramento
Holiday Inn 2730 N. Main St. Walnut Creek Contra Costa 171-070-039-2 $1,700,000
Walnut Creek
Mallory Service 2740 N. Main Walnut Creek Contra Costa 171-070-011-1 $ 505,000
Milpitas 500 E. Calaveras Milpitas Santa Clara 086-28-021 $1,750,000
Blvd.
One Sunrise 2893 Sunrise* Rancho Cordova Sacramento 072-0450-054 $ 880,000
Parkway Center 5200 Golden El Dorado El Dorado 86-830-46 $ 900,000
Hills Pkwy. Hills
TGIF Sunrise 6245 Sunrise Citrus Heights Sacramento 243-0060-040-000 $ 790,000
Blvd.
Town Center 2501-2525 Cherry Signal Hill Los Angeles 7214-002-042-043 $2,350,000
Avenue
</TABLE>
* Also 11500 & 11492 Sunrise Gold Circle
192
<PAGE> 7
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT, is entered into as of
October 6, 1994, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, and COMMONWEALTH EQUITY TRUST,
a California real estate investment trust ("Borrower"), with its chief
executive office located at 1300 Ethan Way, Suite 200, Sacramento, California
95825-6797.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the
following terms shall have the following definitions:
"Accounts" means all currently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods or the rendition of services
by Borrower, irrespective of whether earned by performance, and any and all
credit insurance, guaranties, or security therefor.
"Affiliate" means, as applied to any Person, any
other Person directly or indirectly controlling, controlled by, or under common
control with, that Person. For purposes of this definition, "control" as
applied to any Person means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract, or
otherwise.
"After Acquired Property" means real property or
fixtures acquired by Borrower on or after entry of the Confirmation Order, to
the extent that the purchase money for such property consists solely of the
proceeds of any equity offering, unsecured financing, or purchase money
Permitted Lien on such property.
"Agreement" means this Loan and Security Agreement
and any extensions, riders, supplements, notes, amendments, or modifications to
or in connection with this Loan and Security Agreement.
"Allowed Mechanic's Lien Claim" shall have the
meaning ascribed it in the Plan.
"Allowed Secured Real Property Tax Claim" shall have
the meaning ascribed it in the Plan.
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<PAGE> 8
"Authorized Officer" means any officer of Borrower.
"Available Cash Flow" means, with respect to Borrower
for any fiscal period, EBITDA minus (i) taxes; and (ii) Capital Expenditures in
each case actually due or paid during such fiscal period.
"Average Unused Portion of Maximum Amount" means the
Maximum Amount less the average Daily Balance of advances made by Foothill
under Section 2.1 that were outstanding during the immediately preceding month.
"Bankruptcy Code" means the United States Bankruptcy
Code (11 U.S.C. Section 101 et seq.), as amended, and any successor statute.
"Bankruptcy Court" means the United States Bankruptcy
Court for the East District of California.
"Base NOI" means Four Million Seven Hundred
Sixty-three Thousand Dollars ($4,763,000).
"Benefit Plan" means an employee benefit plan (as
defined in Section 3(3) of ERISA) which Borrower or any ERISA Affiliate
sponsors or maintains or to which Borrower or any ERISA Affiliate makes, is
making, or is obligated to make contributions, including any Multiemployer Plan
or Qualified Plan.
"Borrower" has the meaning set forth in the preamble
to this Agreement.
"Borrower's Books" means all of Borrower's books and
records including: ledgers; records indicating, summarizing, or evidencing the
Collateral or liabilities; all information relating to Borrower's business
operations at the Real Property or financial condition; and all computer
programs, disc or tape files, printouts, runs, or other computer prepared
information, and the equipment containing such information.
"Business Day" means any day which is not a Saturday,
Sunday, or other day on which national banks are authorized or required to
close.
"CalREIT" means California Real Estate Investment
Trust, a California real estate investment trust.
"Capital Expenditures" means any expenditure by a
Person for the acquisition or construction of fixed assets that would be
capitalized on a balance sheet of Borrower prepared in accordance with GAAP,
including deferred maintenance charges and
194
<PAGE> 9
tenant improvements or leasing commissions (whether in connection with a new
lease or with existing lease).
"Cash Equivalents" means (a) securities issued
guaranteed or insured by the United States of America or any of its agencies
with maturities of not more than one year from the date acquired, (b)
certificates of deposit with maturities of not more than one year from the date
acquired that have been issued by a federal or state chartered commercial bank
of recognized standing, which bank has capital and unimpaired surplus in excess
of $500,000,000, based on its most recent publicly available financial
statements, and (c) commercial paper or finance company paper issued by any
entity incorporated under the laws of the United States of America or any state
thereof and having a rating of at least A-1 or the equivalent by Moody's
Investors Service, Inc., in each case with maturities of not more than 60 days
from the date acquired.
"Change of Control" shall be deemed to have occurred
at such time as a "person" or "group" (within the meaning of Sections 13(d) and
14(d) (2) of the Securities Exchange Act of 1934 exclusive, however, of Pacific
Mutual Life Insurance Company, The Prudential Insurance Company of America, or
Trust Company of the West, or their respective Affiliates) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934), directly or indirectly, of 50% or more of the total voting power of
all classes of stock then outstanding of Borrower normally entitled to vote in
the election of directors.
"Closing Date" means the date of the initial advance.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following: the Real
Property; the Related Rents; the Related Accounts; the Related Equipment; the
Related General Intangibles; any money, or other assets of Borrower which now
or hereafter come into the possession, custody, or control of Foothill; and the
proceeds and products, whether tangible or intangible, of any of the foregoing
including proceeds of insurance covering any or all of the Collateral, and any
and all money, deposit accounts, or other tangible or intangible property
resulting from the sale, exchange, collection, or other disposition of any of
the foregoing, or any portion thereof or interest therein, and the proceeds
thereof, including any awards made for any taking by eminent domain.
"Collateral Agent" means U.S. Trust Company of
California, N.A., as the collateral agent for the Noteholders, or any Person
that becomes a successor Collateral Agent.
195
<PAGE> 10
"Confirmation Order" means the order of the
Bankruptcy Court confirming the Plan pursuant to section 1129 of the Bankruptcy
Code entered by the Bankruptcy Court on August 8, 1994.
"Consolidated Current Assets" means, as of any date
of determination, the aggregate amount of all current assets of Borrower and
its subsidiaries calculated on a consolidated basis that would, in accordance
with GAAP, be classified on a balance sheet as current assets.
"Consolidated Current Liabilities" means, as of any
date of determination, the aggregate amount of all current liabilities of
Borrower and its subsidiaries, calculated on a consolidated basis that would,
in accordance with GAAP, be classified on a balance sheet as current
liabilities. For purposes of this definition, all advances outstanding under
this Agreement shall be deemed to be current liabilities without regard to
whether they would be deemed to be so under GAAP.
"Daily Balance" means the amount of the Obligations
owed at the end of a given day.
"Declaration of Trust" means that certain Declaration
of Trust of Commonwealth Equity Trust dated July 31, 1973, as amended from time
to time.
"Early Termination Premium" has the meaning set forth
in Section 3.4.
"EBITDA" means, with respect to Borrower, for any
fiscal period (i) income before interest and taxes, plus (ii) to the extent
deducted in determining such income, depreciation, amortization and other
similar non-cash charges, minus (iii) to the extent recognized in determining
such income, extraordinary gains, in each case for such fiscal period.
"Effective Date of Plan" means the Effective Date as
defined in the Plan.
"Environmental Indemnity" means an environmental
indemnity executed by Borrower in favor of Foothill, the form and substance of
which shall be reasonably satisfactory to Foothill.
"Environmental Law" means all present and future
laws, regulations, statutes, common law, rules, ordinances, codes, licenses,
permits, orders, approvals, plans, authorizations, concessions, franchises, and
similar items of any federal, state or local government, instrumentality or
body, as the same may be amended, modified or supplemented from time to time
related to Hazardous Materials.
196
<PAGE> 11
"Equipment" means all of Borrower's present and
hereafter acquired machinery, machine tools, motors, equipment, furniture,
furnishings, fixtures, vehicles (including motor vehicles and trailers), tools,
parts, goods (other than consumer goods, farm products, or Inventory), wherever
located, and any interest of Borrower in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, or any predecessor, successor, or
superseding laws of the United States of America, together with all regulations
promulgated thereunder.
"ERISA Affiliate" means any trade or business
(whether or not incorporated) which, within the meaning of Section 414 of the
IRC, is: (i) under common control with Borrower; (ii) treated, together with
Borrower, as a single employer; (iii) treated as a member of an affiliated
service group of which Borrower is also treated as a member; or (iv) is
otherwise aggregated with the Borrower for purposes of the employee benefits
requirements listed in IRC Section 414(m)(4).
"ERISA Event" shall mean any one or more of the
following: (i) a Reportable Event with respect to a Qualified Plan or a
Multiemployer Plan; (ii) a Prohibited Transaction with respect to any Benefit
Plan; (iii) a complete or partial withdrawal by Borrower or any ERISA Affiliate
from a Multiemployer Plan; (iv) the complete or partial withdrawal of Borrower
or an ERISA Affiliate from a Qualified Plan during a plan year in which it was,
or was treated as, a "substantial employer" as defined in Section 4001(a)(2) of
ERISA; (v) a failure to make full payment when due of all amounts which, under
the provisions of any Benefit Plan or applicable law, Borrower or any ERISA
Affiliate is required to make; (vi) the filing of a notice of intent to
terminate, or the treatment of a plan amendment as a termination, under
Sections 4041 or 4041A of ERISA; (vii) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any
Qualified Plan or Multiemployer Plan; (viii) the imposition of any liability
under Title IV of ERISA, other than PBGC premiums due but not delinquent under
Section 4007 of ERISA, upon Borrower or any ERISA Affiliate; and (ix) a
violation of the applicable requirements of Sections 404 or 405 of ERISA, or
the exclusive benefit rule under Section 403(c) of ERISA, by any fiduciary or
disqualified person with respect to any Benefit Plan for which Borrower or any
ERISA Affiliate may be directly or indirectly liable.
"Event of Default" has the meaning set forth in
Section 8.
"FEIN" means Federal Employer Identification Number.
"Florin-Perkins Bond Claims" means all such claims
listed in the Plan.
197
<PAGE> 12
"Foothill" has the meaning set forth in the preamble
to this Agreement.
"Foothill Expenses" means all reasonable: costs or
expenses (including taxes, photocopying, notarization, telecommunication and
insurance premiums) required to be paid by Borrower under any of the Loan
Documents that are paid or advanced by Foothill pursuant to the provisions of
the Loan Documents including property taxes or insurance paid by Foothill with
respect to the Collateral; documentation, filing, recording, publication,
appraisal (including periodic Collateral appraisals), real estate survey,
environmental audit and search fees assessed, paid, or incurred by Foothill in
connection with Foothill's transactions with Borrower; costs and expenses
incurred by Foothill in the disbursement of funds to Borrower (by wire transfer
or otherwise); charges paid or incurred by Foothill resulting from the dishonor
of checks; costs and expenses paid or incurred by Foothill to correct any
default or enforce any provision of the Loan Documents, or in gaining
possession of, maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Collateral, or any portion
thereof, irrespective of whether a sale is consummated; costs and expenses paid
or incurred by Foothill in examining Borrower's Books; costs and expenses paid
or incurred by Foothill in connection with third party claims or any other suit
that Foothill is entitled to be reimbursed for in accordance with the Loan
Documents; costs and expenses paid or incurred by Foothill in enforcing or
defending the Loan Documents; and Foothill's reasonable attorneys fees and
expenses incurred in advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing (including attorneys fees and expenses
incurred in connection with a "workout," a "restructuring," or an Insolvency
Proceeding concerning Borrower or any guarantor of the Obligations), defending,
or concerning the Loan Documents, irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles
as in effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present
and future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due
or recoverable from pension funds, route lists, rights to payment and other
rights under any royalty or licensing agreements, infringements, claims,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax
refund claims), other than goods and Accounts.
"Hazardous Materials" means:
(a) those substances as defined as "hazardous
substances," "hazardous materials," "toxic substances," or "solid waste" in the
Comprehensive
198
<PAGE> 13
Environmental Response, Compensation and Liability Act, Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq. ("RCRA"), or the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801 et seq., and in the
regulations promulgated pursuant thereto;
(b) those substances designated as a "hazardous
substance" under or pursuant to the Federal Water Pollution Control Act, 33
U.S.C. Section 1257 et seq., or defined as a "hazardous waste" under or
pursuant to RCRA and in the regulations promulgated pursuant thereto;
(c) those substances listed in the United States
Department of Transportation Table (40 CFR 172.101 and amendments there to) or
by the Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto); and
(d) such other substances, materials and wastes
which are regulated under any act, or which are classified as hazardous or
toxic under any Environmental Law.
"Holiday" means Holiday Inns, Inc. and Holiday Inns
Franchising, Inc.
"Indebtedness" shall mean: (a) all obligations of
Borrower for borrowed money; (b) all obligations of Borrower evidenced by
bonds, debentures, notes, or other similar instruments and all reimbursement or
other obligations of Borrower in respect of letters of credit, letter of credit
guaranties, bankers acceptances, interest rate swaps, controlled disbursement
accounts, or other financial products; (c) all obligations under capital
leases; (d) all obligations or liabilities of others secured by a lien or
security interest on any property or asset of Borrower, irrespective of whether
such obligation or liability is assumed; and (e) any obligation of Borrower
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to Borrower) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other Person.
"Indemnified Persons" means Foothill and its parents,
subsidiaries and affiliates, attorneys and each of their officers, directors,
agents, employees, trustees, receivers, executors and administrators, and the
heirs, successors and assigns of all of the foregoing. The foregoing to the
contrary notwithstanding, purchasers of all or any portion of the Real Property
at a foreclosure sale or through a private sale following a foreclosure or
transfer of all or a portion of the Real Property to Foothill shall not be
Indemnified Persons; it being the intent of the parties that the term
"Indemnified Persons" shall include only those Persons (including their
parents, subsidiaries, affiliates, attorneys, officers, directors, agents,
employees, trustees, receivers, executors, administrators, successors, and
assigns in connection with such capacity) acting in the capacity of Borrower's
lender and
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not successor owners of the Real Property other than Foothill (or an affiliate
of Foothill) that acquires the same after foreclosure or acceptance of a
deed-in-lieu of foreclosure.
"Insolvency Proceeding" means any proceeding
commenced by or against any Person under any provision of the Bankruptcy Code
or under any other bankruptcy or insolvency law, including assignments for the
benefit of creditors, formal or informal moratoria, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.
"Insurance Policy" means any and all policies of
insurance which Borrower obtains, or is required to obtain, on the Collateral
and shall include, but not be limited to, the policies described in Section 6.6
hereof.
"Interest Deferral Notes" means the promissory notes
to be delivered by Borrower to each Noteholder pursuant to the Note Agreement.
"Interest Expense" means, for each fiscal period,
Borrower's cash interest expense due during such period on Indebtedness of
Borrower that should be reported on Borrower's financial statements prepared in
accordance with GAAP.
"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"Loan" has the meaning set forth in Section 2.1
hereof.
"Loan Documents" means this Agreement, the
Environmental Indemnity, the Subordination Agreement, the Mortgages, any other
note or notes executed by Borrower and payable to Foothill, and any other
agreement entered into in connection with this Agreement.
"Lockbox Account" shall mean the depositary account
established pursuant to the Lockbox Account Agreement.
"Lockbox Account Agreement" means a Lockbox Account
Agreement, in form and substance satisfactory to Foothill, among Borrower,
Foothill, and the Lockbox Account Bank.
"Lockbox Account Bank" means the depositary
institution at which Borrower's operating accounts are maintained.
"Losses" shall mean any and all losses, liabilities
contingent liabilities, damages, obligations, claims, contingent claims,
actions, suits, proceedings, disbursements, penalties, costs and expenses
(including reasonable attorneys fees and costs and all other
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<PAGE> 15
professional or consultants fees and expenses), whether or not an action or
proceeding is commenced or threatened, incurred by Foothill and arising out of
or relating to Borrower's ownership of the Real Property or Borrower's
performance or non-performance of its obligations under the Loan Documents.
"Material Adverse Effect" means (a) a material
adverse effect on (i) the business, assets, operations, prospects, or financial
or other condition of Borrower, on a consolidated basis; (ii) the ability of
Borrower to pay or perform the Obligations; (iii) the Collateral or Foothill's
liens or security interests on the Collateral or the priority of any such liens
or security interests; or (iv) Foothill's rights and remedies under this
Agreement and the other Loan Documents, or (b) the incurrence by Borrower of
any liability, contingent or liquidated, that has an actual or estimated
incurrence of liability, or dollar exposure or loss, greater than $1,000,000 to
Borrower, on a consolidated basis, which loss or liability would not be
reflected as a liability on Borrower's financial statement.
"Material Lease" means any lease which represents
more than twenty percent (20%) of the net rentable square footage of any parcel
of Real Property.
"Maximum Amount" means Ten Million Dollars
($10,000,000); provided, however, that the Maximum Amount automatically shall
be reduced or increased, as applicable, in accordance with Section 2.1(d)
hereof; provided further, however, that the Maximum Amount automatically shall
be reduced in accordance with Section 2.1(e) hereof.
"Mortgages" means one or more mortgages, deeds of
trust, or deeds to secure debt, executed by Borrower in favor of Foothill, the
form and substance of which shall be reasonably satisfactory to Foothill, that
encumber the Real Property and the related improvements thereto.
"Multiemployer Plan" shall mean a multiemployer plan
as defined in Sections 3(37) or 4001(a) (3) of ERISA or Section 414 of the IRC
in which employees of Borrower or an ERISA Affiliate participate or to which
Borrower or any ERISA Affiliate contribute or are required to contribute.
"New CET Preferred Stock" means the New CET Preferred
Stock defined in and issued pursuant to the Plan.
"New CET Unsecured Notes" means the New CET Unsecured
Notes defined in the Plan.
"New Kroeger Note" means the New Kroeger Note as
defined in the Plan.
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"NOI" means, with respect to a particular parcel of
the Real Property, the positive number by which the sum of all revenues
generated by such Real Property exceeds the sum of all operating expenses
(exclusive of debt service and general and administrative expenses) relative to
such Real Property.
"Note Agreement" means that certain Second Amended
and Restated Note Agreement, dated as of September 27, 1994, by and among
Borrower and each of the Noteholders.
"Noteholders" means Pacific Mutual Life Insurance
Company, The Prudential Insurance Company of America, Pruco Life Insurance
Company, ORIX USA Corporation, TCW Special Credits Fund IV, TCW Special Credits
Plus Fund, TCW Special Credits Trust IV, TCW Special Credits Trust IVA, and
Weyerhaeuser Company Master Retirement Trust.
"Obligations" means all loans, advances, debts,
principal, interest (including any interest that, but for the provisions of the
Bankruptcy Code, would have accrued), premiums, liabilities (including all
amounts charged to Borrower's loan account pursuant to any agreement
authorizing Foothill to charge Borrower's loan account), obligations, fees
(including the Early Termination Premium), lease payments, guaranties,
covenants, and duties owing by Borrower to Foothill of any kind and description
(pursuant to or evidenced by the Loan Documents), whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
arising, and including all interest not paid when due and all Foothill Expenses
that Borrower is required to pay or reimburse by the Loan Documents, by law, or
equity.
"Overadvance" has the meaning set forth in Section
2.1(a).
"PBGC" means the Pension Benefit Guaranty Corporation
as defined in Title IV of ERISA, or any successor thereto.
"Permitted Disposition" means the sale, mortgage
financing, or other disposition of one or more of the parcels composing the
Real Property so long as, in connection therewith, each of the conditions set
forth in Section 4.4 hereof are satisfied in full.
"Permitted Liens" means: (a) liens and security
interests held by Foothill; (b) subject to the terms and conditions of the
Subordination Agreement, the liens and security interests of the Collateral
Agent for the benefit of the Noteholders; (c) liens for unpaid taxes that are
not yet due and payable; (d) liens extant on the Closing Date securing the
Allowed Secured Real Property Tax Claims; (e) liens extant on the Closing Date
securing the Allowed Mechanic's Lien Claims; (f) easements, rights of way,
reservations, covenants, conditions, restrictions, zoning variances, and other
similar
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encumbrances that do not materially interfere with the use or value of the
property subject thereto; (g) obligations and duties as lessee under any lease
existing on the date of this Agreement; and (h) exceptions listed in the title
insurance or commitment therefor delivered by Borrower hereunder in respect of
the Real Property that on or before the Closing Date are found to be acceptable
by Foothill and its counsel in the exercise of their reasonable discretion.
"Person" means and includes natural persons,
corporations, limited partnerships, general partnerships, joint ventures,
trusts, land trusts, business trusts, or other organizations, irrespective of
whether they are legal entities, and governments and agencies and political
subdivisions thereof.
"Personal Property Collateral" means all of the
Collateral other than the Real Property.
"Plan" means Borrower's Third Amended Plan of
Reorganization, as modified, that was approved by the Bankruptcy Court pursuant
to the Confirmation Order.
"Principal Notes" means the promissory notes to be
delivered by Borrower to each Noteholder pursuant to the Note Agreement.
"Prohibited Transaction" means any transaction
described in Section 406 of ERISA which is not exempt by reason of Section 408
of ERISA, and any transaction described in Section 4975(c) of the IRC which is
not exempt by reason of Section 4975(d) of the IRC.
"Real Property" means the parcel or parcels of real
property, and the related improvements, fixtures, and personal property,
identified on Schedule R-1.
"Redding Hotel Improvement Loan" means the Redding
Hotel Improvement Loan under as defined in the Plan.
"Reference Rate" means the highest of the variable
rates of interest, per annum, most recently announced by (a) Bank of America,
N.T. & S.A., (b) Mellon Bank, N.A., and (c) Citibank, N.A., or any successor to
any of the foregoing institutions, as its "prime rate" or "reference rate," as
the case may be, irrespective of whether such announced rate is the best rate
available from such financial institution.
"Related Accounts" means all of Borrower's present or
future Accounts relating to, or arising out of, Borrower's ownership,
management, or operation of the Real Property or any business conducted
thereon.
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"Related Equipment" means all of Borrower's present
or future Equipment relating to, or arising out of, Borrower's ownership,
management, or operation of the Real Property or any business conducted
thereon.
"Related General Intangibles" means all of Borrower's
present or future General Intangibles relating to, or arising out of,
Borrower's ownership, management, or operation of the Real Property or any
business conducted thereon.
"Related Rents" means all of Borrower's present or
future rents, issues, profits, royalties, and other income derived from any
lease, sublease, franchise agreement, license, or concession or other agreement
affecting all or any portion of the Real Property or any business conducted
thereon.
"Release Amount" means the amount set forth on
Schedule R-1 as the amount that must be paid to Foothill in order for Foothill
to release its liens and security interests therein.
"Remediate" and "Remediation" means the investigation
of the environmental condition of the Real Property, the preparation of any
feasibility studies, reports, or remedial plans, and the performance of any
cleanup, abatement, removal, remediation, containment, operation, maintenance,
monitoring, or restoration work relating to the presence or suspected presence
of Hazardous Materials on or under the Real Property in violation of
Environmental Laws, whether on or off of the Real Property.
"Reportable Event" shall mean any event described in
Section 4043 (other than Subsections (b) (7) and (b) (9)) of ERISA.
"Qualified Plan" means a pension plan (as defined in
Section 3(2) of ERISA) intended to be tax-qualified under Section 401(a) of the
IRC which Borrower or any ERISA Affiliate sponsors, maintains, or to which any
such person makes, is making, or is obligated to make, contributions, or, in
the case of a multiple-employer plan (as described in Section 4064(a) of
ERISA), has made contributions at any time during the immediately preceding
period covering at least five (5) plan years, but excluding any Multiemployer
Plan.
"Senior Mortgages" means the Senior Mortgages as
defined in the Plan.
"Six Properties" means the following parcels of Real
Property: (a) 16th & K Street, (b) Milpitas, (c) Towne Center, (d) Holiday Inn
- - Chico, (e) Holiday Inn - Sacramento, and (f) Holiday Inn - Walnut Creek.
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"Solvent" means, with respect to any Person on a
particular date, that on such date (a) at fair valuations, all of the
properties and assets of such Person are greater than the sum of the debts,
including contingent liabilities, of such Person, (b) the present fair salable
value of the properties and assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its debts
as they become absolute and matured, (c) such Person is able to realize upon
its properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it
will, incur debts beyond such Person's ability to pay as such debts mature, and
(e) such Person is not engaged in business or a transaction, and is not about
to engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it
is intended that such liabilities will be computed at the amount that, in light
of all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
"Subordination Agreement" means that certain
Subordination Agreement, dated on or before the Closing Date, between Foothill
and Collateral Agent, the form and substance of which shall be reasonably
satisfactory to Foothill.
"Tangible Net Worth" means, as of the date any
determination thereof is to be made, the difference of (a) Borrower's total
stockholder's equity, minus (b) (i) all intangible assets of Borrower, (ii) all
of Borrower's prepaid expenses, and (iii) all amounts due to Borrower from
Affiliates, calculated on a unconsolidated basis, as determined in accordance
with GAAP.
"Unfunded Benefit Liability" means the excess of a
Benefit Plan's benefit liabilities (as defined in Section 4001(a) (16) of
ERISA) over the current value of such Benefit Plan's assets, determined in
accordance with the assumptions used by the Benefit Plan's actuaries for
funding the Benefit Plan pursuant to Section 412 of the IRC for the applicable
plan year.
"Voidable Transfer" has the meaning set forth in
Section 15.8.
"Working Capital" means the result of subtracting
Consolidated Current Liabilities from Consolidated Current Assets.
1.2 ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. When
used herein, the term "financial statements" shall include any notes and
schedules thereto. Whenever the term "Borrower" is used in respect of a
financial covenant or a related definition, it shall be
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understood to mean Borrower on a consolidated basis unless the context clearly
requires otherwise.
1.3 CODE. Any terms used in this Agreement that
are defined in the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein.
1.4 CONSTRUCTION. Unless the context of this
Agreement clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including"
is not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement refer to
this Agreement as a whole and not to any particular provision of this
Agreement. Section, subsection, clause, schedule, and exhibit references are
to this Agreement unless otherwise specified. Any reference in this Agreement
or in the Loan Documents to this Agreement or any of the Loan Documents shall
include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, and supplements, thereto and thereof, as
applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules
and exhibits attached to this Agreement shall be deemed incorporated herein by
reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 ADVANCES.
(a) Subject to the terms and conditions
of this Agreement, Foothill agrees to make advances to Borrower (the "Loan") in
an aggregate amount outstanding at any one time equal to the Maximum Amount.
If, at any time or for any reason, the amount of Obligations owed by Borrower
to Foothill pursuant to this Section 2.1 is greater than the Maximum Amount, as
such amount may be reduced as a result of a Permitted Disposition or otherwise
(an "Overadvance"), Borrower immediately shall pay to Foothill, in cash, the
amount of such excess.
(b) Anything to the contrary in
subsection (a) above notwithstanding, Foothill may create reasonable reserves
against the Maximum Amount without declaring an Event of Default if it
determines, in its reasonable discretion, that there is a material impairment
of the prospect of repayment of all or any portion of the Obligations or a
material impairment of the value or priority of Foothill's security interests
in the Collateral. Borrower and Foothill understand and agree that any such
reserve amount shall not be considered a disbursement bearing interest
hereunder, but rather simply shall be an amount that is not available for
borrowing by Borrower.
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(c) Foothill is authorized to make
advances under this Agreement based upon written instructions received from an
Authorized Officer of Borrower or, without instructions, if pursuant to Section
2.2(d). Provided Borrower satisfies all conditions precedent in Section 3.1 or
3.2, as the case may require, Foothill shall advance funds to Borrower on a
reasonably prompt basis. Borrower and Foothill agree that there shall be no
minimum amount required of any advance requested by Borrower pursuant to the
terms and conditions of this Agreement; provided, however, Borrower shall not
make more than one (1) request for an advance per day. Borrower agrees to
establish and maintain a single designated deposit account for the purpose of
receiving the proceeds of the advances requested by Borrower and made by
Foothill hereunder. Unless otherwise agreed by Foothill and Borrower, any
advance requested by Borrower and made by Foothill hereunder shall be made to
such designated deposit account. Amounts borrowed pursuant to this Section 2.1
may be repaid and, subject to the terms and conditions of this Agreement,
reborrowed at any time during the term of this Agreement.
(d) Anything to the contrary in this
Agreement notwithstanding, in the event that, at any time and from time to
time, the NOI for the preceding twelve (12) months ("Comparison NOI") for all
of the parcels then composing the Real Property taken as a whole does not
exceed seventy percent (70%) of the Base NOI, then the then current Maximum
Amount automatically shall be reduced to the following percentage of the
Maximum Amount:
<TABLE>
<CAPTION>
Actual Percentage of Base NOI Percentage of Maximum Amount
----------------------------- ----------------------------
<S> <C>
70% or less, but greater
than 69% 96%
69% or less, but greater
than 68% 92%
68% or less, but greater
than 67% 88%
67% or less, but greater
than 66% 84%
66% or less, but greater
than 65% 80%
65% or less, but greater
than 64% 76%
</TABLE>
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<PAGE> 22
<TABLE>
<S> <C>
64% or less, but greater
than 63% 72%
63% or less, but greater
than 62% 68%
62% or less, but greater
than 61% 64%
61% or less, but greater
than 60% 60%
60% or less, but greater
than 59% 56%
59% or less, but greater
than 58% 52%
58% or less, but greater
than 57% 48%
57% or less, but greater
than 56% 44%
56% or less, but greater
than 55% 40%
55% or less, but greater
than 54% 36%
54% or less, but greater
than 53% 32%
53% or less, but greater
than 52% 28%
52% or less, but greater
than 51% 24%
51% or less, but greater
than 50% 20%
50% or less --0--
</TABLE>
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For purposes of the foregoing, upon the consummation of a Permitted
Disposition, the Base NOI and the Comparison NOI each shall be recalculated to
eliminate permanently the effects of the Real Property that was the subject of
such Permitted Disposition. If, at any time after a reduction of the Maximum
Amount as a result of the provisions of this Section 2.1(d), the Comparison NOI
again exceeds seventy percent (70%) of the Base NOI, in each case as they may
be adjusted, Foothill may elect, in its sole and unrestricted discretion, to
increase the Maximum Amount to an amount up to the amount which the Maximum
Amount would equal were it not for reductions made pursuant to this Section
2.1(d), but subject to the reductions in the Maximum Amount made pursuant to
Section 2.1(e).
(e) Immediately upon the consummation of each
Permitted Disposition, the then current Maximum Amount automatically shall be
reduced permanently by an amount equal to eighty percent (80%) of the Release
Amount applicable to the Real Property that is the subject of such Permitted
Disposition; provided, however, that in the case of a Permitted Disposition of
one of the Six Properties, if Borrower has given Foothill thirty (30) days
prior written notice thereof and if Foothill does not agree to reduce the
foregoing percentage to fifty-five percent (55%) of the Release Amount
applicable to the Real Property that is the subject of such Permitted
Disposition on or before the date of the consummation thereof, then, for a
period of one hundred and twenty (120) days following such consummation,
Borrower shall have the option to terminate this Agreement by paying to
Foothill, in cash, the Obligations, without any penalty or premium (including
the Early Termination Premium).
2.2 INTEREST: RATES, PAYMENTS, AND CALCULATIONS.
(a) Interest Rate. The Obligations
shall bear interest, on the average Daily Balance, at a rate of two and
one-quarter (2-1/4) percentage points above the Reference Rate.
(b) Default Rate. The Obligations shall
bear interest, from and after the occurrence and during the continuance of an
Event of Default at a rate equal to four and three-quarters (4-3/4) percentage
points above the Reference Rate.
(c) Minimum Interest. In no event shall
the rate of interest chargeable hereunder be less than eight and one-half
percent (8-1/2%) per annum, nor shall the annual interest charged be less than
One Hundred Thousand Dollars ($100,000.00). To the extent that interest
accrued hereunder at the rate set forth herein (including the minimum interest
rate) would yield less than the foregoing minimum amount, the interest rate
chargeable hereunder for the period in question automatically shall be deemed
increased to that rate that would result in the minimum amount of interest
being accrued and payable hereunder.
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<PAGE> 24
(d) Payments. Interest hereunder shall
be due and payable, in arrears, on the first day of each month during the term
hereof. Borrower hereby authorizes Foothill, at its option, without prior
notice to Borrower, to charge such interest, all Foothill Expenses (as and when
incurred), and all installments or other payments due under this Agreement or
any note or other Loan Document to Borrower's loan account, which amounts shall
thereafter accrue interest at the rate then applicable hereunder. Any interest
not paid when due shall be compounded by becoming a part of the Obligations,
and such interest shall thereafter accrue interest at the rate then applicable
hereunder.
(e) Computation. The Reference Rate as
of the date of this Agreement is seven and three quarters percent (7.75%) per
annum. In the event the Reference Rate is changed from time to time hereafter,
the applicable rate of interest hereunder automatically and immediately shall
be increased or decreased by an amount equal to such change in the Reference
Rate. All interest and fees chargeable under the Loan Documents shall be
computed on the basis of a three hundred sixty (360) day year for the actual
number of days elapsed.
(f) Intent to Limit Charges to Maximum
Lawful Rate. In no event shall the interest rate or rates payable under this
Agreement, plus any other amounts paid in connection herewith, exceed the
highest rate permissible under any law that a court of competent jurisdiction
shall, in a final determination, deem applicable. Borrower and Foothill, in
executing this Agreement, intend to legally agree upon the rate or rates of
interest and manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or
rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then, ipso facto as of the date of this Agreement, Borrower is
and shall be liable only for the payment of such maximum as allowed by law, and
payment received from Borrower in excess of such legal maximum, whenever
received, shall be applied to reduce the principal balance of the Obligations
to the extent of such excess.
2.3 CREDITING PAYMENTS. The receipt of any wire transfer
of funds, check, or other item of payment by Foothill (whether from transfers
to Foothill by Borrower, from the Lockbox Bank pursuant to the Lockbox
Agreement, or otherwise) immediately shall be applied to provisionally reduce
the Obligations, but shall not be considered a payment on account unless such
wire transfer is of immediately available federal funds and is made to the
appropriate deposit account of Foothill or unless and until such check or other
item of payment is honored when presented for payment. Anything to the
contrary contained herein notwithstanding, any wire transfer, check, or other
item of payment shall be deemed received by Foothill only if it is received
into Foothill's operating account (as such account is identified by Foothill to
Borrower) on or before 11:00 a.m. Los Angeles time. If any wire transfer,
check, or other item of payment is received into Foothill's operating account
(as such account is identified by Foothill to Borrower) after 11:00 a.m. Los
Angeles time it shall be deemed to have been received by Foothill as
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of the opening of business on the immediately following Business Day. Any
advance requested by Borrower and made by Foothill hereunder shall not begin to
accrue interest unless and until the date on which Foothill has transferred
immediately available funds to the designated deposit account of Borrower.
2.4 STATEMENTS OF OBLIGATIONS. Foothill shall
render statements to Borrower of the Obligations, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Foothill Expenses owing, and such statements shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Borrower and Foothill unless, within sixty (60) days after receipt thereof by
Borrower, Borrower shall deliver to Foothill by registered or certified mail at
its address specified in Section 12, written objection thereto describing the
error or errors contained in any such statements.
2.5 FEES. Borrower shall pay to Foothill the
following fees:
(a) Closing Fee. A one time closing fee
of Fifty Thousand Dollars ($50,000), which is earned, in full, and is due and
payable by Borrower to Foothill on the Closing Date;
(b) Unused Line Fee. On the first day
of each month during the term of this Agreement, a fee in an amount equal to
three-eighths of one percent (0.375%) per annum times the Average Unused
Portion of the Maximum Amount, such fee to first begin accruing on the Closing
Date; and
(c) Financial Examination,
Documentation, and Appraisal Fees. Foothill's fee of Six Hundred Fifty Dollars
($650) per day per examiner, plus out-of-pocket expenses for each financial
analysis and examination of Borrower performed by Foothill or its agents;
Foothill's appraisal fee of One Thousand Dollars ($1,000) per day per
appraiser, plus out-of- pocket expenses for each appraisal of the Collateral
performed by Foothill or its agents, subject to the terms and conditions of
Section 4.7; and
(d) Servicing Fee. On the first day of
each month during the term of this Agreement, and thereafter so long as any
Obligations are outstanding, a servicing fee in an amount equal to Four
Thousand Dollars ($4,000) per month.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. The
obligation of Foothill to make the initial advance under the Loan is subject to
the fulfillment, to the satisfaction of Foothill and its counsel, of each of
the following conditions on or before the Closing Date:
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(a) The Closing Date shall occur on or
before October 28, 1994;
(b) The occurrence of the Effective Date
of Plan on or before the Closing Date and in any event no later than October 7,
1994;
(c) Foothill shall have received
confirmation of the filing of its financing statements and fixture filings;
(d) Foothill shall have received each of
the following documents, duly executed, and each such document shall be in full
force and effect:
(i) the Environmental Indemnity;
(ii) the Mortgages; and
(iii) the Subordination Agreement;
(e) Foothill shall have received a
certificate from the Secretary of Borrower attesting to the resolutions of
Borrower's Board of Trustees authorizing its execution and delivery of all of
the documents evidencing the execution and delivery of this Agreement and the
other Loan Documents to which Borrower is a party and authorizing specific
officers of Borrower to execute same;
(f) Foothill shall have received copies
of the Declaration of Trust, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of Borrower;
(g) Foothill shall have received the
certified copies of the policies of insurance, together with the endorsements
thereto, as are required by Section 6.6 hereof, the form and substance of which
shall be reasonably satisfactory to Foothill;
(h) Each of the Mortgages shall have been recorded in the appropriate
county recording office;
(i) Foothill shall have received ALTA
1970 Form Lenders Policies of Title Insurance in form and content acceptable to
Foothill, in its reasonable discretion, with respect to all of the Real
Property;
(j) Foothill shall have received an
opinion of Borrower's counsel in form and substance satisfactory to Foothill in
its reasonable discretion;
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(k) Foothill shall have received
environmental reports with respect to each parcel of the Real Property; the
environmental consultants retained for such reports, the scope of the reports,
and the results of the reports shall be satisfactory to Foothill, in its
reasonable discretion; and
(l) all other documents and legal
matters in connection with the transactions contemplated by this Agreement
shall have been delivered or executed or recorded and shall be in form and
substance reasonably satisfactory to Foothill and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The
following shall be conditions precedent to all advances under the Loan:
(a) the representations and warranties
contained in this Agreement and the other Loan Documents shall be true and
correct in all material respects on and as of the date of such advance as
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date);
(b) no Event of Default or event which,
with the giving of notice or passage of time and nothing else, would constitute
an Event of Default shall have occurred and be continuing on the date of such
advance, nor shall either result from the making thereof; and
(c) no injunction, writ, restraining
order, or other order of any nature prohibiting, directly or indirectly, the
making of such advance shall have been issued and remain in force by any
governmental authority against Borrower, Foothill, or any of their Affiliates.
3.3 TERM. This Agreement shall become effective
upon the execution and delivery hereof by Borrower and Foothill and shall
continue in full force and effect for a term, unless earlier terminated
pursuant to the terms hereof, ending on the date that is three (3) years from
the Effective Date of Plan, at which such time all Obligations should be due
and payable.
3.4 EFFECT OF TERMINATION. On the date of
termination, all Obligations immediately shall become due and payable without
notice or demand. No termination of this Agreement, however, shall relieve or
discharge Borrower of Borrower's duties, Obligations, or covenants hereunder,
and Foothill's continuing security interests in the Collateral shall remain in
effect until all Obligations have been fully and finally discharged and
Foothill's obligation to provide advances hereunder is terminated.
3.5 EARLY TERMINATION BY BORROWER. Borrower has
the option, at any time upon thirty (30) days prior written notice to Foothill,
to terminate this
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Agreement by paying to Foothill, in cash, the Obligations. If Borrower elects
to terminate this Agreement prior to its scheduled maturity date, Borrower
shall pay Foothill, in cash, in addition to the Obligations a premium ("Early
Termination Premium") in an amount equal to the greater of: (a) the total
amount of interest paid by Borrower to Foothill hereunder during the prior six
(6) months (including a prorated portion of the minimum annual interest
charge), and (b) Two Hundred Fifty Thousand Dollars ($250,000). The provisions
of this Section 3.5 to the contrary notwithstanding, (a) in the event that
Foothill creates a reserve against the Maximum Amount pursuant to Section
2.1(b), then for a period of ninety (90) days after such reserve is first
imposed or until the removal thereof by Foothill, whichever first occurs,
Borrower shall be entitled to prepay the Obligations in cash and terminate this
Agreement, in which event the Early Termination Premium shall not be payable,
and (b) in the event that Borrower seeks and obtains a commitment from another
financial institution to refinance the Obligations hereunder, and if Foothill
participates as a lender in such financing, the Early Termination Premium shall
not be payable.
3.6 TERMINATION UPON EVENT OF DEFAULT. If
Foothill terminates this Agreement upon the occurrence of an Event of Default,
in view of the impracticability and extreme difficulty of ascertaining actual
damages and by mutual agreement of the parties as to a reasonable calculation
of Foothill's lost profits as a result thereof, Borrower shall pay to Foothill
upon the effective date of such termination, a premium in an amount equal to
the Early Termination Premium. The Early Termination Premium shall be presumed
to be the amount of damages sustained by Foothill as the result of the early
termination and Borrower agrees that it is reasonable under the circumstances
currently existing. The Early Termination Premium shall be deemed included in
the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby
grants to Foothill a continuing security interest in all currently existing and
hereafter acquired or arising Personal Property Collateral in order to secure
prompt repayment of any and all Obligations and in order to secure prompt
performance by Borrower of each of its covenants and duties under the Loan
Documents. Foothill's security interests in the Personal Property Collateral
shall attach to all Collateral without further act on the part of Foothill or
Borrower.
4.2 NEGOTIABLE COLLATERAL. In the event that any
Collateral, including proceeds, is evidenced by or consists of an instrument or
other negotiable collateral, Borrower shall, immediately upon the request of
Foothill, endorse and assign such negotiable collateral to Foothill and deliver
physical possession of such negotiable Collateral to Foothill.
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4.3 COLLECTION OF RENTS, ISSUES, PROFITS,
ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE COLLATERAL. On and after the
occurrence of, and during the continuation of, an Event of Default, Foothill,
Borrower, and the Lockbox Bank shall, at Foothill's election, which election
must be made during the continuation of an Event of Default and in a writing
sent by Foothill to Borrower, enter into the Lockbox Agreement, in form and
substance reasonably satisfactory to Foothill, pursuant to which all of
Borrower's cash receipts, checks, and other items of payment relating to the
Collateral (including, insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) will be forwarded to Foothill on a daily basis. On
and after such an election by Foothill, Borrower agrees that it will hold in
trust for Foothill, as Foothill's trustee, any cash receipts, checks, and other
items of payment (including, insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) that it receives and immediately will deliver said
cash receipts, checks, and other items of payment to the Lockbox Bank for
deposit to the Lockbox Account in their original form as received by Borrower.
4.4 RELEASE OF PORTIONS OF THE REAL PROPERTY. So
long as no Event of Default has occurred and is continuing, so long as no Event
of Default would occur as a result thereof, and subject to the satisfaction of
each of the following conditions, Foothill shall, from time to time, upon
twenty (20) Business Days prior written request therefor, deliver to an escrow
or title company, a partial reconveyance or release of its lien upon a parcel
composing the Real Property:
(i) Foothill shall have received or
shall receive, concurrent with the delivery of such release or
reconveyance, the Release Amount for the subject parcel of the Real
Property;
(ii) the proposed release or reconveyance
is of one of the fourteen (14) legal parcels set forth on Schedule R-1
attached hereto and not a subdivision thereof;
(iii) prior to the transfer date, Borrower
shall have delivered an irrevocable instruction to the escrow or title
company directing that they are only authorized to record the release
or the reconveyance upon payment of the applicable Release Amount to
Foothill; and
(iv) prior to or on the transfer date,
Beneficiary shall reimburse Foothill for the reasonable cost of
preparing, reviewing, and delivering the releases or reconveyances.
Neither the acceptance of any payment nor the issuance of any
partial reconveyance by Foothill shall affect Borrower's liability to pay all
amounts owing under this Agreement or the lien of any Mortgage on the remainder
of the Real Property not reconveyed. Upon written request of Foothill and
surrender of any Mortgage to the
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applicable trustee for cancellation or endorsement, and upon payment of its
fees and charges, said trustee shall reconvey, without warranty, all or any
part of the Real Property then subject to the applicable Mortgage. Any
reconveyance, whether full or partial, may be made in terms to "the person or
persons legally entitled thereto," and the recitals in such reconveyance of any
matters or facts shall be conclusive proof of the truthfulness thereof.
4.5 DELIVERY OF ADDITIONAL DOCUMENTATION
REQUIRED. At any time upon the request of Foothill, Borrower shall execute and
deliver to Foothill all financing statements, continuation financing
statements, fixture filings, security agreements, chattel mortgages, mortgages,
deeds of trust, pledges, assignments, endorsements, affidavits, reports,
notices, letters of authority, and all other documents that Foothill may
reasonably request, in form satisfactory to Foothill, to perfect and continue
perfected Foothill's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated hereby and under the other the
Loan Documents.
4.6 POWER OF ATTORNEY. Borrower hereby
irrevocably makes, constitutes, and appoints Foothill (and any of Foothill's
officers, employees, or agents designated by Foothill) as Borrower's true and
lawful attorney, with power to: (a) if Borrower refuses to, or fails timely to
execute and deliver any of the documents described in Section 4.5, sign the
name of Borrower on any of the documents described in Section 4.5; (b) at any
time that an Event of Default has occurred and is continuing, sign Borrower's
name on any invoice or bill relating to any Related Account or Related Rents,
drafts against account debtors with respect to Related Accounts or Related
Rents, schedules and assignments of Related Accounts or Related Rents,
verifications of Related Accounts or Related Rents, and notices to account
debtors with respect to Related Accounts or Related Rents; (c) send requests
for verification of Related Accounts or Related Rents; (d) at any time that an
Event of Default has occurred and is continuing or that the Lockbox Agreement
is in effect, endorse Borrower's name on any checks, notices, acceptances,
money orders, drafts, or other item of payment or security that may come into
Foothill's possession; (e) at any time that an Event of Default has occurred
and is continuing, make, settle, and adjust all claims under Borrower's
policies of insurance respecting the Collateral and make all determinations and
decisions with respect to such policies of insurance; and (f) at any time that
an Event of Default has occurred and is continuing, settle and adjust disputes
and claims respecting the Related Accounts directly with the account debtors
thereof, for amounts and upon terms which Foothill determines to be reasonable,
and Foothill may cause to be executed and delivered any documents and releases
which Foothill determines to be necessary. The appointment of Foothill as
Borrower's attorney, and each and every one of Foothill's rights and powers,
being coupled with an interest, is irrevocable until all of the Obligations
have been fully and finally repaid and performed and Foothill's obligation to
extend credit hereunder is terminated.
4.7 RIGHT TO INSPECT. Foothill (through any of
its officers, employees, or agents) shall have the right, from time to time
hereafter to inspect
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Borrower's Books and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, quality, value, condition
of, or any other matter relating to, the Collateral; provided, however, that
Foothill (i) may conduct no more than one financial examination per quarter and
one Collateral appraisal per annum, unless either (a) an Event of Default has
occurred and is continuing, or (b) the NOI for the preceding twelve (12) months
with respect to a parcel of the Real Property is less than seventy percent
(70%) of the Base NOI applicable to such parcel of Real Property, in which case
Foothill may conduct as many financial examinations or Collateral appraisals as
it reasonably deems necessary; and (ii) exercises its rights to perform or
cause to be performed such inspections, checks, tests and appraisals in a
manner so as not to interfere unreasonably with Borrower's operations conducted
on the Real Property.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this
Agreement, Borrower makes the following representations and warranties, which
shall be true, correct, and complete in all material respects as of the Closing
Date and at and as of the date of each advance under the Loan, as though made
on and as of the date of such advance under the Loan (except to the extent that
such representations and warranties expressly relate solely to an earlier
date), such representations and warranties to survive the execution and
delivery of this Agreement:
5.1 STATUS. Borrower (a) is duly organized and
validly formed as a real estate investment trust under California law, formed
pursuant to the Declaration of Trust, and has not been dissolved, revoked, or
terminated, and no action has been taken to dissolve, revoke, or terminate
Borrower, (b) has all requisite power and authority and all necessary licenses
and permits to own and operate its properties and to carry on its business as
now conducted and as currently proposed to be conducted, where failure to have
such power, authority, licenses, and permits might have a Material Adverse
Effect, and (c) has been duly qualified and is authorized to do business in
each jurisdiction, if any, where failure to qualify might have a Material
Adverse Effect.
5.2 NO PRIOR ENCUMBRANCES. Borrower has good and
indefeasible title to the Collateral, free and clear of liens, claims, security
interests, or encumbrances, except for Permitted Liens.
5.3 COMPLIANCE WITH LAWS. To the best of
Borrower's knowledge, after due inquiry, all state and federal laws have been
complied with in conjunction with Borrower's ownership or operation of the
Collateral, the non-compliance with which would have a material adverse effect
upon the value of the Collateral.
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5.4 AUTHORITY TO ASSIGN. Borrower has such title
to the Real Property as it acquired and full right and authority to pledge,
assign, and encumber the same.
5.5 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN.
The chief executive offices of Borrower is located at the address indicated in
the preamble to this Agreement and its FEIN number is 94-2255677.
5.6 DUE AUTHORIZATION; NO CONFLICT. The
execution, delivery, and performance of the Loan Documents are within
Borrower's trust powers, have been duly authorized, and are not in conflict
with nor constitute a breach of any provision contained in Borrower's
Declaration of Trust, nor will they constitute an event of default under any
material agreement to which Borrower is a party or by which its properties or
assets may be bound.
5.7 LITIGATION. There are no actions or
proceedings pending by or against Borrower before any court or administrative
agency and Borrower does not have knowledge or belief of any pending,
threatened, or imminent litigation, governmental investigations, or claims,
complaints, actions, or prosecutions involving Borrower or any guarantor of the
Obligations, except for ongoing collection matters in which Borrower is the
plaintiff and matters arising after the date hereof that, if decided adversely
to Borrower, would not materially impair the prospect of repayment of the
Obligations or materially impair the value or priority of Foothill's security
interests in the Collateral.
5.8 NO MATERIAL ADVERSE CHANGE IN FINANCIAL
CONDITION. All financial statements relating to Borrower or any guarantor of
the Obligations that have been delivered by Borrower to Foothill have been
prepared in accordance with GAAP and fairly present Borrower's financial
condition as of the date thereof and Borrower's results of operations for the
period then ended. There has not been a material adverse change in the
financial condition of Borrower since the date of the latest financial
statements submitted to Foothill on or before the Closing Date.
5.9 SOLVENCY. Borrower is Solvent. No transfer
of property is being made by Borrower and no obligation is being incurred by
Borrower in connection with the transactions contemplated by this Agreement or
the other Loan Documents with the intent to hinder, delay, or defraud either
present or future creditors of Borrower.
5.10 EMPLOYEE BENEFITS. Each Benefit Plan is in
compliance in all material respects with the applicable provisions of ERISA and
the IRC. Each Qualified Plan and Multiemployer Plan has been determined by the
Internal Revenue Service to qualify under Section 401 of the IRC, and the
trusts created thereunder have been determined to be exempt from tax under
Section 501 of the IRC, and, to the best knowledge of Borrower, nothing has
occurred that would cause the loss of such
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qualification or tax-exempt status. There are no outstanding liabilities under
Title IV of ERISA with respect to any Benefit Plan maintained or sponsored by
Borrower or any ERISA Affiliate, nor with respect to any Benefit Plan to which
Borrower or any ERISA Affiliate contributes or is obligated to contribute which
could reasonably be expected to have a material adverse effect on the financial
condition of Borrower. No Benefit Plan subject to Title IV of ERISA has any
Unfunded Benefit Liability which could reasonably be expected to have a
material adverse effect on the financial condition of Borrower. Neither
Borrower nor any ERISA Affiliate has transferred any Unfunded Benefit Liability
to a person other than Borrower or an ERISA Affiliate or has otherwise engaged
in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA
which could reasonably be expected to have a material adverse effect on the
financial condition of Borrower. Neither Borrower nor any ERISA Affiliate has
incurred nor reasonably expects to incur (x) any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Sections 4201 or 4243 of ERISA with respect to
a Multiemployer Plan, or (y) any liability under Title IV of ERISA (other than
premiums due but not delinquent under Section 4007 of ERISA) with respect to a
Benefit Plan, which could, in either event, reasonably be expected to have a
material adverse effect on the financial condition of Borrower. No application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the IRC has been made with respect to any Benefit Plan. No
ERISA Event has occurred or is reasonably expected to occur with respect to any
Benefit Plan which could reasonably be expected to have a material adverse
effect on the financial condition of Borrower. Borrower and each ERISA
Affiliate have complied in all material respects with the notice and
continuation coverage requirements of Section 4980B of the IRC.
5.11 ENVIRONMENTAL CONDITION.
(a) Borrower has not used Hazardous
Materials at or affecting the Real Property in any manner which violates any
Environmental Law governing the use, storage, treatment, transportation,
manufacturing, refinement, handling, production, or disposal of Hazardous
Materials.
(b) To the actual knowledge of Borrower,
no prior or current owner, occupant, or operator of the Real Property has used
Hazardous Materials at or affecting the Real Property in any manner which
violates any Environmental Law governing the use, storage, treatment,
transportation, manufacturing, refinement, handling, production, or disposal of
Hazardous Materials.
5.12 RELIANCE BY FOOTHILL; CUMULATIVE. Each
warranty and representation contained in this Agreement shall be conclusively
presumed to have been relied on by Foothill regardless of any investigation
made or information possessed by Foothill. The warranties and representations
set forth herein shall be cumulative and in
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addition to any and all other warranties and representations that Borrower now
or hereafter shall give, or cause to be given, to Foothill.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any
credit hereunder shall be available and until full and final payment of the
Obligations, and unless Foothill shall otherwise consent in writing, Borrower
shall do all of the following:
6.1 ACCOUNTING SYSTEM. Borrower shall maintain a
standard and modern system of accounting in accordance with GAAP with ledger
and account cards or computer tapes, discs, printouts, and records pertaining
to the Collateral which contain information as from time to time reasonably may
be requested by Foothill.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
Borrower agrees to deliver to Foothill: (a) as soon as available, but in any
event within thirty-five (35) days after the end of each month during each of
Borrower's fiscal years, a company prepared unconsolidated balance sheet,
income statement, and cash flow statement covering Borrower's operations during
such period; and (b) as soon as available, but in any event within ninety (90)
days after the end of each of Borrower's fiscal years, financial statements of
Borrower for each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Foothill and certified, without any
qualifications, by such accountants to have been prepared in accordance with
GAAP, together with a certificate of such accountants addressed to Foothill
stating that such accountants do not have knowledge of the existence of any
event or condition constituting an Event of Default, or that would, with the
passage of time or the giving of notice, constitute an Event of Default,
provided that such accountants shall not be liable for the failure to disclose
such event or condition to the extent that it would not reasonably be
discovered during the course of an audit conducted in accordance with GAAP.
Such audited financial statements shall include a balance sheet, profit and
loss statement, and cash flow statement, and, if and when prepared, such
accountants' letter to management. Borrower shall have issued written
instructions to its independent certified public accountants authorizing them
to communicate with Foothill and to release to Foothill whatever financial
information concerning Borrower that Foothill reasonably may request.
Each month, together with the financial
statements provided for above, Borrower shall deliver to Foothill a certificate
signed by its chief financial officer to the effect that: (i) all reports,
statements, or computer prepared information of any kind or nature delivered or
caused to be delivered to Foothill hereunder have been prepared in accordance
with GAAP and fairly present the financial condition of Borrower; (ii) Borrower
is in timely compliance with all of its covenants and agreements hereunder;
(iii) the representations and warranties of Borrower contained in this
Agreement and the other Loan Documents are true and correct in all material
respects on and as of the date of such
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certificate, as though made on and as of such date (except to the extent that
such representations and warranties relate solely to an earlier date); and (iv)
on the date of delivery of such certificate to Foothill there does not exist
any condition or event that constitutes an Event of Default (or, in each case,
to the extent of any non-compliance, describing such non-compliance as to which
he or she may have knowledge and what action Borrower has taken, is taking, or
proposes to take with respect thereto).
Upon the occurrence of an Event of Default,
Borrower shall issue written instructions to its independent certified public
accountants authorizing them to communicate with Foothill and to release to
Foothill whatever financial information concerning Borrower that Foothill may
require. Borrower hereby irrevocably authorizes and directs all auditors,
accountants, or other third parties to deliver to Foothill, at Borrower's
expense, copies of Borrower's financial statements, papers related thereto, and
other accounting records of any nature in their possession, and to disclose to
Foothill any information they may have regarding Borrower's business affairs
and financial conditions.
6.3 TAX RETURNS. Borrower agrees to deliver to
Foothill copies of each of Borrower's future federal income tax returns, and
any amendments thereto, within thirty (30) days of the filing thereof with the
Internal Revenue Service.
6.4 COLLATERAL REPORTS. Borrower shall deliver
to Foothill from time to time hereafter, but not less frequently than monthly,
(a) a rental delinquency report, prepared on a per property basis with respect
to the Real Property, (b) a report that details the amount of real property
taxes that are currently delinquent, those that are currently due and payable,
and those that are to become due and payable within twelve months of the date
of the report, such report to be prepared on a per property basis with respect
to the Real Property, (c) a report that details those parcels of the Real
Property that have been sold by Borrower within the last three months, the net
cash proceeds received therefrom, the application of such net cash proceeds,
those parcels of Real Property that currently are held for sale, the listing
price, and the length of time that such property has been held for sale, (d) a
report that details the NOI of each of the parcels of Real Property, and (e) a
report that details the vacancy rate of each of the parcels of Real Property.
In addition, from time to time hereafter, Borrower shall deliver to Foothill
such other and additional information or documentation as Foothill reasonably
may request.
6.5 TAXES. Except as otherwise provided by the
Plan, all assessments and taxes, whether real, personal, or otherwise, due or
payable by, or imposed, levied, or assessed against Borrower or any of its
property shall be paid in full, before delinquency or before the expiration of
any extension period. From and after the Closing Date, Borrower shall make due
and timely payment or deposit of all federal, state, and local taxes,
assessments, or contributions required of it by law (including giving effect to
the terms and conditions of the Plan), and will execute and deliver to
Foothill, on demand, appropriate certificates attesting to the payment thereof
or deposit with respect
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thereto. From and after the Closing Date, Borrower will make timely payment or
deposit of all tax payments and withholding taxes required of it by applicable
laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and
local, state, and federal income taxes, and will, upon request, furnish
Foothill with proof satisfactory to Foothill indicating that Borrower has made
such payments or deposits.
6.6 INSURANCE.
(a) Borrower, at its expense, shall keep
the Collateral (exclusive of the Real Property) insured against loss or damage
by fire, theft, explosion, sprinklers, and all other hazards and risks, and in
such amounts, as are ordinarily insured against by other owners in similar
businesses. Borrower also shall maintain, in appropriate amounts, business
interruption, public liability, product liability, and property damage
insurance, as well as insurance against larceny, embezzlement, and criminal
misappropriation.
(b) Borrower will obtain and maintain
(i) insurance of the type necessary to insure the Improvements and Chattels (as
such terms are defined in the Mortgages), for the full replacement cost
thereof, against any loss by fire, lighting, windstorm, hail, explosion,
aircraft, smoke damage, vehicle damage, elevator collision, and other risks
from time to time included under "extended coverage" policies, (ii) combined
single limit bodily injury and property damages insurance against any loss,
liability, or damages on, about or relating to each parcel of Real Property, in
an amount of not less than Two Million Dollars ($2,000,000); and (iii) such
other risks (other than earthquake and flood as to any property not located in
a flood plane) as Foothill reasonably may require. Replacement costs, at
Foothill's option, may be redetermined by an insurance appraiser, satisfactory
to Foothill, not more frequently than once every twelve months at Borrower's
cost.
(c) All insurance required herein shall
be written by companies of recognized financial standing, reasonably
satisfactory to Foothill, which are authorized to do insurance business in the
State of California. Such insurance shall be in form satisfactory to Foothill,
shall with respect to hazard insurance and such other insurance as Foothill
shall specify, name Foothill as the loss payee thereunder, and shall contain a
California Form 438BFU (NS) mortgagee endorsement, or its local equivalent.
Every policy of insurance referred to in this Section shall contain an
agreement by the insurer that it will not cancel such policy except after
thirty (30) days prior written notice to Foothill and that any loss payable
thereunder shall be payable notwithstanding any act or negligence of Borrower
or Foothill that might, absent such agreement, result in a forfeiture of all or
a part of such insurance payment and notwithstanding (i) occupancy or use of
the Real Property for purposes more hazardous than permitted by the terms of
such policy, (ii) any foreclosure or other action or proceeding taken by
Foothill pursuant to the
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Mortgages upon the happening of an Event of Default, or (iii) any change in
title or ownership of the Real Property.
(d) Original policies or certificates
thereof satisfactory to Foothill evidencing such insurance shall be delivered
to Foothill at least thirty (30) days prior to the expiration of the existing
or preceding policies. Borrower shall give Foothill prompt notice of any loss
covered by such insurance and Foothill shall have the right to adjust any loss.
Foothill shall have the right to participate in the adjustment of all loss
payable under any such insurance policies without any liability to Borrower
whatsoever in respect of such adjustments. Any monies received as payment for
any loss under any Insurance Policy including, but not limited to, the
insurance policies mentioned above, shall be paid over to Foothill to be
applied at the option of Borrower either to the prepayment of the Obligations
without premium, in such order and with such effect as Foothill may elect, or
shall be disbursed to Borrower under staged payment terms satisfactory to
Foothill for application to the cost of repairs, replacements, or restorations
in accordance with Section 6.6(f). All restorations shall be effected with
reasonable promptness and shall be of a value at least equal to the value of
the items or property to destroyed prior to such damage or destruction. Upon
the occurrence of an Event of Default, all prepaid premiums shall be the sole
and absolute property of Foothill to be applied by Foothill to the payment of
the Obligations in such order or form as Foothill shall determine.
(e) Borrower shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required to be maintained under this Section 6.6, unless Foothill is included
thereon as named insured with the loss payable to Foothill under a standard
California Form 438BFU (NS) mortgagee endorsement, or its local equivalent.
Borrower shall immediately notify Foothill whenever such separate insurance is
taken out, specifying the insurer thereunder and full particulars as to the
policies evidencing the same, and originals of such policies shall immediately
thereafter be provided to Foothill.
(f) If Borrower elects to cause Foothill
to disburse any monies received as payment for any loss under any insurance
policy pursuant to Section 6.6(d), Foothill only be obligated to disburse such
money for the repair, replacement or restoration of the Real Property which has
been damaged, if all of the following conditions are satisfied: (i) no event or
condition then exists constituting an Event of Default then exists, or that
with the passage of time or the giving of notice (but nothing else) would
constitute an Event of Default; (ii) Borrower shall not be in default under any
of the terms, covenants and conditions of any Material Lease which Borrower has
entered into with respect to the damaged Real Property; (iii) the damage or
destruction of the Real Property shall not cause the termination of any
Material Lease of the damaged Real Property prior to the anticipated completion
date of the repair, replacement or restoration of the Real Property; (iv)
Borrower has in force rental continuation and business interruption insurance
covering the damaged Real Property for twelve (12) months; (v) Foothill is
reasonably
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satisfied that during the period from the time of damage until the repair,
replacement or restoration of such Real Property is completed, the sum of
Borrower's NOI plus the proceeds of the rental and business interruption
insurance is sufficient to satisfy Borrower's Obligations under all of the Loan
Documents as they become due; (vi) Foothill is reasonably satisfied that the
insurance proceeds, together with other amounts to be contributed to the
repair, replacement, or restoration by Borrower (such amounts to be applied
first), shall be sufficient to fully repair, replace or restore the damaged
parcel of Real Property; (vii) construction and completion of the repair,
replacement or restoration of the Real Property shall be completed in
accordance with plans, specifications and drawings submitted to and approved
(which approval shall not be unreasonably withheld) by Foothill, which plans,
specification and drawings shall not be substantially modified, changed or
revised without Foothill's prior written consent, which consent shall not be
unreasonably withheld; and (viii) Foothill shall have approved (which approval
shall not be unreasonably withheld) all prime contractors and subcontractors,
and all contracts Borrower proposes to enter into with respect to the repair,
replacement and restoration of the Real Property.
6.7 NO SETOFFS OR COUNTERCLAIMS. All payments
hereunder and under the other Loan Documents made by or on behalf of Borrower
shall be made without setoff or counterclaim and free and clear of, and without
deduction or withholding for or on account of, any federal, state, or local
taxes.
6.8 COMPLIANCE WITH LAWS. Borrower shall comply
with the requirements of all applicable laws, rules, regulations, and orders of
any governmental authority, including the Fair Labor Standards Act and the
Americans With Disabilities Act.
6.9 EMPLOYEE BENEFITS.
(a) Borrower shall deliver to Foothill a
written statement by the chief financial officer of Borrower specifying the
nature of any of the following events and the actions which Borrower proposes
to take with respect thereto promptly, and in any event within ten (10) days of
becoming aware of any of them, and when known, any action taken or threatened
by the Internal Revenue Service, PBGC, Department of Labor, or other party with
respect thereto: (i) an ERISA Event with respect to any Benefit Plan; (ii) the
incurrence of an obligation to pay additional premium to the PBGC under Section
4006(a) (3) (E) of ERISA with respect to any Benefit Plan; and (iii) any lien
on the assets of Borrower arising in connection with any Benefit Plan.
(b) Borrower shall also promptly furnish
to Foothill copies prepared or received by Borrower or an ERISA Affiliate of:
(i) at the request of Foothill, each annual report (Internal Revenue Service
Form 5500 series) and all accompanying schedules, actuarial reports, financial
information concerning the financial status of each Benefit Plan, and schedules
showing the amounts contributed to each Benefit Plan by or
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on behalf of Borrower or its ERISA Affiliates for the most recent three (3)
plan years; (ii) all notices of intent to terminate or to have a trustee
appointed to administer any Benefit Plan; (iii) all written demands by the PBGC
under Subtitle D of Title IV of ERISA; (iv) all notices required to be sent to
employees or to the PBGC under Section 302 of ERISA or Section 412 of the IRC;
(v) all written notices received with respect to a Multiemployer Plan
concerning (x) the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA, (y) a termination described in Section 4041A of ERISA,
or (z) a reorganization or insolvency described in Subtitle E of Title IV of
ERISA; (vi) the adoption of any new Benefit Plan that is subject to Title IV of
ERISA or Section 412 of the IRC by Borrower or any ERISA Affiliate; (vii) the
adoption of any amendment to any Benefit Plan that is subject to Title IV of
ERISA or Section 412 of the IRC, if such amendment results in a material
increase in benefits or Unfunded Benefit Liability; or (viii) the commencement
of contributions by Borrower or any ERISA Affiliate to any Benefit Plan that is
subject to Title IV of ERISA or Section 412 of the IRC.
6.10 ENVIRONMENTAL CONDITION.
(a) Borrower shall keep or cause the
Real Property to be kept free of Hazardous Materials and not cause or permit
the Real Property to be used to generate, manufacture, refine, transport,
treat, store, handle, dispose, produce, or process Hazardous Materials except,
in each case, in compliance with all applicable Environmental Laws.
(b) Borrower shall use diligent efforts
to ensure compliance by all owners, operators, and occupants, if any, of the
Real Property with all applicable Environmental Laws and will use diligent
efforts to ensure that all such owners, operators, and occupants obtain and
comply with any and all required approvals, registrations, or permits.
(c) Upon the reasonable request of
Foothill, Borrower shall conduct and complete such investigations, studies,
samplings, and testings relative to Hazardous Materials at or affecting the
Real Property as are requested. Upon the reasonable request of Foothill from
time to time, Borrower shall provide to Foothill, at Borrower's sole cost and
expense and without any liability to Foothill, with an environmental site
assessment or an environmental audit report, or an update of such assessment or
report, by an environmental engineering firm acceptable to Foothill, all in
scope, form and content reasonably satisfactory to Foothill, to assess with a
reasonable degree of certainty the presence or absence of Hazardous Materials
and the potential cost in connection with the Remediation of any Hazardous
Materials at or related to the Real Property. Upon demand of Foothill, and at
Borrower's sole cost and expense, Borrower shall promptly take all actions to
Remediate the Real Property that are required by federal, state, or local
governmental agency or political subdivision or that are reasonably necessary
to mitigate a spill or a violation of any Environmental Law or to allow full
economic use
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of the Real Property. All such work shall be performed by one or more
contractors selected by Borrower and reasonably approved in advance and in
writing by Foothill. Borrower shall proceed continuously and diligently with
such investigatory and remedial actions, provided that in all cases, such
actions shall be in accordance with all applicable requirements of all
Environmental Laws. Any such actions shall be performed in a good, safe, and
workman like manner and shall minimize any impact on the business or occupation
at or near the Real Property. Borrower shall pay all costs in connection with
such investigatory and remedial activities, including but not limited to all
power and utility costs and any and all taxes or fees that may be applicable to
such activities. Borrower shall promptly provide to Foothill copies of testing
results and reports that are generated in compliance with the above activities.
Promptly upon completion of such investigation and Remediation, Borrower shall
permanently seal or cap all monitoring wells and test holes to industrial
standards and compliance with all Environmental Laws, remove all associated
equipment, and restore the Real Property to the condition existing prior to the
commencement of Remediation, which shall include the repair of any surface
damage, including paving caused by such investigation or Remediation hereunder.
If the estimated cost of any performance under this section exceeds $250,000 in
the aggregate, then within ten (10) days of demand therefor, Borrower shall
provide Foothill with a bond, letter of credit, or similar financial assurance
evidencing that the necessary funds are available for the obligations
established by this subparagraph or shall instruct Foothill to reserve such
amounts against the amount of the Loan available under Section 2.1.
(d) The obligations of Borrower and the
rights of Foothill with respect to Hazardous Materials are in addition to and
not in substitution of the obligations of Borrower and the rights of Foothill
under all applicable, federal, state and local laws, regulations and ordinances
relating to health and safety, and protection of the environment. The
obligations of Borrower and the rights of Foothill, notwithstanding anything
contained herein or in any other document or agreement which may be construed
to the contrary, (i) shall not be subject to any antideficiency laws or
protections, if any, (ii) shall survive (a) a non- judicial sale, judicial sale
or deed or other transaction in lieu of such sale hereunder, and (b) the
repayment of the Obligations. In the event Borrower does not timely perform
any of its obligations with respect to Hazardous Materials, Foothill may, but
is not required to, after first giving Borrower (a) concurrent written notice,
in the case of an emergency or continuing release, or (b) ten (10) days prior
written notice, in all other cases, and, in the latter circumstance, only if
Borrower fails to commence and thereafter diligently pursue the required
performance, perform such obligations, but is not obligated to, at the expense
of Borrower and such expense shall be added to the Obligations and shall not
cure Borrower's breach under this Agreement.
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6.11 LEASES. Borrower shall comply in all
material respects with all of its obligations under all leases existing on the
Effective Date of Plan or thereafter entered into by it with respect to Real
Property. Borrower shall provide Foothill with a copy of each notice of
default or termination received by Borrower from any tenant under any Material
Lease within five (5) Business Days after receiving any such notice, and
deliver to Foothill a copy of each notice of default or termination sent by
Borrower to the tenant under any lease simultaneously with its delivery of such
notice under such lease, and shall notify Foothill, not later than thirty (30)
days prior to the date of the expiration of the term of any lease, and, if
Borrower shall intend to renew such lease, the terms and conditions of renewal
of any such lease. Upon Foothill's request, Borrower shall use its best
efforts to obtain and deliver to Foothill, an estoppel certificate, in form and
substance satisfactory to Foothill, executed by such tenants as Foothill may
specify, certifying, among other things, that Borrower is not in default under
such lease, the amount of rent payable under such lease, the term of such
lease, any extra-contractual rent adjustments or discounts, and any purchase,
extension or termination option.
6.12 FINANCIAL COVENANT. Borrower shall maintain
a Tangible Net Worth of at least Eight Million Dollars ($8,000,000), measured
on a fiscal quarter-end basis.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any
credit hereunder shall be available and until full and final payment of the
Obligations, Borrower will not do any of the following without Foothill's prior
written consent:
7.1 INDEBTEDNESS. Create, incur, assume, permit,
guarantee, or otherwise become or remain, directly or indirectly, liable with
respect to any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness evidenced by the New Kroeger
Note;
(c) Indebtedness evidenced by the New CET
Unsecured Notes;
(d) Indebtedness evidenced by the Note Agreement,
the Principal Notes, or the Interest Deferral Notes; it being acknowledged that
there are certain fees and expenses payable under the Note Agreement, the
incurrence or payment of which is not restricted hereunder;
(e) Indebtedness arising in connection with the
Redding Hotel Improvement Loan in an amount not to exceed $1,000,000;
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(f) Indebtedness extant on the date hereof and
secured by the Senior Mortgages;
(g) unsecured Indebtedness due and payable after
October 30, 2000; provided, however, that at the time such unsecured
Indebtedness is created, incurred, or assumed the ratio of Available Cash Flow
to Interest Expense for the immediately preceding period meets or exceeds two
to one (2.0:1.0);
(h) purchase money Indebtedness secured by a
purchase money security interest or lien, so long as such security interest or
lien only secures the purchase price of the property or asset acquired with
such Indebtedness; and
(i) refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b), (c), (d), (e), (f), (g), or (h) of
this Section 7.1 (and continuance or renewal of any Permitted Liens associated
therewith) so long as: (i) the terms and conditions of such refinancings,
renewals, or extensions do not materially impair the prospects of repayment of
the Obligations by Borrower, (ii) the net cash proceeds of such refinancings,
renewals, or extensions do not result in an increase in the aggregate principal
amount of the Indebtedness so refinanced, renewed, or extended, (iii) such
refinancings, renewals, refundings, or extensions do not result in a shortening
of the average weighted maturity of the Indebtedness so refinanced, renewed, or
extended, and (iv) to the extent that Indebtedness that is refinanced was
subordinated in right of payment to the Obligations, then the subordination
terms and conditions of the refinancing Indebtedness must be at least as
favorable to Foothill as those applicable to the refinanced Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist,
directly or indirectly, any lien on or with respect to any of the Collateral,
of any kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens.
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Except for the
merger of CalREIT with and into Borrower with CalREIT as the surviving entity
and except for the incorporation of Borrower, in each case subject to
Borrower's compliance with Section 4.5 hereof, enter into any acquisition,
merger, consolidation, reorganization, or recapitalization, or reclassify its
capital stock, or liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, assign, lease, transfer, or
otherwise dispose of, in one transaction or a series of transactions, all or
any substantial part of its business, property, or assets, whether now owned or
hereafter acquired, or acquire by purchase or otherwise all or substantially
all of the properties, assets, stock, or other evidence of beneficial ownership
of any Person.
7.4 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS.
Enter into any transaction not in the ordinary and usual course of Borrower's
business, including the sale, lease, or other disposition of, moving,
relocation, or transfer, whether by sale or otherwise,
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of any of the Collateral; provided, however, that the foregoing shall not
prevent the making of any Permitted Disposition.
7.5 CHANGE NAME. Other than the change of Borrower's
name to "The Peregrine Real Estate Trust" effective on the Effective Date of
Plan, change Borrower's name, FEIN, business structure, or identity, or add any
new fictitious name.
7.6 GUARANTEE. Guarantee or otherwise become in any way
liable with respect to the obligations of any third Person except by
endorsement of instruments or items of payment for deposit to the account of
Borrower or which are transmitted or turned over to Foothill. The foregoing
notwithstanding, Borrower may issue one or more guaranties from time to time so
long as the aggregate amount paid or payable under all such guaranties as of
any date of determination does not exceed $1,000,000.
7.7 RESTRUCTURE. Make any change in the principal nature
of Borrower's business operations or the date of its fiscal year (other than to
change Borrower's fiscal year to be a calendar fiscal year).
7.8 PREPAYMENTS. Except (a) in connection with a
refinancing permitted by Section 7.1(i), or (b) for prepayments that are
contractually required to be made with the net cash proceeds of the sale of any
property or asset of Borrower or its subsidiaries, prepay any Indebtedness
owing to any third Person or prepay the Florin-Perkins Bond Claim. Borrower
shall not pay in cash any interest with respect to Indebtedness as to which it
has the contractual right to make such payment by the issuance of additional
promissory notes of the same kind.
7.9 CHANGE OF CONTROL. Without Foothill's consent, which
consent will not be unreasonably withheld, cause, permit, or suffer, directly
or indirectly, any Change of Control.
7.10 CAPITAL EXPENDITURES. Make any capital expenditure,
or any commitment therefor, in excess of any reasonable and necessary amount
for any individual transaction or where the aggregate amount of such capital
expenditures, made or committed for in any single fiscal year, is in excess of
any reasonable and necessary amount.
7.11 DISTRIBUTIONS. Make any distribution or declare or
pay any dividends (in cash or property or assets, other than in-kind) on, or
purchase, acquire, redeem, or retire any of Borrower's capital stock, of any
class, whether now or hereafter outstanding; provided, however, that if
permitted under applicable law, Borrower may declare dividends to the extent,
in the opinion of counsel to Borrower satisfactory to Foothill, such payment is
required to maintain Borrower's status as a real estate investment trust.
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7.12 ACCOUNTING METHODS. Modify or change its method of
accounting or enter into, modify, or terminate any agreement currently
existing, or at any time hereafter entered into with any third party accounting
firm or service bureau for the preparation or storage of Borrower's accounting
records without said accounting firm or service bureau agreeing to provide
Foothill information regarding the Collateral and the Real Property or
Borrower's financial condition. Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Foothill
pursuant to or in accordance with this Agreement, and agrees that Foothill may
contact directly any such accounting firm or service bureau in order to obtain
such information.
7.13 INVESTMENTS. Except for (a) investments in Cash
Equivalents, (b) seller financing permitted by Section 6.6(b) of the Note
Agreement, and (c) the purchase, with After Acquired Property, of 100% of the
stock of a corporation whose primary assets are real property, Borrower shall
not make any loans, guarantees (including guarantees of any lease in connection
with a sale/leaseback transaction), capital contributions, or advances to or
for the benefit of, or investments in any Person, unless such loans,
guarantees, capital contributions, advances or investments are made in the
ordinary course of business by real estate operators of property of like kind
to the applicable parcel of Real Property.
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly
enter into or permit to exist any material transaction with any Affiliate of
Borrower except for transactions that are in the ordinary course of Borrower's
business, upon fair and reasonable terms, that are fully disclosed to Foothill,
and that are no less favorable to Borrower than would be obtained in arm's
length transaction with a non-Affiliate. Borrower and Foothill hereby
acknowledge that the foregoing shall not prohibit any transactions between
Borrower and the Noteholders pursuant to the terms and conditions of the Note
Agreement.
7.15 SUSPENSION. Suspend or go out of a substantial
portion of its business.
7.16 USE OF PROCEEDS. Use the proceeds of the advances
made hereunder for any purpose other than: (a) to pay transactional costs and
expenses incurred in connection with this Agreement; (b) to pay those amounts
which Borrower is obligated to pay under the provisions of the Plan in order
for the Plan to become effective; and (c) thereafter, consistent with the terms
and conditions hereof, for its lawful and permitted purposes; provided,
however, that no advance hereunder shall be used to purchase real property or
to make tenant improvements on After Acquired Property.
7.17 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; RELATED
EQUIPMENT WITH BAILEES. Borrower covenants and agrees that it will not,
without thirty (30) days prior written notification to Foothill, relocate its
chief executive office to a new location and so long as, at the time of such
written notification, Borrower provides any financing
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statements or fixture filings necessary to perfect and continue perfected
Foothill's security interests. The Related Equipment shall not at any time now
or hereafter be stored with a bailee, warehouseman, or similar party without
Foothill's prior written consent.
7.18 AMENDMENT OF CERTAIN DOCUMENTS.
(a) Agree to any amendment to, or waive any of
its rights with respect to, the terms and provisions regarding interest rates,
principal or interest payment amounts, total principal amounts or the maturity
of principal amounts under the Principal Notes, the Interest Deferred Notes,
the Note Agreement, or any of the agreements, or any amendments or waivers with
respect to any of the foregoing, without in each case obtaining the prior
written consent of Foothill to such amendment or waiver.
(b) Alter, amend, or otherwise change or
supplement any term or condition contained in Borrower's Declaration of Trust
relative to the rights and preferences of the New CET Preferred Stock in order
to (i) provide for the mandatory redemption thereof or mandatory dividends with
respect thereto at any time that any of the Obligations are outstanding or
Foothill has any commitment to Borrower under any of the Loan Documents, or
(ii) provide terms and conditions that reasonably could be expected to have a
Material Adverse Effect.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall
constitute an event of default (each, an "Event of Default") under this
Agreement:
8.1 MONETARY OBLIGATIONS. If Borrower fails to
pay when due and payable or when declared due and payable, any portion of the
Obligations (whether of principal, interest (including any interest which, but
for the provisions of the Bankruptcy Code, would have accrued on such amounts),
fees and charges due Foothill, reimbursement of Foothill Expenses, or other
amounts constituting Obligations) unless in any case under this Section 8.1
(except as set forth in the following proviso) such payment is made within five
(5) Business Days after the date such payment was first due; provided, however,
that the five (5) Business Day grace period set forth herein only shall apply
to (i) Overadvances that are caused by the charging of interest or Foothill
Expenses to Borrower's loan account with Foothill, or (ii) Overadvances that
are caused by the decrease in the Maximum Amount pursuant to Section 2.1(d).
8.2 NON-MONETARY OBLIGATIONS. (a) If Borrower
fails or neglects to perform, keep, or observe, in any material respect, any
term, provision, condition, covenant, or agreement contained in Sections 6.2,
6.4, or 6.10 of this Agreement and such failure continues for a period of
fifteen (15) days from the date of such failure or neglect; (b) If Borrower
fails or neglects to perform, keep, or observe, in any material respect, any
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term, provision, condition, covenant, or agreement contained in Sections 6.3,
6.5, or 6.8 of this Agreement and such failure continues for a period of thirty
(30) days from the date of such failure or neglect; or (c) If Borrower fails or
neglects to perform, keep, or observe, in any material respect, any other term,
provision, condition, covenant, or agreement contained in this Agreement, in
any of the Loan Documents, or in any other present or future agreement between
Borrower and Foothill (other than any such term, provision, condition,
covenant, or agreement contained in Article 5 hereof or that is the subject of
another provision of this Article 8);
8.3 BREACH OF MORTGAGES. If Borrower fails or
neglects to perform, keep or observe any term, provision, condition, or
agreement contained in the Mortgages or the Environmental Indemnity after the
expiration of any applicable cure period contained therein;
8.4 MATERIAL IMPAIRMENT. If there is a material
impairment of the value of, or priority of Foothill's security interests in,
the Collateral. In this regard, the parties hereby agree that the termination
or other loss of Borrower's franchise agreement with Holiday with respect to
the Chico, Sacramento, or Walnut Creek, California hotels would, ipso facto,
constitute a material impairment of the value of the Collateral unless such
franchise agreement or agreements, as the case may be, are replaced by Borrower
with a franchise agreement with a franchisor of a comparable or better
franchise within a period of one hundred eighty (180) days of the date of the
termination or loss;
8.5 SEIZURE OF BORROWER'S PROPERTIES. If any
material portion of Borrower's properties or assets is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes into the
possession of any third Person;
8.6 VOLUNTARY INSOLVENCY PROCEEDING. If an
Insolvency Proceeding is commenced by Borrower;
8.7 INVOLUNTARY INSOLVENCY PROCEEDING. If an
Insolvency Proceeding is commenced against Borrower and any of the following
events occur: (a) Borrower consents to the institution of the Insolvency
Proceeding against it; (b) the petition commencing the Insolvency Proceeding is
not timely controverted; (c) the petition commencing the Insolvency Proceeding
is not dismissed within sixty (60) calendar days of the date of the filing
thereof; provided, however, that, during the pendency of such period, Foothill
shall be relieved of its obligation to make additional advances hereunder; (d)
an interim trustee is appointed to take possession of all or a substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, Borrower; or (e) an order for relief shall have
been issued or entered therein;
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8.8 COURT ORDERS. If Borrower is enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs;
8.9 GOVERNMENTAL LIENS. If a notice of lien,
levy, or assessment is filed of record with respect to any of Borrower's
properties or assets by the United States Government, or any department,
agency, or instrumentality thereof, or by any state, county, municipal, or
governmental agency, or if any taxes or debts owing at any time hereafter to
any one or more of such entities becomes a lien, whether inchoate or otherwise,
upon any of Borrower's properties or assets and the same is not paid on the
payment date thereof;
8.10 JUDGMENTS. If any judgments or other claims
that are junior in priority to any of Foothill's Mortgages in excess of One
Million Dollars ($1,000,000) in the aggregate amount become liens or
encumbrances upon any material portion of Borrower's properties or assets;
8.11 MATERIAL DEFAULTS. If there is a default in
any material agreement to which Borrower is a party with one or more third
Persons resulting in a right by such third Persons, irrespective of whether
exercised, to accelerate the maturity of Borrower's obligations thereunder or
if there is a material default by Borrower in the payment or performance of any
of its obligations under the Plan; provided, however, the preceding sentence
notwithstanding, in the event that an Event of Default occurs under this
Agreement because of the occurrence of an event of default under the Note
Agreement, such Event of Default automatically shall be annulled (and any
acceleration rescinded) if the applicable event of default under the Note
Agreement has been cured or waived and any acceleration of the Indebtedness
thereunder rescinded, and written notice of such cure, waiver, or rescission,
as the case may be, shall have been given to Foothill and no other Event of
Default has occurred that has not been cured or waived during such period. No
rescission or annulment referred to above shall affect any subsequent Event of
Default or any right, power, or remedy arising out of such subsequent Event of
Default.
8.12 MISREPRESENTATIONS BY BORROWER. If any
material misstatement or misrepresentation exists in any warranty,
representation, statement, or report as of the date when made to Foothill by
Borrower or any officer, employee, agent, or director of Borrower, or if any
such material warranty or representation is withdrawn;
8.13 TERMINATION OF SUBORDINATION AGREEMENT. If
the obligation of any third Person under the Subordination Agreement is limited
or terminated by operation of law, or terminated or purported to be terminated
by the third Person thereunder, or any such third Person becomes the subject of
an Insolvency Proceeding; or
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8.14 EMPLOYEE BENEFITS.
(a) With respect to any Benefit Plan,
the occurrence of any of the following which could reasonably be expected to
have a material adverse effect on the financial condition of Borrower: (i) the
violation of any of the provisions of ERISA; (ii) the loss by a Benefit Plan
intended to be a Qualified Plan of its qualification under Section 401(a) of
the IRC; (iii) the incurrence of liability under Title IV of ERISA; (iv) a
failure to make full payment when due of all amounts which, under the
provisions of any Benefit Plan or applicable law, Borrower or any ERISA
Affiliate is required to make; (v) the filing of a notice of intent to
terminate a Benefit Plan under Sections 4041 or 4041A of ERISA; (vi) a complete
or partial withdrawal of Borrower or an ERISA Affiliate from any Benefit Plan;
(vii) the receipt of a notice by the plan administrator of a Benefit Plan that
the PBGC has instituted proceedings to terminate such Benefit Plan or appoint a
trustee to administer such Benefit Plan; (viii) a commencement or increase of
contributions to, or the adoption of or the amendment of, a Benefit Plan; and
(ix) the assessment against Borrower or any ERISA Affiliate of a tax under
Section 4980B of the IRC.
(b) The Unfunded Benefit Liability of
all of the Benefit Plans of Borrower and its ERISA Affiliates shall, in the
aggregate, exceed $1.00.
8.15 REAL PROPERTY.
(a) If there shall occur during any
consecutive twelve month period, one or more uninsured losses, thefts, damage
or destruction of the Real Property, or any part thereof, having an aggregate
value in excess of ten percent of the aggregate amount of the Release Amounts
for the then remaining Real Property Collateral; or
(b) If an event of default shall occur
under any Permitted Lien that encumbers the Real Property and the effect
thereof is to cause a Material Adverse Effect.
Foothill has agreed to endeavor, in good faith, to
provide Borrower with telephonic notice of the occurrence of an Event of
Default under Sections 8.2, 8.3, 8.4, 8.11, 8.12 or 8.13 at or prior to time at
which Foothill declares such Event of Default to be extant; provided, however,
that Foothill shall suffer no liability whatsoever for any failure (other than
a wilful failure) to send such notification.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. In addition to the
remedies set forth in the Mortgages, upon the occurrence of an Event of Default
Foothill may, at its election, without notice of its election and without
demand, do any one or more of the following, all of which are authorized by
Borrower:
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(a) Declare all Obligations, whether
evidenced by this Agreement, by any of the other Loan Documents, or otherwise,
immediately due and payable;
(b) Cease advancing money or extending
credit to or for the benefit of Borrower under this Agreement, under any of the
Loan Documents, or under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of
the other Loan Documents as to any future liability or obligation of Foothill,
but without affecting Foothill's rights, liens, and security interests in the
Collateral and without affecting the Obligations;
(d) Without notice to or demand upon
Borrower, make such payments and do such acts as Foothill considers necessary
or reasonable to protect its security interests in the Collateral. Borrower
authorizes Foothill to pay, purchase, contest, or compromise any encumbrance,
charge, or lien that in Foothill's determination appears to conflict with its
security interests and to pay all expenses incurred in connection therewith.
The foregoing shall include the right to discharge any Allowed Mechanic's Lien
Claim or Allowed Secured Real Property Tax Claim;
(e) Without notice to Borrower (such
notice being expressly waived), and without constituting a retention of any
collateral in satisfaction of an obligation (within the meaning of Section 9505
of the Code), set off and apply to the Obligations any and all (i) balances and
deposits of Borrower held by Foothill, or (ii) indebtedness at any time owing
to or for the credit or the account of Borrower held by Foothill;
(f) Hold, as cash collateral, any and
all balances and deposits of Borrower held by Foothill, to secure the full and
final repayment of all of the Obligations;
(g) Prepare for sale, advertise for
sale, and sell (in the manner provided for herein or in the Mortgages) the
Collateral. Foothill is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in advertising for sale, and selling any Collateral and Borrower's rights under
all licenses and all franchise agreements shall inure to Foothill's benefit;
(h) Sell the Personal Property
Collateral at either a public or private sale, or both, by way of one or more
contracts or transactions, for cash or on terms, in such manner and at such
places (including Borrower's premises) as Foothill
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determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale;
(i) Foothill shall give notice of the
disposition of the Personal Property Collateral as follows:
(1) Foothill shall give Borrower
and each holder of a security interest in the Personal Property Collateral who
has filed with Foothill a written request for notice, a notice in writing of
the time and place of public sale, or, if the sale is a private sale or some
other disposition other than a public sale is to be made of the Personal
Property Collateral, then the time on or after which the private sale or other
disposition is to be made;
(2) The notice shall be personally
delivered or mailed, postage prepaid, to Borrower as provided in Section 12, at
least five (5) days before the date fixed for the sale, or at least five (5)
days before the date on or after which the private sale or other disposition is
to be made; no notice needs to be given prior to the disposition of any portion
of the Personal Property Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a recognized market.
Notice to Persons other than Borrower claiming an interest in the Personal
Property Collateral shall be sent to such addresses as they have furnished to
Foothill;
(3) If the sale is to be a public
sale, Foothill also shall give notice of the time and place by publishing a
notice one time at least five (5) days before the date of the sale in a
newspaper of general circulation in the county in which the sale is to be held;
(j) Foothill may credit bid and purchase
at any public sale; and
(k) Any deficiency that exists after
disposition of the Personal Property Collateral as provided above will be paid
immediately by Borrower. Any excess will be returned, without interest and
subject to the rights of third Persons, by Foothill to Borrower.
9.2 REMEDIES CUMULATIVE. Foothill's rights and
remedies under this Agreement, the other Loan Documents, all other agreements
shall be cumulative. Foothill shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by Foothill of one right or remedy shall be deemed an election, and no
waiver by Foothill of any Event of Default shall be deemed a continuing waiver.
No delay by Foothill shall constitute a waiver, election, or acquiescence by
it.
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9.3 FORECLOSURE NOT A DISCHARGE. Foreclosure
shall not operate as a discharge to Borrower's obligations to Foothill as to
Hazardous Materials and the indemnity provisions in Section 11 hereof; and in
the event Borrower tenders a deed in lieu of foreclosure for all or part of the
Real Property, Borrower shall deliver such property to Foothill (or its
designee) free of any and all Hazardous Materials that were not permitted,
under the terms and conditions of this Agreement, to be on or under such
property. The indemnity provisions in Section 11 hereof shall not be
discharged or affected in any way by foreclosure or by Foothill's acceptance of
a deed in lieu thereof, and the same shall continue for a period equal to the
longest living child born in Los Angeles County on October 1, 1994, plus
twenty-one (21) years.
10. TAXES AND EXPENSES REGARDING THE COLLATERAL.
10.1 FAILURE TO PAY. If Borrower fails to pay, or
cause the payment of, any monies (whether taxes, rents, assessments, insurance
premiums, or otherwise) due to third Persons, or fails to make any deposits or
furnish any required proof of payment or deposit, all as required under the
terms of this Agreement or the Mortgages, after having been given notice and
the opportunity to make any such payment within the applicable cure period,
then, to the extent that Foothill reasonably determines that such failure by
Borrower could have a material adverse effect on Foothill's interests in the
Collateral, in its reasonable discretion and without further notice to
Borrower, Foothill may do any or all of the following: (a) make payment of the
same or any part thereof; (b) set up such reserves in Borrower's loan account
as Foothill deems necessary to protect Foothill from the exposure created by
such failure; or (c) obtain and maintain insurance policies of the type
described in Section 6.6, and take any action with respect to such policies as
Foothill deems prudent. Any such amounts paid by Foothill shall constitute
Foothill Expenses. Any such payments made by Foothill shall not constitute an
agreement by Foothill to make similar payments in the future or a waiver by
Foothill of any Event of Default under this Agreement. Foothill need not
inquire as to, or contest the validity of, any such expense, tax, security
interest, encumbrance, or lien and the receipt of the usual official notice for
the payment thereof shall be conclusive evidence that the same was validly due
and owing.
10.2 RIGHT TO CONTEST. Notwithstanding the
provisions set forth in Sections 6.5 and 10.1 regarding Borrower's obligation
to pay taxes, Borrower shall not be required to pay or discharge any taxes
levied against any parcel of Real Property so long as Borrower shall in good
faith and at its own expense contest the same or the validity thereof by
appropriate legal proceedings which shall operate to prevent the collection
thereof or other realization thereon or the sale, forfeiture or loss of the
Real Property or any part thereof to satisfy the same; provided that (i) during
such contest Borrower shall, at the option of Foothill, provide security in
forms and amounts satisfactory to Foothill assuring the discharge of Borrower's
obligation to pay such taxes and of any additional charge, penalty or expense
arising from or incurred as a result of such contest, (ii) any such contest
shall not subject Foothill to any civil or criminal liability whatsoever, and
(iii)
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<PAGE> 52
Borrower diligently and rapidly prosecutes such contest to completion.
However, if at any time payment of any taxes levied against any parcel of Real
Property shall become necessary to prevent foreclosure on the Real Property or
any portion thereof because of non-payment, or if Foothill or Borrower shall
incur any civil or criminal liability as a result of such non-payment, Foothill
may, without any liability to Borrower whatsoever, apply such security to the
payment of the same, or otherwise pay the same pursuant to the provisions of
Section 10.1 in sufficient time to prevent the delivery of such tax deed or the
incurrence of such civil or criminal liability, as the case may be.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Except as expressly
provided for herein, Borrower waives demand, protest, notice of protest, notice
of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Foothill on which Borrower may in any way be liable.
11.2 FOOTHILL'S LIABILITY FOR COLLATERAL. So long
as Foothill complies with its obligations, if any, under Section 9207 of the
Code, Foothill shall not in any way or manner be liable or responsible for: (a)
the safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the
value thereof; or (d) any act or default of any other Person. All risk of
loss, damage, or destruction of the Collateral shall be borne by Borrower.
11.3 INDEMNIFICATION. Borrower agrees to defend,
indemnify, save, and hold all Indemnified Persons harmless against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
Person arising out of or relating to the transactions contemplated by this
Agreement or any other Loan Document including those claimed by any broker or
finder, except to the extent that such indemnified liability arises proximately
from the gross negligence or wilful misconduct of the Indemnified Person
asserting its rights under this indemnity, (b) all Losses, and (c) all losses
(including reasonable attorneys' fees) suffered or incurred by any Indemnified
Person, regardless of negligence (except to the extent that such indemnified
liability arises proximately from the gross negligence or wilful misconduct of
the Indemnified Person asserting its rights under this indemnity), whether as a
holder of security interests in Real Property, as mortgagee in possession, or
as successor in interest to Borrower as owner of the Real Property by virtue of
foreclosure or acceptance of a deed or other transaction in lieu of
foreclosure, or after partial or total reconveyance of the mortgage, arising
from, in respect of, as a consequence of (whether foreseeable or unforeseeable)
or in connection with the use, storage, disposal, generation, transportation,
spill or treatment of any Hazardous Materials at or related to the Real
Property whether or not originating or emanating from the Real Property. The
foregoing indemnity shall not apply, however, to any losses suffered or
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<PAGE> 53
incurred by any Person as the result of any act or omission with respect to the
Real Property that occurs or fails to occur on or after the date on which any
Indemnified Person has foreclosed thereon or taken title thereto. This section
shall survive the termination of this Agreement. Borrower and Foothill
understand and acknowledge that Borrower's covenant regarding Remediation of
Hazardous Materials is contained in Section 6.10 and nothing in this section is
intended to modify or expand Borrower's obligations to Foothill under Section
6.10 hereof.
12. NOTICES.
Unless otherwise provided in this Agreement, all
notices or demands by any party relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail, postage
prepaid, return receipt requested, or by prepaid telex, TWX, telefacsimile, or
telegram (with messenger delivery specified) to Borrower or to Foothill, as the
case may be, at its address set forth below:
<TABLE>
<S> <C>
If to Borrower: THE PEREGRINE REAL ESTATE TRUST
1300 Ethan Way, Suite 200
Sacramento, California 95825
Attention: Arnold E. Brown
Telefacsimile No.: (916) 929-1122
With a copy to: GREENBERG, GLUSKER, FIELDS, CLAMAN & MACHTINGER
1900 Avenue of the Stars, Suite 2000
Los Angeles, California 90067
Attention: Paula J. Peters, Esq.
Telefacsimile No.: (310) 553-0687
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attention: Business Finance Division Manager
Telefacsimile No.: (310) 478-4860
</TABLE>
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<TABLE>
<S> <C>
With a copy to: BROBECK, PHLEGER & HARRISON
550 South Hope Street, Suite 2100
Los Angeles, California 90071-2604
Attention: John Francis Hilson, Esq.
Telefacsimile No.: (213) 239-1324
</TABLE>
The parties here to may change the address at which
they are to receive notices hereunder, by notice in writing in the foregoing
manner given to the other. All notices or demands sent in accordance with this
Section 12, other than notices by Foothill in connection with Sections 9504 or
9505 of the Code, shall be deemed received on the earlier of the date of actual
receipt or three (3) Business Days after the deposit thereof in the mail.
Borrower acknowledges and agrees that notices sent by Foothill in connection
with Sections 9504 or 9505 of the Code shall be deemed sent when deposited in
the mail or transmitted by telefacsimile or other similar method set forth
above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED
UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA
OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER AND FOOTHILL
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE
TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13. BORROWER
AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR
ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
BORROWER AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF
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LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other
papers delivered by Borrower to Foothill may be destroyed or otherwise disposed
of by Foothill four (4) months after they are delivered to or received by
Foothill, unless Borrower requests, in writing, the return of said documents,
schedules, or other papers and makes arrangements, at Borrower's expense, for
their return.
15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. This Agreement shall be
binding and deemed effective when executed and delivered by Borrower and
Foothill.
15.2 SUCCESSORS AND ASSIGNS. This Agreement shall
bind and inure to the benefit of the respective successors and assigns of each
of the parties; provided, however, that Borrower may not assign this Agreement
or any rights or duties hereunder without Foothill's prior written consent and
any prohibited assignment shall be absolutely void. No consent to an
assignment by Foothill shall release Borrower from its Obligations. Foothill
may assign this Agreement and its rights and duties hereunder and no consent or
approval by Borrower is required in connection with any such assignment.
Foothill reserves the right to sell, assign, transfer, negotiate, or grant
participations in all or any part of, or any interest in Foothill's rights and
benefits hereunder. In connection with any such assignment or participation,
Foothill may disclose all documents and information which Foothill now or
hereafter may have relating to Borrower or Borrower's business. To the extent
that Foothill assigns its rights and obligations hereunder to a third Person,
Foothill shall thereafter be released from such assigned obligations to
Borrower and such assignment shall effect a novation between Borrower and such
third Person. Foothill and Borrower hereby agree that the provisions of this
Section 15.2 shall not expand the eligible classes of Persons included within
the definition of Indemnified Persons.
15.3 SECTION HEADINGS. Headings and numbers have
been set forth herein for convenience only. Unless the contrary is compelled
by the context, everything contained in each section applies equally to this
entire Agreement.
15.4 INTERPRETATION. Neither this Agreement nor
any uncertainty or ambiguity herein shall be construed or resolved against
Foothill or Borrower, whether under any rule of construction or otherwise. On
the contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of all parties hereto.
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15.5 SEVERABILITY OF PROVISIONS. Each provision
of this Agreement shall be severable from every other provision of this
Agreement for the purpose of determining the legal enforceability of any
specific provision.
15.6 AMENDMENTS IN WRITING. This Agreement cannot
be changed or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations, if any, are merged into this
Agreement.
15.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This
Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
shall be deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed counterpart
of this Agreement by telefacsimile shall be equally as effective as delivery of
a manually executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver a
manually executed counterpart of this Agreement but the failure to deliver a
manually executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement.
15.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If
the incurrence or payment of the Obligations by Borrower or the transfer by
Borrower to Foothill of any property of Borrower should for any reason
subsequently be declared to be void or voidable under any state or federal law
relating to creditors' rights, including provisions of the Bankruptcy Code
relating to fraudulent conveyances, preferences, and other voidable or
recoverable payments of money or transfers of property (collectively, a
"Voidable Transfer"), and if Foothill is required to repay or restore, in whole
or in part, any such Voidable Transfer, or elects to do so upon the reasonable
advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that Foothill is required or elects to repay or restore, and as to all
reasonable costs, expenses, and attorneys fees of Foothill related thereto, the
liability of Borrower automatically shall be revived, reinstated, and restored
and shall exist as though such Voidable Transfer had never been made.
15.9 LENDING RELATIONSHIP. Nothing contained in
this Agreement or any of the other Loan Documents shall be deemed or construed
by the parties hereto or by any third party to create the relationship of
principal and agent, partnership, joint venture or any association between
Borrower and Foothill, it being expressly understood and agreed that nothing
contained in this Agreement or the other Loan Documents shall be deemed to
create any relationship between Borrower and Foothill other that the
relationship of borrower and lender.
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15.10 INTEGRATION. This Agreement, together with
the other Loan Documents, reflects the entire understanding of the parties with
respect to the transactions contemplated hereby and shall not be contradicted
or qualified by any other agreement, oral or written, whether before or after
the date hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in Los Angeles, California.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By__________________________
Title:_______________________
COMMONWEALTH EQUITY TRUST, a
California real estate investment trust
By__________________________
Title:_______________________
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<PAGE> 1
EXHIBIT 4.3
PREFERRED STOCK PURCHASE AGREEMENT
by and among
THE PEREGRINE REAL ESTATE TRUST
and
THE BUYERS NAMED HEREIN
Dated as of October 1, 1994
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Defined Terms. . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
PURCHASE AND SALE OF SECURITIES . . . . . . . . . . . . . . . . . 4
2.1 Authorization of Securities. . . . . . . . . . . . . . . . 4
2.2 Purchase and Sale of Securities. . . . . . . . . . . . . . 4
2.3 Consideration for Preferred Shares. . . . . . . . . . . . 4
ARTICLE III
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Actions to be Taken and Documents to be Delivered. . . . . 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF Peregrine . . . . . . . . . . . 5
4.1 Organization of Peregrine. . . . . . . . . . . . . . . . . 5
4.2 Capital Stock. . . . . . . . . . . . . . . . . . . . . . . 6
4.3 Authorization. . . . . . . . . . . . . . . . . . . . . . . 6
4.4 No Conflict or Violation. . . . . . . . . . . . . . . . . 6
4.5 Consents and Approvals. . . . . . . . . . . . . . . . . . 7
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYERS . . . . . . . . . . . . . 7
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
5.1 Sophistication . . . . . . . . . . . . . . . . . . . . . 7
5.2 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . 7
5.3 No Public Market . . . . . . . . . . . . . . . . . . . . 8
5.4 Access to Data . . . . . . . . . . . . . . . . . . . . . 8
5.5 Authority . . . . . . . . . . . . . . . . . . . . . . . 8
5.6 Residence . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VI
CONDITIONS TO Peregrine'S OBLIGATIONS . . . . . . . . . . . . . 8
6.1 Representations, Warranties and Covenants . . . . . . . 8
6.2 Consents. . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Note Agreement . . . . . . . . . . . . . . . . . . . . . 9
6.4 Note Agreement and Registration Rights Agreement . . . . 9
6.5 Declaration of Trust . . . . . . . . . . . . . . . . . . 9
ARTICLE VII
CONDITIONS TO BUYERS' OBLIGATIONS . . . . . . . . . . . . . . . 9
7.1 Representations, Warranties and Covenants. . . . . . . . 9
7.2 Note Agreement and Registration Rights Agreement . . . . 9
7.3 Declaration of Trust . . . . . . . . . . . . . . . . . . 9
7.4 Consents. . . . . . . . . . . . . . . . . . . . . . . . 10
7.5 Opinion of Counsel. . . . . . . . . . . . . . . . . . . 10
7.6 Certificates. . . . . . . . . . . . . . . . . . . . . . 11
7.7 Sales to All Buyers. . . . . . . . . . . . . . . . . . . 12
ARTICLE VIII
ACTIONS BY Peregrine AND BUYERS AFTER THE CLOSING . . . . . . . 12
8.1 Trustees' and Officers' Liability Insurance . . . . . . 12
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
8.2 Declaration of Trust. . . . . . . . . . . . . . . . . . . .. . 12
8.3 Further Assurances. . . . . . . . . . . . . . . . . . . . .. . 12
8.4 Selection of Independent Public Accountants. . . . . . . . .. . 12
8.5 Payment of Taxes; Existence and Licenses;
Maintenance of Assets . . . . . . . . . . . . . . . . . . . 12
8.6 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . .. . 13
8.7 Payment of Indebtedness; Compliance with Contracts,
Leases, Etc.; Purchase of Stock; Other . . . . . . . . . . . . 13
8.8 Financial Statements; Notices. . . . . . . . . . . . . . . .. . 14
8.9 Discussion with Officers and Executives. . . . . . . . . . .. . 16
8.10 Blue Sky. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.11 Tax Treatment of Dividends. . . . . . . . . . . . . . . . . . 17
8.12 Transactions with Affiliates. . . . . . . . . . . . . . . . . 17
8.13 Specific Performance as Remedy . . . . . . . . . . . . . . . 17
ARTICLE IX
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . .. . 18
9.1 Survival of Representations, Etc. . . . . . . . . . . . . . 18
9.2 Indemnification. . . . . . . . . . . . . . . . . . . . . . . 18
9.3 Indemnification Procedures. . . . . . . . . . . . . . . . . . 18
ARTICLE X
TRANSFER OF SECURITIES . . . . . . . . . . . . . . . . .... . . . . . 19
10.1 Restrictive Legends. . . . . . . . . . . . . . . . . . . . 20
10.2 Notice of Proposed Transfer. . . . . . . . . . . . . . . . 20
10.3 Termination of Restrictions . . . . . . . . . . . .. . . . . 21
10.4 Compliance with Rule 144 and Rule 144A . . . . . .. . . . . 22
10.5 Non-Applicability of Restrictions on Transfer . . .. . . . . 22
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . .. 22
11.2 Choice of Law. . . . . . . . . . . . . . . . . . . . . . .. 23
11.3 Entire Agreement; Amendments and Waivers. . . . . . . . . .. 23
11.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . .. 23
11.5 Invalidity. . . . . . . . . . . . . . . . . . . . . . . . .. 23
11.6 Headings. . . . . . . . . . . . . . . . . . . . . . . . .. 24
11.7 Attorney's Fees. . . . . . . . . . . . . . . . . . . . . .. 24
11.8 Parties in Interest. . . . . . . . . . . . . . . . . . . .. 24
SCHEDULES
Schedule 1 Notices and Shares Purchased
EXHIBITS
Exhibit A Note Purchase Agreement
Exhibit B Registration Rights Agreement
Exhibit C Declaration of Trust
Exhibit D Bylaws of The Peregrine Real Estate Trust
</TABLE>
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PREFERRED STOCK PURCHASE AGREEMENT
This Preferred Stock Purchase Agreement ("Agreement"), dated
as of October 1, 1994, is by and among The Peregrine Real Estate Trust f/k/a
Commonwealth Equity Trust, a real estate investment trust organized under the
laws of the State of California ("Peregrine"), and the buyers named herein
(each a "Buyer," and collectively, the "Buyers").
RECITALS
A. Peregrine incurred certain indebtedness to the Buyers
(or their predecessors in interest) pursuant to the Old Note Agreement.
B. On August 2, 1993, Peregrine filed a petition for
relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy
Court for the Eastern District of California, Case No. 93-26727-C11.
C. Pursuant to the Plan of Reorganization of Peregrine,
a portion of the indebtedness of Peregrine to the Buyers under the Old Note
Agreement is being satisfied in consideration of, among other things, the
execution, delivery and performance of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
premises contained herein and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall
have the following meanings:
"Affiliate" shall mean any entity controlling, controlled by
or under common control with Peregrine. For the purposes of this definition,
"control" shall have the meaning presently specified for that word in Rule 405
promulgated by the SEC under the Securities Act. With respect to any person
who is a limited partnership, Affiliate shall also mean any general partner or
limited partner of such limited partnership, or any person which is a general
partner in a general or limited partnership, which is a general partner of such
limited partnership.
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"Agreement" shall mean this Preferred Stock Purchase
Agreement, together with all schedules and exhibits referenced herein.
"Assets" shall mean all real and personal property and other
assets of Peregrine and its Subsidiaries.
"Bankruptcy Code" shall mean Title 11 of the United States
Bankruptcy Code, as amended.
"Bankruptcy Court" shall mean the United States Bankruptcy
Court for the Eastern District of California.
"Closing Date" shall mean the business day on which each of
the conditions set forth in Articles V and VI of this Agreement is satisfied or
waived, or such other date as may be mutually agreed upon in writing by
Peregrine and Buyers.
"Code" shall mean the Internal Revenue Code of 1986, as it may
be amended from time to time.
"Common Stock" shall mean Peregrine's Common Stock.
"Conversion Stock" shall mean Common Stock issued upon
conversion of the Preferred Shares.
"Declaration of Trust" shall mean the Declaration of Trust of
Peregrine as in effect on the date hereof.
"Dividends Received Deduction" shall mean the deduction for
dividends received provided by Section 243(a) of the Code as in effect on the
date hereof and as hereafter amended, or any successor provision.
"Encumbrances" shall mean any claim, lien, pledge, option,
charge, easement, security interest, right-of-way, encumbrance or other rights
of third parties, and, with respect to any securities, any agreements,
understandings or restrictions affecting the voting rights or other incidents
of record or beneficial ownership pertaining to such securities.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"GAAP" shall mean U.S. generally accepted accounting principles.
"Indebtedness" shall mean, with respect to any person, without
duplication, (i) all items (excluding items of contingency reserves or of
reserves for deferred income taxes) which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as of the date on which Indebtedness is to
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be determined, (ii) all indebtedness secured by any lien on any property or
asset owned or held by such Person subject thereto, whether or not the
indebtedness secured thereby shall have been assumed, and (iii) all
indebtedness of others with respect to which such Person has become liable by
way of a guarantee.
"Material Adverse Effect" with respect to any person or entity
shall mean a material adverse effect on the business, condition (financial or
otherwise), Permits, assets, Liabilities, working capital, reserves, earnings
or operations of such person or entity.
"Note Agreement" shall mean that certain Second Amended and
Restated Note Agreement by and among Peregrine and Buyers substantially in the
form of Exhibit A hereto.
"Old Note Agreement" shall mean that certain Amended and
Restated Note Agreement dated July 17, 1992 by and among Peregrine and Buyers
(or their predecessors in interest), as amended.
"Permits" shall mean all licenses, permits, orders, consents,
approvals, registrations, authorizations, qualifications and filings with and
under all federal, state, local or foreign laws and governmental or regulatory
bodies and all industry or other non-governmental self-regulatory
organizations.
"Plan" shall mean the Third Amended Plan of Reorganization of
Peregrine under chapter 11 of the Bankruptcy Code dated July 27, 1994 as
confirmed by order of Bankruptcy Judge Christopher Klein dated August 8, 1994.
"Preferred Stock" shall mean Peregrine's preferred stock.
"Registration Rights Agreement" shall mean that certain
Registration Rights Agreement by and among Peregrine and Buyers, substantially
in the form of Exhibit B hereto.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Significant Holder" shall mean a holder of Preferred Shares
which are convertible into 5% or more of the initial number of shares of
Conversion Stock issuable upon conversion of the Preferred Shares, as adjusted
from time to time pursuant to the respective terms thereof.
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"Subsidiary" shall mean any corporation or other entity of
which Peregrine owns, directly or indirectly, a majority of the capital stock
or a majority of the other equity interests.
1.2 Other Defined Terms. The following terms shall have
the meanings defined for such terms in the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Buyer Recitals
Buyers Recitals
Peregrine Recitals
Closing 3.1
Indemnified Parties 8.2
Losses 8.2
Old Note Agreement Recitals
Preferred Shares 2.2
Rule 144 9.3
</TABLE>
ARTICLE II
PURCHASE AND SALE OF SECURITIES
2.1 Authorization of Securities. On or before the
Closing Date, Peregrine will have authorized the issuance of the Preferred
Shares.
2.2 Purchase and Sale of Securities. Upon the terms and
subject to the conditions contained herein, on the Closing Date, Peregrine will
sell to Buyers, and Buyers will purchase from Peregrine, all of the Preferred
Shares (as hereinafter defined). The aggregate number of shares of Preferred
Stock to be purchased by each Buyer shall be the amount set forth opposite such
Buyer's name on Schedule 1 hereto. The aggregate number of shares of Preferred
Stock to be purchased hereunder ("Preferred Shares") shall be 11,250,000.
2.3 Consideration for Preferred Shares. The
consideration for the purchase of the Preferred Shares shall be the
restructuring of a portion of the Indebtedness owed to Buyers by Peregrine as
provided in the Plan of Reorganization.
ARTICLE III
CLOSING
3.1 Closing. The closing of the transactions
contemplated herein (the "Closing") shall be held at 9:00 A.M.
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Pacific Time on the Closing Date at the offices of Greenberg, Glusker, Fields,
Claman & Machtinger, 1900 Avenue of the Stars, Los Angeles, California 90067,
unless the parties hereto otherwise agree.
3.2 Actions to be Taken and Documents to be Delivered.
Subject to the terms and conditions of this Agreement, to effect the purchase
and sale of the Preferred Shares and the delivery of the consideration
described in Section 2.3 hereof, Peregrine and Buyers shall take the following
actions in the following order:
(a) At the Closing:
(i) Peregrine shall issue and deliver to Buyers
certificates evidencing the Preferred Shares;
(ii) Peregrine and Buyers shall each deliver all
documents required to be delivered pursuant to Articles V and VI.
(b) Immediately prior to or concurrently with the
completion of the actions described in subsection (a) above, Peregrine and
Buyers shall enter into and consummate the transactions contemplated by the
Note Agreement and shall enter into the Registration Rights Agreement.
All instruments and documents executed and delivered to Buyers
pursuant hereto shall be in form and substance, and shall be executed in a
manner, reasonably satisfactory to Buyers. All instruments and documents
executed and delivered to Peregrine pursuant hereto shall be in form and
substance, and shall be executed in a manner, reasonably satisfactory to
Peregrine.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PEREGRINE
Peregrine hereby represents and warrants only to Buyers with
respect to this purchase as follows:
4.1 Organization of Peregrine. Peregrine is a real
estate investment trust duly organized, validly existing and in good standing
under the laws of the State of California and has full power and authority to
conduct its business as it is presently being conducted and to own, lease and
operate its properties and assets. Peregrine is duly qualified or otherwise
authorized as a foreign entity to conduct the business conducted by it and is
in good standing in each jurisdiction in which such qualification or
authorization is necessary under the applicable law and where the failure to be
so qualified or otherwise authorized would have a Material Adverse Effect on
Peregrine and its Subsidiaries, taken as a whole. A copy of the Restated
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Declaration of Trust, and a copy of the Bylaws, attached hereto as Exhibits C
and D, respectively, are and will be accurate and complete as of the date
hereof.
4.2 Capital Stock. As of the Closing Date the
authorized capital stock of Peregrine consists of Fifty Million
(50,000,000) shares of Common Stock, not more than Five Million (5,000,000) of
which will be issued and outstanding on the Closing Date and Twenty-Five
Million (25,000,000) shares of Preferred Stock, no shares of which are issued
and outstanding, and no shares of any other class or series of capital stock
are authorized, issued or outstanding. All of the outstanding shares of the
Common Stock have been duly and validly authorized and issued, are fully paid
and non-assessable and were issued pursuant to the Plan, and within the
limitations contained in, appropriate and effective Permits of each
governmental authority from whom any Permit was required by law. Except as
provided in the Plan, other than this Agreement there are no subscriptions,
options, warrants, calls, commitments, preemptive rights or other rights of any
kind outstanding for the purchase of, nor any securities convertible into or
exchangeable for, any securities of Peregrine. Upon consummation of the
transactions contemplated by this Agreement the Preferred Shares acquired by
Buyers from Peregrine will be duly authorized and validly issued, fully paid
and non-assessable and not subject to any preemptive or similar rights. The
Conversion Stock, when issued, will be duly authorized and validly issued,
fully paid, and non-assessable, and not subject to any preemptive or similar
rights. The Conversion Stock has been reserved for issuance upon the
conversion of the Preferred Shares in an amount sufficient to permit the
conversion of all the Preferred Shares.
4.3 Authorization. Peregrine has all necessary power and
authority to enter into this Agreement and has taken all action necessary to
consummate the transactions contemplated hereby and to perform its obligations
hereunder. No other corporate proceedings on the part of Peregrine are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Peregrine and is a
legal, valid and binding obligation of Peregrine, enforceable against Peregrine
in accordance with its terms.
4.4 No Conflict or Violation. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated by this Agreement will (i) result in a violation of or a conflict
with any provision of the Declaration of Trust or other organizational document
of Peregrine or any Subsidiary, (ii) result in a breach of, or a default under,
any term or provision of any contract, agreement, indebtedness, lease,
Encumbrance, commitment, license, franchise, Permit, authorization or
concession to which Peregrine or any Subsidiary
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is a party or is subject or by which any Assets of Peregrine or its
Subsidiaries are bound, which breach or default is reasonably likely to have a
Material Adverse Effect on Peregrine and its Subsidiaries, taken as a whole or
interfere in any material way with their respective abilities to consummate the
transactions contemplated by this Agreement, (iii) result in a violation by
Peregrine or any Subsidiary of any statute, rule, regulation, ordinance, code,
order, judgment, writ, injunction, decree or award, (iv) result in the
imposition of any material Encumbrance, restriction or charge on the business
of Peregrine or any Subsidiary or on any Assets of Peregrine or its
Subsidiaries except pursuant to the Note Purchase Agreement, (v) give rise to
any right of termination, cancellation, acceleration, alteration, modification
or amendment under any contract or other agreement to which any Subsidiary or
Peregrine is a party or by or to which they or any of their Assets or
properties may be bound or subject, the effect of which would have a Material
Adverse Effect on Peregrine and its Subsidiaries, taken as a whole, (vi)
result in the breach of any of the terms or conditions of, constitute a
default under, or otherwise cause any impairment of, any material Permit or
(vii) give rise to any right involving the issuance of securities by Peregrine
or any Subsidiary other than the Preferred Shares.
4.5 Consents and Approvals. No consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority, or any other person or entity, is required to be made
or obtained by Peregrine or any Subsidiary on or prior to the Closing Date in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYERS
Each Buyer hereby severally represents and warrants only to
the Company with respect to this purchase as follows:
5.1 Sophistication. Buyer is experienced in making
investments of this type and has such knowledge and background in financial and
business matters that it is capable of evaluating the merits and risks of this
investment and protecting its own interests.
5.2 Rule 144. Buyer acknowledges that, because they have
not been registered under the Securities Act, the Preferred Shares (and the
Conversion Stock into which the Shares are convertible) Buyer is purchasing
must be held indefinitely unless subsequently registered under the Securities
Act or an exemption from such registration is available. Buyer is aware of the
provisions of Rule 144 promulgated under the Securities Act that permit limited
resale of shares purchased in a private placement
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subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the shares, the availability of
certain current public information about the Company, the resale occurring not
less than two years after a party has purchased and paid for the security to be
sold, the sale being through a "broker's transaction" or in transactions
directly with a "market maker" (as provided by Rule 144(f)), and the number of
shares being sold during any three-month period not exceeding specified
limitations (unless the sale is within the requirements of Rule 144(k)).
5.3 No Public Market. Buyer understands that no public
market now exists for any of the securities issued by the Company and that it
is uncertain whether a public market will ever exist for the Preferred Shares
or for the Conversion Stock into which the Preferred Shares are convertible.
5.4 Access to Data. Buyer has had an opportunity to
discuss the Company's business, management, and financial affairs with the
Company's management and to obtain any additional information necessary to
verify the accuracy of the information given to Buyer.
5.5 Authority. If Buyer is a corporation, trust, or any
other entity, (i) it is authorized and has full right and power to purchase the
Preferred Shares, and (ii) the person signing this Agreement and the
Registration Rights Agreement and any other instrument executed and delivered
hereby on behalf of such entity has been duly authorized by such entity and has
full power and authority to do so. Such entity has not been formed for the
specific purpose of acquiring the Preferred Shares.
5.6 Residence. The residence or principal place of
business set forth on the Schedule of Buyers is Buyer's true and correct
residence or principal place of business, is the only jurisdiction in which an
offer to sell the Shares was made to Purchaser.
ARTICLE VI
CONDITIONS TO PEREGRINE'S OBLIGATIONS
The obligation of Peregrine to consummate the transactions
contemplated hereby on the Closing Date is subject to the satisfaction or
waiver, in the discretion of Peregrine, on or prior to the Closing Date, of
each of the following conditions:
6.1 Representations, Warranties and Covenants. All
representations and warranties of each Buyer contained in this Agreement shall
be true and correct in all material respects at and as of the Closing Date as
if such representations and warranties were made at and as of the Closing Date
and Buyers
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shall have performed in all material respects all agreements and
covenants required hereby to be performed by them prior to or at the Closing
Date.
6.2 Consents. All consents, approvals, Permits and
waivers from governmental authorities and other parties necessary to permit
Peregrine to consummate the transactions contemplated hereby shall have been
obtained, unless the failure to obtain any such consent, approval, Permit or
waiver would not have a Material Adverse Effect upon Peregrine and its
Subsidiaries, taken as a whole.
6.3 Note Agreement. Peregrine and Buyers shall have
entered into the Note Agreement and the transactions contemplated thereby shall
have been consummated.
6.4 Note Agreement and Registration Rights Agreement.
Peregrine and Buyers shall have entered into the Note Agreement and the
transactions contemplated thereby shall have been consummated, and Peregrine
and Buyers shall have entered into the Registration Rights Agreement.
6.5 Declaration of Trust. The Declaration of Trust shall
not have been amended, modified or supplemented in any respect from the
Declaration of Trust attached hereto as Exhibit C.
ARTICLE VII
CONDITIONS TO BUYERS' OBLIGATIONS
The obligation of each Buyer to consummate the transactions
contemplated hereby is subject to the satisfaction or waiver, in the discretion
of each Buyer, on or prior to the Closing Date, of each of the following
conditions:
7.1 Representations, Warranties and Covenants. All
representations and warranties of Peregrine contained in this Agreement shall
be true and correct in all material respects at and as of the Closing Date as
if such representations and warranties were made at and as of the Closing Date,
and Peregrine shall have performed in all material respects all agreements and
covenants required hereby to be performed prior to or at the Closing Date.
There shall be delivered to each Buyer a certificate (signed by the President
and the Secretary of Peregrine) to the foregoing effect.
7.2 Note Agreement and Registration Rights Agreement.
Peregrine and Buyers shall have entered into the Note Agreement and the
transactions contemplated thereby shall have been consummated, and Peregrine
and Buyers shall have entered into the Registration Rights Agreement.
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7.3 Declaration of Trust. The Declaration of Trust shall
not have been amended, modified or supplemented in any respect from the
Declaration of Trust attached hereto as Exhibit C.
7.4 Consents. All consents, approvals, permits and
waivers from governmental authorities and other parties necessary to permit
Peregrine to consummate the transactions contemplated hereby or necessary to
avoid a breach of, default under or termination of any contract or Permit of
Peregrine or any Subsidiary shall have been obtained, unless the failure to
obtain any such consent, approval, Permit or waiver would not have a Material
Adverse Effect upon Peregrine and its Subsidiaries, taken as a whole, or Buyer.
7.5 Opinion of Counsel. Peregrine shall have delivered
to Buyers an opinion or opinions of counsel for Peregrine reasonably acceptable
to Buyers, in form and substance reasonably satisfactory to Buyers, to the
effect that (but subject to customary assumptions and limitations):
(a) Peregrine has been duly organized and is validly
existing and in good standing under the laws of the State of California with
the power and authority to enter into this Agreement and perform its
obligations hereunder and, to such counsel's best knowledge to carry on its
business as now conducted and to own, lease and operate its properties;
(b) The execution, delivery and performance of this
Agreement have been duly authorized by all necessary action of Peregrine, and
this Agreement has been duly executed and delivered by Peregrine;
(c) This Agreement constitutes the valid and binding
obligation of Peregrine, enforceable against it in accordance with its terms,
except as limited by (i) the effect of bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights or remedies of creditors, (ii) the effect of general
principles of equity, whether enforcement is considered in a proceeding in
equity or at law and the discretion of the court before which any proceeding
therefor may be brought, and (iii) other customary exceptions;
(d) The authorized capital stock of Peregrine consists
of Fifty Million (50,000,000) shares of Common Stock, and Twenty-Five Million
(25,000,000) shares of Preferred Stock, and no shares of any other class
or series of capital stock are authorized, issued or outstanding. All
of the outstanding shares of the Common Stock have been duly authorized and
validly issued, and are fully paid and non-assessable and not subject to any
preemptive or similar rights (such opinion to specify the number of shares of
Common
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Stock issued and outstanding on the date thereof) will not exceed Five Million
(5,000,000);
(e) The Preferred Stock has the rights and preferences
specified in the Declaration of Trust, and the Preferred Shares are duly
authorized, validly issued, fully paid and non-assessable and not subject to
any preemptive or similar rights, and the stock certificates representing the
Preferred Shares to be sold to Buyer on the Closing Date have been duly
executed by the authorized officers of Peregrine and delivered to Buyers or
their nominees as provided in this Agreement;
(f) The shares of Common Stock initially issuable upon
conversion of the Preferred Shares have been duly authorized and reserved for
issuance and, when issued upon such conversion, will be duly authorized,
validly issued, fully paid and non-assessable and not subject to any preemptive
or similar rights;
(g) The execution and performance of this Agreement by
Peregrine will not violate or result in a failure to comply with any statute,
law, ordinance, regulation, rule or order of any federal or California
government or any other governmental department or agency, or any judgment,
decree, injunction, writ or order applicable to the business or operations of
Peregrine;
(h) Neither the execution and delivery of this Agreement
by Peregrine nor the consummation of the transactions contemplated hereby will
(i) violate the Declaration of Trust or any other organizational document of
Peregrine, (ii) to the best knowledge of such counsel, result in the breach of,
a default under or give rise to any right of termination, cancellation,
acceleration, alteration, modification or amendment under, any material
agreement or commitment to which Peregrine is a party and which is identified
to such counsel by Peregrine as a material agreement or commitment, (iii) to
the best knowledge of such counsel, require any consents, approvals,
authorizations, registrations, declarations or filings by Peregrine under any
federal or California statute, rule or regulation applicable to Peregrine,
except for such consents, approvals, authorizations, registrations,
declarations or filings as have been obtained or made prior to the Closing Date
or (iv) to the best knowledge of such counsel, give rise to any right involving
the issuance of securities by Peregrine or any Subsidiary other than the
Preferred Shares;
(i) The offer and sale of the Preferred Shares to Buyer
by Peregrine pursuant to the Agreement will not necessitate registration under
the Securities Act; and
(j) The offer and sale of the Preferred Shares to Buyers
by Peregrine pursuant to the Agreement does not require registration,
qualification or other action under any state
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securities or blue sky laws, other than action which has been taken.
7.6 Certificates. Peregrine shall furnish Buyers with
such certificates of the Chief Executive Officer and the Secretary of Peregrine
and others to evidence compliance with the conditions set forth in this Article
VII as may be reasonably requested by any Buyer.
7.7 Sales to All Buyers. The sales of Preferred Shares
provided for herein shall have taken place to all Buyers contemporaneously.
ARTICLE VIII
ACTIONS BY Peregrine
AND BUYERS AFTER THE CLOSING
8.1 Trustees' and Officers' Liability Insurance. For so
long as any shares of Preferred Stock purchased hereunder are outstanding,
Peregrine shall use its best efforts to maintain in full force and effect
Peregrine's existing trustees' and officers' liability insurance policy (or
such other trustees' and officers' liability policy on terms no less favorable
than those of the existing policy in terms of coverage and amounts) covering
the trustees and officers of Peregrine with respect to claims made under the
policy during the policy period.
8.2 Declaration of Trust. Peregrine will maintain in
effect the provisions in its Declaration of Trust which provide for
indemnification and limitation of personal liability of Peregrine's officers
and trustees.
8.3 Further Assurances. On and after the Closing Date,
Peregrine and Buyers will take all appropriate action and execute all
documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the provisions hereof.
8.4 Selection of Independent Public Accountants. From
and after the Closing Date Peregrine shall retain as its independent public
accountants an independent public accounting firm of nationally recognized
standing.
8.5 Payment of Taxes; Existence and Licenses; Maintenance
of Assets. Peregrine will:
(a) pay and discharge promptly, or cause to be paid and
discharged promptly, when due and payable, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or upon any
of its Assets or upon any part
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therereof, any of which give rise to liens, charges or encumbrances
attaching to any material property of Peregrine or any of its Subsidiaries, as
well as all claims of any kind (including claims for labor, materials and
supplies) which, if unpaid, might by law become a lien, charge or encumbrance
upon its Assets; provided, however, that Peregrine shall not be required to
pay, or to cause any Subsidiary to pay, any tax, assessment, charge, levy or
claim if the amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings and if Peregrine or such
Subsidiary shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting principles) deemed by Peregrine
adequate with respect thereto;
(b) do or cause to be done all things necessary to
preserve and keep in full force and effect its existence, and all of its
rights, franchises, licenses and permits; provided, however, that nothing in
this Subsection (b) shall (i) prevent the abandonment or termination of
Peregrine's or any Subsidiary's authorization to do business in any foreign
state or jurisdiction, if, in the opinion of Peregrine or its Board of Trustees
(in the latter case evidenced by a duly adopted resolution), such abandonment
or termination is in the best interest of Peregrine or such Subsidiary and not
disadvantageous to the holders of the Securities or the shares of Common Stock
issued upon conversion of the Preferred Shares, or (ii) require compliance with
any law so long as the validity or applicability thereof shall be disputed or
contested in good faith; and
(c) maintain and keep, or cause to be maintained and
kept, its material Assets in good repair, working order and condition, and from
time to time make, or cause to be made, all repairs, renewals and replacements
which, in the opinion of Peregrine or its Board of Trustees, are necessary and
proper so that the business carried on in connection therewith may be properly
and advantageously conducted at all times; provided, however, that nothing in
this Subsection (c) shall prevent Peregrine or any Subsidiary from selling or
otherwise disposing of any Assets whenever in the good faith judgment of
Peregrine's management such Assets are obsolete, worn out, without economic
value, or unnecessary for the conduct of the business of Peregrine or such
Subsidiary.
8.6 Insurance. Peregrine will, and, except as otherwise
provided herein, will cause each Subsidiary to keep or cause to be kept
insured, with companies that Peregrine believes to be financially sound and
reputable, all of its insurable properties or properties in which it has an
insurable interest against such risks and in such amounts and with such
deductibles as customarily are maintained by other business entities operating
similar businesses.
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8.7 Payment of Indebtedness; Compliance with Contracts,
Leases, Etc.; Purchase of Stock; Other Restrictions. Peregrine will:
(a) pay or cause to be paid the principal of, and the
interest and premium, if any, on, all Indebtedness heretofore or hereafter
incurred or assumed by Peregrine when and as the same shall become due and
payable where the failure to do so is likely to have a Material Adverse Effect,
unless such Indebtedness shall be renewed or extended, in which case, such
payments shall be made in accordance with the terms of such renewal or
extension;
(b) faithfully observe, perform and discharge in all
material respects all the covenants, conditions and obligations which are
imposed on it by any and all indentures, agreements, or other instruments
securing or evidencing Indebtedness or pursuant to which Indebtedness is issued
when failure to do so is likely to have a Material Adverse Effect, and not
permit the occurrence or continuance of any act or omission which is or under
the provisions thereof may be declared to be a default thereunder and where
such default is likely to have a Material Adverse Effect, unless such default
(other than default in payment of principal or interest) or the right to
declare a default on account of such act or omission is waived pursuant to the
provisions thereof; neither Peregrine nor any Subsidiary shall be required to
make any payment or to take any other action by reason of Subsection (a) or (b)
at any time while it shall be currently contesting in good faith by appropriate
proceedings its obligations to make such payment or to take such action, if
Peregrine shall have set aside on its books reserves (segregated or classified
to the extent required by generally accepted accounting principles) deemed by
it adequate with respect thereto; and
(c) not violate any provision of its Declaration of
Trust, as amended, or any material provision of any judgment, writ, decree,
order, statute, rule or governmental regulation or approval applicable to
Peregrine or any material provision of any contract, agreement, indenture,
mortgage, lien, lease, sublease or arbitration award to which Peregrine is a
party, by which it is bound or to which any of its Property is subject where
the failure to do any of the foregoing is likely to have a Material Adverse
Effect.
8.8 Financial Statements; Notices. Peregrine covenants
that it will deliver to each Significant Holder:
(a) as soon as practicable and in any event within 35
days after the end of each fiscal month, unconsolidated statements of income of
Peregrine for such month, setting forth in comparative form figures for the
corresponding month in the preceding fiscal year, all in reasonable detail and
reasonably satisfactory in form to such Significant Holder;
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<PAGE> 20
(b) as soon as practicable and in any event within 45
days after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, consolidated statements of income, stockholders'
equity and cash flows of Peregrine and its Subsidiaries for the period from the
beginning of the current fiscal year to the end of such quarterly period, and a
consolidated balance sheet of Peregrine and its Subsidiaries as at the end of
such quarterly period, setting forth in each case in comparative form figures
for the corresponding period in the preceding fiscal year, all in reasonable
detail and reasonably satisfactory in form to Buyer and certified by the
principal accounting officer or controller, or their equivalent, of Peregrine,
subject to changes resulting from year-end adjustments; provided, however, that
delivery pursuant to subsection (e) below of copies of the Quarterly Report on
Form 10-Q of Peregrine for such quarterly period filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of this
subsection (b);
(c) as soon as practicable and in any event within 90
days after the end of each fiscal year, consolidated statements of income and
cash flows and a consolidated statement of stockholders' equity of Peregrine
and its Subsidiaries for such year, and a consolidated balance sheet of
Peregrine and its Subsidiaries as at the end of such year, setting forth in
each case in comparative form corresponding consolidated figures from the
preceding annual audit, all in reasonable detail and satisfactory in form to
such Significant Holder and, as to the consolidated statements, reported on by
independent public accountants of recognized national standing selected by
Peregrine whose report shall be without limitation as to the scope of the audit
and satisfactory in substance to such Significant Holder and, as to the
consolidating statements, certified by the principal accounting officer or
controller, or their equivalent, of Peregrine; provided, however, that delivery
pursuant to subsection (d) below of copies of the Annual Report on Form 10-K of
Peregrine for such fiscal year filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this subsection (c);
(d) promptly upon transmission thereof, copies of all
such financial statements, proxy statements, notices and reports as it shall
send to its public stockholders and copies of all registration statements
(without exhibits) and all reports which it files with the SEC or with any
domestic securities exchange on which any of its securities are listed, and
copies of all press releases and other statements made available to the public
concerning material developments in the business of Peregrine and its
Subsidiaries;
(e) promptly upon receipt thereof, a copy of each other
report submitted to Peregrine or any Subsidiary by independent accountants in
connection with any annual, interim or
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<PAGE> 21
special audit made by them of the books and records of Peregrine or any
Subsidiary; and
(f) prompt notice of:
(i) any investigation by the SEC, the Internal
Revenue Service, or the United States Department of Justice in
connection with which Peregrine or any Subsidiary is identified as an
object of such investigation;
(ii) any complaint or proceeding instituted against
Peregrine or any Subsidiary by the SEC, the Internal Revenue Service,
or the United States Department of Justice;
(iii) any investigation of, or complaint or
proceeding against, Peregrine or any Subsidiary instituted by any
other federal agency or by any state or local regulatory agency,
which, if concluded adversely to Peregrine or such Subsidiary, could
have a Material Adverse Effect on the business or Property of
Peregrine or of such Subsidiary; and
(iv) any other action at law or suit in equity in
any court or any proceeding before any regulatory or administrative
body, involving a claim or claims against Peregrine or any Subsidiary
which, if concluded adversely to Peregrine or any Subsidiary, could
give rise to damages in excess of $1,000,000 in the aggregate or could
otherwise have a Material Adverse Effect on the business or property
of Peregrine or such Subsidiary.
(g) with reasonable promptness, such other financial
and/or operating data as such Significant Holder may reasonably request.
8.9 Discussion with Officers and Executives. Peregrine
will permit any Significant Holder and any Person designated from time to time
by such Significant Holder in writing, at the expense of such Significant
Holder, upon notice to Peregrine to visit and inspect any of the properties
owned by Peregrine and its Subsidiaries, to examine the books and financial
records of Peregrine and make copies thereof or extracts therefrom and to
discuss the affairs, finances and accounts of Peregrine with the principal
officers and trustees of Peregrine and its independent public accountants, all
at such reasonable times and as often as such Significant Holder may reasonably
request.
8.10 Blue Sky. From and after the Closing Date, so long as
any Preferred Shares are outstanding, if at any time a holder of Preferred
Shares converts any Preferred Shares, in whole or in part, the issuance of
Common Stock upon such conversion or exercise may not be lawfully made without
the
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<PAGE> 22
registration or qualification of such Common Stock under the securities or
blue sky laws of any jurisdiction, Peregrine shall promptly use its best
efforts to effect such registration or qualification and such action shall not
count as a registration under Section 2 of the Registration Rights Agreement.
8.11 Tax Treatment of Dividends.
(a) Peregrine will not take any action which could
reasonably be expected by it (i) to cause the Preferred Shares to be treated as
indebtedness for purposes of the Code pursuant to Section 385 of the Code or
any successor provision of the Code and the regulations promulgated thereunder,
or (ii) to cause the Dividends Received Deduction to cease to be available, in
whole or in part, with respect to dividends on the Preferred Shares received by
any corporate holder thereof.
(b) Without limiting the generality of the foregoing,
Peregrine covenants and agrees that (i) it will not claim a deduction for
dividends paid on the Preferred Shares whether as interest or otherwise, in any
federal income tax return, claim for refund of federal income tax or other
submission to the Internal Revenue Service, and (ii) unless required to do so
by GAAP, it will not treat the Preferred Shares other than as equity capital or
the dividends paid thereon other than as dividends paid on capital in any
report to stockholders or any governmental body having jurisdiction over
Peregrine or otherwise.
(c) Peregrine will cooperate with and support any
corporate holder of any Preferred Shares in any litigation, appeal or other
proceeding challenging or contesting any ruling, technical advice, finding or
determination of the Internal Revenue Service that the Preferred Shares are to
be treated as indebtedness for purposes of the Code or that dividends paid on
the Preferred Shares are not eligible for the Dividends Received Deduction.
The cooperation and support required of Peregrine by the preceding sentence
shall be at the expense of such corporate holder, except that Peregrine will
pay all fees and expenses (whether incurred by it or a corporate holder) in
connection with any such submission, litigation, appeal or other proceeding
necessitated or caused by a breach by Peregrine of its covenants contained in
this Section 7.11.
8.12 Transactions with Affiliates. Peregrine and its
Subsidiaries will not enter into any transactions with any Affiliate on terms
that are less favorable to Peregrine or such Subsidiary than those that would
be obtainable at the time in an ordinary course transaction with an
unaffiliated entity or person.
8.13 Specific Performance as Remedy. If Peregrine, or any
Subsidiary or Affiliate, fails to perform any act or take any action required
pursuant to this Article VIII, Buyers hereby
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<PAGE> 23
waive any rights or remedies which may otherwise be available to them, at law
or in equity, other than (a) damage claims arising under Section 8.11 and (b)
specific performance, which shall generally be available under this Article
VIII.
ARTICLE IX
INDEMNIFICATION
9.1 Survival of Representations, Etc. All statements
contained herein or in any certificate or instrument of conveyance delivered by
or on behalf of any party pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by such party hereunder. The representations and warranties of
Peregrine contained herein shall survive the Closing Date.
9.2 Indemnification. Peregrine shall indemnify and hold
harmless each Buyer and its Affiliates, directors, officers, advisors, agents
and employees (the "Indemnified Parties") to the fullest extent lawful, from
and against any and all losses, damages, claims, liabilities, actions and
expenses (including without limitation, costs of investigating, preparing or
defending any such claim or action and reasonable legal fees and expenses)
(collectively "Losses") arising out of or in connection with the breach of any
warranty, representation, covenant or agreement of Peregrine contained in this
Agreement, and including without limitation, any such Losses arising out of
transactions entered into or events occurring prior to the Closing; provided,
however, that no Indemnified Party shall be entitled to indemnification by
Peregrine hereunder with respect to any Losses arising solely from the bad
faith or gross negligence (as finally determined by a court of competent
jurisdiction) of such Indemnified Party or any affiliate director, officer,
agent, or employee of such Indemnified Party. The term "Losses" as used in
this Section 8.2 is not limited to matters asserted by third parties against an
Indemnified Party, but includes Losses incurred or sustained by an Indemnified
Party in the absence of third party claims.
9.3 Indemnification Procedures.
(a) If any action or proceeding shall be brought or
asserted against any Indemnified Party in respect of which indemnity may be
sought from Peregrine, such Indemnified Party shall promptly notify Peregrine
in writing and Peregrine shall assume the defense thereof, including the
employment of counsel satisfactory to the Indemnified Party and the payment of
expenses as provided in Section 8.2. The Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of
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<PAGE> 24
such counsel shall be borne by such Indemnified Party, unless (i) Peregrine
has agreed in writing to pay such fees and expenses, (ii) Peregrine
shall have failed promptly to assume the defense of such action or proceeding
or shall have failed to employ counsel reasonably satisfactory to such
Indemnified Party in any such action or proceeding, or (iii) such Indemnified
Party shall have reasonably concluded that there are defenses available to it
which are different from or additional to those available to Peregrine which,
if Peregrine and the Indemnified Party were to be represented by the same
counsel, would constitute a conflict of interest for such counsel or materially
prejudice the prosecution of the defenses available to such Indemnified Party
(in which case if such Indemnified Party notifies Peregrine in writing that it
elects to employ separate counsel at the expense of Peregrine, Peregrine shall
not have the right to assume the defense of such action or proceeding on behalf
of such Indemnified Party, it being agreed to and understood that Peregrine
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together, if appropriate, with one firm of local counsel per jurisdiction) at
any time for such Indemnified Party, which counsel or firm shall be designated
in writing by such Indemnified Party or by Buyer if there is more than one
Indemnified Party, provided that in the case of (iii) above, Peregrine shall
only be liable for the fees and expenses of separate counsel with respect to
such different or additional defenses and such Indemnified Party shall instruct
such separate counsel to cooperate with Peregrine's counsel in order to reduce
the fees and expenses for which Peregrine is liable). Peregrine shall not be
liable for any settlement of such action or proceeding, effected without its
prior written consent, which consent shall not be unreasonably withheld, but if
settled with its written consent, or if there be a final judgment for the
plaintiff in any such action or proceeding, Peregrine will indemnify and hold
harmless any such Indemnified Party from and against any Losses (to the extent
provided for in this Article VIII) by reason of such settlement or judgment.
ARTICLE X
TRANSFER OF SECURITIES
The Preferred Shares and the Conversion Stock shall not be
transferable except upon the conditions specified in this Article X, which
conditions are intended to insure compliance with the provisions of the
Securities Act and state securities laws in respect of the transfer of any such
securities.
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<PAGE> 25
10.1 Restrictive Legends.
(a) Unless and until otherwise permitted by this Article,
each certificate for Preferred Shares or Conversion Stock issued to a Buyer or
its nominee, or to any subsequent transferee of such certificate, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
thus may not be offered for sale, sold, transferred or
otherwise disposed of unless registered under the Securities
Act of 1933, as amended, or unless an exemption from such
registration is available. Further, such transfer is subject
to the conditions specified in that certain Preferred
Stock Purchase Agreement by and among the Peregrine Real
Estate Trust and the Buyers named therein, pursuant to which
such shares were issued and sold or otherwise transferred by
The Peregrine Real Estate Trust f/k/a Commonwealth Equity
Trust ("Peregrine"), a copy of which Agreement is on file and
may be inspected at the principal office of Peregrine. A copy
of such Agreement will be furnished by Peregrine to the holder
hereof upon request and without charge. Under certain
circumstances specified in such Agreement, Peregrine has
agreed to deliver to the holder hereof a new certificate, not
bearing this legend, for all or part of the number of shares
evidenced hereby, as the case may be, registered in the name
of such holder or designated nominee."
(b) Each certificate for Preferred Shares shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"A statement of the relative rights and preferences of
Peregrine's Common Shares and its Preferred Shares
will be furnished by Peregrine to the holder hereof upon
request and without charge."
(c) Peregrine may order its transfer agents for Preferred
Shares and Conversion Stock to stop the transfer of any shares of Preferred
Stock or Conversion Stock bearing the legend set forth in Subsection (a) of
this Section 10.1 until the conditions of this Article X with respect to the
transfer of such shares have been satisfied.
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<PAGE> 26
10.2 Notice of Proposed Transfer. If, prior to any transfer
or sale of any Preferred Shares or Conversion Stock, the holder desiring to
effect such transfer or sale shall deliver a written notice to Peregrine
describing briefly the manner of such transfer or sale and a written opinion of
counsel for such holder (provided that such counsel, and the form and substance
of such opinion, are reasonably satisfactory to Peregrine) to the effect that
such transfer or sale may be effected without the registration of such
securities under the Securities Act, Peregrine shall thereupon permit or cause
its transfer agent (if any) to permit such transfer or sale to be effected;
provided, however, that if in such written notice the transferring holder
represents and warrants to Peregrine that the transfer or sale is to a
purchaser or transferee whom the transferring holder knows or reasonably
believes to be a "qualified institutional buyer," as that term is defined in
Rule 144A promulgated by the SEC under the Securities Act ("Rule 144A"), no
opinion shall be required.
10.3 Termination of Restrictions.
(a) Notwithstanding the foregoing provisions of this Article
IX, the restrictions imposed by this Article IX upon the transferability of
Preferred Shares and Conversion Stock shall terminate as to any particular
share of Preferred Stock or Conversion Stock, when (1) such security shall
have been effectively registered under the Securities Act and sold by the
holder thereof in accordance with such registration, or (2) a written opinion
to the effect that such restrictions are no longer required or necessary under
any federal or state securities law or regulation have been received from
counsel for the holder thereof (who may be inside counsel in the case of any
institutional holder) or counsel for Peregrine, or (3) such security shall
have been sold without registration under the Securities Act in compliance with
Rule 144 promulgated by the SEC under the Securities Act ("Rule 144") or Rule
144A, or (4) Peregrine is reasonably satisfied that the holder of such security
shall, in accordance with the terms of Subsection (k) of Rule 144, be entitled
to sell such security pursuant to such Subsection, or (5) a letter or an order
shall have been issued to the holder thereof by the staff of the SEC or the SEC
stating that no enforcement action shall be recommended by such staff or taken
by such commission, as the case may be, if such security is transferred without
registration under the Securities Act in accordance with the conditions set
forth in such letter or order and such letter or order specifies that no
subsequent restrictions on transfer are required.
(b) Whenever the restrictions imposed by this Article IX
shall terminate, as hereinabove provided, the holder of any particular share of
Preferred Stock or Conversion Stock then outstanding as to which such
restrictions shall have terminated shall be entitled to receive from Peregrine,
without expense to such holder, one or more new certificates for
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<PAGE> 27
Preferred Stock or Conversion Stock not bearing the restrictive legend set
forth in Section 10.1(a) hereof.
10.4 Compliance with Rule 144 and Rule 144A. At the written
request of any holder of Preferred Shares or Conversion Stock who proposes to
sell Preferred Shares or Conversion Stock in compliance with Rule 144,
Peregrine shall furnish to such holder, within ten days after receipt of such
request, a written statement as to whether or not Peregrine is in compliance
with the filing requirements of the SEC as set forth in such Rule. For
purposes of effecting compliance with Rule 144A, in connection with any resales
of any shares of Preferred Stock or Conversion Stock that hereafter may be
effected pursuant to the provisions of Rule 144A, any holder of Preferred
Shares or Conversion Stock desiring to effect such resale and each prospective
institutional purchaser of such shares designated by such holder shall have the
right, at any time Peregrine is not subject to Section 13 or 15(d) of the
Exchange Act, to obtain from Peregrine, upon the written request of such holder
and at Peregrine's expense, the documents specified in Section (d)(4)(i) of
Rule 144A, as such rule may be amended from time to time.
10.5 Non-Applicability of Restrictions on Transfer.
Notwithstanding the provisions of Section 10.2 hereof, any record owner of
Preferred Shares or Conversion Stock may from time to time transfer all or part
of such record owner's Preferred Shares or Conversion Stock (i) to a nominee
identified in writing to Peregrine as being the nominee of or for such record
owner, and any nominee of or for a beneficial owner of Preferred Shares or
Conversion Stock identified in writing to Peregrine as being the nominee of or
for such beneficial owner may from time to time transfer all or part of the
Preferred Shares or Conversion Stock registered in the name of such nominee but
held as nominee on behalf of such beneficial owner, to such beneficial owner,
(ii) to an Affiliate, or (iii) if such record owner is a partnership or the
nominee of a partnership, to a partner, retired partner, or estate of a partner
or retired partner, of such partnership, so long as such transfer is in
accordance with the transferee's interest in such partnership and is without
consideration; provided, however, that each such transferee shall remain
subject to all restrictions on the transfer of securities herein contained.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to
any other party shall be in writing and delivered by hand-delivery, registered
first-class mail, telex, telecopier, or air courier guaranteeing overnight
delivery, at
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the address or to the telecopy number on Schedule 1 hereto or to
such other place as one party may designate as to itself by written notice to
the others.
All such notices, requests, instructions or other documents
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; four business days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged by addressee, if by telecopier transmission; and on the next
business day if timely delivered to an air courier guaranteeing overnight
delivery.
11.2 Choice of Law. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with the
internal laws of the State of California, without regard to the conflict of law
principles thereof, except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a party to or the
subject of this Agreement, and as to those matters the law of the jurisdiction
under which the respective entity derives its powers shall govern.
11.3 Entire Agreement; Amendments and Waivers. This
Agreement constitutes the entire agreement among the parties pertaining to the
subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties. Prior
to the completion of the Closing, no amendment, supplement, modification or
waiver of this Agreement shall be binding unless executed in a written
instrument by the party to be bound thereby; thereafter any such amendment,
supplement, modification or waiver shall require execution of a written
instrument by the beneficial holders of no less than a majority of the
Preferred Shares then outstanding and, if it is bound thereby, by Peregrine.
No waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
11.4 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.5 Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any other such instrument.
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11.6 Headings. The headings of the Articles and Sections
herein are inserted for convenience of reference only and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.
11.7 Attorney's Fees. If any party entitled to do so brings
an action to enforce the terms hereof or to declare rights hereunder, the
prevailing party in such action shall be entitled to an award of reasonable
costs of litigation, including attorneys' fees and related costs, to be paid by
the losing party in such action as may be determined by the court having
jurisdiction in such action. In addition to costs of litigation, if Buyers
incur costs in connection with any effort or action (whether or not litigation
is involved) to defend or enforce rights and remedies under this Agreement in
connection with a case commenced by or against Peregrine under the federal
bankruptcy or reorganization laws or similar laws under applicable state law,
Buyers shall be entitled to an award of reasonable costs and expenses,
including attorneys' fees, incurred in connection with such efforts or actions.
11.8 Parties in Interest. Except for Sections 8.1 and 8.2,
this Agreement shall be binding upon and inure solely to the benefit of each
party hereto and their transferees, successors and assigns, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement. Sections 8.1 and 8.2 shall inure to the benefit of
each of the directors and officers of Peregrine and its Subsidiaries at the
Closing Date as well as to the benefit of each party hereto and such directors
and officers shall have the right to enforce the obligations of Peregrine
thereunder. Sections 8.1 and 8.2 and the rights to enforce Sections 8.1 and
8.2 shall survive the Closing.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, or have caused this Agreement to be duly executed on their
respective behalf by their respective officers thereunto duly authorized, as of
the day and year first above written.
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THE PEREGRINE REAL ESTATE TRUST f/k/a
COMMONWEALTH EQUITY TRUST
Name:______________________________
Frank A. Morrow
Title: President, Chief Executive Officer
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Name: _________________________________
Title: _________________________________
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Name: _________________________________
John Mullman
Title: Vice President
PRUCO LIFE INSURANCE COMPANY
Name: _________________________________
Gary Trabka
Title: Managing Director
ORIX USA CORPORATION
Name: _________________________________
Title: _________________________________
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<PAGE> 31
WEYERHAEUSER COMPANY MASTER RETIREMENT TRUST
By: TCW Special Credits, Its Investment Manager
By: TCW Asset Management Co.,
By: _________________________________
Richard Masson
Managing Director
By: _________________________________
Name:
Title:
TCW SPECIAL CREDITS FUND IV
By: TCW Special Credits, Its General Partner
By: TCW Asset Management Co.
By: _________________________________
Richard Masson
Managing Director
By: _________________________________
Name:
Title:
TCW SPECIAL CREDITS PLUS FUND
By: TCW Special Credits, Its General Partner
By: TCW Asset Management Co.
By: _________________________________
Richard Masson
Managing Director
By: _________________________________
Name:
Title:
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<PAGE> 32
TCW SPECIAL CREDITS TRUST IV
By: Trust Company of the West, Trustee
By: _________________________________
Richard Masson
Managing Director
By: _________________________________
Name:
Title:
TCW SPECIAL CREDITS TRUST IVA
By: Trust Company of the West, Trustee
By: _________________________________
Richard Masson
Managing Director
By: _________________________________
Name:
Title:
276
<PAGE> 33
SCHEDULE 1
1. The Peregrine Real Estate Trust
1300 Ethan Way
Sacramento, California 95825
Attention: Frank A. Morrow
FAX: (916) 929-1122
<TABLE>
<CAPTION>
Shares
Buyers Purchased FEIN #
------ --------- ------
<S> <C> <C> <C>
2. The Prudential Insurance 913,782 22-1211670
Company of America
Prudential Specialized Finance Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4069
Attention: Sr. Managing Director
FAX: (201) 802-2662
3. The Prudential Insurance 958,721 22-1211670
Company of America
Prudential Specialized Finance Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4069
Attention: Sr. Managing Director
FAX: (201) 802-2662
2. PRUCO Life Insurance Company 1,123,502 22-1944557
c/o The Prudential Insurance Co.
Company of America
Prudential Specialized Finance Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102-4069
Attention: Sr. Managing Director
FAX: (201) 802-2662
5. Pacific Mutual Life Insurance 2,996,005 95-1079000
Company
Ronn C. Cornelius
700 Newport Beach
Newport Beach, California 92660
FAX: (714) 640-3199
6. Orix USA Corp. 449,401 13-3095268
Denise L. Getty
600 Wilshire Boulevard, Suite 1460
Los Angeles, California 90017
FAX: (213) 955-6530
7. Weyerhaeuser Company Master 432,773 13-6351459
Retirement Trust
c/o Trust Company of the West
Attention: Richard Masson
865 South Figueroa Street
Suite 1800
Los Angeles, California 90017
FAX: (213) 244-0549
</TABLE>
277
<PAGE> 34
<TABLE>
<S> <C> <C> <C>
8. TCW Special Credits Fund IV 1,394,490 95-4424460
Richard Masson
865 South Figueroa Street
Suite 1800
Los Angeles, California 90017
FAX: (213) 244-0549
9. TCW Special Credits Plus Fund 1,490,663 95-4424461
Richard Masson
865 South Figueroa Street
Suite 1800
Los Angeles, California 90017
FAX: (213) 244-0549
10. TCW Special Credits Trust IV 1,202,147 95-6955426
Richard Masson
865 South Figueroa Street
Suite 1800
Los Angeles, California 90017
FAX: (213) 244-0549
11. TCW Special Credits Trust IVA 288,516 95-6958283
Richard Masson
865 South Figueroa Street
Suite 1800
Los Angeles, California 90017
FAX: (213) 244-0549
</TABLE>
278
<PAGE> 1
EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
by and among
THE PEREGRINE REAL ESTATE TRUST
and
THE INVESTORS NAMED HEREIN
Dated as of OCTOBER 1, 1994
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of October 1, 1994
("Agreement"), by and among The Peregrine Real Estate Trust f/k/a Commonwealth
Equity Trust, a trust organized under the laws of the State of California
("Peregrine"), Pacific Mutual Life Insurance Company, The Prudential Insurance
Company of America, PRUCO Life Insurance Company, Orix USA Corporation,
Weyerhaeuser Company Master Retirement Trust, TCW Special Credits Fund IV, TCW
Special Credits Plus Fund, TCW Special Credits Trust IV and TCW Special Credits
Trust IVA (individually, an "Investor" and collectively, the "Investors")
RECITALS
(A) Peregrine incurred certain indebtedness to the Investors (or
their predecessors in interest) pursuant to the Old Note Agreement.
(B) On August 2, 1993, Peregrine filed a petition for relief under
chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
Eastern District of California, Case No. 93-26727-C11.
(C) Pursuant to the Plan of Reorganization of Peregrine, a portion
of the indebtedness of Peregrine to the Investors under the Old Note Agreement
is being satisfied in consideration of, among other things, the issuance of
Plan Common and Preferred to the Investors and the execution, delivery and
performance of this Agreement and that certain Preferred Stock Purchase
Agreement dated as of October 1, 1994 by and among Peregrine and each of the
Investors (the "Stock Purchase Agreement").
(D) As provided in the Plan of Reorganization, and as a condition
to the consummation of the transactions contemplated by the Stock Purchase
Agreement, Peregrine and the Investors have entered into this Agreement to
provide certain securities registration rights to the Investors.
AGREEMENTS
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. As used in this Agreement:
"Affiliate" shall mean any entity controlling, controlled by or under
common control with another entity. For the purposes of this definition,
"control" shall have the meaning presently specified for that word in Rule 405
promulgated by the Securities
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and Exchange Commission under the Securities Act. With respect to any person
who is a limited partnership, Affiliate shall also mean any general partner or
limited partner of such limited partnership, or any Person which is a general
partner in a general or limited partnership which is a general partner of such
limited partnership.
"Bankruptcy Code" shall mean Title 11 of the United States Code, as
amended from time to time, or any successor statute.
"Common" shall mean Peregrine's Common Stock, $.01 par value per
share, and any Stock into which such stock may hereafter be changed.
"Conversion Stock" means Common issued upon conversion of the
Preferred.
"Effective Date" shall mean the effective date of the Plan of
Reorganization as provided therein.
"Holders" shall mean the Persons who shall, from time to time, own of
record any Security. The term "Holder" shall mean any one of the Holders.
"Initial Public Offering" shall mean the initial firm commitment
underwritten public offering of Common by means of a Registration Statement
filed by Peregrine, which offering does not exclusively relate to the
securities under an employee stock option, bonus or other compensation plan,
and at a price of not less than $3 per share of Common (such amount to be
ratably adjusted to reflect any stock splits, subdivisions or combinations
affecting the Common) and yielding net proceeds to Peregrine of not less than
$20 million (including proceeds received by Peregrine upon exercise of any
over-allotment option by the underwriters).
"Investors" shall have the meaning set forth in the Recitals hereto.
"Old Note Agreement" shall mean that certain Amended and Restated Note
Agreement dated as of July 17, 1992 among Peregrine and the Investors (or their
predecessors in interest).
"Peregrine" shall have the meaning set forth in the Recitals hereto.
"Person" shall mean an individual, a corporation, a partnership, a
trust, an unincorporated organization or a governmental organization or any
agency or political subdivision thereof.
"Plan Common" shall mean the Common issued to the Investors pursuant
to the Plan of Reorganization.
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"Plan of Reorganization" shall mean the Third Amended Plan of
Reorganization of Peregrine under Chapter 11, Title 11 of the United States
Code, dated July 27, 1994 as confirmed by order of United States Bankruptcy
Judge Christopher Klein, dated August 8, 1994.
"Preferred" shall mean Peregrine's Preferred Stock, $.01 par value per
share, and any Stock into which such Stock may hereafter be changed other than
by the conversion of such Stock.
"Property" shall mean any kind of interest in any kind of property or
assets, whether real, personal or mixed, or tangible or intangible.
"Prospectus" shall mean any prospectus which is a part of a
Registration Statement, together with all amendments or supplements thereto.
"Public Offering" shall mean the offering of Securities by Peregrine,
the holders of such Securities, or both on an underwritten basis pursuant to a
Registration Statement.
"Registrable Stock" shall mean at any time, the shares of the then
outstanding Plan Common, the then outstanding Conversion Stock and the
Conversion Stock then issuable upon conversion of the then outstanding
Preferred owned by any Investor or any subsequent Holder of Registrable Stock
having rights hereunder pursuant to Section 10 hereof; provided, however, that
Registrable Stock shall not be deemed to include any shares after such shares
have been registered under the Securities Act and sold pursuant to such
registration or any shares sold, or eligible for sale, without registration
under the Securities Act in compliance with Rule 144, or pursuant to any other
exemption from registration under the Securities Act to a Person who is free to
resell such shares without registration or restriction under the Securities
Act.
"Registration Statement" shall mean any registration statement filed
with the Securities and Exchange Commission in accordance with the Securities
Act, together with all amendments or supplements thereto.
"Securities" shall mean any debt or equity securities of Peregrine,
whether now or hereafter authorized, and any instrument convertible into or
exchangeable for Securities or a Security. The term "Security" shall mean any
one of the Securities.
"Securities Act" shall mean the Securities Act of 1933, as amended
prior to or after the date of this Agreement, or any federal statute or
statutes which shall be enacted to take the place of such Act, together with
all rules and regulations promulgated thereunder.
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"Securities and Exchange Commission" shall mean the United States
Securities and Exchange Commission or any successor to the functions of such
agency.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended prior to or after the date of this Agreement, or any federal
statute or statutes which shall be enacted to take the place of such Act,
together with all rules and regulations promulgated thereunder.
"Seller" shall mean each Holder of Securities of Peregrine as to which
Securities Peregrine could be required to file a Registration Statement or
which Securities could be registered under the Securities Act at the request of
such Holder pursuant to any of the provisions of this Agreement.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participation in, corporate stock.
"Stock Purchase Agreement" shall have the meaning given such term in
the Recitals hereto.
2. Required Registrations.
(A) Subject to Section 2(B) below, upon the written request (made
not sooner than 180 days after the Effective Date) to register no less than 20%
of the shares of Plan Common or Conversion Stock, as the case may be, or, if
fewer than 20% of Plan Common or Conversion Stock, as the case may be, remains
Registrable Stock as of the date of such demand all such shares of Registrable
Stock under the Securities Act made at any time during the five year period
commencing on the Effective Date by Holders of not less than 20% of the then
existing shares of Plan Common and Holders of not less than 20% of the then
existing shares of Conversion Stock Peregrine will use its best efforts to
effect the registration of Registrable Stock under the Securities Act and the
registration or qualification thereof under all applicable state securities or
blue sky laws, but only to the extent provided for in the following provisions
of this Agreement. A request pursuant to this Section 2(A) shall state the
intended method of disposition of the Registrable Stock sought to be
registered. Whenever Peregrine shall, pursuant to this Section 2(A), be
requested to effect the registration of any Registrable Stock under the
Securities Act, Peregrine shall promptly give written notice of such proposed
registration to all Holders of Registrable Stock, stating that such Holders
have the right to request that any or all of the Registrable Stock owned by
them be included in such registration. Subject to the Marketing Restrictions
described in Section 9. below, Peregrine shall include in such registration
all Registrable Stock with respect to which Peregrine receives written requests
from the Holders thereof for inclusion therein (stating the intended method of
disposition of such Stock); and thereupon Peregrine
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will, as expeditiously as possible, use its best efforts to effect the
registration, under the Securities Act, of such Registrable Stock which
Peregrine has been requested to register for disposition by such Holders in
accordance with the intended method of disposition described in the requests of
such Holders, all to the extent requisite to permit such sale or other
disposition by such Holders of the Conversion Stock so registered.
(B) The foregoing registration rights of Holders of Registrable
Stock shall be deemed satisfied by Peregrine when two Registration Statements
respecting the Plan Common and two Registration Statements respecting the
Conversion Stock shall have been filed by Peregrine with and made effective by
the Securities and Exchange Commission under the Securities Act pursuant to
requests made pursuant to Section 2(A) and the offerings pursuant to each such
Registration Statement shall have been completed. The Holders of at least a
majority of the Registrable Stock included in a Registration Statement filed
pursuant to this Section 2 shall have the right to select the investment banker
or bankers who shall serve as the manager and/or co-managers for the offering
of Securities covered by such Registration Statement if the offering requested
is to be an underwritten offering.
(C) From and after the date, if any, that Peregrine becomes
eligible to use Form S-3 to register Common for sale by the Holders thereof
under the Securities Act, the Holder or Holders of Registrable Stock in
existence at such time having a fair market value of at least $1,000,000 (fair
market value per share to be equal to the reported closing bid price of the
Common on the date for which such price is reported last preceding the date of
the request) shall be entitled to require Peregrine to register Registrable
Stock pursuant to the provisions of Section 2(A) hereof for an unlimited number
of times, and Peregrine shall comply with each such request in accordance with
the terms of Section 2(A) hereof.
3. Incidental Registration.
If Peregrine at any time during the ten year period commencing on the
Effective Date proposes or is required to register any of its Securities under
the Securities Act or any applicable state securities or blue sky laws on a
form which permits inclusion of the Registrable Stock, it will each such time
give written notice to all Holders of then existing Registrable Stock of its
intention so to do. Upon the written request of any such Holder given within
30 days after receipt of any such notice, Peregrine will use its best efforts
to cause all Registrable Stock which such Holders shall have requested be
registered to be registered under the Securities Act and any applicable state
securities or blue sky laws all to the extent requisite to permit the sale or
other disposition by such Holders of the Registrable Stock so registered. No
registrations of
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Registrable Stock under this Section 3 shall relieve Peregrine of its
obligation to effect registrations under Section 2 hereof, or shall constitute
a registration request by any Holder of Registrable Stock under Section 2.
Peregrine shall have the right to select the investment banker or bankers who
shall serve as the manager and/or co-managers for all registrations of
offerings of Securities under this Section 3.
4. Registration Procedures.
Whenever Peregrine is required by the provisions of this Agreement to
use its best efforts to effect the registration of any Registrable Stock under
the Securities Act, Peregrine will:
(A) As expeditiously as possible and in any event not more than 90
days after the end of the period within which requests for registration may be
given to the Company, prepare and file with the Securities and Exchange
Commission a Registration Statement with respect to such Registrable Stock and
use its best efforts to cause such Registration Statement to become and remain
effective for a period of not less than nine months, provided that before
filing a Registration Statement or Prospectus or any amendments or supplements
thereto, Peregrine will furnish to counsel for the Holders of Registrable Stock
included in such Registration Statement copies of all such documents proposed
to be filed, which documents will be subject to the review of such counsel;
(B) As expeditiously as possible, prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
Registration Statement and the Prospectus used in connection therewith as may
be necessary to keep such Registration Statement effective for a period of not
less than nine months and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all Securities covered by such
Registration Statement during such period in accordance with the intended
method or methods of disposition by the Sellers thereof set forth in such
Registration Statement;
(C) furnish to each Seller such number of copies of such
Registration Statement, each amendment and supplement thereto, the Prospectus
included in the Registration Statement (including each preliminary Prospectus),
and such other documents, as such Seller may reasonably request in order to
facilitate the public sale or other disposition of the Securities owned by such
Seller;
(D) use every reasonable effort to register or qualify all the
Securities covered by such Registration Statement under such other securities
or blue sky laws of such jurisdictions as each Seller shall reasonably request,
and do any and all other acts and things which may be necessary under such
securities or blue sky laws to enable such Seller to consummate the public sale
or other disposition in such jurisdiction of the Securities owned by
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such Seller covered by such Registration Statement; provided, however, that
Peregrine shall not be required to (i) qualify to do business as a foreign
corporation in any jurisdiction wherein it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction, or (iii) consent to general service of process in any such
jurisdiction;
(E) use its best efforts to cause all Securities covered by such
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the Seller
or Sellers thereof to consummate the disposition of such Registrable
Securities;
(F) furnish to each Seller of Registrable Stock a signed
counterpart, addressed to such Seller (and the underwriters, if any) of
(x) an opinion of counsel for Peregrine, dated the effective
date of such Registration Statement (and, if such registration
includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), reasonably
satisfactory in form and substance to such Seller covering
substantially the same matters with respect to such
Registration Statement and the Prospectus included therein as
are customarily covered in opinions of issuer's counsel
delivered to the underwriters in underwritten public offerings
of securities and such other legal matters as such Seller or
Sellers may reasonably request, and
(y) the cold comfort letter referred to in Section 4(M) hereof;
(G) notify each Seller at any time when a Prospectus relating to
the Securities of such Seller covered by such Registration Statement is
required to be delivered under the Securities Act, of the happening of any
event as a result of which the Prospectus included in such Registration
Statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and at the request of
any such Seller, prepare a supplement or amendment to such Prospectus so that,
as thereafter delivered to the purchasers of the Securities covered by such
Registration Statement, such Prospectus will not contain an untrue statement of
a material fact or omit to state any fact necessary to make the statements
therein not misleading;
(H) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but not more
than eighteen
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months, beginning with the first full calendar month after the effective date
of such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act, and furnish to each Seller
at least five business days prior to the filing thereof a copy of such
Registration Statement or any Prospectus and any amendment or supplement to
such Registration Statement or Prospectus, and not file any thereof to which
any Seller shall have reasonably objected on the grounds that such document
does not comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;
(I) cause all such Securities covered by such Registration
Statement to be listed on each securities exchange on which Securities of the
same class are then listed;
(J) provide a transfer agent and registrar for Common not later
than the effective date of such Registration Statement;
(K) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as
the Holders of at least a majority of the Registrable Stock included in such
Registration Statement or underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Securities (including, without
limitation, effecting a stock split or a combination of shares);
(L) make available for inspection by any Seller, any underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney, accountant or other agent retained by any such Seller or
underwriter, all financial and other records, pertinent corporate documents and
properties of Peregrine, and cause Peregrine's officers, directors and
employees to supply all information reasonably requested by any such Seller,
underwriter, attorney, accountant or agent in connection with such Registration
Statement; and
(M) obtain a cold comfort letter from Peregrine's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the Holders of at least a
majority of the Registrable Stock included in such Registration Statement or
the managing underwriter of the offering covered by such Registration Statement
shall reasonably request.
5. Expenses.
To the fullest extent allowable under applicable state securities and
blue sky laws, all expenses incurred in effecting the registrations provided
for in Sections 2(A), 2(C) and 3 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for Peregrine, fees and disbursements of a single counsel for all of
the Sellers, underwriting expenses other than underwriting
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discounts and commissions, expenses of any audits incident to or required by
any such registration and expenses of complying with the securities or blue sky
laws of any jurisdictions pursuant to Subsection (D) of Section 4 hereof, shall
be borne and paid by Peregrine.
6. Preparation; Reasonable Investigation.
In connection with the preparation and filing of each Registration
Statement under the Securities Act pursuant to this Agreement, Peregrine will
give the Holders of Registrable Stock registered under such Registration
Statement, their underwriters, if any, and their respective counsel and
accountants, the opportunity to participate in the preparation of such
Registration Statement, each Prospectus included therein or filed with the
Securities and Exchange Commission, and each amendment thereof or supplement
thereto, and will give each of them such access to its books and records and
such opportunities to discuss the business of Peregrine with its officers and
the independent public accountants who have certified its financial statements
as shall be necessary, in the opinion of such Holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act. In addition, if such Registration Statement refers to any
Holder including Registrable Stock therein by name or otherwise as the holder
of any securities of Peregrine, then such Holder shall have the right to
require (x) the insertion therein of language, in form and substance
satisfactory to such Holder, to the effect that the holding by such Holder of
such securities does not necessarily make such Holder a "controlling person" of
Peregrine within the meaning of the Securities Act and is not to be construed
as a recommendation by such Holder of the investment quality of Peregrine's
debt or equity securities covered thereby and that such holding does not imply
that such Holder will assist in meeting any future financial requirements of
Peregrine, or (y) in the event that such reference to such Holder by name or
otherwise is not required by the Securities Act or any rules and regulations
promulgated thereunder, the deletion of the reference to such Holder.
7. Indemnification.
(A) In the event of any registration of any of its Securities
under the Securities Act pursuant to this Agreement, Peregrine, to the extent
permitted by law, shall indemnify and hold harmless the Seller of such
Securities, each underwriter (as defined in the Securities Act), each other
Person who participates in the offering of such Securities, and each other
Person, if any, who controls (within the meaning of the Securities Act) such
Seller, underwriter or participating Person, against any losses, claims,
damages or liabilities, joint or several, to which such Seller, underwriter,
participating Person or controlling Person may become subject under the
Securities Act or any other statute or at common law, in so far as such losses,
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claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (1) any alleged untrue statement of any material fact contained,
on the effective date thereof, in any Registration Statement under which such
Securities were registered under the Securities Act, any preliminary Prospectus
or final Prospectus contained therein, or any summary Prospectus issued in
connection with any Securities being registered, or any amendment or supplement
thereto, or (2) any alleged omission to state in any such document a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and shall reimburse each such Seller, or any such underwriter,
participating Person or controlling Person for any legal or other expenses
reasonably incurred by such Seller, underwriter, participating Person or
controlling Person in connection with investigating or defending any such loss,
damage, liability or action; provided, however, that Peregrine shall not be
liable to any Seller, or any such underwriter, participating Person, or
controlling Person in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any alleged untrue statement
or alleged omission made in such Registration Statement, preliminary
Prospectus, summary Prospectus, Prospectus, or amendment or supplement thereto
in reliance upon and in conformity with written information furnished to
Peregrine by such Seller, specifically for use therein.
(B) Each Holder of Registrable Stock, by acceptance thereof,
severally and not jointly, indemnifies and holds harmless each other Holder of
Registrable Stock, Peregrine, its directors and officers, each underwriter (as
defined in the Securities Act), and each other Person, if any, who controls
(within the meaning of the Securities Act) Peregrine, any underwriter or any
Holder, against any losses, claims, damages, or liabilities, joint or several,
to which any such other Holder, Peregrine, any such director or officer, any
such underwriter, or any such Person may become subject under the Securities
Act or any other statute or at common law, in so far as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon (1) any alleged untrue statement of any material fact contained, on
the effective date thereof, in any Registration Statement under which
Registrable Stock is registered under the Securities Act at the request of such
Holder, any preliminary Prospectus or final Prospectus contained therein, or
any summary Prospectus issued in connection with any such Securities being
registered, or any amendment or supplement thereto, or (2) any alleged omission
to state in any such document a material fact required to be stated therein or
necessary to make the statements therein not misleading, in either case to the
extent, and only to the extent, that such alleged untrue statement or alleged
omission was made in such Registration Statement, preliminary Prospectus,
summary Prospectus, Prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to Peregrine by such Holder
specifically for use therein, and then only to the
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extent that such alleged untrue statements or alleged omissions by such Holder
were not based on the authority of an expert as to which such Holder had no
reasonable ground to believe, and did not believe, that the statements made on
the authority of such expert were untrue or that there was an omission to state
a material fact. Notwithstanding the foregoing provisions of this Subsection
(B), no Holder shall be required to pay under such provisions an amount in
excess of the proceeds received by such Holder in payment for the Securities
sold by such Holder pursuant to the Registration Statement.
(C) Indemnification similar to that specified in Subsections (A)
and (B) of this Section 7 shall be given by Peregrine and each Seller (with
such modifications as shall be appropriate) covered by any registration or
other qualification of Securities under any federal or state securities law or
regulation other than the Securities Act with respect to any such registration
or other qualification effected pursuant to this Agreement.
(D) Any Person which proposes to assert the right to be
indemnified under Subsections (A), (B) or (C) of this Section 7 shall, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such Person in respect of which a claim is to be made against an
indemnifying Person under such Subsections (A), (B) or (C), notify each such
indemnifying Person of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served. The indemnifying Person shall have the
right to investigate and defend any such loss, claim, damage, liability or
action and to employ separate counsel in any such action and to control the
defense thereof. The Person claiming indemnification shall have the right to
employ separate counsel in any such action and to control the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
Person against whom indemnification is sought; provided, however, that
notwithstanding the foregoing, in any case when indemnification is sought
against Peregrine and (i) the Person seeking indemnification has been advised
by counsel that its defenses may be different from those of Peregrine, or (ii)
Peregrine has not proceeded in a timely manner to effect such defense, then the
reasonable fees and expenses of counsel for such Person shall be paid by
Peregrine and the indemnified Person shall have the right to control the
defense of such action, suit or proceeding. In no event shall a Person against
whom indemnification is sought be obligated to indemnify any Person for any
settlement of any claim or action effected without the indemnifying Person's
consent.
(E) The indemnification provided for under this Section 7 will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and will survive the transfer of Securities.
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8. Participation in Underwritten Registrations.
No Person may participate in any underwritten registration hereunder
unless such Person (i) agrees to sell such Person's Securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
The Holders of Registrable Stock to be sold in an underwritten offering
pursuant to this Agreement may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of,
Peregrine to and for the benefit of the underwriters in or pursuant to the
underwriting agreement pertaining to such offering shall also be made to and
for the benefit of such Holders of Registrable Stock and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
Holders of Registrable Stock. Any such Holder of Registrable Stock shall not
be required to make any representations or warranties to or agreements with
Peregrine or the underwriters other than representations, warranties or
agreements regarding such Holder, such Holder's Registrable Stock and such
Holder's intended method of distribution and any other representation required
by law.
9. Marketing Restrictions.
(A) If
(1) any Holder of Registrable Stock is entitled and
wishes to register any Registrable Stock in a registration made
pursuant to Section 2 hereof, and
(2) the offering proposed to be made by the Holder or
Holders for whom such registration is to be made is to be an
underwritten public offering, and
(3) Peregrine or one or more Holders of Securities other
than Registrable Stock wishes to register Securities in such
registration, and
(4) the managing underwriters of such public offering
furnish a written opinion that the total amount of Securities to be
included in such offering would exceed the maximum amount of
Securities (as specified in such opinion) which can be marketed at a
price reasonably related to the then current market value of such
Securities and without otherwise materially and adversely affecting
such offering,
then the relative rights to participate in such offering of the Holders of
Registrable Stock, the Holders of other Securities
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having the right to include such Securities in such registration, and Peregrine
shall be in the following order of priority:
First: The Holders of Registrable Stock shall be entitled to
participate in accordance with the number of shares of Registrable
Stock which each such Holder shall request to be registered, such
participation to be pro rata in accordance with the number of shares
which each such Holder shall request be registered if, pursuant to
clause 4 of this Subsection (A), the total amount of Securities to be
included in the offering will be less than the number of shares of
Registrable Stock that all of such Holders shall request be
registered; and then
Second: Peregrine shall be entitled to participate; and then
Third: All Holders of other Securities having the right to
include such Securities in such registration shall be entitled to
participate in accordance with the relative priorities, if any, as
shall exist among them;
and no Securities (issued or unissued) other than those registered and included
in the underwritten offering shall be offered for sale or other disposition by
Peregrine or any Holder of Registrable Stock in a transaction which would
require registration under the Securities Act until the expiration of 180 days
after the effective date of the Registration Statement filed pursuant to
Section 2 hereof, or such earlier time consented to by the managing
underwriters.
(B) If
(1) any Holder of Registrable Stock entitled to do so
requests registration of Registrable Stock under Section 3 hereof, and
(2) the offering proposed to be made is to be an
underwritten public offering, and
(3) the managing underwriters of such public offering
furnish a written opinion that the total amount of Securities to be
included in such offering would exceed the maximum amount of
Securities (as specified in such opinion) which can be marketed at a
price reasonably related to the then current market value of such
Securities and without materially and adversely affecting such
offering,
then the relative rights to participate in such offering of the Holders of
Registrable Stock, the Holders of other Securities having the right to include
such Securities in such registration, and Peregrine shall be in the following
order of priority:
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First: If such offering shall have been initiated by
Peregrine, and shall equal or exceed the amount necessary to allow
Peregrine to cause an optional conversion to occur pursuant to Section
5.2.5.1. of the Declaration of Trust, and Peregrine makes such an
election to effect an Optional Conversion, then Peregrine shall be
entitled to include in such Registration Statement all Securities that
it shall elect to so include.
Second: If such registration shall have been requested by a
Person or Persons other than Peregrine, the Person or Persons
requesting such registration shall be entitled to participate in
accordance with the relative priorities, if any, as shall exist among
them; and then
Third: The Holders of Registrable Stock and all other Holders
of Securities having the right to include such Securities in such
registration shall be entitled to participate pro rata among
themselves in accordance with the number of shares of Common which
each such Holder shall have requested be registered (for the purposes
of this clause, Securities convertible into or exchangeable or
exercisable for Common to be treated as if they were so converted or
exchanged or exercised immediately prior to the filing of the
Registration Statement covering such registration); and then
Fourth: If such registration shall have been requested by a
Person or Persons other than Peregrine, Peregrine shall be entitled to
include Securities in such registration; and then
Fifth: All other Holders of other Securities having the right
to include such Securities in such registration shall be entitled to
participate with the relative priorities , if any, as shall
exist among them;
and no Securities (issued or unissued) other than those registered and included
in the underwritten offering shall be offered for sale or other disposition by
Peregrine or any Holder of Registrable Stock in a transaction which would
require registration under the Securities Act until the expiration of 180 days
after the effective date of the Registration Statement in which Registrable
Stock was included pursuant to Section 3 hereof, or such earlier time consented
to by the managing underwriters.
10. Market Stand-Off.
Each Investor (and any subsequent holder of Securities owned by one or
more of the Investors) agrees not to make a demand for registration under
Section 2. of this Agreement during the one hundred and eighty (180) day period
following the effective date of a registration statement of Peregrine filed
under the
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Securities Act in connection with a Public Offering of Peregrine's Common
Stock, if so requested by Peregrine. Peregrine may impose stop-transfer
restrictions with respect to such Securities, subject to the foregoing
restrictions to the end of such period.
In addition to the restrictions in the preceding paragraph, from and
after such time as the Investors have sold or otherwise disposed of fifty-one
percent (51%) of the aggregate shares of Plan Common held by them as of the
Effective Date, in the event of an underwritten public offering of shares of
Common and/or equity securities convertible into or exchangeable or exercisable
for shares of Common by Peregrine (which offering requires registration of such
Securities under the Securities Act) in which Peregrine causes the optional
conversion of shares of Preferred into shares of Common pursuant to Section
5.2.5.1 of the Company's Declaration of Trust, no Securities (issued or
unissued) other than those registered and included in such offering shall be
publicly sold or transferred, or offered for public sale or other public
disposition by current or prior Holders of Registrable Stock, or by the
transferees of any Securities from such Holders.
11. Assignability of Registration Rights.
The registration rights set forth in this Agreement shall accrue to
each subsequent Holder of Registrable Stock who consents in writing to be bound
by the terms and conditions of this Agreement; provided, however, that if a
Holder transfers any fewer than 150,000 shares (or all of the shares held by
such Holder, whichever is less) to any other Holder, those shares so
transferred shall no longer be deemed Registrable Stock and the transferee and
the shares so transferred shall be entitled to no registration rights, or other
rights under this Agreement.
12. Grant of Subsequent Registration Rights.
Peregrine may not grant registration rights to investors in Peregrine
other than the Holders of Registrable Stock unless such rights are subordinate
to the rights of the Holders of Registrable Stock or the grant of such rights
is consented to by the Holders of not less than a majority of the Registrable
Stock.
13. Severability.
Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
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14. Descriptive Headings.
The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
15. Notices.
All communications provided for hereunder shall be in writing and
delivered by hand or by first-class or certified mail, postage prepaid, to the
following addresses, or such other addresses as shall be given by notice
delivered hereunder, and shall be deemed to have been received on the day of
personal delivery or within three business days after such mailing:
If to any Holders of Registrable Stock, addressed to such Holders at
their addresses as shown on the books of Peregrine or its transfer
agent;
If to Peregrine, to:
The Peregrine Real Estate Trust
1300 Ethan Way
Sacramento, California 95825
Attention: Frank A. Morrow
or, as to the Investors or Peregrine, to such other persons or at such other
addresses as shall be furnished by any such party by like notice to the other
parties.
16. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall together constitute
one and the same document.
17. Entire Agreement.
This Agreement constitutes the entire agreement by and among the
parties hereto with respect to the subject matter hereof.
18. Specific Performance.
The parties hereto recognize and agree that money damages may be
insufficient to compensate the Holders of any Registrable Stock for breaches by
Peregrine of the terms hereof and, consequently, that the equitable remedy of
specific performance of the terms hereof will be available in the event of any
such breach.
19. Amendments and Governing Law.
This Agreement may be amended, modified or supplemented only by a
written instrument executed by Peregrine and Holders of not less than a
majority of the then existing shares of Registrable
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Stock. This Agreement shall be governed by and construed in accordance with
the laws of the State of California applicable to contracts made and to be
performed in that state.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first written above.
ATTEST: THE PEREGRINE REAL ESTATE TRUST f/k/a
COMMONWEALTH EQUITY TRUST
_______________________ Name: _________________________________
Secretary Frank A. Morrow
Title: President, Chief Executive
Officer
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Name: _________________________________
Title: _________________________________
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
Name: _________________________________
John Mullman
Title: Vice President
PRUCO LIFE INSURANCE COMPANY
Name: _________________________________
Gary Trabka
Title: Managing Director
ORIX USA CORPORATION
Name: _________________________________
Title: _________________________________
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<PAGE> 19
WEYERHAEUSER COMPANY MASTER RETIREMENT TRUST
By: TCW Special Credits, Its
Investment Manager
By: TCW Asset Management Co.,
By: _________________________________
Richard Masson
Managing Director
By: _________________________________
Name:
Title:
TCW SPECIAL CREDITS FUND IV
By: TCW Special Credits, Its
General Partner
By: TCW Asset Management Co.
By: _________________________________
Richard Masson
Managing Director
By: _________________________________
Name:
Title:
TCW SPECIAL CREDITS PLUS FUND
By: TCW Special Credits, Its
General Partner
By: TCW Asset Management Co.
By: _________________________________
Richard Masson
Managing Director
By: _________________________________
Name:
itle:
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<PAGE> 20
TCW SPECIAL CREDITS TRUST IV
By: Trust Company of the West, Trustee
By: _________________________________
Richard Masson
Managing Director
By: _________________________________
Name:
Title:
TCW SPECIAL CREDITS TRUST IVA
By: Trust Company of the West, Trustee
By: _________________________________
Richard Masson
Managing Director
By: _________________________________
Name:
Title:
298
<PAGE> 1
EXHIBIT 10
SERVICES AND CONFIDENTIALITY AGREEMENT
1. IDENTIFICATION.
This Services and Confidentiality Agreement (the "Agreement") is made
as of October 1, 1994, between Commonwealth Equity Trust, a California Real
Estate Investment Trust ("CET"), and Fama Management, Inc., a California
corporation ("Fama").
2. RECITALS.
2.1. CET is presently a debtor in possession operating under
Chapter 11 of the United States Bankruptcy Code, and in connection with the
bankruptcy proceeding has filed a plan of reorganization (the "Plan of
Reorganization") with the bankruptcy court for confirmation. CET desires to
engage a Chief Executive Officer to provide services to CET commencing October
1, 1994, which services shall continue following confirmation of the Plan of
Reorganization in CET's bankruptcy proceeding, and following the effective date
of the Plan of Reorganization (the "Effective Date"), to the extent
confirmation of the Plan of Reorganization and the Effective Date occur prior
to the expiration or termination of the "Term," as set forth in Article 3
below.
2.2. CET wishes to engage Fama to provide the services of Frank
A. Morrow ("Morrow") who will act as CET's Chief Executive Officer as of
October 1, 1994 pursuant to the terms hereof. Fama desires to provide Morrow's
services to CET, as more particularly described below.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties agree as follows:
3. TERM.
This Agreement shall commence on October 1, 1994 and shall continue
for a period of one (1) year thereafter (the "Original Term"), unless earlier
terminated by CET's Board of Trustees on written notice to Fama, with or
without cause, in CET's sole discretion, subject to CET's payment of certain
severance compensation to Fama as more particularly set forth in Section 5.2
below. The Original Term may be extended mutually by CET and Fama for an
additional one (1) year period (the "Extension Period") on the same terms set
forth herein which apply during the Original Term; notwithstanding the
foregoing, if CET terminates this Agreement and Morrow's services as provided
by Fama during the Extension Period, the amount of severance compensation which
shall
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become payable to Fama on such termination shall be limited in the manner
described in Section 5.2 below. The Original Term and any extension thereof
shall be collectively referred to herein as the "Term."
4. DUTIES.
4.1. During the Term, Morrow shall report solely and directly to,
and be under the immediate supervision of, CET's Board of Trustees.
Notwithstanding the foregoing, CET's Board of Trustees shall not unduly
interfere with the performance of Morrow's duties hereunder or Morrow's
decision making with respect to CET's day-to-day operations. Morrow shall
serve as CET's Chief Executive Officer, with the powers and duties consistent
with such position. The responsibilities to be performed by Morrow shall be
such as inhere in the position of Chief Executive Officer, and such other
powers, duties and responsibilities as may be delegated or assigned to Morrow
by CET's Board of Trustees, so long as Morrow maintains the duties of CET's
Chief Executive Officer, i.e. Morrow shall maintain direct responsibility for
the operations and administration of CET. Morrow's duties shall include, but
are not limited to, responsibility for the planning, supervision, management
and coordination of CET's asset and property portfolio, and, specifically, the
management and leasing of CET's commercial and retail properties, management
and operation of CET's hotels, management of CET's notes receivable portfolio,
management of CET's joint venture interests, supervising the administration of
CET's financial affairs, coordination of CET's advisors and supervision and
administration of CET's employees, including the terms and conditions of
employment of CET's employees in consultation with CET's Board of Trustees.
Morrow is presently serving and shall continue to serve as Chairman of the
Board of Trustees and Chief Executive Officer of California Real Investment
Trust ("CalReit"). Morrow's services on behalf of CalReit shall be performed
without additional compensation other than as set forth in Article 5 below.
4.2. Fama shall cause Morrow to do and perform all services, acts
and obligations necessary and advisable to carry out Morrow's duties hereunder
in a competent and diligent manner, subject to and in accordance with the terms
of this Agreement, CET's policies, rules and regulations and the direction of
CET's Board of Trustees.
4.3. Fama shall provide Morrow's services on a full time basis
and Morrow shall not engage in any other business or employment during the
Term. Fama shall cause Morrow to devote his full productive time, energy,
effort, attention and ability solely to the performance of his duties as set
forth herein, and to the proper and efficient management and development of the
business and operations of CET. Notwithstanding the foregoing, CET
acknowledges that Morrow currently holds the position of Director on the Board
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of Trustees of the Lansing Pacific Fund, and performs consulting services for
McCown DeLeeuw, and further, acknowledges that such activities are not in
violation of the provisions of this Section 4.3, conditional that such
obligations do not interfere with the performance of Morrow's responsibilities
at CET.
5. COMPENSATION.
5.1. During the Term, and conditioned upon Morrow's full and
faithful performance of his duties hereunder, CET shall pay to Fama, as full
and complete compensation for all of the services to be rendered by Fama and/or
Morrow hereunder, a salary equal to Twenty-Five Thousand Dollars ($25,000) per
month. CET shall pay Fama one-half of the monthly salary on the tenth (10th)
and the twenty-fifth (25th) day of each month during the Term.
5.2. If CET terminates this Agreement and Morrow's services as
provided by Fama during the Original Term, or if CET does not offer to extend
the Original Term for an additional one (1) year period on the expiration of
the Original Term as set forth in Section 3.1 above, CET shall pay to Fama upon
such termination, or upon the expiration of the Original Term, as applicable,
severance compensation in the amount of Three Hundred Thousand Dollars
($300,000) (the "Severance Compensation"). If CET terminates this Agreement
and Morrow's services during the Extension Period, CET shall pay Fama the
Severance Compensation reduced by the amount of any compensation paid to Fama
as consideration for Morrow's services during the Extension Period. Neither
Fama nor Morrow shall have any duty or obligation to mitigate any damages
arising from CET's termination of this Agreement and Morrow's services, nor
shall the amount of the Severance Compensation be reduced based on any
mitigating circumstances. The Severance Compensation shall constitute full and
complete payment to Fama of any and all amounts which may be or become owing
from CET to Fama arising from this Agreement or Morrow's services as set forth
herein, or the termination of this Agreement and such services, and neither
Fama nor Morrow shall have any additional claim for compensation or damages on
CET's termination of this Agreement and Morrow's services other than as set
forth in this Section 5.2 and in Article 6 below.
5.3. Fama shall be eligible to participate in any stock option
plan adopted by CET, on terms to be determined by CET's Board of Trustees.
5.4. Fama acknowledges that neither Fama nor Morrow shall be an
employee of CET for federal tax purposes, and Fama shall be responsible for
paying all of its and Morrow's estimated income and self-employment taxes. CET
shall have no obligation to make any withholdings from compensation payable
hereunder for state or federal taxes and shall have no other obligations of an
employer
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with respect to Fama and/or Morrow. Fama shall indemnify and hold CET harmless
from and against any and all costs, liabilities, expenses, damages or fees
(including, but not limited to, attorneys' fees and costs) resulting from a
failure by Fama and/or Morrow to pay its or his own estimated income and
self-employment taxes.
5.5. All compensation payable for Morrow's services shall be
payable to Fama directly, and not to Morrow. Morrow shall look solely to Fama
to perform and discharge, and Fama shall fully perform and discharge, and CET
shall have no responsibility or liability on account of, any obligation of an
employer, including, without limitation, the payment and/or withholding of all
sums required to be paid and/or withheld by such employer, pension, health and
welfare benefits, social security, unemployment, workers' compensation and
state disability insurance required in connection with, based on, resulting
from or relating to the services to be rendered hereunder and/or the rights to
be granted by Morrow under this Agreement and/or the compensation to be paid to
Fama therefore. Fama and Morrow agree to indemnify and hold CET harmless from
and against any and all liability (including, without limitation, judgments,
penalties, interests, damages, costs, expenses and attorneys' fees) which CET
may incur by reason of Fama's failure to assume and discharge all obligations
imposed on employers (including, without limitation, with respect to income tax
withholding as discussed in Section 5.4 above).
6. EXPENSE REIMBURSEMENTS.
6.1. CET shall reimburse Fama for Morrow's actual and reasonable
out-of-pocket expenses incurred in the performance of Morrow's duties
hereunder. Reimbursable expenses shall include Morrow's commuting costs from
San Francisco to Sacramento, which shall include gasoline, tolls, parking,
hotels and meals. In addition, CET shall reimburse Fama for Morrow's business
expenses related to travel from Sacramento to Los Angeles, or other locations
requiring his presence for CET business.
6.2. Notwithstanding the provisions of Section 6.1 above, in no
event shall the aggregate reimbursement of expenses from CET to Fama exceed Two
Thousand Five Hundred Dollars ($2,500) in any month during the Term.
6.3. CET's reimbursement of Morrow's expenses, as described in
Sections 6.1 and 6.2 above, is expressly conditioned upon the following in each
instance:
(a) Each such expense must be of a nature qualifying it
as a proper deduction on CET's federal and state income tax returns as a
business expense, and not as deductible compensation to Fama;
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(b) Fama and/or Morrow furnishes CET with adequate
records and other documentary evidence required by either federal or state
statutes or regulations issued by appropriate taxing authorities for the
substantiation of such expenses as deductible business expenses of CET and not
as deductible compensation to Fama; and
(c) Reimbursement shall be paid and payable by CET in
accordance with its policies and procedures for making such reimbursements in
the normal course of its business.
7. CONFIDENTIAL INFORMATION.
7.1. "Confidential Information" means any information relating to
CET's business or operations which is not generally known outside of CET or
information entrusted to CET by third parties, and includes information known
as confidential or secret or which reasonably should be known as confidential
or secret. Confidential Information may relate, for example, to financial or
other investment information, shareholder information, CET's strategic
planning, trade secrets, technology, ideas, processes, computer hardware,
computer software, business or marketing plans, the names and locations of
employees and/or shareholders, and any and all other information relating to
CET and the operation of its business. Confidential Information may be
contained in materials (collectively "Materials") such as business records,
legal documents, correspondence, data, reports, programs, contracts between CET
and third parties, or computer programs, or may be in the nature of, or consist
of, unwritten knowledge, techniques, devices, processes, practices, methods or
know-how. Notwithstanding the foregoing, "Confidential Information" does not
include information (i) which is or becomes generally available to the public
other than as a result of a disclosure by Fama, Morrow or its or his agents,
(ii) which was available to Fama and/or Morrow on a non-confidential basis
prior to disclosure of the information to Fama and/or Morrow by CET, or (iii)
which becomes available to Fama and/or Morrow on a non-confidential basis from
a person or entity other than CET, who is not otherwise bound by a written
confidentiality agreement prohibiting that person or entity from disclosing the
information. For purposes hereof, information made public only in connection
with CET's Chapter 11 bankruptcy proceeding shall not be deemed information
generally available to the public.
7.2. Fama acknowledges that a confidential and fiduciary
relationship exists between Fama and Morrow, on the one hand, and CET, on the
other hand, in connection with CET's Confidential Information.
7.3. Other than as required in order for Morrow to perform the
services contemplated herein, and other than in compliance with
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a subpoena or a court order (if the Confidential Information is not the subject
of a protective order), Fama shall not, and shall cause Morrow not to, use,
disclose, disseminate or otherwise communicate, directly or indirectly, in
whole or in part, at any time or in any manner, whether during the Term or for
a period of sixty (60) months thereafter, or twelve (12) months in connection
with Confidential Information specific to any property owned by CET, any
Confidential Information, without CET's prior written consent in each instance,
and Fama shall use its best efforts to prohibit its representatives, or any
third person acting for or on Fama's or Morrow's behalf to do any of the
foregoing. If at any time Fama and/or Morrow becomes aware of any such
unauthorized use, disclosure, dissemination or communication, or any threat
thereof, Fama shall immediately notify CET, which notice shall specify the
person(s) and circumstances relating to such unauthorized use, disclosure,
dissemination, communication or threat.
7.4. All Confidential Information relating to CET's business that
comes into Fama's and/or Morrow's knowledge or possession, as between CET on
the one hand, and Fama and Morrow on the other, is CET's exclusive property,
and except as necessary in order for Morrow to perform the services
contemplated herein, may not be reproduced, copied, summarized or removed from
CET's premises without CET's prior written consent in each instance. Any such
Confidential Information removed from CET's premises shall be immediately
returned to CET when it is no longer required in order for Morrow to perform
his duties hereunder or upon CET's demand at any time or times.
7.5. Fama acknowledges that all Confidential Information created
by Fama and/or Morrow shall be CET's exclusive property, free of any claim or
interest of any third party, and Fama, for itself and on behalf of Morrow,
hereby irrevocably and perpetually assigns to CET all rights of every kind or
nature which arise from Morrow's and/or Fama's creation of any Confidential
Information, to the extent that CET does not already own such rights.
7.6. In CET's sole discretion, CET may elect to apply for,
obtain, register or take any action to protect or prevent the infringement,
dissemination or release of any Confidential Information. If CET chooses to
take any such action, either during or after the Term, Fama shall:
(a) take any reasonable action CET determines to be
necessary or desirable in connection with the exercise and/or protection of
these rights; and
(b) execute and acknowledge before a notary and deliver to
CET, in a form suitable to CET, any document reasonably necessary or required
to obtain, exercise or protect such rights.
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7.7. Fama hereby irrevocably appoints any of CET's authorized
corporate officers to act as its and Morrow's agent and attorney-in-fact, which
appointment is coupled with an interest, to perform all acts described in
Section 7.6 above.
7.8. Fama's covenants and agreements contained in this Article 7
shall be deemed to be effective as of the date Fama and/or Morrow first
acquired knowledge of any Confidential Information.
7.9. Fama's covenants and agreements contained in this Article 7
shall survive the expiration or termination of this Agreement.
8. INDEMNIFICATION.
CET shall, to the maximum extent permitted by law, indemnify and hold
Fama and Morrow harmless from and against any and all claims, actions, causes
of actions, judgments, liabilities, obligations and expenses, including without
limitation, reasonable attorneys' fees, court costs, judgments, fines,
settlements, and other amounts actually incurred ("Liabilities") arising out
of, relating to, or in connection with the discharge of Fama's and Morrow's
duties hereunder; provided, however, that CET shall have no obligation to
indemnify Fama or Morrow for any Liabilities resulting from Fama's or Morrow's
bad faith, malfeasance, gross negligence or reckless disregard of duties as
described herein.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS.
9.1. Fama is and shall remain during the Term a corporation in
good standing, duly organized and existing under the laws of the State of
California, and authorized to engage in business in the State of California.
9.2. Fama has a valid, binding and subsisting agreement with
Morrow pursuant to which Morrow is obligated to render Morrow's services
exclusively for Fama for at least the full Term, and pursuant to which Fama has
the full right and authority to enter into this Agreement and furnish Morrow's
services and to grant CET the rights herein granted.
9.3. Fama has not undertaken any obligations to any person, firm,
corporation or other entity which might conflict with, interfere with, or
derogate from the rights granted to CET hereunder, or the obligations incurred
by Morrow in this Agreement.
9.4. CET has been authorized by its Board of Trustees to enter
into this Agreement, and once such Agreement has been approved by the
bankruptcy court, no further approval or authority
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is required in order for this Agreement to constitute a legal and binding
obligation of CET.
9.5. CET shall obtain and maintain Directors and Officers
Liability Insurance covering Morrow during the Term, to the extent such
insurance is reasonably available.
10. MISCELLANEOUS.
10.1. This Agreement is to be governed by and construed under the
laws of the State of California.
10.2. Should any provision of this Agreement for any reason be
declared invalid, void or unenforceable by a court of competent jurisdiction,
such adjudication shall in no way affect any other provision of this Agreement
nor the validity or enforcement of the remainder of this Agreement, and any
provision so affected shall be curtailed only to the extent necessary to bring
this Agreement within the applicable requirements of the law.
10.3. This Agreement contains the sole and entire understanding
between the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous oral and written agreements, understandings,
statements and practices among the parties.
10.4. This Agreement may not be modified, except in writing, signed
by the parties hereto. No waiver of any provision of this Agreement shall be
deemed to be a waiver of any other provision, whether or not similar, nor shall
any waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party charged with the waiver.
10.5. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which, when taken
together, shall constitute one and the same instrument.
10.6. Any notices, requests, demands, waivers, consents, approvals or
other communications which are required hereunder shall be in writing and shall
be deemed given only if delivered personally or sent by telegram or by
registered or certified mail, postage prepaid, return receipt requested, to the
recipients at the following addresses:
If to CET: Commonwealth Equity Trust
705 University Avenue
Suite A
Sacramento, CA 95825
Attn: Chairman of the Board of Trustees
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with a copy to: Greenberg, Glusker, Fields,
Claman & Machtinger
1900 Avenue of the Stars,
Suite 2000
Los Angeles, CA 90067
Attn: Paula J. Peters, Esq.
If to Fama: Fama Management, Inc.
1249 Lombard Street
San Francisco, CA 94109
10.7. If either party to this Agreement brings an action to enforce
the terms hereof or to declare rights hereunder, the prevailing party in such
action shall be entitled to an award of reasonable costs of litigation,
including attorneys' fees and related costs, to be paid by the losing party in
such amount as may be determined by the court having jurisdiction in such
action.
10.8. In addition to attorneys' fees and costs as provided for in
Section 10.7 above, the parties hereto agree that if any dispute between the
parties results in a judgment in favor of either party, the prevailing party
shall be entitled to recover from the other all attorneys' fees and costs
incurred by the prevailing party in enforcing such judgment. This provision is
intended to be severable from any other provision in this Agreement and is not
to be deemed merged in the judgment.
10.9. Any dispute, controversy or claim with respect to this
Agreement shall be settled by final and binding arbitration in the City of San
Francisco, State of California. Such arbitration shall be conducted in
accordance with the rules of the American Arbitration Association or its
successor. Judgment upon the award rendered by the arbitrator in such
proceeding may be entered in any court having jurisdiction thereof.
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date set forth below.
Date of
Execution: ____________, 1994 COMMONWEALTH EQUITY TRUST,
a California Real Estate
Investment Trust
By:__________________________
Doris V. Alexis, Chairman
of the Board of Trustees
(SIGNATURES CONTINUED ON FOLLOWING PAGE)
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Date of
Execution: ____________, 1994 FAMA MANAGEMENT, INC.,
a California corporation
By:__________________________
Its:______________________
ACKNOWLEDGED, ACCEPTED
AND AGREED TO:
________________________
FRANK A. MORROW
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