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EXHIBIT 10.1
AGREEMENT (this "Agreement"), dated as of September 11,
2000, by and among Burnham Pacific Properties, Inc., (the "Company") Burnham
Pacific Operating Partnership, L.L.P. ("BPOP"), Jay L. Schottenstein ("JLS")
Schottenstein Stores Corporation, ("SSC"), Jubilee Limited Partnership ("JLP"),
Jubilee Limited Partnership III ("JLPIII"), Schottenstein Professional Asset
Management Corp. ("SPAMC"), Michael L. Ashner ("MLA") and Susan Ashner ("SA"
and, together with SSC, JS, JLP, JLPIII, SPAMC and MLA, the "SA Group").
R E C I T A L S
WHEREAS, the SA Group beneficially owns, in the aggregate,
shares (the "Shares") constituting approximately 9.78% of the outstanding shares
of common stock, par value $.01 per share, of the Company (the "Common Stock");
WHEREAS, members of the SA Group or their Affiliates (as
hereinafter defined) have extensive real estate property and asset management
expertise; and
WHEREAS, the Company and the SA Group wish to set forth
their understanding and agreement with respect to (i) the nomination of certain
representatives of the SA Group to serve as members of the Board of Directors of
the Company (the "Board"), (ii) the voting of shares of Common Stock
beneficially owned by the SA Group, (iii) the ability of the SA Group to acquire
additional shares of Common Stock, and (iv) the dismissal, with prejudice, of
certain legal proceedings instituted by certain members of the SA Group against
the Company and certain of its directors and the execution and delivery of
mutual releases by the Company, on the one hand, and the SA Group, on the other,
of any claims that such parties now have or may have against the other;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, the parties hereto, intending
to be legally bound, hereby agree as follows:
SECTION 1. Governance.
(a) Until the termination of this Agreement, the entire Board shall
consist of not more than eleven directors.
(b) Until the termination of this Agreement, the Company shall
nominate for election as directors, and use all reasonable best efforts to cause
to be elected or appointed as directors, JLS and MLA (the "SA Group Nominees");
provided, however, that the SA Group may designate a person or persons,
reasonably acceptable to a majority of the members of the Board other than the
SA Group Nominees (the "Independent Directors"), for nomination as director(s)
in place of either or both of JLS and MLA. The Company represents to the SA
Group that JLS and MLA are being appointed to the Board contemporaneously with
the execution and delivery of this Agreement. The Company represents to the SA
Group that the holders of the Series 2000-C Convertible Preferred Stock have
approved the nomination and election of JLS and MLA to the Board and have agreed
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to vote in favor of the Board's nominees (including JLS and MLA) at the next
annual meeting of the Company's shareholders as and to extent provided in the
Exchange Agreement pursuant to which such Preferred Stock was issued. The
Company agrees not to enter into any agreement, arrangement or understanding
with any shareholder pursuant to which such shareholder agrees to vote in favor
of any nominees for election to the Board unless such nominees shall include the
SA Group Nominees.
(c) In furtherance of the obligations of the Company set forth in
Section 2(b), at each annual meeting of stockholders of the Company or any
special meeting called for the purpose of electing directors of the Company (or
by consent of stockholders in lieu of any such meeting) or at such other time or
times as shall be required, the Company shall nominate the SA Group Nominees and
shall include such SA Group Nominees in any Company proxy solicitation materials
with respect to the election of directors.
(d) The Company shall cause JLS to be appointed as a Co-Chairman of
the Board with an Independent Director who is not employed by the Company
serving as the other Co-Chairman. The Company represents to the SA Group that
such appointment is being made contemporaneously with the execution and delivery
of this Agreement.
(e) The SA Group acknowledges that the Company is hiring Developers
Diversified Realty Corp. or an affiliate thereof to perform property management,
asset management and other services in connection with the liquidation of the
Company.
SECTION 2. Permitted Ownership
(a) Within three business days after the date hereof, the Company
shall amend the Company's Shareholder Rights Agreement, dated as of June 19,
1999 between the Company and First Chicago Trust Company of New York, as Rights
Agent (the "Rights Agreement"), or take such other action with respect thereto,
such amendment or other action to be in form and substance reasonably acceptable
to the SA Group and its legal counsel, in order to permit the SA Group to
beneficially own, in the aggregate, up to (and including) 19.9% of the
outstanding Common Stock (the "Permitted Ownership"), which may include, without
limitation, shares convertible into Common Stock, without triggering any adverse
consequences to any member of the SA Group under the provisions of the Rights
Agreement.
(b) Within three business days after the date hereof, the Company
shall take such action as is necessary to exempt the Permitted Ownership from
the provisions of Article VII, Section 7.2 of the Company's Articles of
Amendment and Restatement (the "Charter"), and the SA Group shall cooperate with
the Company and take such action as may be reasonably requested by the Company
so that the requirements thereof shall be complied with; provided, however, that
purchases of shares of Common Stock by the SA Group may be prohibited if such
purchases would result in the Company becoming "closely held" within the meaning
of Section 856(h) of the Internal Revenue Code of 1986, as amended (the "Code"),
or otherwise would cause the Company to fail to qualify as a Real Estate
Investment Trust under the Code and the rules relating thereto.
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(c) Each member of the SA Group agrees to support and vote (or cause
to be voted) all of his, her or its shares of stock of the Company (including,
without limitation, the Shares) in favor of (i) the Board's plan of liquidation,
(ii) the election of all directors nominated by the Board for election at any
and all annual or special meetings of shareholders and (iii) the adoption of
such amendments to the Rights Agreement and the Charter or the taking of such
other action with respect thereto as the Independent Directors may determine to
be necessary or appropriate to permit any other shareholder to acquire the
levels of Permitted Ownership that the SA Group is permitted to acquire.
(d) The Company represents and warrants to the SA Group that, (i)
except for any actions to be taken by the Company pursuant to this Section 3, no
acts are required to be taken by the Company in order to cause the Permitted
Ownership to be exempt from any restriction or limitation under the Rights
Agreement, the Charter, the Company's by-laws or any other agreement or
instrument to which the Company is a party or by which it is bound and (ii) the
execution, delivery and performance of this Agreement by the Company will not:
(A) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any governmental authority
or court to which the Company is subject or any provision of the Charter or
by-laws of the Company; or (B) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, result in the creation of any
encumbrance upon or require any notice under any agreement to which the Company
is a party or by which it is bound.
(e) The Company hereby confirms and acknowledges that the Company has
adopted appropriate resolutions to exempt itself from the provisions of Section
3-602 of the Maryland General Corporation Law with respect to the acquisition by
any person of the capital stock of the Company, and the Company further confirms
and acknowledges that such resolutions exempt the Permitted Ownership from such
provisions.
(f) The Company has furnished to the SA Group a true, correct and
complete copy of its by-laws as amended to date.
(g) Each member of the SA Group severally represents and warrants to
the Company that the execution, delivery and performance of this Agreement by
the members of the SA Group will not: (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any governmental authority or court to which such member is
subject or, if such member is not a natural person, any provision of such
member's organizational documents; or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, result in the creation of
any encumbrance upon or require any notice under any agreement to which such
member is a party or by which it is bound.
SECTION 3. Standstill Arrangements. Until the termination of this Agreement (or
thereafter if this Agreement terminates as a result of the SA Group's breach of
this Agreement), and for so long as the SA Group Nominees serve as directors and
JLS serves as Co-Chairman of the Board (other than the failure of any such
person to serve by reason of death, disability, resignation or declining to be
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nominated or elected), each member of the SA Group hereby agrees that, except as
otherwise permitted hereby or actions taken by the SA Nominees solely in their
capacities as directors, neither it nor any of its members or any of their
Affiliates, acting alone or as part of a group with any other person, will,
directly or indirectly:
(a) acquire or agree, or cause to be acquired, ownership (including,
but not limited to, beneficial ownership) of any of the assets or businesses of
the Company or any of its subsidiaries or of any securities or debt obligations
of the Company or any of its subsidiaries, or any rights or options to acquire
any such ownership (including from a third party) except in any bankruptcy
proceeding, or
(b) commence or support a stockholder proposal (including the
election of directors) not supported by the Board or make, or in any way
participate in, any "solicitation" of "proxies" (as such terms are used in the
proxy rules of the Securities Exchange Commission) to vote or seek to advise or
influence in any manner whatsoever any person or entity with respect to the
voting of any securities of the Company or any of its subsidiaries, or
(c) otherwise act, whether alone or in concert with others, to seek
to propose to the Company or any of its subsidiaries, or any of their respective
stockholders or other equity holders any merger, tender or exchange offer,
business combination, restructuring, recapitalization or similar transaction to
or with the Company or any of its subsidiaries or otherwise act, whether alone
or in concert with others, to seek to control, change or influence the
management, the Board or policies of the Company or any of its subsidiaries, or
nominate any person as a director of the Company who is not nominated by the
then incumbent directors, or propose any matter to be voted upon by the
stockholders of the Company or the equity holders of any of its subsidiaries, or
(d) solicit, negotiate with, or provide any information to, any
person with respect to a merger with, tender or exchange offer for, or
liquidation of the Company or any of its subsidiaries or any other acquisition
of the Company or any of its subsidiaries, or any other similar transaction, or
(e) announce an intention to, or enter into any discussion,
negotiations, arrangements or understandings with any third party with respect
to, any of the foregoing, or
(f) disclose any intention, plan or arrangement inconsistent with the
foregoing, or
(g) advise, assist or encourage any other person in connection with
any of the foregoing, or
(h) enter into any agreement with respect to the actions described in
subsections (a) through (g), inclusive, above or ask for a waiver of any such
provisions.
Notwithstanding anything to the contrary contained in this Section 3, (i) in the
event that the Company receives an unsolicited offer of a third party to acquire
the Company by means of merger, tender or exchange offer or other business
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combination which the Board has determined to accept or not to oppose, the SA
Group may make a competing offer for an acquisition of the Company by any such
means, and (ii) members of the SA Group shall be permitted to bid for any
properties that are then being offered for sale by the Company.
SECTION 4. Termination of Litigation/Mutual Releases.
(a) The SA Group concurrently herewith is causing a Stipulation of
Dismissal with Prejudice, in the form attached as Exhibit A hereto, to be
executed and delivered to the Company on behalf of the plaintiffs and the
Company is causing the same to be executed and delivered to the SA Group on
behalf of the defendants. The parties shall promptly file such Stipulation with
the appropriate court. The Company and BPOP, on the one hand, and each member of
the SA Group, on the other, do hereby release and forever discharge each other
and all of the other's predecessors, successors, assigns, beneficiaries, heirs,
executors, and administrators, and all of the other's present and/or former
representatives, principals, trustees, parents, subsidiaries, affiliates,
partners, shareholders general partners, limited partners, preferred equity
holders (including the affiliates, partners, stockholders and employees
thereof), co-venturers, officers (including, in the case of the Company, J.
David Martin, Scott C. Verges, Daniel B. Platt, Joseph W. Byrne, James W. Gaube,
and Michael L. Rubin), directors (including, in the case of the Company, Malin
Burnham, James D. Harper, Jr., James D. Klingbell, Jr., J. David Martin, Nina B.
Matis, Donne P. Moen, Philip S. Schlein and Robin Wolander), employees,
auditors, accountants, attorneys, advisors, agents, insurers and reinsurers from
any and all actions, causes of action, suits, claims, demands or controversies
whatsoever (including but not limited to all claims for subrogation,
contribution or indemnification, however denominated, and all claims arising
under the federal securities laws or state law including those based in tort,
contract or statute), whether known or unknown, direct or indirect, suspected or
unsuspected, asserted or unasserted, contingent on non-contingent, individual or
derivative, which such persons now have, every may have had, or may have in the
future arising out of or based in whole or in part upon any transactions,
events, occurrences, acts and omissions prior to the date of the execution and
delivery of this Agreement. In addition, the Company, on the one hand, and the
SA Group, on the other, hereby expressly waive and relinquish any rights or
benefits which they had, now have or may ever have in the future under Section
1542 of the Civil Code of the State of California, or any similar provision of
statutory or non-statutory law, to the fullest extent that they may lawfully
waive any such right and benefit arising out of or based in whole or in part
upon any transactions, events, occurrences, acts and omissions, prior to the
date of the execution and delivery of this Agreement. Notwithstanding the
foregoing, this release shall not serve to release or discharge, and shall have
no effect whatsoever upon, any claims arising under this Agreement.
(b) The Company agrees to pay the SA Group the amount of $2,500,000
(the "Settlement Amount") to reimburse it for expenses incurred in connection
with the litigation referred to in Exhibit A and in connection with the SA
Group's agreement to dismiss such litigation with prejudice and to provide the
Company with the general release as set forth herein. The Settlement Amount
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shall be payable as follows: (i) $1,000,000 shall be paid upon the execution and
delivery of this Agreement by all parties hereto by check made payable to (or
wire transfer to the account of) Weil, Gotshal & Manges LLP, which is serving as
agent for the SA Group, and (ii) $1,500,000 shall be paid immediately following
the redemption in full (including payment of any applicable premium) of the
Series 2000-C Convertible Preferred Stock pursuant to the Article Supplementary
with respect thereto by check made payable to (or wire transfer to the account
of) Weil, Gotshal & Manges LLP or as otherwise directed in writing by the SA
Group.
SECTION 5. Termination. The Company, on the one hand, or the SA Group, on the
other, may terminate this Agreement by written notice to the other upon a
material breach by the other of this Agreement that remains uncured for a period
of 20 days after written notice of such breach.
SECTION 6. Publicity. The Company and the SA Group shall agree upon a press
release concerning this Agreement.
SECTION 7. Director Indemnification. The Company shall enter into an agreement
(an "Indemnity Agreement") with each of the SA Group Nominees elected to the
Board whereby the Company shall (i) agree to provide such director with
director's liability insurance substantially similar in all respects to such
insurance provided to the other members of the Board and (ii) indemnify such
director to the same extent that the other members of the Board are indemnified
by the Company. Each Indemnity Agreement shall provide that such directors shall
receive the benefit of any increase in the scope or amount of insurance or
indemnification provided to the other members of the Board. In no event shall
the Company at any time reduce the scope or amount of the insurance (unless such
reduction is made with respect to all members of the Board) or indemnity
provided under an Indemnity Agreement, even if the indemnification provided by
the Company is reduced with respect to the other members of the Board. Unless
the Board (including the SA Group Nominees serving as directors) shall
unanimously determine otherwise, the Company shall retain counsel satisfactory
to the Board to advise the members of the Board in their capacity as directors
of the Company, and the Company shall pay for the reasonable fees and expenses
of such counsel.
SECTION 8. Further Assurances. Each of the parties shall, at any time and from
time to time after the date hereof, fairly and in good faith, do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged and
delivered, all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney, receipts, acknowledgements, acceptances and assurances as
may be reasonably required to procure for each of the parties and their
respective successors and assigns, the consideration to be delivered to them as
provided for herein or otherwise to carry out the intent and purposes of this
Agreement or to consummate any of the transactions contemplated hereby.
SECTION 9. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
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remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 10. GOVERNING LAW. THIS AGREEMENT IS MADE UNDER AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF MARYLAND
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE. EACH
PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS, TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF MARYLAND LOCATED WITHIN THE CITY OF
BALTIMORE AND THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND
(NORTHERN DIVISION) FOR ANY ACTIONS, SUITS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY (AND EACH
PARTY HERETO AGREES NOT TO COMMENCE ANY ACTION, SUIT OR PROCEEDING RELATING
THERETO EXCEPT IN SUCH COURTS, AND FURTHER AGREES THAT SERVICE OF ANY PROCESS,
SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO SUCH PARTY'S ADDRESS SET
FORTH BELOW SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY ACTION, SUIT OR
PROCEEDING BROUGHT AGAIN SUCH PARTY IN ANY SUCH COURT). FOR THE PURPOSES HEREOF,
THE ADDRESS OF THE SA GROUP SHALL BE c/o THE MANAGER AT THE ADDRESS SET FORTH OR
REFERRED TO IN THE MANAGEMENT AGREEMENT AND THE ADDRESS OF THE COMPANY SHALL BE
ITS ADDRESS SET FORTH OR REFERRED TO IN THE MANAGEMENT AGREEMENT. EACH PARTY
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING
OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY IN SUCH COURTS, AND HEREBY FURTHER IRREVOCABLY
AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN ANY INCONVENIENT FORUM.
SECTION 11. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, including, without
limitation, specific performance to enforce this Agreement, in addition to any
other remedy at law or in equity. The parties further agree to waive any
requirement for the posting of any bond in connection with any such remedy.
SECTION 12. Miscellaneous Provisions.
(a) This Agreement may not be amended or modified, nor may the rights
of any party hereunder be waived, except by a written document that is executed
by each party hereto. No waiver of any provision of this Agreement shall be
deemed to constitute a waiver of any other provision hereof, nor shall any
waiver constitute a continuing waiver.
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(b) This Agreement may be executed in any number of counterparts,
each of which when executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument.
(c) When the context in which words are used in this Agreement
indicates that such is the intent, singular words shall include the plural and
vice versa and masculine words shall include the feminine and the neuter genders
and vice versa. References to Articles, Sections, Exhibits, Schedules or other
subdivisions are to appropriate subdivisions of this Agreement unless the
context otherwise requires. The words "herein", "hereof", "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Section, Annex or other subdivision.
(d) Captions and headings are employed herein for convenience of
reference only and shall not affect the construction or interpretation of any
provision hereof.
(e) For purposes of this Agreement, the term "Affiliate" shall have
the meaning set forth in Rule 12b-2 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended.
(f) Any action taken or approved, and any agreement or document
signed, by MLA and either JLS or SSC on behalf of the SA Group shall be deemed
to be binding on each member of the SA Group.
[SIGNATURES BEGIN ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties have executed or caused this
Agreement to be executed as of the date first written above.
BURNHAM PACIFIC PROPERTIES, INC.
By: /s/ Scott C. Verges
-----------------------------------------------
Name: Scott C. Verges
Title: President
BURNHAM PACIFIC OPERATING PARTNERSHIP, L.L.P.
By: /s/ Scott C. Verges
-----------------------------------------------
Name: Scott C. Verges
Title: President
/s/ Jay L. Schottenstein
---------------------------------------------------
JAY L. SCHOTTENSTEIN
/s/ Michael L. Ashner
---------------------------------------------------
MICHAEL L. ASHNER
/s/ Susan Ashner
---------------------------------------------------
SUSAN ASHNER
SCHOTTENSTEIN STORES CORPORATION
By: /s/ Benton E. Kramer
-----------------------------------------------
Name: Benton E. Kramer
Title: Vice President
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JUBILEE LIMITED PARTNERSHIP
By: SCHOTTENSTEIN PROFESSIONAL ASSET
MANAGEMENT CORP., as sole general partner
By: /s/ Benton E. Kramer
-----------------------------------------------
Name: Benton E. Kramer
Title: Vice President
JUBILEE LIMITED PARTNERSHIP III
By: SCHOTTENSTEIN PROFESSIONAL ASSET
MANAGEMENT CORP., as sole general partner
By: /s/ Benton E. Kramer
-----------------------------------------------
Name: Benton E. Kramer
Title: Vice President
SCHOTTENSTEIN PROFESSIONAL ASSET MANAGEMENT CORP.
By: /s/ Benton E. Kramer
-----------------------------------------------
Name: Benton E. Kramer
Title: Vice President
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EXHIBIT A
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
---------------------------------------------x
JUBILEE LIMITED PARTNERSHIP, et al., :
:
Plaintiffs, : CIVIL ACTION NO.: L-00-1774
:
v. :
:
BURNHAM PACIFIC PROPERTIES, INC., et al., :
:
Defendants. :
---------------------------------------------x
STIPULATION OF DISMISSAL WITH PREJUDICE
---------------------------------------
PLEASE TAKE NOTICE that pursuant to Fed. R. Civ. Pro. 41(a)(1)(ii),
the parties, by their undersigned counsel, hereby stipulate and agree that the
above-entitled action is dismissed with prejudice and without costs.
<PAGE>
------------------------------------ ---------------------------------------
David Clarke, Jr. (#02177) Arthur F. Fergenson
James D. Mathias (#06311) BALLARD SPAHR ANDREWS & INGERSOLL, LLP
PIPER MARBURY RUDNICK 300 East Lombard Street, 19th Floor
& WOLFE LLP Baltimore, Maryland 21202-3268
6225 Smith Avenue (410) 528-5856
Baltimore, Maryland 21209-3600
(410) 580-4208
Attorneys for Plaintiffs
---------------------------------------
R. Todd Cronan, P.C. (#542466)
GOODWIN, PROCTER & HOAR LLP
Exchange Place
Boston, MA 02109
(617) 570-1000
Attorneys for Defendants
Of Counsel:
--------------------------------
Irwin H. Warren (IW-1168)
Greg A. Danilow (GD-1621)
Timothy E. Hoeffner (TH-4195)
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
Dated: September __, 2000
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